2003 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-23-2003

Rosado v. Ford Mtr Co

Precedential or Non-Precedential: Precedential

Docket No. 02-3356

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Recommended Citation

"Rosado v. Ford Mtr Co" (2003). 2003 Decisions. Paper 319.

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PRECEDENTIAL

Filed July 23, 2003

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 02-3356 & 02-3357

WILLIAM ROSADO,

Appellee in No. 02-3356; Appellant in No. 02-3357

v.

FORD MOTOR COMPANY,

Appellant in No. 02-3356; Appellee in No. 02-3357

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

(D.C. Civ. No. 00-cv-00046 )

District Judge: Honorable A. Richard Caputo

Argued April 23, 2003

Before: SCIRICA, Chief Judge,* AMBRO and

WEIS, Circuit Judges.

Filed: July 23, 2003

Carla W. McMillian, Esquire

(ARGUED)

Daniel G. Flannery, Esquire

Rosenn, Jenkins & Greenwald,

L.L.P.

15 South Franklin Street

Wilkes-Barre, Pennsylvania 18711

* Judge Scirica began his term as Chief Judge on May 4, 2003. 
John H. Fleming, Esq.

Sutherland, Asbill & Brennan

999 Peachtree Street, N.E.

Suite 2300

Atlanta, GA 30309

Attorneys for Ford Motor Company

Paul A. Barrett, Esquire (ARGUED)

O’Malley, Harris, Durkin &

Perry, P.C.

345 Wyoming Avenue

Scranton, PA 18503

Attorneys for William Rosado

OPINION OF THE COURT

WEIS, Circuit Judge. 

In this appeal, we are asked to respond to a certified

question of law — whether a prospective purchaser of an

automobile dealership has standing to challenge the

exercise of a manufacturer’s right of first refusal. We

conclude that the Pennsylvania Board of Vehicles Act

grants only limited rights to a prospective purchaser and

they have not been infringed. Accordingly, we answer in the

negative and remand for appropriate disposition of the

case. 

In 1999, John S. Lopatto, Jr. and Ann S. Lopatto, the

owners of a Ford distributorship in Plymouth,

Pennsylvania, agreed to sell their business to the plaintiff

William Rosado. The agreement included the purchase of

the dealership assets and real estate for $545,000, less

certain credits. 

Pursuant to the terms of the franchise, the purchase

agreement was submitted to defendant Ford Motor

Company, which chose to exercise its contractual right of

first refusal. In accordance with statutory provisions, Ford

gave timely notice to Rosado and offered to pay his

reasonable expenses incurred in connection with the

aborted purchase agreement. In addition, the Lopattos

offered to return the $5,000 non-refundable deposit that

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Rosado had paid to them. Ford assigned its rights under

the agreement to another party in the area, who then

purchased the dealership. 

Rosado alleges that as a result the Lopattos received less

compensation than they would have had they sold to him.

However, the Lopattos do not dispute that they received all

of the consideration that they were due under the terms of

the Rosado agreement. 

Rosado filed suit in state court and Ford removed to the

District Court. The complaint asserted tortious interference

with contractual rights and violations of the Pennsylvania

Board of Vehicles Act, 63 P.S. §§ 818.16, and 818.12(b)(3).

The statute limits a manufacturer’s right of first refusal and

prohibits unreasonable withholding of consent to the sale of

a dealership. 

The District Court granted summary judgment to Ford on

the count alleging unreasonable withholding of consent, but

concluded that plaintiff had standing to challenge Ford’s

right of first refusal. Consistent with that ruling, the Court

also denied Ford’s motion for summary judgment on

Rosado’s claim for tortious interference with contract.

Pursuant to 28 U.S.C. § 1292(b), the Court certified as a

controlling question of law “whether a prospective

purchaser has standing to claim that the selling dealer did

not receive the same or a greater consideration under

§ 818.16.” We accepted the certification. 

On appeal, in addition to denying Rosado’s standing,

Ford contends that its invocation of the right of first refusal

did not constitute tortious interference with contract. 

I.

The Pennsylvania Board of Vehicles Act is a

comprehensive statute governing the relationship between

automobile manufacturers and their franchise dealers. The

Act prohibits a manufacturer from unreasonably

withholding consent to the sale of a franchise to a qualified

buyer. 63 P.S. § 818.12(b)(3). To further regulate transfers,

the legislation was amended in 1996 to permit a

manufacturer to include a right of first refusal in the

franchise.

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The amended portion of the statute reads: 

“A manufacturer or distributor shall be permitted to

enact a right of first refusal to acquire the new vehicle

dealer’s assets or ownership in the event of a proposed

change of all or substantially all ownership or transfer

of all or substantially all dealership assets [if certain

requirements are met, including that] . . . (2) the

exercise of the right of first refusal will result in the

dealer and dealer’s owners receiving the same or

greater consideration as they have contracted to receive

in connection with the proposed change of all or

substantially all ownership or transfer of all or

substantially all dealership assets.”

