Court Opinion

ID: 2974392
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:17:11.711971+00
Date Added: 2024-06-11T15:32:57.314307
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                          File Name: 06a0741n.06
                           Filed: October 5, 2006

                                          No. 05-5458

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

PAUL F. CARUANA,                                )
                                                )
       Plaintiff-Appellee,                      )
                                                )
v.                                              )    ON APPEAL FROM THE UNITED
                                                )    STATES DISTRICT COURT FOR THE
                                                )    MIDDLE DISTRICT OF TENNESSEE
GENERAL MOTORS CORPORATION,                     )
                                                )
       Defendant-Appellant.                     )

       Before: COOK, McKEAGUE, Circuit Judges, and WILHOIT, District Judge.*

       COOK, Circuit Judge. Paul Caruana was the sole shareholder and operator of a General

Motors dealership, Tennessee Motors, Inc., until March 2001, when financial setbacks caused him

to sell a majority interest to several investors. Caruana then sued Defendants General Motors

Corporation (“GM”), General Motors Acceptance Corporation (“GMAC”), and several additional

defendants under, among other things, the Automobile Dealers’ Day in Court Act (“ADDCA”) and

the federal antitrust laws. GM moved to dismiss Caruana’s ADDCA and antitrust claims for lack

of standing. The district court denied GM’s motion, but certified these standing questions for

       *
        The Honorable Henry R. Wilhoit, Jr., United States District Judge for the Eastern District
of Kentucky, sitting by designation.
No. 05-5458
Caruana v. Gen. Motors Corp.

interlocutory appeal, which this court accepted. We hold Caruana lacks standing under both the

ADDCA and federal antitrust laws.

                                                I.

       Caruana owned all the stock and also managed Tennessee Motors, a GM dealership. To

stimulate sales, Caruana adopted a full disclosure, consumer-oriented approach known as “invoice

price selling” and thereby sold significantly more cars than anticipated. Caruana claims that other

dealers, struggling to compete with Caruana’s low pricing, complained to GM, who bowed under

the dealers’ pressure and retaliated against Caruana and Tennessee Motors by (1) refusing to ship

vehicles to Tennessee Motors, (2) refusing to fill orders for sold vehicles, and (3) providing

inadequate support and assistance.

       Caruana also claims that GMAC followed GM’s lead in applying pressure by its refusal to

provide financing to Caruana’s customers on the same terms under which it financed other dealers’

customers. When GMAC also demanded that Caruana infuse $275,000 cash into Tennessee

Motors—which it could do because Caruana was “out of trust” with GMAC as a result of

comptroller theft—or it would terminate Tennessee Motors’s financing, Caruana sold part of his

interest in Tennessee Motors to several investors to raise the cash. Caruana now holds only a 32%

interest in the company and no longer manages the dealership. According to Caruana, GM intended

this result when it made financial demands on him that it knew he could not meet and otherwise

                                               -2-
No. 05-5458
Caruana v. Gen. Motors Corp.

discriminated against him. Also, Caruana claims that GM and GMAC conspired with the investors

who purchased equity in Tennessee Motors.

       Caruana sued GM, GMAC, and several of the investors. The Defendants moved to dismiss

under Fed. R. Civ. P. 12(b)(6). Relevant to this appeal, the district court denied GM’s motion to

dismiss Caruana’s claims under both the ADDCA and federal antitrust laws, concluding that

Caruana had standing to pursue his claims. We review the standing questions pursuant to 28 U.S.C.

§ 1292(b).

                                                  II.

       “To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain either direct

or inferential allegations respecting all the material elements to sustain a recovery under some viable

legal theory. Nonetheless, conclusory allegations . . . will not suffice to prevent a motion to

dismiss.” Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005) (internal citation omitted). We review

such judgments de novo. Id.

                             A. Automobile Dealers’ Day in Court Act

       GM first contests the district court’s determination that Caruana has standing to pursue his

ADDCA claims. Because the Act provides a cause of action for an “automobile dealer” when an

“automobile manufacturer” fails to act in good faith in carrying out a franchise agreement, we must

consider whether Caruana himself is an “automobile dealer,” the district court having concluded that

                                                 -3-
No. 05-5458
Caruana v. Gen. Motors Corp.

