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IN RE MERCEDES-BENZ ANTI-TRUST LITIGATION

April 12, 2005.

IN RE MERCEDES-BENZ ANTI-TRUST LITIGATION.


The opinion of the court was delivered by: WILLIAM H. WALLS, District Judge

OPINION

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 ...


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