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In Re Ford Motor Co. E-350 )Van

February 16, 2011


The opinion of the court was delivered by: Hon. Garrett E. Brown, Jr.



BROWN, Chief Judge:

This matter comes before the Court on the Court's orders (Doc. Nos. 319, 328, 329, 331, 335, 336) that certain California, New Jersey, Pennsylvania, and Texas Plaintiffs show cause, in support of their respective unjust enrichment and statutory consumer fraud claims, demonstrating that they had conferred a benefit upon Defendant Ford Motor Company ("Ford"). The Court permitted limited supplemental discovery regarding these claims, and the parties filed supplemental submissions on November 22, 2010, December 15, 2010, and January 5, 2011. For the following reasons, the Court finds that the unjust enrichment claims of First United and Bethel may go forward, and the Court will grant summary judgment against the unjust enrichment claims of Macedonia, Bethany Baptist, Hickman Temple, and St. Luke's, as well as the remaining statutory consumer fraud claims of First United.


This multidistrict litigation commenced on June 16, 2005, when the Judicial Panel on Multidistrict Litigation transferred five actions to this Court for consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407. In re Ford Motor Co. E-350 Van Prods. Liab. Litig. (No. II), 374 F. Supp. 2d 1353 (J.P.M.L. 2005). Following the transfer to this Court, Plaintiffs filed a Consolidated Amended Class Action Complaint ("Complaint") alleging that their Ford E-350 "15-passenger" vans were defectively designed due to a high center of gravity that leads to an unusually high rollover rate and, consequently, an increased risk of death or injury. The Complaint asserts claims on behalf of Plaintiffs and a putative nationwide class that includes: "all persons and entities who purchased or otherwise lawfully acquired E350 '15-passenger' vans (a/k/a E350 Super Club Wagons, Econoline '15-passenger' vans, or E350 Super Duty Extended Length passenger vans) manufactured by Defendant Ford Motor Company . . . model years 1991-2005, and who reside in the fifty states and/or the District of Columbia." (Compl. ¶ 1.) No Plaintiffs or members of the proposed class have actually suffered a rollover, but Plaintiffs assert economic harm on the grounds that the alleged defect makes their E-350 vans unsuitable and unfit for transporting 15 passengers and, thus, has diminished the value of their vehicles and/or required Plaintiff's to incur out-of-pocket expenses to repair the defect.

Defendant Ford Motor Company (hereinafter "Ford") moved for summary judgment on all claims. By Opinion and Orders of July 9, 2010 ("July 9 Opinion"), this Court granted in part and denied in part Ford's motion with regard to specific Plaintiffs' claims. See In re Ford Motor Co. E-350 Van Products Liability Litigation (No. II), Civ. No. 03-4558, 2010 WL 2813788, at *80 (D.N.J. July 9, 2010) (summarizing the Court's rulings as to each motion and party). With regard to the unjust enrichment claims of six Plaintiffs from four jurisdictions, as well as two state consumer fraud act claims for the California Plaintiffs, the Court granted Ford's motion without prejudice, on the ground that these Plaintiffs had not presented evidence that they conferred a benefit to Ford. Id. at *17--18, 33, 43--44, 56. These Plaintiffs-First United (CA), Macedonia (NJ), Bethany Baptist (NJ), Bethel (PA), Hickman Temple (PA), and St. Luke's (TX)-had essentially relied on the fact that they purchased their van from an authorized Ford dealership to establish the requisite conferral of a benefit to Defendant Ford Motor Company. The Court permitted supplemental discovery on this issue and ordered these Plaintiffs' to show cause "to cure this evidentiary deficiency."

Responses to Order to Show Cause

Plaintiffsresponded with a proffer premised on, inter alia, the deposition testimony of Anthony Said, a dealer contract supervisor for Ford; Ford's standard Sales & Service Agreement (SSA) and Vehicle Terms of Sales Bulletin (TSB); the Wholesale Financing and Security Agreement (WFSA) utilized by Ford's subsidiary Ford Motor Credit Company ("Ford Credit"); the affidavit of purported automotive industry expert Richard O. Neville; and Ford Credit's UCC filings with the New Jersey Department of Treasury. In light of the parties' submissions, the following facts are largely undisputed.

