Opinion ID: 1189773
Heading Depth: 3
Heading Rank: 2

Heading: Toledo's Evidence of an Agreement Between Mack and Mack Dealers

Text: Toledo also presented three categories of evidence to show that Mack agreed with its dealers that it would deny sales assistance on sales a dealer tried to make outside of that dealer's AOR. First, Toledo introduced recordings and notes of conversations between Yeager and various Mack executives referring to an informal policy against out-of-AOR sales. Second, Toledo introduced evidence that, in 1989, Mack adopted an official policy of denying sales assistance on out-of-AOR sales. Toledo also presented evidence that this policy was the result of a meeting between Mack executives and dealer representatives. Finally, Toledo presented evidence that, despite Mack's claims to have abandoned its prior policy, Mack in fact continued to enforce that policy until at least the time Toledo filed suit in 2002. With respect to evidence of an informal policy, Toledo introduced at trial notes taken in July 1988 by Richard Tracht, the Mack District Manager responsible for overseeing Toledo at that time. According to Tracht's notes, Yeager asked him whether Mack approved of Toledo's practice of selling trucks outside its AOR. Tracht recorded that he told Yeager that Mack did not like [Yeager's] policy as he was selling the majority of his trucks to already established Mack customers and in doing so was breaking established profit structures ... [making] the Mack dealers look bad in customers [sic] eyes causing a lot of concern between customers and dealers. (App. at A3963.) Toledo also introduced a cartoon Tracht sent to Yeager featuring two shabbily dressed men sitting in front of a poor house, with one man saying to the other, [m]y Mack Distributorship did more business than any others in the state. The trick was to undercut my competitor's rates. (App. at A3286.) At the top of the cartoon, Tracht had typed: This could be what we are headed for if we do not stop selling against other Mack dealers and concentrate on the real competition. Think about it!! Id. In addition, Toledo introduced a recording of a December 1988 telephone conversation [3] between Yeager and Dennis Wurzelbacher, Mack's then-Parts Promotion Manager. During that conversation, Yeager and Wurzelbacher discussed the sales of Mack parts called glider kits, which are bare truck bodies without engines or transmissions. Wurzelbacher told Yeager that [t]he ... problem we have is there are certain dealers that are sending [sic] glider kits in other people's backyards and we are getting calls on it. (App. at A3994.3) Yeager then asked Wurzelbacher what Mack's written policy was on dealers competing with one another. Wurzelbacher responded that he was not aware of an official company policy but that it was his opinion that there was a policy that would say, hey, you're only supposed to sell in your territory, okay? (App. at A3994.4.) Toledo also introduced evidence that Mack adopted an official policy of denying sales assistance on out-of-AOR sales. In 1989, Mack issued Marketing Distribution Bulletin 38-89 (Bulletin 38-89). Under this major ... change in official truck pricing policy (App. at A3147), Mack sought to enhance the competitive strength of Mack distributors within their respective geographic areas of sales and service responsibility. Id. To that end, Mack eliminated sales assistance on sales by a dealer outside the dealer's AOR. The express purpose of the policy was to create increased profit margins for Mack distributors as well as the Company. (App. at A3147.) Toledo introduced evidence at trial to show that Bulletin 38-89 was the result of an agreement between Mack and its National Distributor Advisory Council (NDAC) to prevent dealers from engaging in sales outside their AORs. [4] Specifically, Toledo introduced a recording of a July 1989 phone call between Yeager and Dick Murphy, a Mack Vice President, during which Yeager asked Murphy whether the NDAC had unanimously recommended Bulletin 38-89. Murphy responded, Oh yes. Oh very much so. Very much so. I mean, something as significant as this, it had to come from all walks. (App. at A4025.) Murphy indicated that some dealers had complained about the new policy. He then said if there's something that would justify [changing the policy] we'll get the [NDAC] together and perhaps we'll consider it. (App. at A4024.) Toledo also introduced a recording of another July 1989 conversation between Yeager and Gary Johnson, Mack's Vice President of Distributor Sales. During that exchange, Johnson explained that he was kind of new on the job and then went on to say that the one thing I can tell you that would be fair and legitimate advice is that I think this policy [i.e., Bulletin 38-89] came about to a large extent because of the voice of the distributor organization.... And if it's probably ever gonna be changed or modified, it will come about as a result of the voice of the dealer organization. (App. at A4058.) Johnson then stated, I can tell you, and this probably is not a surprise, that when we talked about some of the problems that come from selling outside of the territory, I guess Toledo goes pretty close to the top of the list. (App. at A4059.) After some additional discussion, Yeager stated that, [a]s I understand what [the dealer network did,] they did not recommend [a] restrictional territorial system.... [A]nd if they did, it's strictly a self-serving type of thing for the dealers that have a lot of geographical area. (App. at A4062-63.) Johnson responded by simply saying Umhmm. [5] (App. at A4063.) In October 