The opinion of the court was delivered by: WILLIAM H. WALLS, District Judge
This matter is before the Court on defendants' motion for
partial summary judgment to dismiss the claims of the lessee
plaintiffs. Oral arguments were held on January 27, 2005.
FACTS AND PROCEDURAL BACKGROUND
The basic facts underlying plaintiffs' Complaint are set forth
in this Court's opinion reported at 157 F. Supp. 2d 355 (D.N.J.
2001). In short, plaintiffs allege that Mercedes-Benz USA
(MBUSA), the national distributor of Mercedes-Benz automobiles,
each of its local dealers in New York City, southern New York,
western Connecticut and northern New Jersey suburbs, and the
accountant Sheft Kahn conspired to fix the prices of new
automobiles sold or leased by them to consumers from February
1992 to August 1999. The Complaint has survived a motion to
dismiss and the matter has been certified as a class action
pursuant to Fed.R.Civ.P. 23(b)(3). On May 14, 2004, MBUSA
filed a motion for partial summary judgment to dismiss the claims
of lessee plaintiffs. The defendants who joined this motion are
Beifus Motors, Continental Motors, Inc., Country Imported Car
Corp., David Michael Car Corp., Friendly Country, Inc., Helms
Brothers, Inc., Mercedes-Benz Manhattan, Inc., Mercedes-Benz of
Morristown, Midstate Motor Car Corp. d/b/a Millennium Automotive
Group, Pepe Motors, Corp., Princeton Motorsport, Inc., Ray Catena Motor Car Corp., Sheft Kahn & Co., Sovereign Motor
Cars, Ltd. and Watson Enterprises Inc.
The issues raised in this motion deal with those class members
who leased new Mercedes-Benz vehicles. And so, the facts material
to this motion are those dealing with lease transactions that
took place during the class period and the relationship between
MBUSA and Mercedes-Benz Credit Corporation ("MBCC"), a leasing
and finance company. The following facts are undisputed unless
noted.
MBUSA imports U.S. version Mercedes-Benz vehicles into the
United States and distributes them to authorized dealers. At no
time during the class period did MBUSA (then known as
Mercedes-Benz of North America)*fn1 engage in the business
of providing retail financing or leasing of Mercedes-Benz
vehicles sold by its authorized dealers. During the class period,
numerous companies offered retail financing and leasing of new
Mercedes-Benz vehicles, including MBCC. MBCC is a captive finance
company which means it is the financial arm of the manufacturer.
MBCC only does leasing transactions for Mercedes-Benz vehicles as
opposed to leases for other makes of automobiles. Ninety-five
percent of MBCC's finance transactions are for Mercedes-Benz
vehicles. During the class period, approximately seventy percent
of MBCC's business was leases and thirty percent financed
transactions.
During the class period, MBUSA and MBCC were jointly owned by
the same parent company, Daimler-Benz of North America Holding
Company, Inc. MBCC was separate from and not owned by MBUSA. Furthermore, MBUSA did not hold or
control any stock of MBCC and MBCC did not hold or control any
stock of MBUSA. Two persons who are currently on the board of
directors of MBUSA, Michael Bassermann and Ernst Stoeckl, were
members on that board during part of the class period and have
also sat or currently sit on the board of directors for MBCC.
Because MBUSA and MBCC are owned by the same parent company,
they "have a vested interest in the company as a whole doing
well." (MBCC Dep. at 51:18-52:1). MBUSA and MBCC interact in a
number of ways. MBUSA shares sales information meaning actual
sales numbers with MBCC. The purpose of sharing such information
is because MBCC "need[s] to know how many sales they [MBUSA] have
in order for us to determine whether or not we need to develop
new programs which would possibly help them sell more vehicles."
(Id. 48:22-49:2). MBUSA did not share such information with the
other leasing companies whose representatives were deposed, Hann
Financial Services Corp. ("Hann"), and Chase Manhattan Automotive
Finance Corp. ("Chase"). Furthermore, unlike any other finance
company, MBCC consults with MBUSA in developing joint programs to
attract consumers to purchase Mercedes-Benz vehicles.
Representatives from MBCC attend the regional MBUSA meetings
where MBUSA and MBCC share marketing and sales information. No
other finance companies attend those meetings. MBUSA also has
national dealer meetings and MBCC is the only finance or leasing
services organization invited to attend.
