Opinion ID: 3011284
Heading Depth: 1
Heading Rank: 1

Heading: introduction

Text: This matter comes on before this court on appeal from a final order of the district court entered September 28, 1999, granting judgment as a matter of law in favor of defendant Chrysler Motors pursuant to Fed. R. Civ. P. 50(a) after the close of all the evidence on plaintiff Northview Motors's breach of contract and Automobile Dealers Day in Court Act (ADDCA), 15 U.S.C. SS 1221-25, claims. Northview also appeals from (1) an order entered March 7, 1995, to the extent that it granted Chrysler summary judgment on Northview's Pennsylvania Board of Vehicles Act (BVA), Pa. Stat. Ann. tit. 63, SS 818.1 et seq., claims on the ground that they were barred by the statute of limitations and (2) an order entered February 9, 1996, to the extent it granted Chrysler summary judgment on Northview's claim for violation of a provision of Pennsylvania's Uniform Commercial Code (UCC) which obligates contracting parties to act in good faith. See 13 Pa. Cons. Stat. Ann. S 1203. We will affirm the orders entered by the district court, although we do so with respect to the March 7, 1995 and February 9, 1996 orders for reasons which differ from those the district court set forth.
At the times material to this action, Northview, a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania, was an automobile dealership franchise selling and servicing Jeep and Eagle vehicles. 2 Frank Cuda, Northview's sole shareholder, oversaw the dealership's operations. Chrysler, a Delaware corporation with its principal place of business in Detroit, Michigan, at the times material to this opinion manufactured Jeep and Eagle vehicles as successor to American Motors Corporation. Cuda had been involved in the automobile industry since he was a child. See app. at 258. He began in the industry by working at his father's dealership between 1954 and 1968. See id. at 260. In 1968, Northview began selling new cars as an American Motors dealer in the North Hills section of Pittsburgh. See id. at 261. Cuda testified that throughout the 1970s and 1980s, Northview was a successful dealership consistently ranking as one of the top one hundred American Motors dealerships in the nation. See id. at 287. As an American Motors dealership, Northview marketed both the Jeep and Eagle lines of vehicles. This case arose directly from events commencing on or about December 11, 1987, when Northview entered into an American Motors Sales Corporation Eagle Sales and Service Agreement (Eagle SSA) and an American Motors Sales Corporation Jeep Sales and Service Agreement (Jeep SSA) (collectively, the SSAs). Chrysler subsequently acquired American Motors Sales Corporation's Jeep and Eagle lines and became its successor in interest to the Jeep and Eagle SSAs in contractual privity with Northview.1 Inasmuch as the suit Northview filed against Chrysler evolved out of the two SSAs to which Chrysler became a party after it purchased American Motors's Jeep and Eagle product lines, we set forth significant parallel portions of the agreements. Section 11(a) of the SSAs obligated Northview to use its best efforts to sell aggressively and effectively each and every model of the Jeep and Eagle product lines. See, e.g., exhs. at 152. Section 12 required that Northview be a member in good standing of the Dealer _________________________________________________________________ 1. There was testimony that Chrysler acquired American Motors in the summer of 1987 but even if this is so our result would be the same as that we reach. 3 Advertising Association, an association which advertised lines of vehicles sold by its dealer members. See id. at 156. Section 28 of the SSAs governed their termination. See exhs. at 161. It provided, in relevant part: (C) Notwithstanding the provisions above, this Agreement will terminate automatically without notice from either party on: . . . (vi) the failure of DEALER to fully conduct its Dealership Operations for seven (7) consecutive business days . . . Id. at 162 (emphasis added). Northview asserts that Chrysler had problems with the allocation of vehicles and parts availability immediately following the absorption of the Jeep and Eagle dealers into the Chrysler system. Thus, Northview presented evidence that it continuously was unable to obtain desired vehicles from Chrysler to sell to the public and was unable to fill a fleet order for Alamo Rent-A-Car. See id. at 305. In addition to the supply problems Northview experienced under Chrysler, it asserts that it had problems because it was unable to obtain answers from local Chrysler management concerning questions critical to the efficient operation of its dealership. For example, Northview asserts that Chrysler never