The opinion of the court was delivered by: WOLIN
Defendant General Motors Corporation ("GM") moves for partial summary judgment dismissing the claims of plaintiff Regency Oldsmobile, Inc. ("Regency"), a franchised GM automobile dealer. Regency's claims arise out of its nationwide sale of an extended manufacturers warranty called the General Motors Protection Plan ("GMPP" or the "Plan"). Regency alleges that GM breached its obligations to Regency under federal and state franchisee protection statutes and under the common law. Regency further alleges that GM violated the federal and state antitrust laws by conspiring with other GM dealers to eliminate Regency as a nationwide seller of the GMPP and by attempting to corner the national GMPP market for itself. GM's actions, according to Regency, caused Regency great financial loss and ultimately led to the destruction of the dealership.
After a careful review of the record, the Court has found insufficient evidence to support Regency's claims that GM violated the antitrust laws and will therefore grant GM summary judgment on the antitrust claims. On the other hand, because of factual issues that are unresolvable from the current record, the Court cannot determine as a matter of law whether GM breached its statutory and common law duties to Regency as a franchisee, and will therefore deny GM's request for summary judgment on the remaining claims, with one minor exception.
Regency operated as an authorized Oldsmobile dealer from January 1981 through April 1989, when the assets of the dealership were sold off. During this time, Regency was authorized to sell and service Oldsmobile vehicles under a Dealer Sales and Service Agreement signed with GM. Regency was also authorized to sell the General Motors Protection Plan, an extended manufacturer's warranty, which entitled GM new vehicle owners to receive free parts and labor on certain repairs, subject to the time and mileage limits of various plans. The GMPP was sold only by GM automobile dealers, and only to GM new vehicle owners.
General Motors sent its Administrative Guide for the GMPP to all its automobile dealers in advance of each new model year. In its Administration Guide for model year 1985, issued in late 1984, GM encouraged its dealers to actively promote the sale of the GMPP. In a section entitled "Overview," the Guide states:
The GM Protection Plan can prove to be an important profit maker for your dealership, at little or no risk. The GM suggested selling price (mandatory in Florida) for the Plan allows for a substantial profit margin over dealer cost. In addition, a quarterly penetration bonus program provides the opportunity for additional profit on each Plan sold when a dealer actively Promotes Plan sales.
Administration Guide, West Affidavit of February 24, 1987 [hereinafter First West Affidavit] Exhibit D, at 1.
Under the guidelines established in the GMPP manual, all GM new vehicle owners were entitled to purchase the plan at the time of vehicle purchase or at any time "up to the day the vehicle has been in service for 12 months or accrued 12,000 miles on the vehicle odometer." Id. at 3. Under "unique circumstances," the GMPP coordinator at the dealer's division zone office could approve sales to customers with vehicles in service for more than 12 months or 12,000 miles. Id. The Administration Guide did not prevent GM dealers from selling the service contract to customers who purchased a new GM vehicle at other dealerships. Although not prominently displayed, a paragraph in the Guide offers the following sales suggestion from a GM dealer: "There are two other GM dealers in this town who sell brand X. So I put the GM Protection Plan logo in the paper with my new car ads and write headquarters underneath. I sell Plans to a lot of their customers." Id. at 54.
The 1985 Guide introduced a new method of financing the Plan: the GM Protection Card. This charge card program, administered by the National Bank of Delaware (NBD), enabled qualified customers to finance the retail selling price of the plan. Customers were also permitted to pay for the plan in cash, finance it along with the new vehicle or use a major credit card. GM would charge the dealer for GM's share of the purchase price by directly billing the dealer's open account. Id. at 5.
Customers were allowed to cancel the Plan within 60 days of purchase and receive a full refund of the purchase price. Customers who cancelled the Plan after 60 days were entitled to a prorated refund "based on the lesser of the time or mileage remaining of Plan coverage." Id. at 19. When a customer cancelled the GMPP, GM "charged back" the dealer's open account for the dealer's share of the refund.
The bonus program mentioned above provided an incentive for dealers to aggressively market and sell the GMPP. A dealer who sold large numbers of Plans was provided with quarterly cash rebates calculated as a percentage of a dealer's market penetration. For example, if a dealer sold 50 GMPPs out of 100 vehicles sold in a line, it would receive a $ 70 bonus for each plan sold. See id. at 17. Initially, bonuses were paid on all Plans sold by a dealer, including sales to customers who purchased their vehicles at their dealerships. Thus, a dealer could sell Plans to large numbers of GM new vehicle owners, achieve a market penetration far in excess of 100%, and receive bonus payments on all Plans sold. Moreover, if customers cancelled their Plans, dealers would still keep their bonuses. Id. at 19.