Caruana could not maintain a derivative claim. 15 U.S.C. §§ 1221–1225; see id. § 1222. An

“automobile dealer” is “any person, partnership, corporation, association, or other form of business

enterprise . . . operating under the terms of a franchise and engaged in the sale or distribution of

passenger cars, trucks, or station wagons.” Id. § 1221(c). A “franchise” is “the written agreement

or contract between any automobile manufacturer engaged in commerce and any automobile dealer

which purports to fix the legal rights and liabilities of the parties to such agreement or contract.” Id.

§ 1221(b).

        Caruana argues that he qualifies as an “automobile dealer” by virtue of his being a party to

the franchise agreement, which emphasized his personal role. He highlights the clause designating

the agreement as a “Personal Services Agreement, entered into . . . on Dealer’s assurance that Dealer

Operator will provide personal services by exercising full managerial authority over Dealership

Operations.” To show that he and his dealership were essentially indistinguishable, Caruana notes

that he signed the agreement on behalf of Tennessee Motors, he was the “Dealer Operator” referred

to in the agreement, and GM could terminate the franchise agreement if Caruana became

incapacitated. Yet the contract delimits Tennessee Motors as the “only party to [the] Agreement

with General Motors,” and Tennessee law instructs that we construe the contract “according to its

plain terms.” Pitt v. Tyree Org. Ltd., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002) (citations omitted).

        Caruana also contends that he qualifies as a dealer because he is “an intended third party

beneficiary of the Agreements.” Under Tennessee law, however, a third party may enforce a contract

                                                  -4-
No. 05-5458
Caruana v. Gen. Motors Corp.

only if, among other things, the parties have not otherwise agreed. Owner-Operator Indep. Drivers

Ass’n, Inc. v. Concord EFS, Inc., 59 S.W.3d 63, 70–71 (Tenn. 2001). The franchise agreement

provides, “This Agreement is not enforceable by any third parties and is not intended to convey any

rights or benefits to anyone who is not a party to this Agreement.” Caruana thus may not assert the

rights of Tennessee Motors as a third party beneficiary.

        Caruana essentially seeks to sue as a shareholder for the corporation’s injuries. In this circuit,

individual shareholders, even sole shareholders, generally do not have standing under the ADDCA

to sue for the corporation’s injuries. As we explained in Dienstberger v. General Motors Corp., No.

94-4336, 1995 WL 559374, at *1 (6th Cir. Sept. 20, 1995) (unpublished opinion), a plaintiff who

sues “in his sole capacity as a shareholder . . . lacks standing to challenge [the manufacturer’s]

action. Only the corporate entity . . . could sue [the manufacturer] . . . .” Dienstberger applied the

well-established doctrine, articulated in Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals., Inc.,

862 F.2d 597, 602–03 (6th Cir. 1988), that shareholders and officers of a franchisee lack standing

to sue the franchisor for the franchisee corporation’s injuries. The district courts in this circuit apply

this rule to ADDCA claims, and we see no reason here to depart from it. See, e.g., Salem Mall

Lincoln Mercury, Inc. v. Hyundai Motor Am., No. C-3-95-231, 1998 WL 1572766, at *3 (S.D. Ohio

Aug. 18, 1998) (“When the dealership is doing business in the corporate form, ‘the statute contains

no hint that it intends a departure from the established principle that the locus of the right of action

is the corporation.’” (quoting Vincel v. White Motor Corp., 521 F.2d 1113, 1120 (2d Cir. 1975));

Hagen v. Gen. Motors Corp., No. C-1-75-321, 1976 WL 1304, at *2 (S.D. Ohio Aug. 27, 1976).

                                                  -5-
No. 05-5458
Caruana v. Gen. Motors Corp.

Many of our sister circuits apply this standing limitation without exception. See, e.g., Tucker v.

Chrysler Credit Corp., No. 97-1364, 1998 WL 276266, at *4 (4th Cir. May 29, 1998); Pearson v.

Ford Motor Co., 68 F.3d 1301, 1303 (11th Cir. 1995); Olson Motor Co. v. Gen. Motors Corp., 703
F.2d 284, 289–90 (8th Cir. 1983); Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 439–40

(9th Cir. 1979); Vincel, 521 F.2d at 1120.

