622 F. Supp. 466 (1984) | Cited 0 times | N.D. Illinois | September 4, 1984


This is an action by North Broadway Motors, Inc. ("NorthBroadway"), an automobile dealer, against Fiat Motors of NorthAmerica, Inc., ("Fiat North America"), which supplied NorthBroadway with Fiat automobiles. In January 1976, NorthBroadway entered into a Dealer Sales and Service Agreementwith Fiat North America that established North Broadway as aFiat dealer. According to plaintiff's amended complaint, FiatNorth America established a system of unfair and unequalquotas that had the effect of forcing plaintiff to accept adisproportionately high number of automobiles and parts ascompared with neighboring Fiat dealers, thus placing plaintiffat a competitive disadvantage. Amended Complaint, Count 1¶¶ 7, 8. Further, Fiat North America sold new Fiat cars toautomobile liquidators at "cut-rate" prices lower than theprices at which similarcars were offered to plaintiff. Id. ¶ 9. Finally, defendantallegedly forced plaintiff to purchase unpopular Fiat models asa condition precedent of the purchase of more popular models.Id. ¶ 10. As a result of these actions, North Broadway wasforced to sell its Fiat dealership at a great loss. Id. Count 2¶ 13. After plaintiff gave up its Fiat dealership, thecomplaint asserts, Fiat North America offered an arbitrarilylow price for the repurchase of plaintiff's inventory of partsand automobiles. Id., Count 6 ¶ 14.

The amended complaint is stated in eight counts. In count 1,plaintiff alleges that defendant had an implied obligationunder its agreement with plaintiff to provide plaintiff a fairand equitable allocation of Fiat cars, an obligation breachedby the previously-described actions. In count 2, plaintiffclaims that these actions were done by defendant with maliceand the intent to destroy plaintiff's business or to forceplaintiff to sell his dealership at a loss. Count 3 is basedon the Automobile Dealer's Day in Court Act ("Dealer's Act"),15 U.S.C. § 1221-25 (1982); plaintiff asserts that defendant'sactions with respect to allocation of automobiles and purchaseprice violated the obligation of "good faith" applicable toauto manufacturers contained in id. § 1222. In count 4,plaintiff asserts that these actions violated the IllinoisMotor Vehicle Franchise Act ("IMVFA"), Ill. Rev.Stat. ch. 1211/2, §§ 751-64 (1983), which makes unlawful certain practicesconcerning allocation of automobiles. Count 5 is based ondefendant's alleged refusal to reimburse plaintiff for twoclaims plaintiff made for performing repair work on Fiat carscovered by the manufacturer's warranty. In count 6, plaintiffasserts that defendant's pricing of plaintiff's inventory wasarbitrary, capricious, and willful. Count 7 claims that thisconduct violated the IMVFA; count 8 asserts that it violatedthe Dealer's Act.

Defendant has moved to dismiss all of the complaint exceptcount 5.


Count 1 is, as we have noted, essentially a breach ofcontract claim. The contract is attached to the amendedcomplaint. The only obligations it imposes on Fiat NorthAmerica with respect to allocation of automobiles are asfollows:

[Fiat North America] shall give careful consideration to each order received from Dealer for Fiat passenger cars and other [Fiat North America] Products. . . .

[Fiat North America], however, will not ship any (Fiat North America] Products to Dealer, except pursuant to Dealer's specific order.

Dealer Sales and Service Agreement ¶ 13(b), (c). The agreementalso provides that "there is no other agreement orunderstanding, either oral or in writing, between the partiesaffecting this Agreement or relating to the subject matterhereof." Id. ¶ 61(c). It also provides that defendant "shallnot be under any liability to Dealer for failure to deliver. . . pursuant to orders of Dealer accepted by [Fiat NorthAmerica]. . . ." Id. ¶ 15. Defendant argues, based on theseprovisions, that there is neither an express nor an implicitagreement by defendant to provide plaintiff a fair andequitable allocation of Fiat cars. Plaintiff's only response tothis is that if we read the complaint carefully we will seethat it states a claim.

We have read the complaint and the agreement carefully, andwe agree with defendant that there is no basis for a claim ofbreach of contract. Plaintiff does not allege that defendantbreached its obligation to give "careful consideration" toplaintiff's orders or its undertaking not to ship products toplaintiff except pursuant to an order. In light of theintegration clause contained in ¶ 61(c) of the agreement, wecannot hold defendant responsible for breaching undertakingsthat are not made expressly in the agreement. Count 1 istherefore dismissed for failure to state a claim upon whichrelief may be granted.