In addition to providing GM and its dealers with substantial profits in the short term, the GMPP was designed to promote customer satisfaction and develop long-term customer loyalty to GM products and services. As stated in the 1985 Guide,
the primary purpose of the GM Protection Plan is improved customer satisfaction with the GM vehicle ownership experience. The goal of the Plan is to retain the nameplate loyalty of the owner, who, it is hoped, will return to you in the future to buy new GM vehicles. . . . The GM Plan is designed to provide you and your customers with a GM product, identifiable with GM and the vehicle division trademark you represent . . . .
In the fall of 1984, Regency developed a program to sell the GMPP nationwide to GM new vehicle purchasers through direct mail and telemarketing. After a successful test of its idea in January 1985, Regency undertook a full-scale marketing effort.
Opposition Brief, at 11-12. By mid-October of 1985, Regency had sold over 17,000 GMPPs. Id. at 16. Although Regency's success produced profits for both the dealership and GM, the two parties became embroiled in a dispute over Regency's nationwide marketing efforts.
GM alleges that Regency's telemarketing and direct mail solicitation were purposefully designed (1) to create the false impression that General Motors, and not Regency, was offering the GMPP for sale, and (2) to induce prospective buyers into calling Regency's toll-free number by falsely implying that a warranty or recall problem existed. GM asserts that Regency accomplished its objective, in large measure, through use of a postcard that listed "General Motors Protection Plan Headquarters, P.O. Box C, Lakewood, NJ 08701" as its return address and that included the following message: "URGENT! Please call at your earliest convenience. Toll Free 1-800-446-7526. Please have your General Motors Manufacturers Warranty Book in hand." Initial Brief, at 5-6. GM claims that by mid-March of 1985 it had received hundreds of complaints from angry customers who believed that they had received a recall notice from General Motors. Id. at 8. In response to these complaints, GM asserts, it asked Regency to modify its solicitation materials. GM claims that, at all times, it acted independently to protect its trademarks and good will and to ensure honest salesmanship. Id. at 29-30.
Regency alleges that its solicitation materials were encouraged by the GM Administration Guide and were expressly approved by GM officials. Opposition Brief, at 12-13. Regency also asserts that it modified its solicitation materials in response to GM's "demands" and that it did so to avoid termination of its right to sell the GMPP. According to Regency, "the successive modifications eventually rendered the [sales] techniques ineffective." Opposition Brief, at 15-16. Regency claims that GM forced Regency to modify its sales tactics as part of an overall conspiracy with other dealers to "force Regency out of its nationwide sales program and to impose unreasonable territorial restrictions." Id. at 15. GM allegedly did this in order to take over the nationwide GMPP sales market and to appease threatening dealers who were angry that Regency was selling the GMPP at discount prices in their areas. Id. at 2, 26.
On August 30, 1985, GM wrote to Regency informing the dealership that its rights to sell the GMPP would be terminated as of October 1, 1985. The letter cited GM's continuing concerns over consumer deception and infringement of trademark rights. Amended Complaint Exhibit K. However, on October 16, 1985, the parties entered into a Supplemental Agreement governing Regency's sale of the GMPP. The parties stipulated that "the terms and provisions of this Agreement are intended to avoid consumer confusion, mistake, and deception." Supplemental Agreement para. 7, Amended Complaint Exhibit L. Under the terms of the agreement, Regency agreed to clearly identify itself as Regency Oldsmobile, Inc. on all communications concerning the GMPP and to refrain from identifying itself as "Headquarters" for the GMPP on all solicitation materials and over the telephone. Id. paras. 2.1, 2.6. Regency also agreed to
refrain from stating or implying in any and all written and oral representations and communications . . . that Regency's solicitation of GMPP purchases originate from GM or from the GMPP, or that Regency is affiliated with GM or the GMPP in any capacity other than as an independent Oldsmobile dealer and an authorized seller of the GMPP, or that Regency has any exclusive rights or privileges with respect to the GMPP.
On the same day the Supplemental Agreement was executed, GM and Regency signed a General Motors Continuous Protection Plan Participation Agreement (Participation Agreement). The Participation Agreement authorized Regency to sell the GMPP and spelled out the general obligations of each party.
GM alleges that Regency violated the terms of the Supplemental Agreement in November 1985 by sending out a solicitation letter that falsely stated that Regency was authorized to sell the mechanical protection plan "at a SPECIAL LOW PRICE." Initial Brief, at 13. On December 30, 1985, GM wrote to Regency informing the dealership that it was in violation of the Supplemental Agreement, again threatening to terminate Regency's authorization to sell the Plan. In a letter response, dated December 30, 1985, Regency stated:
we are constrained to believe that the true purpose of your concern is the substantial price break offered in the Final Opportunity solicitation. Perhaps this concern is based on the complaints made to GM by other dealers.
Amended Complaint Exhibit N.