Ford pre-approves all dealerships before they can be recognized as an authorized Ford dealership and sell new Ford vehicles. As part of this approval process, dealerships execute the SSA, which provides the terms of the relationship between Ford and its authorized dealerships. (Pls.' Supp. 56.1 Statement ¶ 1; Def.'s Supp. 56.1 Resp. ¶ 1.) Authorized dealerships may only keep Ford vehicles in stock, may not sell new Ford vehicles to unauthorized dealers, and may not change location without Ford's consent. (Pls.' Supp. 56.1 Statement ¶¶ 3--4, 7; Def.'s Supp. 56.1 Resp. ¶¶ 3--4, 7.) With the exception of Ford's supply for governmental and "fleet" services, consumers may only purchase Ford vehicles from authorized dealers. (Pls.' Supp. 56.1 Statement ¶ 6; Def.'s Supp. 56.1 Resp. ¶ 6.)

On the supply side, Ford sets a "production allocation" for each authorized dealer, which is "based upon the dealer's reported sales activity and availability of vehicles within each line." (See Pls.' Supp. 56.1 Statement ¶ 11; Def.'s Supp. 56.1 Resp. ¶ 11; TSB § I.E.) Each month, an authorized dealer makes a "basic Wholesale Order," or "wholesale commitment," to meet Ford's prospective production allocation. (Pls.' Supp. 56.1 Statement ¶ 12; Def.'s Supp. 56.1 Resp. ¶

12.) The SSA requires authorized dealerships to maintain vehicle inventory "in accordance with company guides," or "adequate to meet the dealer's share of current and anticipated demand for vehicles in the dealer's locality." (See Pls.' Supp. 56.1 Statement ¶ 15; Def.'s Supp. 56.1 Resp. ¶ 15; SSA § 2(d); Said Dep. at 41 (explaining that Ford and the dealers "come to an agreed upon number of what orders by vehicle line that they would commit to order," and that this agreement would reflect "the dealer's current inventory, anticipate[d] sales, and requirements for a projected month in the future").) The TSB provides that Ford may place specific vehicle orders on behalf of the dealership "[i]f the dealer has not submitted buildable specific vehicle orders." (TSB § I.E.)Ford requires that its authorized dealers use Ford's accounting system, keep certain minimum levels of capital, and submit monthly financial reports to Ford showing the dealers' respective operating results. (Pls.' Supp. 56.1 Statement ¶¶ 19--21; Def.'s Supp. 56.1 Resp.¶¶ 19--21.)