In addition to information about the relationship between MBUSA
and MBCC, both parties submitted evidence about the mechanics of
leasing transactions involving the defendant dealers during the class period. Any facts not supported by the
referenced citations, however, are not recited here since
unsupported assertions can not be used to defeat a motion for
summary judgment. Herbert v. Newton Memorial Hosp.,
933 F. Supp. 1222, 1229 (D.N.J. 1996) ("[A] party cannot rely upon
self-serving conclusions, unsupported by specific facts in the
record.").
To repeat, this motion deals solely with closed-end leases.
Under the closed-end lease, the most common type of lease since
the early 1990s, a lessee of a vehicle pays for the use of the
vehicle for a certain term.*fn2 Unlike a purchaser, the
lessee does not have to pay the purchase price of the car, either
by cash on hand or by a down payment and financing. Instead, the
lessor, which usually is a leasing company affiliated with a car
manufacturer or a financial institution, pays the dealer the
purchase price of the vehicle and thus owns or "buys" the
vehicle. At the end of a closed-end lease, the lessee has an
option to purchase from the leasing company the vehicle he or she
leased. The principal attraction for customers to lease rather
than purchase (or buy) is that monthly lease payments are
generally lower than monthly payments for purchase transactions
which are financed.
Monthly lease payments are comprised of two elements: the
depreciation charge and the rent charge. The depreciation charge
is calculated by subtracting the residual value of the vehicle from the adjusted capitalized cost and dividing that number by
the number of months in the lease term. The residual value is the
leasing company's estimate of the value of the car when the lease
term ends. The leasing companies provide dealers with the
residual values for all models of Mercedes-Benz vehicles and
require that the dealers use these residual values to calculate
depreciation. Leasing companies provide the same residual value
for each vehicle model to all dealers at any point in time and do
not negotiate residual values with dealers or customers. In terms
of estimating and adjusting residual values, the deposition of a
representative from Chase shows that residual values are stated
as a percentage of the manufacturer suggested retail price
("MSRP") of the vehicle as those numbers are published in the
"Automotive Lease Guide." (Chase Dep. at 31:24-34:25). The
deposition of a representative of MBCC shows that what percentage
of the MSRP constitutes the residual value depends upon a number
of factors that are considered in the following manner:
The risk department looks at actual auction data,
historical auction data. They translate that into a
percentage, which they recommend to the marketing
department as the value of the vehicle. The marketing
department then looks at the marketplace, where the
risk department's estimated residual value would
place Mercedes-Benz Credit compared to our
competition, meaning Chase and other banks that lease
Mercedes-Benz vehicles. Based on that analysis, a
residual is set.
(MBCC Dep. at 147:4-12).
The adjusted capitalized cost is the "agreed value" for the
car, increased by any taxes, fees or use and service options to
be paid for through the monthly payments and reduced by the value
of any trade-in or any cash payment the lessee makes. The
adjusted capitalized cost is the amount the leasing company pays
to the dealer. The rent charge is the interest amount that the leasing company
earns on the capital that it invests in the leased vehicle. The
interest rate charged for use of capital is reflected in the
money factor used to calculate the rent charge. The leasing
companies provide the dealers with the money factors they are to
use in calculating the rent charge. The leasing companies do not,
however, necessarily provide all dealers with the same money
factors. For example, leasing companies often make available
lower money factors to dealers who originate large volumes of
leases or commit to provide certain minimum volumes of leasing
business. The monthly lease payment equals the sum of the monthly
depreciation charge and the monthly rent charge.
Customers who are interested in leasing a new Mercedes-Benz
vehicle usually negotiate the monthly lease payment as well as
other lease terms such as duration and mileage allowance with the
dealer. While the parties dispute the frequency with which
dealers and customers negotiate the "agreed value" of the
vehicle, it is undisputed that the customer negotiates the
"agreed value" of the vehicle in at least a minority of lease
transactions.
Leasing companies regularly adjust the residual values and
money factors they provide to dealers to reflect changes in
competitive conditions as time passes. In other words, residual
values are not adjusted on a lease-by-lease basis. Dealers are
very conscious that their profitability opportunities are
expanded the more vehicles they are able to sell to customers or
to leasing companies for ...