Count 2, with its allegation of malice and intent to destroyplaintiff's business,appears to be a tort claim. Though once again plaintiff doesnot attempt to illuminate matters for us with respect to count2, we must examine the complaint to determine whether itsallegations provide for relief under any possible theory, evenif that theory is not articulated in the complaint itself.See Knapp v. McCoy, 548 F. Supp. 1115, 1116 (N.D.Ill. 1982)(Shadur, J.). The only tort conceivably implicated by theallegations in count 2 is interference with prospectiveeconomic advantage. There are four elements of this tort underIllinois law: 1) plaintiff reasonably expects to enter into avalid business relationship; 2) defendant knows of thisexpectancy; 3) defendant intentionally interferes inplaintiff's expectancy, preventing it from ripening into avalid business relationship; and 4) plaintiff suffers damagesas a result of defendant's interference. See Knapp, 548 F. 1117 (Illinois law); Bank Computer Network Corp. v.Continental Illinois National Bank and Trust Co., 110 Ill. App.3d 492,500, 66 Ill.Dec. 160, 166, 442 N.E.2d 586, 592(1982).

Opportunity to obtain customers is an expectancy protectedby the tort action for interference with prospectiveadvantage. Knapp, 548 F. Supp. at 1117. Giving the allegationsof the complaint a fair reading, plaintiff asserts thatdefendant's conduct concerning allocations impaired plaintiff'sability to obtain customers, as plaintiff had a poor "mix" ofFiat automobiles. As we read the complaint, plaintiff had areasonable expectancy of which defendant was aware. Further,the allegation of malice contained in paragraph 12 of thecomplaint suffices as an assertion of intentional interferencein plaintiff's expectancy, particularly when combined with anallegation of an intent to destroy plaintiff's business orlower its value. Knapp, 548 F. Supp. at 1117. Finally, plaintiffadequately alleges that it was damaged by defendant's conductin that it had to sell its dealership at a great loss.

The caselaw also requires that a defendant's conduct bewrongful and not in accord with legitimate business practicesin order to be actionable. See Panter v. Marshall Field & Co.,646 F.2d 271, 298 (7th Cir.) (Illinois law), cert. denied,454 U.S. 1092, 102 S.Ct. 658, 70 L.Ed.2d 631 (1981); Knapp, 548F. Supp. at 1117; Bank Computer, 110 Ill. App.3d at 500-01, 66Ill.Dec. at 166-67, 442 N.E.2d at 592-93. As the IllinoisAppellate Court has stated,

[t]he theory of the tort of interference, it is said, is that the law draws a line beyond which no member of the community may go in intentionally intermeddling with the business affairs of others; that if acts of which the complaint is made do not rest on some legitimate interest, or if there is sharp dealing or overreaching or other conduct below the behavior of fair men [sic] similarly situated, the ensuing loss should be redressed; and that line of demarcation between permissible behavior and interference reflects the ethical standards of the community.

City of Rock Falls v. Chicago Title & Trust Co., 13 Ill. App.3d 359,362-63, 300 N.E.2d 331, 333 (1973), quoted in Panter, 646F.2d at 298. It is established in Illinois law that "one whohas an interest may take action to protect his rights, and evenif the interference is done with malice he cannot be heldfinancially liable for the result of his actions." BankComputer, 110 Ill. App.3d at 500, 66 Ill.Dec. at 166, 442N.E.2d at 592; Petit v. Cuneo, 290 Ill. App. 16, 22,7 N.E.2d 774, 777 (1937).

It is possible that defendant will take the position thatits allocations of automobiles among its dealers was devisedin order to ensure that it was able to dispose of all of theautomobiles it obtained from the manufacturer and/or in orderto develop a market for automobiles other than the so-called"popular" models. These might be legitimate interests thatdefendant is legally entitled to protect. However, at presentwe are concerned only with the issue of the adequacy ofplaintiff's complaint, and the question is therefore whether"it appears beyond doubt that the plaintiff can prove no setof facts in support of his claim which would entitle him torelief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99,2L.Ed.2d 80 (1957).We cannot simply assume that defendant acted reasonably infurtherance of its own legitimate objectives and that it didnot engage in overreaching. The complaint adequately spellsout the elements of a claim for interference with prospectiveadvantage, and defendant's motion to dismiss is thereforedenied as it relates to count 2.