explained its system for new vehicle allocation properly, despite Northview's numerous attempts to obtain the information. Further, Northview alleges that Chrysler never gave it a sufficient explanation of its warranty processing system which is known as Expense Per Unit Repaired or EPUR. Northview argues that the lack of an adequate explanation caused its service department to be audited and placed in a restrictive warranty approval category. Clearly there was animosity between Northview personnel and Cuda on the one hand and local Chrysler management, or zone employees, on the other. Northview asserts that the only response Chrysler gave it to its inquiries about Chrysler's processes was That's the system. Chrysler employees, however, documented instances in which Cuda was uncooperative and verbally abusive towards them. 4 Northview asserts that its supply problems and the confusion at the dealership concerning Chrysler's operating procedures, combined with the personal animosity between Northview and Cuda and Chrysler zone personnel, caused it increasing financial problems. Northview claims that because it could not obtain vehicles it could sell, and instead was left with unwanted or slow moving vehicles, it was forced to sell vehicles out of trust.2 When Mellon Bank, Northview's floor plan lender, discovered that Northview was selling out of trust, it revoked Northview'sfloor plan agreement and required Northview to enter into an agreement for repayment of its loan. When Northview was unable to make the required payments, Mellon Bank closed the dealership on July 10, 1991. Upon learning that Northview was closed for business, Chrysler, on July 19, 1991, sent it notice that it was canceling the Jeep and Eagle SSAs. After Northview failed in attempts to sell its dealership, it filed for protection under Chapter 11 of the Bankruptcy Code, but the bankruptcy court would not allow for a restructuring of the failing dealership. Chrysler sent its final notice of termination to Northview on December 12, 1991. Although Northview argues that its financial troubles were attributable directly to the actions of Chrysler and its employees, plainly other factors contributed to its problems. Notably, in May 1984, the Attorney General of Pennsylvania filed suit against Northview alleging that it committed 109 separate violations of Pennsylvania's consumer protection laws, see app. at 605, an action that led to negative press coverage of Northview. See id. at 609-10. During the trial concerning the consumer fraud violations in May 1988, the Pittsburgh Press quoted Cuda as stating that the lawsuit had cost Northview a lot of money and that Northview's _________________________________________________________________ 2. A dealer will sell out of trust when it has afloor plan agreement with a financial institution for it to lend money to the dealer to fund the purchase of new vehicles. Under the floor plan, as the vehicles are sold, the dealer is responsible for repayments of the loan. The dealer sells out of trust when it sells vehicles without making payments to the financial institution as required by the agreement, but rather keeps the funds within the dealership for other purposes or otherwise utilizes the funds. 5 sales had plunged from . . . one hundred ten cars a month to twenty or thirty cars. Id. at 603.
Northview and Cuda, individually, filed the complaint in this action in the district court on October 20, 1993, alleging claims predicated on Chrysler's alleged breach of contract and violation of state and federal statutory law, including claims under the BVA, the UCC, and the ADDCA. In particular, count one alleged that Chrysler breached the Jeep and Eagle SSAs as well as various statutory and contractual duties of good faith by conduct which demonstrated its: (a) failure to act in good faith; (b) failure to provide financial assistance as promised; (c) failure to provide products and vehicles; (d) failure to treat dealership [(Northview)] in equitable manner; and (e) discriminatory practices against Plaintiffs. Northview alleged that as a result of this conduct it was forced to cease doing business and that the Jeep and Eagle SSAs were terminated on July 10, 1991. In count two, Northview and Cuda alleged that Chrysler, through its acts and omissions, violated the BVA. Specifically, the count alleged that Chrysler violated the following provisions of the Act by coercing Northview with respect to: (a) S 818.9(a)(1) - ordering or accepting delivery of new vehicles which were not voluntarily ordered; (b) S 818.9(a)(3) - participating monetarily in advertising campaign at expenses of new vehicle dealer; and (c) S 818.9(a)(4) - threatening to terminate or cancel franchise unless prejudicial act performed by dealer; The count also charged Chrysler with: (d) S 818.9(b)(1) - failure to deliver new vehicles; 6 (e) S 818.9(b)(2) - discriminating among its new vehicle dealers; and (f) S 818.9(c) - unfairly and without just provocation canceling the franchise of the new vehicle dealer. 