On the demand side, authorized dealers must use wholesale financing, or "floor plan financing," to pay for all new Ford vehicles it orders from Ford. (Pls.' Supp. 56.1 Statement ¶ 23; Def.'s Supp. 56.1 Resp. ¶ 23.) These loans differ from the retail financing services that consumers use when they purchase the car from the dealer. Dealers may use an independent lending source, but Ford Credit provides wholesale financing for most of Ford's dealers. Dealers may only use one wholesale lender at a time. (See Pls.' Supp. 56.1 Statement ¶¶ 28, 30; Def.'s Supp.56.1 Resp. ¶¶ 28, 30.) Plaintiffs have presented evidence that they purchased their E-350 vans from authorized Ford dealers, and that Ford Credit provided wholesale financing for their respective purchases. (See Pls.' Supp. 56.1 Statement ¶¶ 42--43 (First United), 44--45 (Macedonia), 46--48 (Bethany Baptist), 49--50 (Bethel), 51--52 (Hickman Temple), 53--54 (St. Luke's); Def.'s Supp.56.1 Resp. ¶¶ 42--55.) Ford only objects to Plaintiffs' proofs that Ford Credit floor plan financed the purchases of Bethel, Hickman Temple, and St. Luke's. (See Def.'s Br. at 12.) The parties' characterizations of Ford Credit's role in the supply chain diverges, and so the Court relies upon the evidentiary materials submitted by the parties.*fn1 According to the deposition testimony of Mr. Said, Ford Credit has a service contract with Ford to "take care of the delivery and the insurance and handling of the vehicle until it gets to the dealer, at which point it is transferred and delivered to the dealer and at that point the vehicle becomes in possession of the dealership and the floor plan finance source takes over from them." (Said Dep. 92:19--24.) Ford Credit performs these services, regardless of whether an individual dealer uses Ford Credit for floor plan financing. (See id. at 93--94.) Pursuant to the service agreement, Ford Credit pays Ford for the vehicles and takes possession of the same when Ford Credit takes delivery from the manufacturing plant. (Id. at 91--93 (explaining that Ford Credit makes payment to Ford "upon release of the vehicles" from the manufacturing plant).) Although he was not certain as to the transfer-of-funds method used in the transaction, Mr. Said stated he was "sure" the transaction between Ford Credit and Ford "[wa]s a type of wire or journal entry of some sort, some type of a wire transfer of funds so [Ford] can recognize that." (Said Dep. at 94:9--12.) According to Mr. Said, it this transfer with Ford Credit, prior to the delivery of the vehicles by Ford Credit to dealers, that registers as revenue to Ford. (See id. at 94:22--25 ("[A]t that point when [the new vehicles] are removed from our manufacturing facility, that is when [Ford] recognize[s] the revenue and that is when the actual physical transfer of the vehicles occurs . . . ."); id. at 106:12--15 ("The payment to Ford in every instance of when a vehicle is released from our manufacturing facility, we are paid in full at that point.").) For dealers who use Ford Credit for floor plan financing, the dealer must pay interest to Ford Credit for the period of time that vehicles remain in the their inventory, and the dealer becomes obligated to pay Ford Credit the amount the dealer owes for the vehicle when a consumer purchases the vehicle.*fn2 (Pls.' Supp. 56.1 Statement ¶ 34; Def.'s Supp.56.1 Resp. ¶ 34; WFSA ¶ 5 ("Any and all proceeds of any sale, lease or other disposition of the Merchandise by Dealer shall be received and held by Dealer in trust for Ford Credit and shall be fully, faithfully and promptly accounted for and remitted by Dealer to Ford Credit to the extent of Dealer's obligation to Ford Credit with respect to the Merchandise."); see also Said Dep. at 108:9--14.) After delivery of the vehicle but prior to the consumer purchase-i.e., while the vehicle is in the dealer's inventory-Ford considers the dealer to be the owner of the vehicle, subject to a security interest that Ford Credit (or the appropriate floor plan lender) maintains in the vehicle. (See Said Dep. at 149:5--9.) Although the sale of a vehicle to the consumer does not directly result in the dealership ordering a replacement vehicle from Ford, the Court understands that a dealership's aggregate sales factors into Ford's periodic review of the dealer's wholesale commitment, which may be adjusted up/or down on the basis of the dealership's projected sales and Ford's production capabilities. (See Def.'s Br. at 15 ("[A]ny particular sale to any particular Plaintiff influences the number of vehicles a dealer will order only to the extent that it is one out of a much larger number of aggregate sales by the dealer."); Said Dep. at 62:10--19 ("Q: Would you agree that the more vehicles the dealer sells, the more vehicles that Ford is going to be able to sell to that dealer? . . . A: Subject to them committing per our wholesale commitment and projecting future anticipated sales of them submitting the orders, that would impact our profitability and ability to produce more product.").)

In addition to these facts, Plaintiffs submit that Ford directly advertises to consumers, offers incentives directly to consumers (i.e., manufacturer's rebates), gathers extensive information on consumers, and otherwise views the consumer as its "customer." (See Pls.' Supp. 56.1 Statement ¶¶ 63--65; Def.'s 56.1 Resp. ¶¶ 63--65; Said Dep. at 141; Berger Decl. Ex. T.) On the basis of this evidence, Plaintiffs argue they conferred a benefit upon Ford when they purchased their E-350 vans from Ford-authorized dealerships that used Ford Credit for floor plan financing.*fn3 This benefit is realized, Plaintiffs argue, when dealers order replacement product for the vehicles they sell. Furthermore, Plaintiffs argue that Ford's direct solicitation of consumers demonstrates Ford's interest in, and inherent benefit from, the sale of Ford vehicles to consumers. Ford responds that Plaintiffs have not shown Ford Credit to be an agent of Ford, that Plaintiffs have not shown grounds ...

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