       Several circuits have recognized exceptions to the rule against shareholder standing, and

Caruana argues that his case fits one of these exceptions. In Kavanaugh v. Ford Motor Co., 353 F.2d
710, 716 (7th Cir. 1965), the Seventh Circuit allowed a shareholder of a franchisee corporation to

sue Ford because the corporation was “substantially owned and controlled by Ford.” This

relationship, the court reasoned, “effectively insulates Ford from liability under the act.” Id. at 717.

The Seventh Circuit relied on the “settled doctrine that the fiction of corporate entity will be

disregarded whenever it has been adopted or used to evade the provisions of a statute.” Id. Caruana

alleges no such facts regarding his adoption of the corporate form. Later analysis of Kavanaugh has

essentially limited it to situations where the manufacturer also owns a controlling interest in the

dealership. See Salem Mall, 1998 WL 1572766, at *4 (rejecting plaintiffs’ reliance on Kavanaugh

as misplaced when they made no showing that the manufacturer “forced” the corporate form on them

or that the manufacturer controlled the dealership); see also Vincel, 521 F.2d at 1120 (“the

circumstances in [Kavanaugh] which induced the court to disregard the corporate entity were

compelling”).

                                                 -6-
No. 05-5458
Caruana v. Gen. Motors Corp.

       Caruana also urges us to adopt the exception articulated by the Fifth Circuit in York Chrysler-

Plymouth v. Chrysler Credit Corp., 447 F.2d 786 (5th Cir. 1971). In York, the Fifth Circuit

recognized that “individuals would not come within the scope of the Act merely because they were

sole stockholders, officers and directors of the corporate franchise holder,” id. at 790, but because

the franchisees in York “were so inextricably woven” into the franchise agreement, the court granted

them standing. Id. This reasoning, however, fails to respect the plain language of the ADDCA. As

the court in Salem Mall explained, “the York court misinterpreted the holding in the . . . Kavanaugh

decision, in reaching a conclusion that ‘essential’ persons—or as the Plaintiffs characterize it, those

persons having a ‘personal commitment’—enjoy an exception to the plain language of the ADDCA.”

1998 WL 1572766, at *5. The district court in this case followed Salem Mall in correctly rejecting

Caruana’s reliance on York, in keeping with several circuits that have criticized or declined to follow

York. See, e.g., Tucker, 1998 WL 276266, at *4; Pearson, 68 F.3d at 1303; Olson Motor Co., 703
F.2d at 289 n.5; Sherman, 601 F.2d at 440 n.11; Vincel, 521 F.2d at 1120.

       The district court also discussed and relied on Imperial Motors, Inc. v. Chrysler Corp., 559
F. Supp. 1312 (D. Mass. 1983), in determining Caruana’s standing. Although Imperial Motors’s

facts resemble those in this case, Imperial Motors relied on York and Kavanaugh in permitting

plaintiff suits beyond the purview of the plain language of the statute, id. at 1314–15, and as

previously discussed, we find these extensions unsupported by the ADDCA.

                                                 -7-
No. 05-5458
Caruana v. Gen. Motors Corp.

       Caruana bemoans 12(b)(6) dismissal as denying him the opportunity to present facts

establishing his standing to sue under the Act. Such dismissals require courts to accept all factual

allegations contained in the complaint as true and “determine whether the plaintiff undoubtedly can

prove no set of facts in support of his claims that would entitle him to relief.” In re DeLorean Motor

Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (citing Meador v. Cabinet for Human Res., 902 F.2d 474,

475 (6th Cir. 1990)). Though Caruana alleges in his complaint that he is an “automobile dealer” as

defined by the ADDCA, this allegation is a legal conclusion, and “we need not accept as true legal

conclusions or unwarranted factual inferences.” Morgan v. Church’s Fried Chicken, 829 F.2d 10,

12 (6th Cir. 1987). Without allegations of fact to support “dealer” status, 12(b)(6) dismissal fits.

       We hold that the district court erred by permitting Caruana to assert claims under the

ADDCA.

                                       B. Antitrust Standing

       Caruana asserts several antitrust claims under the Sherman Act, 15 U.S.C. § 1, the Clayton

Act, 15 U.S.C. § 15, and the Robinson-Patman Act, 15 U.S.C. § 13. In essence, Caruana claims that

Defendants GM, GMAC, and some other unknown individuals conspired to engage in a resale-price-

maintenance scheme to harm Tennessee Motors and end its practice of “invoice price selling.”

