UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK
March 29, 1966
The opinion of the court was delivered by: DOOLING
Plaintiff's motion is to enjoin defendant from terminating the importer-distributor relation between the parties or substituting a new Western States distributor for plaintiff (15 U.S.C. §§ 1221-1225, New York General Business Law §§ 195-197, Bateman v. Ford Motor Co., 3d Cir. 1962, 302 F.2d 63, 66-67, Cf. Wagner v. World Wide Automobiles, W.D.N.Y. 1961, 201 F. Supp. 22, 24, Staten Island Motors, Inc. v. American Motor Sales Corp., D.N.J. 1959, 169 F. Supp. 378, 381); defendant moves to enjoin plaintiff from threatening to sue the Western States dealers if they stop dealing with plaintiff and give their business to defendant's substitutional distributor. Both motions are denied.
The facts have been separately found.
It may be that "equity jurisdiction" exists to arrest defendant's unilateral ending of whatever importer-distributor relation existed on February 15, 1966, when defendant acted. Bateman v. Ford Motor Co., supra, says that. All New York Auto Corp. v. Renault, Inc., N.Y. Co. 1959, 19 Misc.2d 790, 190 N.Y.S.2d 410, aff'd., 1st Dept. 1960, 10 A.D.2d 910, 202 N.Y.S.2d 200 notes that the absence of a truly adequate remedy at law is not implicit in the ending of a dealership, and Deltown Foods, Inc. v. Tropicana Products, Inc., S.D.N.Y. 1963, 219 F. Supp. 887 indicates that even the presence of an express statutory base for the prayer for injunction does not dispense with the need to show a fair prospect of ultimate success on the merits. It may be, too, that there are supposable circumstances in which a preliminary injunction must be granted - as where private right and a strong statutory public policy coincide in demanding maintenance of a status quo of dealing. Bergen Drug Co. v. Parke, Davis & Co., 3rd Cir. 1962, 307 F.2d 725; Cf. House of Materials, Inc. v. Simplicity Pattern Co., 2d Cir. 1962, 298 F.2d 867, 870, 871-872. And there are cases where an express (or genuinely implicit) covenant not to deal with any one else is ready at hand to give a contract base for a negative injunction that is relatively certain to preserve or restore the old distributor-dealer relationship. Standard Fashion Co. v. Siegel-Cooper Co., 1898, 157 N.Y. 60, 66, 51 N.E. 408; Liedermann v. Voco, Inc., Kings Co. 1947, 73 N.Y.S.2d 462; Cf. Butterick Pub. Co. v. Frederick Loeser & Co., Inc., 1921, 232 N.Y. 86, 133 N.E. 361.
In the present case, however, the claim to preliminary injunctive relief rests only on the existence of the importer-distributor relation and the controverted promise of its continuance supported by the statutory restrictions on discontinuance and the fact that termination for the duration of a lawsuit is, necessarily, irreversible and, therefore, permanent. There is here no promise on defendant's part not to deal with others (Cf. Garvin v. American Motor Sales Corp., 3rd Cir. 1963, 318 F.2d 518, 520); the business expectation of the parties and the probabilities of fact are not, for present purposes, relevant; a legal fear may have dictated foregoing the right to be an exclusive distributor; the surrender of it is nonetheless real for that fact.
Whatever else may be thought, it cannot be easily supposed that importer-distributor contracts form a class especially eligible for specific performance as, legal history seems to indicate, are land contracts and contracts for unique chattels - or the services of uniquely talented people. Rather the right to the equitable specific relief of injunction, it would seem, must be here made out from some aggregate of circumstances that demonstrates that specific relief is manifestly more appropriate than damages. That cannot here be done. The galling harness of an injunction cannot create teamwork. At best an experiment, a preliminary injunction could well be wholly damaging here, jeopardizing any claim for damages that plaintiff might otherwise have without giving it any assurance that the experiment would not simply lengthen its losses. Too much would depend on efforts of continuing cooperation that are difficult to expect of parties locked in litigation and impossible to command. Cf. Bach v. Friden Calculating Mach. Co. Inc., 6th Cir. 1946, 155 F.2d 361, 366; Engemoen v. Rea, 8th Cir. 1928, 26 F.2d 576, 578-579. A negative injunction will not serve where it is cooperation and reciprocal action that is required; here the duties and the rights of the importer are of that sort and not simple duties to pay money. Cf. Bethlehem Engineering Export Co. v. Christie, 2d Cir. 1939, 105 F.2d 933, 935.
On the facts of the present case as they appeared from the affidavits and testimony, it cannot be said that a fair prospect of ultimate success has been shown. The tantalizing question of the status of the relation between the parties on February 15, 1966, is, perhaps, only superficially difficult. It would not be too easy to infer an automatic franchise extension of one year if the parties had been altogether silent at the end of the first year and had, in that way, created some basis for arguing that they must have meant to adopt exactly the first year contract form as their contract for an intended second year. That would defy their explicit undertaking to write out a new agreement each year and deny to their silence and inaction the legal effect that their contract advertently sought to impose on it. More pointedly, it would rule out the inference that their failure to execute a new contract had meaning, the plain meaning that they would follow along without definite term until they reached either a parting or a will to reduce their arrangement to a new writing. But here the parties adverted to the need for a new agreement, deferred consideration of whether to make a new agreement or part, and then went on, in inconclusiveness of manifested intention, and did not again advert to making an agreement. No inference of an intention to be bound to each other for a definite term grows out of ground so lean. The ambiguity may have pleased each party, for perhaps each had much to consider and reconsider as the Renault transaction took shape; and, perhaps, each may have thought that the future was not going to be a simple continuance but a thing of a new shape altogether when the Renault transaction was over. Plaintiff's present position does not imply that it may not calculatedly have kept its whole position under reserve until January 10 at least.