63 P.S. § 818.16. 

In addition to restrictions not at issue here, when

exercising the right of first refusal, the manufacturer must

pay “the reasonable expenses including reasonable attorney

fees” to the “proposed new owner” incurred in negotiating a

contract to purchase the dealership. 63 P.S. § 818.16(4). 

In the case before us, neither the manufacturer nor the

dealer contest the exercise of the right of first refusal. The

objections come from the plaintiff who was deprived of his

opportunity to purchase the dealership after an apparently

satisfactory agreement had been negotiated with the owner.

In this diversity case, we look to the law of Pennsylvania.

In general, standing depends on whether the plaintiff has

suffered a legal injury that the law was designed to protect.

See Pennsylvania Nat’l Mut. Cas. Insur. Co. v. Dep’t of Labor

& Indus., Prevailing Wage Appeals Bd., 715 A.2d 1068,

1071 (Pa. 1998) (explaining that “[s]tanding may be

conferred by statute or by having an interest deserving of

legal protection”). “It is also clear that standing will be

found more readily where protection of the type of interest

asserted is among the policies underlying the legal rule

relied upon by the person claiming to be aggrieved.” Wm.

Penn Parking Garage v. City of Pittsburgh, 346 A.2d 269,

284 (Pa. 1975). 

Ultimately, in order to have standing, a party must have

a substantial, immediate and direct interest in the subject

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matter. See Ken R. v. Arthur Z., 682 A.2d 1267, 1270 (Pa.

1996). In Sprague v. Casey, 550 A.2d 184, 187 (Pa. 1988),

the Court explained that other factors must be considered

such as “existence of other persons better situated to assert

the claim.” The Pennsylvania Superior Court in In re Seitz,

43 A.2d 547 (Pa. Super. Ct. 1945), concluded that, in the

absence of special statutory authority, a homeowner had no

standing to challenge issuance of a liquor license for

property in the same neighborhood because his interest

was only a “collateral concern” for the “indirect effect” that

issuance of the liquor license might have on the value of his

property. 

Rosado relies on section 818.29 of the Act to grant him

standing as a prospective purchaser. That section reads in

pertinent part: “Any person who is or may be injured by a

violation of a provision of this Act of1 any party to a

franchise who is so injured in his business or property by

a violation of a provision of this Act . . . may bring an

action for damages and equitable relief . . . .” 63 P.S.

§ 818.29. 

Rosado asserts that Ford’s exercise of its right of first

refusal resulted in a diminution of the compensation due

the Lopattos and, thus, violated the Act. That being so, he

contends that Ford has forfeited its right to a first refusal

and the original agreement remains in effect. However, even

if it be assumed that the Lopattos received less than

Rosado’s offer, Ford responds that the statutory provision

at issue here is for the benefit of the dealer, not a

prospective purchaser. Essentially the argument is that

Rosado does not have any right to litigate the merits of an

obligation that Ford owes to the Lopattos. 

The Pennsylvania courts have not interpreted these

sections of the Act, but we have had the occasion to review

pertinent portions of the legislation in two instances,

Crivelli v. General Motors Corp., 215 F.3d 386 (3d Cir.

2000), and Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974

F.2d 1358 (3d Cir. 1992). Both of these cases, however,

1. The use of “of ” instead of “or” appears to be a typographical error. The

original Act used “or” rather than “of.” 

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were concerned with events that occurred before 1996

when the right of first refusal was added to the statute. 

In Crivelli, the franchise agreement provided the

manufacturer with a right of first refusal, a matter on

which the statute, at that time, was silent. Crivelli, 215

F.3d at 387. After the manufacturer exercised its right of

first refusal, the frustrated prospective purchaser

contended that the statutory provision preventing the

manufacturer from unreasonably withholding consent to a

sale applied to the right of first refusal as well. Id. We

discussed the difference between an unreasonable

withholding of consent and the right of first refusal, both of

which are somewhat different forms of contractual control

by manufacturers over dealership transfers. 

As we explained, a right of first refusal requires the

manufacturer to match the terms of the original proposal

and, thus, protects dealers by creating two prospective

purchasers for every offer they receive. Id. at 389-90. In

most instances, the dealer would be largely indifferent to

the identity of the new owner, and the prospective

purchaser’s expectations must take into account the

uncertainty over whether the manufacturer will exercise its

rights. 

In contrast, by preventing a manufacturer from

arbitrarily refusing consent to a transfer, the Act enables

dealers to sell their businesses to qualified successors.