3 In count three, Northview and Cuda alleged that Chrysler's intentional and/or negligent acts constituted tortious interference with business relations. Count four alleged Chrysler breached its duty of good faith in the UCC. Count five alleged that Chrysler violated the ADDCA. In conclusion, Northview and Cuda alleged that [a]s a result of the numerous breaches of good faith and wrongful and intentional acts by [Chrysler], Plaintiffs have suffered substantial damages including, but not limited to, the loss of Frank Cuda's life savings and investment, loss of profits including future profits, loss of franchise auto dealership and land, loss of salary and benefits. Thus, Northview and Cuda sought compensatory and punitive damages as well as attorneys' fees and costs. On August 16, 1994, Chrysler filed a motion seeking a summary judgment dismissing all of Cuda's claims. The district court, in an opinion and order entered on March 7, 1995, granted that motion in an order from which Cuda does not appeal. As we shall explain, the court also partially granted Chrysler summary judgment against Northview at that time, even though Chrysler did not then move for summary judgment against Northview. Northview does appeal from that order. On August 7, 1995, Chrysler filed a motion for summary judgment against Northview. Following a hearing on the motion held on December 6, 1995, the district court issued an order, entered on February 9, 1996, partially granting and partially denying the motion. On March 11, 1996, Chrysler filed a motion for reconsideration, which the district court denied by order entered March 14, 1996. The court held a pretrial conference on May 6, 1996. Following the conference, the parties apparently settled the _________________________________________________________________ 3. These provisions were renumbered in 1996 as Pa. Stat. Ann. tit. 63, SS 818.12 and 818.13. 7 case on May 16, 1996, and thus the district court closed the case. The settlement, however, was not consummated, leading Chrysler on February 18, 1998, to file a motion to enforce the settlement agreement. On June 10, 1998, the district court entered an order granting the motion to enforce the settlement. On July 7, 1998, Northview and Cuda filed an appeal from the order granting the motion to enforce the settlement. On June 18, 1999, for reasons implicating Northview's bankruptcy which we need not explain, we reversed the order of the district court enforcing the settlement and remanded the matter to the district court for further proceedings. See Northview Motors, Inc. v. Chrysler Motors Corp., 186 F.3d 346 (3d Cir. 1999). There was a jury trial on the remand starting on September 14, 1999. At the close of Northview's case, Chrysler unsuccessfully moved for a judgment as a matter of law. Thereafter, Chrysler presented its case and the trial concluded on September 28, 1999. Chrysler then renewed its motion for a judgment as a matter of law and on September 28, 1999, the district court granted the motion, setting forth its reasons on the record. On October 26, 1999, Northview timely filed a notice of appeal from the September 28, 1999 order. Inasmuch as Northview appeals from the March 7, 1995, February 6, 1996 and September 28, 1999 orders, we describe them in some detail.
In its memorandum opinion and order entered March 7, 1995, the district court addressed Chrysler's motion for summary judgment with respect to Cuda's claims. The court determined that Cuda lacked standing to assert claims pursuant to the ADDCA, and accordingly entered judgment in Chrysler's favor on those claims. The district court also concluded that Cuda had failed to establish essential elements of his breach of contract and UCC claims in that he did not allege that he was a party to the agreements involved or that Chrysler owed him a duty of good faith under the UCC. Finally, with respect to Cuda, the district court determined that the statute of limitations 8 barred his allegations of tortious interference with contract and violation of the BVA. On its own motion, the court granted Chrysler summary judgment on statute of limitations grounds on Northview's claims of tortious interference and violations of the BVA, as the factual bases for these claims were the same as the bases for Cuda's claims. On this appeal, Northview challenges the district court's dismissal of its BVA claims as barred by the statute of limitations but, as we have indicated, Cuda does not appeal.
