1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

10-17-1994

Maschio v. Prestige Motors

Precedential or Non-Precedential:

Docket 94-5114

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Recommended Citation

"Maschio v. Prestige Motors" (1994). 1994 Decisions. Paper 156.

http://digitalcommons.law.villanova.edu/thirdcircuit_1994/156
 UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

No. 94-5114 

 

MAURO MASCHIO, Individually and as 

President of Euro-Trade U.S.A., Ltd.; 

EURO-TRADE U.S.A. LTD., (a New York Corporation), 

 Appellants 

V. 

PRESTIGE MOTORS, (a New Jersey Corporation) 

 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF NEW JERSEY 

(D.C. Civil No. 93-02167) 

 

Submitted Under Third Circuit LAR 34.1(a) 

August 12, 1994 

Before: HUTCHINSON and NYGAARD, Circuit Judges

and KATZ, District Judge* 

(Opinion filed: October 17, 1994) 

ANDREW J. KYREAKAKIS, ESQUIRE 

Ambrosio, Kyreakakis & DiLorenzo 

317 Belleville Avenue 

Bloomfield, NJ 07003 

Attorney for Appellants 

THOMAS H. BRUINOOGE, ESQUIRE 

GEORGE P. STASIUK, ESQUIRE 

Bruinooge & Associates 

85 Orient Way 

Rutherford, NY 07070 

Attorneys for Appellee 

 

 OPINION OF THE COURT 

 
 

* Honorable Marvin Katz, United States District Judge for the 

Eastern District of Pennsylvania, sitting by designation. 

NYGAARD, Circuit Judge. 

 Mauro Maschio appeals from a district court order 

granting summary judgment against him in an action he filed under 

the Automobile Dealer's Day in Court Act ("ADDCA"), 15 U.S.C. 

§§1221-25. Because we conclude that the defendant, Prestige 

Motors, Inc., is not a "manufacturer" within the meaning of the 

ADDCA, we will affirm. 

I. 

 Mercedes-Benz of North America is an affiliate of 

Daimler-Benz, a German manufacturer of luxury automobiles. 

Defendant Prestige Motors, Inc. is an authorized dealer of 

Mercedes-Benz vehicles. Maschio is the principal owner of EuroTrade, U.S.A., Ltd., a corporation licensed to sell automobiles. 

 Maschio and Euro-Trade regularly purchased scarce 

"high-end" automobiles from authorized dealers, including several 

Mercedes-Benz dealers. They would then resell them at a profit 

to customers desiring exotic vehicles not generally available in 

dealers' showrooms. During 1989 and 1990, Maschio and Euro-Trade 

attempted to purchase sixteen new vehicles from Prestige at 

retail, intending to resell them to the general public. There 

was no formal franchise agreement between Prestige and EuroTrade. Instead, Prestige accepted orders on the same purchase 

order form it used when dealing with typical retail buyers. 

Prestige honored six of these contracts, but refused to deliver 
the remaining ten vehicles, allegedly because of pressure exerted 

on it by Mercedes Benz of North America to refrain from selling 

automobiles to Maschio. 

 The district court granted summary judgment in favor of 

Prestige on the ADDCA claim, and after determining that 

complete diversity was lacking, dismissed the pendent 

state law causes of action. It held that the purchase 

orders used in the series of vehicle purchases did not 

constitute a franchise agreement within the meaning of 

the ADDCA, a necessary element of any such case. 

 II. 

 The ADDCA is a remedial statute enacted to redress the 

economic imbalance and unequal bargaining power between large 

automobile manufacturers and local dealerships, protecting 

dealers from unfair termination and other retaliatory and 

coercive practices. See, e.g., Hanley v. Chrysler Motors Corp., 

433 F.2d 708, 710-11 (10th Cir. 1970). It is, essentially, a 

supplement to the national antitrust laws, passed to counterbalance the economic leverage a manufacturer has over its 

ostensibly independent dealers, and its "control over [its] 

product in what amounts to quasi-integration to the retail level 

of distribution." H.R. Rep. No. 2850, 84th Cong., 2d Sess. 1, 3, 

reprinted in 1956 U.S.C.C.A.N 4596, 4596, 4598. There are four 

elements of an ADDCA cause of action: (1) the plaintiff must be 

an automobile dealer; (2) the defendant must be an "automobile 

manufacturer" engaged in commerce; (3) there must be a 

manufacturer-dealer relationship embodied in a written franchise 
agreement; and (4) the plaintiff must have been injured by the 

defendant's failure to act in good faith. 15 U.S.C. § 1222; 

Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 441 (9th 

Cir. 1979). 