Similarly, prospective purchasers’ opportunities to acquire

dealerships may not be thwarted by manufacturers’

obstinate and unjustifiable blocking of sales. Without the

statutory provision, manufacturers, at no risk or expense,

could foreclose transfers advantageous to both dealers and

prospective purchasers. A violation of the unreasonably

withholding consent provision would directly injure both

dealers and qualified prospective purchasers. Thus, the

unreasonable withholding consent provision offers more

protection to purchasers than a right of first refusal. 

Crivelli concluded that, because the two contractual

clauses were substantially different, the manufacturer’s

right of first refusal should not be subject to the existing

statute’s ban on unreasonable denial of consent. In short,

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the Court upheld the freedom to contract in the absence of

limiting legislation. 

The case had been tried on the merits and therefore the

standing issue was not raised by the parties. However, in a

footnote we commented that “[a]lthough some courts have

dismissed such cases on lack of standing [citations] in

interpreting the Pennsylvania Act, we held that prospective

purchasers have standing.” Crivelli, 215 F.3d at 392 n.3

(citing Big Apple, 974 F.2d at 1383). Under Pennsylvania

law, standing may be waived by the parties. See In re

Duran, 769 A.2d 497 (Pa. Super. Ct. 2000). Because it was

not a subject of the appeal in Crivelli, the footnoted

reference is dictum insofar as it might be read to apply to

standing of prospective purchasers in right of first refusal

controversies. 

Obviously, the footnote was inserted to acknowledge Big

Apple’s superficial relevance. In that case, a significant

issue was whether a prospective purchaser had standing

under the Vehicles Act to pursue a claim against a

manufacturer that unreasonably withheld consent to the

transfer of a franchise. We decided in that circumstance

section 818.29 (previously section 818.20), granting a cause

of action to anyone injured by violation of the Act, conferred

standing on a prospective purchaser. Big Apple, 974 F.2d at

1382-3. The withholding consent provision, section

818.12(b)(3), implies at least some concern for prospective

purchasers by the reference to those who are qualified and

who are capable of obtaining a dealer’s license, and might

appear to give some protection to prospective purchasers. 

However, Big Apple’s holding on standing in the

unreasonable withholding context does not logically carry

over to the first refusal setting. The holding in that case on

standing must be read in light of the fact that the claim

was limited to a contention that consent was unreasonably

denied. 

The statute does, however, require the manufacturer to

give timely notice and to reimburse a prospective purchaser

with reasonable expenses incurred from negotiating the

original agreement with the owner. Obviously, a prospective

purchaser would have standing for violation of those

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statutory provisions, and to that extent Big Apple and the

footnote in Crivelli are applicable. But there are no such

violations at issue here. The fact that the Act grants the

prospective purchaser specific benefits tends to negate any

suggestion that other limitations on the right to contract

were intended to be included. Nothing in the Act confers

authority on one party to seek recovery on the part of

another. 

Here, it is critical that the prospective purchaser’s

complaint is based on the contention that the owner did

not receive what he was entitled to under the Act when

Ford exercised its right of first refusal. But, if the

prospective purchaser prevailed on that theory, it would not

be he, but the owner, who would be entitled to the loss

resulting from the violation by the manufacturer. See

Sprague, 550 A.2d at 187 (noting as a standing factor “the

existence of other persons better situated to assert the

claim”). 

In reality, it is not the loss that the Lopattos might have

suffered that Rosado seeks. Rather, he wants to recover the

benefits of his bargain. Unfortunately for him, the Act only

grants prospective purchasers the right to timely notice and

reimbursement of reasonable expenses incurred from

negotiating the original sales contract. 

Ultimately, the Crivelli footnote does not aid Rosado

because it is dictum and, by its dependence on Big Apple,

is limited to the unreasonable withholding of consent

context. That is all the more obvious in view of the

enactment of the 1996 amendment to the Board of Vehicles

Act. 

We conclude that our response to the question certified

to us must be in the negative. A prospective purchaser

lacks standing to claim that the selling dealer did not

receive the same or greater consideration under section

818.16. 

II.

The parties have also briefed the issue of whether

Rosado’s claim for tortious interference with contractual

rights continues to be viable. 

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Our scope of review is not limited to the issue articulated

in the section 1292(b) certification motion. Generally, we

may address any question fairly included within the

certified order because it is the order, and not the

controlling question of law, that is appealable. Abdullah v.

American Airlines, 181 F.3d 363, 366 (3d Cir. 1999). 

Here, the tortious interference claim obviously depends

on whether the defendant acted in violation of the Vehicles

Act. Crivelli denied a similar claim, finding that

Pennsylvania law would not allow a recovery in such

circumstances. We need not repeat Crivelli’s thorough

analysis of the tortious interference issue. It clearly applies

here and mandates denial of recovery. 

We conclude that the District Court erred in failing to

grant summary judgment in favor of Ford Motor Company

on the tortious interference claim. 

Accordingly, we will remand the case to the District Court

for the entry of the appropriate orders.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

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