Counts 4 and 7 are, as we have noted, based on the IMVDA.The IMVDA became effective in June 1979. The Illinois courtshave held that the statute is to be construed as operatingprospectively so as not to violate the constitutionalguarantee against impairment of the obligation of contracts.Marquette National Bank v. Loftus, 117 Ill. App.3d 771, 73Ill.Dec. 267, 454 N.E.2d 11 (1983); McAleer Buick-Pontiac Co.v. General Motors Corp., 95 Ill. App.3d 111, 50 Ill.Dec. 500,419 N.E.2d 608 (1981). Under McAleer and Marquette, thequestion whether application of the Act in a particular casewould be impermissibly retroactive is determined by examiningwhether the Act "`takes away or impairs vested rights acquiredunder existing laws, or creates a new obligation, imposed a newduty, or attaches a new disability in respects of transactionsor considerations already past.'" McAleer, 95 Ill. App.3d at113, 50 Ill.Dec. at 502, 419 N.E.2d at 610 (quoting UnitedStates Steel Credit Union v. Knight, 32 Ill.2d 138, 142,204 N.E.2d 4, 6 (1965)).

The agreement between plaintiff and defendant was enteredinto over three years before the effective date of the IMVDA.Because the agreement does not impose any obligation upondefendant as to allocation of cars other than the limited dutyto give plaintiff's orders fair consideration, application todefendant of the IMVDA's proscription of arbitrary andcapricious allocation plans, see Ill.Rev.Stat. ch. 121 1/2, §754(d)(1), unquestionably would "impose[] a new duty" upondefendant. It does not matter that the conduct of whichplaintiff complains may have come after the effective date ofthe IMVDA; the same was true in McAleer, in which the plaintiffcomplained of defendant's failure to renew its agreement withplaintiff in 1980. Plaintiff's only counterargument is that nospecific contractual right of defendant is impaired byapplication of the IMVDA, as the agreement is silent withrespect to allocations of cars among dealers. This argumentevinces a basic misunderstanding of the nature of a contract. Acontract is often as important for what it does not say as forwhat it requires. The agreement's silence on the subject ofallocations indicates that the parties did not intend to imposeupon defendant any duties concerning that subject. Thus,application of the IMVDA's proscription would add a new duty tothose that Fiat North America agreed to undertake. The same wastrue in McAleer, where the contract did not limit thedefendant's ability to refuse to renew its terms but the Actimposed a requirement of good cause for failure to renew. Forthese reasons, count 4 is dismissed for failure to state aclaim.

The same analysis applied to count 7, which is based on thealleged underpricing of plaintiff's inventory at the time ofits repurchase by defendant. The agreement sets a formula forcalculating repurchase prices, see Dealer Sales and ServiceAgreement ¶ 56, but the provision of the statute upon whichplaintiff relies in count 7, § 754(b), proscribes all"arbitrary" or "unconscionable" conduct. The effect of § 754(b)is to impose upon defendant a duty to act fairly in addition toits duty to pay the contractually mandated price to the dealer.McAleer requires that count 7 be dismissed.1


The Dealer's Act, upon which counts 3 and 8 are based,provides that an automobile dealer may bring suit against anyautomobile manufacturer and recover damages sustained byreason of the manufacturer's failure to act in good faith inperforming or complying with the terms or provisions of awritten dealership agreement or in terminating or not renewingsuch an agreement. 15 U.S.C. § 1222 (1982). "Good faith" isdefined in id. § 1221 as

the duty of each party to any [agreement] to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party

The courts have read the Act's definition of good faithliterally, and thus a manufacturer may be found to haveviolated the obligation of good faith only if it acted in acoercive or intimidating manner toward the dealer. See, e.g.,Ed Houser Enterprises, Inc. v. General Motors Corp.,595 F.2d 366, 369 (7th Cir. 1978) (per curiam); Lawrence ChryslerPlymouth, Inc. v. Chrysler Corp., 461 F.2d 608, 610 (7th Cir.),cert. denied, 409 U.S. 981, 93 S.Ct. 317, 34 L.Ed.2d 245(1972).

