Court Opinion

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Opinions of the United
1994 Decisions                                                                                                             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Precedential or Non-Precedential: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

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                         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 Euro-

Trade, 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 Euro-

Trade.   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 counter-

balance 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.