Caruana’s right to proceed hinges on his ability to overcome challenges to his standing under the

antitrust laws. Antitrust plaintiffs must prove more than economic injury; they “‘must prove antitrust

injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows

                                                -8-
No. 05-5458
Caruana v. Gen. Motors Corp.

from that which makes the defendants’ acts unlawful.’” Valley Prods. Co. v. Landmark, A Div. of

Hospitality Franchising Sys., Inc., 128 F.3d 398, 402 (6th Cir. 1997) (quoting Brunswick Corp. v.

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). This heightened standard obtains because the

antitrust laws “were enacted for ‘the protection of competition, not competitors.’” Brunswick, 429
U.S. at 488 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). Schooled by the

Supreme Court’s articulation of factors relevant to antitrust standing in Associated General

Contractors of California Inc. v. California State Council of Carpenters, 459 U.S. 519, 537–45

(1983), this circuit then adopted that formulation:

       (1) the causal connection between the antitrust violation and harm to the plaintiff and
       whether that harm was intended to be caused; (2) the nature of the plaintiff’s alleged
       injury including the status of the plaintiff as consumer or competitor in the relevant
       market; (3) the directness or indirectness of the injury, and the related inquiry of
       whether the damages are speculative; (4) the potential for duplicative recovery or
       complex apportionment of damages; and (5) the existence of more direct victims of
       the alleged antitrust violation.

Southaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir. 1983) (citing Associated

Gen. Contractors, 459 U.S. at 537–45). “All five factors must be balanced, however, with no one

factor being determinative.” Indeck Energy Servs., Inc. v. Consumers Energy Co., 250 F.3d 972, 976

(6th Cir. 2000). Nonetheless, “[t]he Sixth Circuit, it is fair to say, has been reasonably aggressive

in using the antitrust injury doctrine to bar recovery where the asserted injury, although linked to an

alleged violation of the antitrust laws, flows directly from conduct that is not itself an antitrust

violation.” Valley Prods., 128 F.3d at 403. With these guidelines in mind, we assess the Southaven

                                                 -9-
No. 05-5458
Caruana v. Gen. Motors Corp.

factors as they apply to this case.

        We first examine “the causal connection between the antitrust violation and harm to the

plaintiff and whether that harm was intended to be caused.” Southaven, 715 F.2d at 1085. As the

district court aptly observed, “The majority of the antitrust violations averred by Caruana stem from

Defendants’ alleged use of [resale] price maintenance. However, any antitrust infraction that may

have been perpetrated was directed at [Tennessee Motors], as a corporate entity, not at Caruana as

an individual. Thus, Caruana’s injury is only incidental to the alleged misconduct . . . .” Caruana,

No. 3:01-1567, slip op. at 21. But the district court then reversed course: despite its initial focus on

the distinction between shareholder injury and corporate injury, the concept of GM and GMAC

targeting Caruana personally for his advocacy of invoice-price selling moved the court to find

standing. There is no reconciling the court’s initial determination that the pricing conspiracy aimed

“to prevent [Tennessee Motors] from utilizing invoice price selling . . . and not Caruana

individually,” Caruana, No. 3:01-1567, slip op. at 21–22, with its conclusion that the conspiracy

sought to “force a change in ownership and control in [Tennessee Motors] directed at Caruana

personally because of his advocacy of invoice price selling.” Id. at 22. We see the chain of

causation between the alleged conspiracy to harm the business and injury to Caruana’s

ownership/management interest as too attenuated to be “injury of the type the antitrust laws were

intended to prevent.” Valley Prods., 128 F.3d at 402 (quoting Brunswick, 429 U.S. at 489).

        We buttress this conclusion by consideration of the second and conceptually-related factor,

                                                 - 10 -
No. 05-5458
Caruana v. Gen. Motors Corp.

“the nature of the plaintiff’s alleged injury including the status of the plaintiff as consumer or

competitor in the relevant market.” Southaven, 715 F.2d at 1085. Caruana is neither a consumer

nor a competitor in the relevant market; he is a shareholder and employee of a competitor. He

suffered investment and employment losses, while Tennessee Motors suffered any alleged “antitrust

injury” here. In Peck v. General Motors Corp., 894 F.2d 844 (6th Cir. 1990), a factually analogous

case, the former employees and shareholders of a car dealership driven into bankruptcy by an

antitrust conspiracy did not have standing to assert antitrust claims. As the court explained, “[t]he

Pecks’ loss of employment income, benefit incentives and personal investments place them in no

. . . position to assert standing. . . . Accordingly, the Pecks’ damages are derivative and militate

against granting them antitrust standing.” Id. at 847.