Coercion under the Act consists of an either-or demand, or,otherwise stated, a demand that will result in sanctions ifnot complied with. See, e.g., H.C. Blackwell Co. v. KenworthTruck Co., 620 F.2d 104, 107 (5th Cir. 1980); Marquis v.Chrysler Corp., 577 F.2d 624, 633 (9th Cir. 1978); FrayChevrolet Sales, Inc. v. General Motors Corp., 536 F.2d 683,685 (6th Cir. 1976); McDaniel v. General Motors Corp.,480 F. Supp. 666, 677 (E.D.N.Y. 1979); Cecil Corley Motor Co. v.General Motors Corp., 380 F. Supp. 819, 844 (M.D.Tenn. 1974);General Motors Corp. v. Mac Co., 247 F. Supp. 723, 726 (D.Colo.1965) (conduct which results in dealer acting or refrainingfrom acting against its will). In addition, most courts haveheld that the coercive demand must be wrongful, unfair, orinequitable in order to be actionable. See, e.g., Howard v.Chrysler Corp., 705 F.2d 1285, 1286-87 (10th Cir. 1983); H.C.Blackwell Co., 620 F.2d at 107; Marquis, 577 F.2d at 633;Autohaus Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901,911.(9th Cir.), cert. denied, 436 U.S. 946, 98 S.Ct. 2848, 56L.Ed.2d 787 (1978); Fray, 536 F.2d at 685; Randy's StudebakerSales, Inc. v. Nissan Motor Corp., 533 F.2d 510, 514 (10th Cir.1976); Milos v. Ford Motor Co., 317 F.2d 712, 716 (3d Cir.1963); Woodard v. General Motors Corp., 298 F.2d 121, 127 (5thCir. 1962). See also ShorLine Rambler, Inc. v. American MotorSales Corp., 543 F.2d 601, 604 (7th Cir. 1976) ("unreasonableand unrealistic" demand). But see Conroy Datsun, Inc. v. NissanMotor Corp., 506 F. Supp. 1051, 1058 (N.D.Ill. 1980) (dictum).Other courts have suggested, on the other hand, that themanufacturer must take into account the dealer's economicinterests in making decisions that affect the dealer. SeeColonial Ford, Inc. v. Ford Motor Co., 577 F.2d 106, 110-11(10th Cir. 1978), modified in part on reh'g, 592 F.2d 1126(10th Cir. 1979); Autowest, Inc. v. Peugeot, Inc.,434 F.2d 556, 561-62 (2d Cir. 1970); Volkswagen Interamericana, S.A. v.Rohlsen, 360 F.2d 437, 442 (1st Cir.), cert. denied,385 U.S. 919, 87 S.Ct. 230, 17 L.Ed.2d 143 (1966); Clifford JacobsMotors, Inc. v. Chrysler Corp., 357 F. Supp. 564, 574 (S.D. Ohio1973). See also H.C. Blackwell, 620 F.2d at 105-07 (demandsinvolving proper subjects but unreasonable time forcompliance).

In any event, several courts have held that a manufacturer'sinsistence that a dealer accept an unfair allocation ofautomobiles may form the basis for a suit under the Dealer'sAct. See Sherman v. British Leyland Motors, Ltd., 601 F.2d 429,445-46 (9th Cir. 1979); Autohaus Brugger, 567 F.2d at 914;American Motors Sales Corp. v. Semke, 384 F.2d 192, 195 (10thCir. 1967); David R. McGeorge Car Co. v. Leyland Motor Sales,Inc., 504 F.2d 52, 55-56 (4th Cir. 1974), cert. denied,420 U.S. 992, 95 S.Ct. 1430, 43 L.Ed.2d 674 (1975). Indeed, thelegislative history ofthe Act plainly demonstrates that Congress intended for suchconduct to be actionable:

[t]he existence of coercion or intimidation depends upon the circumstances arising in each particular case and may be inferred from a course of conduct. For example, manufacturer pressure, direct or indirect, upon a dealer to accept automobiles, parts, accessories, or supplies which the dealer does not need, want, or feel the market is able to absorb, may in appropriate circumstances constitute coercion or intimidation.