On January 6, 1986, Regency wrote to GM indicating that it would modify its solicitation letter in accordance with GM's request. Amended Complaint Exhibit O. Moreover, on May 12, 1986, Regency met with GM to stress, among other things, that it was unable to effectively market the GMPP using the current postcard. Initial Brief, at 13. In a letter dated May 16, 1986, Regency repeated its concerns and enclosed for GM's review three postcards "that, in our opinion, would effectively market the GMPP without causing confusion to consumers." Amended Complaint Exhibit R (emphasis in original). Attached were three postcards, each containing one of the following phrases in large, bold capital letters: "URGENT!"; "URGENT NOTICE!"; and "RESPONSE REQUIRED." GM responded in a letter dated June 13, 1986 that the postcards were unacceptable, adding that "they could alarm and mislead consumers and cause the same type of serious customer relation problems encountered with Regency's earlier postcards." Amended Complaint Exhibit 5. That same month, Regency discontinued its nationwide sales of the GMPP.
As noted above, Regency claims that GM acted not to protect its trademarks and customer goodwill, but to push Regency out of the nationwide GMPP sales market; GM acted in concert with local dealers to eliminate Regency as a national seller because it was selling the Plan "at a steep discount in competition with local dealers." Opposition Brief, at 17. To support its conspiracy claim, Regency points to three specific instances of alleged concerted activity between GM and certain dealers designed to thwart Regency's nationwide GMPP sales. The three agreements, which plaintiff calls "The Oldsmobile National Dealer Council Conspiracy," "The Tarrytown Zone Conspiracy," and "The Memphis Zone Agreement," are summarized in the paragraphs that follow.
(1) The Alleged Oldsmobile National Dealer Council Conspiracy
The National Dealer Council is a "Board of Review" comprised of elected representatives of local Oldsmobile dealers. Opposition Brief, at 19. A division of the Council met in Atlanta in late 1985 to discuss nationwide sales of the GMPP, among other topics. Deposition of C.N. Moore, Perlberg Affidavit Exhibit M, at 47. According to an Oldsmobile official present at the meeting, there was no formal discussion of nationwide GMPP sales. Following the meeting, however, the dealers presented GM and Oldsmobile officials with a list of questions and recommendations. The dealers "recommend[ed] [that] Oldsmobile make every effort to stop the interstate solicitation of GMPP policies that are made to look like they are legitimate requests from Oldsmobile or the dealer the car was purchased from." The dealers also recommended that "bonus participation be based on sales of cars delivered by that dealership." Perlberg Affidavit Exhibit B, at P-140.
GM stated, in a written response, that while it "has no objection to the concept of dealer follow-up programs to sell the Plan, GM does not endorse such programs. . . ." Id. Regency alleges that the dealer council "was plainly successful in obtaining GM's agreement to the demanded restrictions." Opposition Brief, at 19. Regency asserts that, in response to the "demanded restrictions," GM announced that it "does not encourage GMPP telemarketing or direct mail programs to other than a dealer's own customers." Opposition Brief, at 20 (emphasis in original). GM also announced that, effective October 1, 1986, bonuses would be paid only on plans "sold by the same dealer that delivers the vehicle," and that the number of plans eligible for bonus payments would be limited to 200 percent of a dealer's retail vehicle sales in a quarter. Id.
(2) The Alleged Tarrytown Zone Conspiracy
An Oldsmobile official, Jim Coleman, called a GM official, Bernie McGuire, to inform him that he had been contacted by Atlantic Oldsmobile concerning Regency's sales of the GMPP. The dealer told Coleman that if Regency contacted his customers and asked them to cancel their current GMPP and purchase a discounted Plan from Regency, then "he was going to discontinue selling the product at his Oldsmobile store as well as several other GM stores that he had an interest in." Deposition of Bernie McGuire, Perlberg Affidavit Exhibit D, at 103. Regency alleges that, in response to this "threatened boycott," GM conspired with R.L. Polk Co., an independent firm, which generated lists of GM new car owners, to provide Regency and other dealers with purged lists that did not include the names of persons who had previously purchased Plans from their local dealers. To support its conspiracy claim, Regency also cites the testimony of a Polk official, John B. Watkins, who stated that other dealers were upset about the nationwide marketing of the GMPP and wanted Regency and other sellers to be "shut down and stopped." Deposition of John B. Watkins, Perlberg Affidavit Exhibit V, at 98-99; Opposition Brief, at 23.
(3) The Alleged Memphis Zone Agreement
Regency's President, David West, testified that in September 1985, Oldsmobile's District Manager, Jim Reid,
told me that dealers in the Memphis Zone had been complaining about my GMPP sales in their area at discounted prices. Reid told me that his boss, Larry Tierney, told him to handle it. Reid told me to stop selling there until it cooled down a bit. When I refused, Reid told me if I wanted to get new Oldsmobiles as I had in the past, I should stop soliciting there. I told Reid that I would.