       We see no relevant distinction between Caruana’s and the Pecks’ injury. Caruana claims that

the defendants’ resale price maintenance scheme harmed Tennessee Motors and that, as a result of

the dire financial straits caused by the scheme, Caruana was forced to seek outside investors and

ultimately lost control of the Tennessee Motors business. This is no different than the Pecks’ injury:

Caruana suffered economic loss deriving from the effects of an antitrust conspiracy directed at the

corporation itself. And Caruana’s status as sole shareholder during part of the alleged conspiracy

fails to distinguish his case from Peck because this court has refused to find that sole-shareholder

status confers antitrust standing. Meyer Goldberg, Inc. of Lorain v. Goldberg, 717 F.2d 290, 294

& n.2 (6th Cir. 1983) (sole shareholder of a bankrupt corporation lacked antitrust standing).

                                                - 11 -
No. 05-5458
Caruana v. Gen. Motors Corp.

       Caruana points us to some instances in which an individual not fitting into the category of

competitor or consumer in the relevant market may have standing to bring antitrust claims. See Blue

Shield of Va. v. McCready, 457 U.S. 465 (1982). McCready is inapposite to Caruana’s case. As this

court explained in Southaven, “McCready instructs that an injury ‘inextricably intertwined’ with the

injury sought to be inflicted upon the relevant market or participants therein may fall ‘within the area

of congressional concern’ so as to satisfy the [standing] inquiry.” Southaven, 715 F.2d at 1086

(quoting McCready, 457 U.S. at 484). Caruana, however, does not contend that he has standing

under an “inextricably intertwined” theory, nor could he. To merit standing under the “inextricably

intertwined” category, a plaintiff must assert that defendants used him as a “a fulcrum, conduit or

market force to injure competitors or participants in the relevant product or geographical markets.”

Id.

       McCready concerned a purchaser of psychotherapy services and not a competitor of the

alleged conspirators. The Supreme Court ruled the purchaser nevertheless had antitrust standing

“because her injury was integrally connected to the harm the conspirators sought to inflict [and she]

was actively manipulated by conspirators. . . .” Peck, 894 F.2d at 847 (citing McCready, 457 U.S.

at 483–84). Just as in Peck, though, Caruana claims injury derived from the effects of the conspiracy

perpetrated against Tennessee Motors; he was not manipulated or used by defendants in carrying out

their conspiracy. See id.

       As regards the third and fourth Southaven factors, the directness or indirectness of the injury,

                                                 - 12 -
No. 05-5458
Caruana v. Gen. Motors Corp.

whether the damages are speculative, and the potential for duplicative recovery or complex

apportionment of damages, because Caruana asserts only shareholder injury not cognizable under

the antitrust laws, we bypass questions of the nature of his damages as inapposite to this case.

Southaven, 715 F.2d at1085.

        And finally, the fifth Southaven factor examines the existence of more direct victims of the

alleged antitrust violation. 715 F.2d at 1085. The district court found that “[i]f Caruana is denied

standing to sue, no one else has incentive to restore competition to the automotive market and these

antitrust injuries to [Tennessee Motors] and the market remain unaddressed.” Caruana, No. 3:01-

1567, slip op. at 23–24. While the district court’s observation may have been correct, it does not

cure the central defect with Caruana’s complaint, i.e., his injuries are not antitrust injuries, but

merely derivative injuries. Moreover, if there were a conspiracy between GM and the other

unidentified defendants to terminate price-cutting car dealers, at least two more direct victims of the

violation exist: Tennessee Motors and the consumers themselves.

        After considering each Southaven factor, we find that Caruana does not establish standing

to assert his antitrust claims.

                                                 III.

        We hold that the district court erred in finding that Caruana established standing to pursue

claims under the ADDCA and the federal antitrust laws. We therefore reverse the district court’s

                                                - 13 -
No. 05-5458
Caruana v. Gen. Motors Corp.

denial of GM’s motion to dismiss and remand for proceedings consistent with this opinion.

                                             - 14 -