H.R.Rep. No. 2850, 84th Con., 2d Sess. 9 (1956), reprinted in1956 U.S.Code Cong. & Ad.News 4596, 4603. Here, as in Semke,plaintiff alleges that defendant required it to accept cars andparts that it did not want and that it was forced by thedownturn caused by that conduct to give up its franchise. If,in addition to this, it is necessary that an implied threat ofsanctions exists, though plaintiff does not make the argumentwe think that such a threat lies in the fact that under theagreement, ¶ 11, plaintiff was required to keep a stock ofcars, parts, and accessories adequate to meet defendant'srequirements, and if he did not, cause for termination mightexist under id. ¶ 52(b). Had plaintiff refused to accept thecars he did not want, a breach of the "adequate stock"requirement might have resulted.2 Count 3 thereforedescribes conduct that may give rise to a claim under theDealer's Act.3

Defendant argues, however, that since it is not amanufacturer of automobiles it is not a proper defendant underthe Dealer's Act. Section 1222, quoted earlier, provides forlawsuits against automobile manufacturers, a term defined in§ 1221(a) as anyone engaged in the manufacture or assembly ofautomobiles, "including any person, partnership, or corporationwhich acts for and is under the control of such manufacturer orassembler in connection with the distribution of saidautomotive vehicles." Paragraph 3 of the complaint statessimply that Fiat North America is in the business of operatingand issuing Fiat franchises and that it is the distributor forFiat products manufactured by Fiat Motors, which is not adefendant here.

As presently alleged, the complaint fails to satisfy therequirements of the DDICA, for there is no allegation thatdefendant "acts for and is under the control" of the entitythat manufactures Fiat automobiles. Plaintiff notes that theDealer Sales and Service Agreement frequently mentions theItalian company that manufactures the cars, Fiat S.P.A, but wesee nothing in the agreement to suggest that defendant isunder the Italian company's control. Plaintiff has, however,asked that it be granted leave to amend the complaint tosatisfy the requirements of the statute. We will permitplaintiff to do so, but in so doing we note that as weperceive the law, "control" under § 1221(a) does not requirecorporate affiliation or a principal-agent relationship. SeeGrappone, Inc. v. Subaru of North America, Inc., 403 F. Supp. 123,135 (D.N.H. 1975); DeCantis v. Mid-Atlantic ToyotaDistributors, Inc., 371 F. Supp. 1238, 1244 (E.D.Va. 1974). Asthe court stated in DeCantis, "it is sufficient that themanufacturer has the power, by contract or otherwise, to directthe course of dealing between the wholesale distributors andits retail dealers." 371 F. Supp. at 1244. See generallyVolkswagen Interamericana, S.A. v. Rohlsen, 360 F.2d at 441-42;Barney Motor Sales v. Cal Sales, Inc., 178 F. Supp. 172, 175(S.D.Cal. 1959).

Though this same defect in count 8, which also arises underthe Dealer's Act, can be cured by amendment, unlike count 3,count 8 does not describe conduct proscribed by the Act. Noelement of "coercion" is present in defendant's allegedarbitrarily low repurchase price, as there is nosuggestion that an either-or demand was made such thatsanctions would result upon noncompliance. That defect cannotbe cured by amendment.


Defendant's motion to dismiss for failure to state a claimis granted in part and denied in part. Counts 1, 4, 7, and 8are dismissed. Count 3 is dismissed with leave to amend within10 days. The motion is otherwise denied. Defendant is toanswer the remainder of the complaint within 20 days afterplaintiff amends count 3. Previous discovery/trial schedule tostand.

1. The amended complaint states at Count 1, paragraph 4,that the agreement was renewed annually by the parties. Werethis true, it might well mean that application of the IMVDAwould not be retroactive in the circumstances of this case.However, plaintiff does not rely on such an argument inresponding to the motion to dismiss, and in any event thecomplaint's allegation is contradicted by the plain languageof the agreement, which states that it remains in effect untilterminated. Dealer Sales and Service Agreement ¶ Eighth.

2. We do not intend by this to limit plaintiff to thisparticular "sanction" in proving his Dealer's Act claim. Theabove suffices, however, for purposes of a motion todismiss.

3. Plaintiff cannot, however, maintain a claim under theDealer's Act based on the alleged price discrimination betweenhis dealership and certain automobile liquidators. No elementof "coercion" as defined by the caselaw is present in suchconduct.

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