In its memorandum opinion and order entered on February 9, 1999, the district court addressed Chrysler's motion for summary judgment as to Northview's claims for violations of the ADDCA, breach of contract and breach of the duty to act in good faith as specified in the UCC, 13 Pa. Cons. Stat. Ann. SS 1011 et seq. The court partially granted and partially denied the motion. The court found that Northview asserted two distinct ADDCA causes of action, one based upon both Chrysler's failure to act in good faith in performing and complying with the terms of the SSAs and the other for Chrysler's lack of good faith in terminating Northview's franchise. The court determined that substantial questions of fact remained to be resolved with respect to Northview's ADDCA claim relating to the termination of its franchises. Accordingly, it denied the motion for summary judgment as to the ADDCA lack of good faith termination claim. Chrysler, however, also moved for summary judgment as to Northview's claim that it failed to act in good faith in performing and complying with the provisions of the franchise agreements. Specifically, Chrysler asserted that the bad faith acts of which Northview complained were insufficient to state a claim or, in the alternative, were barred by the statute of limitations. The court found that the following alleged bad faith acts were insufficient, as a matter of law, to state a claim under the ADDCA: (1) the alleged failure of Chrysler to provide parts and vehicles to Northview; 9 (2) the alleged failure of Chrysler to provide financial assistance to Northview; (3) the alleged failure of Chrysler to provide Northview with copies of the District Service Manager's Reports; (4) the alleged failure of Chrysler to provide adequate training for Northview personnel concerning Chrysler's procedures, programs, and computer systems; (5) the performance of a warranty audit by Chrysler on the Northview dealership. App. at 25. The district court reasoned that Northview had failed to present sufficient evidence of express or implied coercion, as required under the ADDCA, to allow it to proceed with the good faith and performance aspect of its ADDCA cause of action. In the absence of evidence that it coerced or intimated Northview, the district court determined that Chrysler was entitled to judgment as a matter of law on this claim. The district court found that only two of Northview's allegations, other than those relating to termination, could state a claim for relief under the ADDCA: (1) that Chrysler threatened to terminate its franchise agreements with Northview unless Northview agreed to join an advertising campaign; and (2) that Chrysler forced Northview to accept new vehicles that it did not want or need. See id. at 26. This conduct, however, occurred in 1988 and 1987, respectively, and, as a result, the court found that any claims based upon these allegations were barred by the statute of limitations. See id. at 26-28. The court also noted that Northview had agreed expressly in the SSAs toat all times be a member in good standing of the . . . Dealer Advertising Association. Id. at 28 n.5. The district court therefore concluded that Northview's complaint with respect to being forced to join an advertising campaign failed inasmuch as the use of coercion to enforce a valid contractual provision is not wrongful under the ADDCA. See id. (citing Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90, 97 (2d Cir. 1987)). 10 When it addressed Northview's claim for breach of the covenant of good faith and fair dealing in the UCC, the district court found that Pennsylvania law did not provide for an independent cause of action for breach of the covenant of good faith. See app. at 33. The district court based this determination on the comment to 13 Pa. Cons. Stat. Ann. S 1203, Pennsylvania's version of the UCC provision codifying the obligation to act in good faith. See id. The comment provides: This section does not support an independent cause of action for failure to perform or enforce in good faith. Rather, this section means that a failure to perform or enforce, in good faith, a specific duty or obligation under the contract, constitutes a breach of that contract or makes unavailable, under the particular circumstances, a remedial right or power. This distinction makes it clear that the doctrine of good faith merely directs a court towards interpreting contracts within the commercial context in which they are created, performed, and enforced, and does not create a separate duty of fairness and reasonableness which can be independently breached. 13 Pa. Cons. Stat. Ann. S 1203, UCC Comment. Accordingly, the court entered judgment in favor of Chrysler on Northview's UCC claim.
Although Northview has focused its briefs on the Rule 50(a) order on the ADDCA claim, at trial it advanced both its breach of contract claim and its ADDCA claim which, in light of the district court's earlier rulings, was limited to a cause of action for bad faith termination of Northview's franchises. Accordingly, the court did not admit evidence of Northview's being forced to take unwanted cars, the warranty audits, and the failure of Chrysler to provide needed vehicles as substantive evidence to support a damages recovery by Northview for these alleged wrongdoings. Rather, the court admitted this evidence under Fed. R. Evid. 404(b) solely for the purpose of establishing motive or intent, i.e., that Chrysler terminated 11 the SSAs in July 1991 to force Northview out of business in furtherance of its business plan to terminate stand alone Jeep and Eagle dealerships and replace them with dealerships selling other Chrysler lines. d. The September 28, 1999 Order and Record Statements As we have indicated, after the close of all of the evidence, the district court issued an order, dated September 28, 1999, granting judgment as a matter of law in favor of Chrysler on all remaining claims pursuant to Fed. R. Civ. P. 50(a), i.e., those under the ADDCA for termination of Northview's franchise and for breach of contract. The court set forth its reasons for granting judgment in favor of Chrysler on the record. See app. at 1279-80. After hearing argument from the parties, the district court explained as follows: These points that were given to me, there are -- here's what they say, that they say, what was it, coercive and discriminatory practices beginning in 1988; failed to allocate and deliver the appropriate quantity of cars; forced Northview to accept unwanted vehicles; performed a retaliatory warranty audit. Now, clearly the audit was performed. There's no contract claim or Dealer Day in Court claim for-- that it's barred by the statute of limitations. Furthermore, the audit was authorized under the contract. Improperly placed the dealership on prior approval for warranty and repair work. Well, that was done in 19-- early in `88, before the audit occurred. That's also barred. And failed to act in good faith in complying with the contract, with the ulterior purpose of reducing its dealer body; there is no evidence of that at all.