 Although the district court granted summary judgment in 

favor of Prestige, concluding that the sixteen purchase orders 

did not constitute a franchise agreement, we will assume, without 

deciding, that there was a valid franchise agreement.1 We will 

further assume, without deciding both, that Euro-Trade was a 

dealer within the meaning of the Act, and that Prestige 

terminated its "franchise" in other than good faith. We will 

instead simply analyze the narrow question of whether Prestige 

was a manufacturer under the ADDCA, which we conclude determines 

the outcome of Maschio's appeal. 

 It is axiomatic that our inquiry begins with the 

language of the statute. 28 U.S.C. § 1221 defines the term 

"automobile manufacturer" as 

 any person, partnership, corporation, 

association, or other form of business 

enterprise engaged in the manufacturing or 

assembling of passenger cars, trucks, or 

station wagons, including any person, 

partnership, or corporation which acts for 

and is under the control of such manufacturer 

or assembler in connection with the 

distribution of said automotive vehicles. 

 

 1"An appellate court may affirm a correct decision by a 

lower court on grounds different than those used by the lower 

court in reaching its decision." Erie Telecommunications, Inc. 

v. City of Erie, 853 F.2d 1084, 1089 n.10 (3d Cir. 1988) (citing 

cases). 
Prestige, of course, does not manufacture or assemble 

automobiles. To be liable as a manufacturer, then, Prestige must 

be found to be both "acting for" and "under the control of" 

Mercedes-Benz. 

 Only three courts of appeals have had occasion to 

interpret § 1221(a). The first considered "the 'control' 

requirement [to be] satisfied by showing corporate ownership and 

confluence of interest." Colonial Ford, Inc. v. Ford Motor Co., 

592 F.2d 1126, 1129 (10th Cir. 1979). In the other two, the 

issue was resolved by reference to agency law. Stansifer v. 

Chrysler Motors Corp., 487 F.2d 59, 64 (9th Cir. 1973); 

Volkswagen Interamericana, S.A. v. Rohlsen, 360 F.2d 437, 441 

(1st Cir. 1966). 

 These cases usually arise, however, in the context of 

distributors or importers that stand between the dealer and the 

physical manufacturer. In those circumstances, courts will be 

justifiably concerned that physical manufacturers might attempt 

to avoid the ADDCA's requirements by placing a strawman between 

themselves and their dealers, thus insulating themselves from the 

duty to act in good faith. In Rohlsen, for example, the court 

stated that "the inclusion of certain distributors in section 

1221(a) was designed only to prevent a manufacturer from 

circumventing its responsibilities under the act by transacting 

business with its dealers through alter egos." 360 F.2d at 437. 

 That context is not present here. Mercedes-Benz of 

North America never agreed to accept Euro-Trade as a dealer. Nor 

did Mercedes-Benz employ Prestige as an alter ego to impose 
onerous terms on Euro-Trade without running afoul of the ADDCA; 

each operated independently. At most, Mercedes-Benz pressured 

Prestige to cease doing business with Euro-Trade because it 

objected to Euro-Trade's business. Such a desire not to deal 

does not implicate the same sort of anticompetitive concerns that 

apparently motivated the drafters of the ADDCA, nor is it 

indicative of any motive on the part of the physical manufacturer 

to oppress the local "dealer" -- in this case Euro-Trade -- with 

whom the manufacturer never intended to deal at all. 

III. 

 In sum, we decline to hold that Prestige became a 

"manufacturer" the moment it sold automobiles to Euro-Trade. Nor 

do we conclude it was under a manufacturer's "control ... in 

connection with the distribution ..." of the automobiles. 

Instead, we hold that non-physical manufacturer status is limited 

to those situations in which the physical manufacturer has the 

potential to control an intermediary that acts for the 

manufacturer to avoid its duty to treat its dealers with good 

faith, thereby subverting the ADDCA. For this reason, we will 

affirm the judgment of the district court.