West Affidavit of April 10, 1989 [hereinafter Second West Affidavit] para. 24. In a follow-up memo to Larry Tierney, Reid stated: "I've discussed the problems the Memphis Zone has had through Regency's mailings with Dave West. He now has discontinued the mailings to that part of the country. Hopefully, we won't have any more complaints from the Memphis area." Perlberg Affidavit Exhibit B, at P-106. Regency also cited a memo from the Memphis Assistant Zone Manager, C.C. Barnett, III, to an Oldsmobile official, Bernie McGuire, concerning complaints by Memphis dealers about Regency's GMPP solicitations. Barnett states: "I have explained to these dealers that Oldsmobile, GMPP, and the Corporation have tried to stop this activity, yet, have no legal right to do so according to the courts." Perlberg Affidavit Exhibit B, at 25; see Opposition Brief, at 25.
In addition to the three conspiracies discussed above, Regency alleges that GM made numerous changes in the administration of the GMPP, all of which were designed to cripple the efforts of Regency and other dealers to market the Plan nationwide. These changes include the following:
(1) GM's assertion, contrary to the GMPP Administration Guide, that no Plan sales were allowed to customers with vehicles in service for more than 12 months or 12,000 miles. Opposition Brief, at 14.
(2) GM's own entry into the GMPP nationwide sales market in July 1985, and its refusal to provide dealers with the same customer lists it was using to solicit sales. Opposition Brief, at 26-27.
(3) GM's assertion in its revised 1986 Guide that the GMPP "is not intended to be a stand-alone business." Perlberg Affidavit Exhibit B, at 185.
(4) GM's modifications to the GMPP bonus program, which included imposition of the 200 percent cap discussed above and provision of bonus dollars only when the dealer sold both the Plan and the new car. Opposition Brief, at 29.
(5) GM's failure to register Regency as a seller of the GMPP in Florida. Under Florida law, GM was required to register all of its dealers proposing to sell the Plan in that State. Regency alleges that GM did not file the application for "many months." Opposition Brief, at 33. Second West Affidavit para. 20.
(6) GM's rejection of Regency sales to GM employees when Regency sold the Plan "below cost." Regency actually made a profit on such sales because of subsequent bonus payments to its open account. Opposition Brief, at 34. Second West Affidavit para. 20; id. Exhibit I.
(7) GM's modification of its cancellation and chargeback policy governing the GMPP. These changes included (a) calculation of refunds based solely on time remaining on the Plan, rather than the lesser of time or mileage remaining, Opposition Brief, at 36, (b) GM's allowing customers who purchased their GMPP from Regency to first cancel their plans more than 60 days after the date of purchase, id. at 37; (c) GM's charging back dealers for bonuses paid on flat cancellations, id. at 37-38; and (d) GM's acceptance of "fraudulent cancellations," including instances where dates were tampered with or plans were cancelled when customers had more than 12,000 miles or 12 months on the car, even though such sales were made with zone approval, id. at 38-39.
Regency claims that the general changes to the cancellation and chargeback procedures had a more damaging effect on Regency and other nationwide sellers of the GMPP than on local dealers. Dealers who sold the Plan along with the vehicle were less likely to experience cancellations because GMPP payments were included in monthly car payments. Opposition Brief, at 36. Thus, the modifications, though not facially discriminatory, allegedly had a disparate impact on national sellers.
Regency also alleges that GM made the "improper charges" against Regency's open account without giving the dealers an opportunity to dispute the charges; eventually, the chargebacks cut into Regency's non-GMPP earnings and destroyed the dealership. Opposition Brief, at 39-40. Seen as part of an overall conspiracy to eliminate Regency as a nationwide GMPP seller, GM's use of the Plan cancellation charges was allegedly for the purpose of delivering its final blow to the dealership.
Under Fed.R.Civ.P. 56(c), summary judgment shall be granted if "there is no genuine issue as to any material fact" and "the moving party is entitled to a judgment as a matter of law." As the Supreme Court stated in Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986), "at the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." In making this determination, a court must make all reasonable inferences in favor of the non-movant. Once this is done, summary judgment will be granted if no reasonable trier of fact could find for the nonmoving party. Id.
In its motion GM has focused principally on the federal antitrust claims asserted by Regency in counts 10 through 13 of the Amended Complaint. Thus the Court will consider those claims first.
I. Federal Antitrust Claims
The Third Circuit has repeatedly stated that summary judgment in antitrust cases is disfavored. Arnold Pontiac-GMC Inc. v. General Motors Corp., 786 F.2d 564, 572 (3d Cir. 1986). The Supreme Court has held, however, and the Circuit has acknowledged, that summary judgment is proper where there is no significant evidence to support an antitrust claim. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S. Ct. 1575, 1593, 20 L. Ed. 2d 569 (1968); Arnold Pontiac, 786 F.2d at 572. Regency has ...