1989, shortly after it had adopted Bulletin 38-89, Mack issued a revised policy, Marketing Distribution Bulletin Addendum 38-89A (Bulletin 38-89A). Bulletin 38-89A provided that [s]ales [a]ssistance shall be uniformly made available to ALL Mack distributors on an equal basis, actively and directly involved in prior negotiations with the retail customer for the purchase of new Mack vehicles. (App. at A3982 original emphasis). Toledo presented evidence at trial, however, indicating that, despite the new policy, Mack and some of its dealers continued to work in concert to prevent other Mack dealers from selling outside their individually assigned AORs. Regarding the period from 1989 to 1998, Toledo introduced a recording of a January 1991 telephone conversation between Yeager and Kevin Flaherty, Mack's Vice-President for Sales. During the conversation, Yeager and Flaherty discussed some difficulties Yeager was having selling three trucks Toledo had bought from Mack. [6] Yeager requested sales assistance to sell those trucks outside of his AOR. Flaherty told him, however, that our policy has not changed and that Mack would provide sales assistance if Yeager sold the trucks inside his AOR but would not give a whole lot of hope if the sales were outside of it. (App. at 4085-86.) Flaherty emphasized, [O]bviously, we're looking to protect our distributors. That's always been the backbone of Mack is to protect our distributors. (App. at 4086.) During a second conversation between Yeager and Flaherty in June 1991, Flaherty stated that [if] there's ever a manufacturer that protected their distributor organization.... It's the Mack truck company, to a fault. (App. at 4128.) Toledo also introduced a recording of a conversation that took place in 1996 between Yeager and Bob Grussing, Mack's Parts Manager. Grussing told Yeager that dealers constantly want Mack to get involved in these territorial disputes ... and to protect them from one another. And right or wrong, we do that, you know. (App. at A4147.) Grussing also stated that such protection was a long standing tradition and that I don't know if I can break that. Id. To establish that Mack continued to participate in an illegal conspiracy with its dealers from 1998 to 2002, Toledo points to various conversations between Jack Lusty, the Mack District Manager responsible for supervising Toledo during that time period, and Jeff Yelles, a Mack Regional Vice President who was Lusty's immediate superior. Lusty testified that Yelles told him in 2002 that he kn[ew] what [Toledo] [was] trying to do. [Toledo] wants to establish discounts and sell trucks all over the place. We are not going to let this happen. (App. at A2824.) Lusty also testified that Yelles told him that Yeager was just soliciting customers on price;... we have to beat the living shit out of him.... [H]e is a son of a bitch. (App. at A2818.) Yelles also allegedly told Lusty, in a profanity-laced burst of anger, that Toledo was not play[ing] by the rules and that someone should take [Yeager] out. (App. at A2825.) Toledo presented evidence that Yelles took affirmative steps to prevent Toledo from selling outside its AOR. Lusty testified that, in 2000, Yelles instructed him to tell Toledo to stop competing against another Mack dealer for a particular sale to a customer located outside Toledo's AOR. Yelles told Lusty to tell Toledo that Mack would not release sales assistance on any sale by Toledo to that customer. Accordingly, Lusty sent Yeager a fax instructing him to cease his predatory approach to customer prospecting. (App. at 2812.) Yelles himself admitted at trial that, on at least one occasion in 2003, he asked Mack's Controller, Steve Polzer, to delay approving Toledo's request for sales assistance so that another Mack dealer could get the customer's business instead. Finally, Lusty testified that, after 1998, Mack used the sales assistance process to control dealers. After rescinding the 1989 policy, Mack implemented a system of cross-checks which were ostensibly designed to ensure that, in a situation where an out-of-AOR dealer competed with an in-AOR dealer, both dealers received the same amount of sales assistance from Mack. The system was presented by Mack as requiring equal treatment. Supposedly, a dealer who wished to make an out-of-AOR sale had to indicate to its District Manager the area into which the dealer wished to make the sale before it could receive sales assistance. The dealer's District Manager would then conduct a cross-check by contacting the District Manager responsible for that AOR and informing him or her of the potential sale. If it turned out that the dealer into whose AOR the sale would be made was competing for the same deal, then the in-AOR District Manager and the out-of-AOR District Manager were to ensure that both dealers received equal amounts of sales assistance. Despite the stated purpose of the cross-checks, however, Lusty testified that from 1999 to 2003, the cross-checks were often used as an early warning system to let an in-AOR dealer know when an out-of-AOR dealer was attempting to make a sale inside the in-AOR dealer's territory. (App. at A2877.) Lusty explained that District Managers would often grant requests for sales assistance verbally rather than using Mack's computer system, so that in-AOR dealers could give a potential customer a quote before an out-of-AOR dealer could obtain a quote on the same deal. Lusty also said that, because there was no record of verbal grants of sales assistance, District Managers would sometimes use this tactic to extend a discount to a dealer without conducting a cross-check.