The ambiguities here are not ambiguities of inference from evidence that can be supposed to have a single meaning if its riddle can be read; the ambiguities here are intrinsic in the conduct of the parties, unless one imposes on them the idea that they, somehow, intended to contract by silence or inadvertence or both. There is no ground at all for inferring inadvertence here; no ground either for saying that their omission to make a new agreement was not advertent. So, on the present record, there is no way of saying that a contract for a definite term was made out. In this view the lesson of New York Telephone Co. v. Jamestown Telephone Co., 1940, 282 N.Y. 365, 371, 26 N.E.2d 295, limited as it is (Cf. Miller v. Schloss, 1916, 218 N.Y. 400, 406-407, 113 N.E. 337; Martin v. Campanaro, 2d Cir. 1946, 156 F.2d 127, 129) - that an expired contract may furnish the transactional terms on which a continuing relation will operate - has no application; the expired contract is impotent to establish that there is a new contract and to define the duration of the new contract; it may furnish, in default of a new agreement, the basis on which the transactions that constitute the informal continuance of the relation will be conducted and liquidated, but it goes no farther. Cf. Martin v. Campanaro, supra.
That does not mean that defendant could act in disregard of relevant statutory duties engrafted on the relation. But viewed in that perspective the evidence simply fails to meet the applicable standards.
Defendant's cross-motion does not require discussion.
The motions must be denied.
The following are the findings of fact and conclusions of law made on the hearing of the motion of plaintiff for a preliminary injunction and the cross-motion of defendant for a preliminary injunction:
Findings of Fact
1. Plaintiff is a corporation organized under the laws of the State of California and it has its principal place of business in Long Beach, California.
2. Defendant is a New York corporation and it has its principal place of business in the County of Queens in the Eastern District of New York.
3. Defendant is an importer of Peugeot automobiles and related products which are manufactured by a French corporation all of the stock of which is owned by a French holding corporation the stock of which is traded on the French stock exchange and is owned generally by the members of the public.
4. Peugeot automobiles have been sold in this country apparently since approximately 1957-1958.
5. Until October 1, 1964, Peugeot products were distributed in the West Coast States and in Idaho, Montana, Nevada, Utah, Arizona and Alaska by Renault West, Inc., a corporation all of the stock of which was owned by Renault, Inc., a corporation associated with the French manufacturer of Renault automobiles.
6. Renault West had approximately 76 dealers in the nine Western States at October 1, 1963, and 55 dealers in those States at October 1, 1964; on October 1, 1964, three of the 55 dealers were under notice of termination and were later terminated as dealers.
7. The dealers of Renault West, Inc., were with few exceptions dealers both in Renault and in Peugeot automobiles; the Renault automobile was lower priced than the Peugeot selling in the price range of the Volkswagen; the Peugeot was priced in the range of American "compact" cars.
8. In the years preceding October 1, 1964, both Renault and Peugeot retail sales in the continental United States had shrunk substantially; Renault sales had declined from about 90,000 units a year to 44,000 units in 1961, to about 30,000 in 1962 and about 22,600 in 1963; sales of Peugeot had declined from about 6,400 in 1961, to about 4,900 in 1962, to 2,994 in 1963, and in 1964 were approximately 3,046; the sharp decline in Renault sales preceded by about a year the decline in Peugeot sales; the decline in Renault sales was not ascribed to the introduction of the American compact cars; the decline in Peugeot sales coincided with the introduction of the American compacts; other foreign cars apparently affected by the introduction of the American compacts in their price range included the Fiat, Mercedes Benz, English Ford and Simca; only the English Ford and Simca apparently recorded a decline in sales comparable to that of the Peugeot.
9. In 1964 Joseph Edward Anzelon had been engaged in the automobile business for 16 years; he had first been in an automobile business in Seattle, Washington, thereafter held a position in Europe with an automobile distribution firm, and for the 12 years preceding October 1, 1964, had been associated with Volkswagen in New York City; he had played an important part in the development of the Volkswagen distribution organization and at the time he left it shortly before associating with Renault West, Inc., he was general manager of the parts and service division of Volkswagen and was outranked in the company only by the president and owner of the company.
10. Before October 1, 1964, Anzelon discussed with Renault, Inc. and Peugeot, Inc. taking over Renault West, Inc. and acting as distributor in the nine Far Western States above named for Renaults and Peugeots under agreements that, it was understood from the beginning, would be independent of each other.
11.Anzelon was unwilling if he took over Renault West, Inc., to undertake to act as a distributor for Renault alone or Peugeot alone for two principal reasons: first, the income from both distributor franchises would be needed to support the operation; and second, no matter what long range planning might be, it would be upsetting of and damaging to the dealer networks of each of the two automobiles if their distributions were separated without any advance preparation of the ground.
12. By separate negotiation, Anzelon acquired from Renault, Inc. the stock of Renault West, Inc., and in a separate negotiation on behalf of Renault West, Inc. entered into a distributor agreement with Renault, Inc., in October 1964. The annual loss that had been sustained in Renault West, Inc. preceding the time when it was taken over by Anzelon effective October 1, 1964, was $300,000.
13. It was contemplated at the time of the acquisition by Anzelon of the stock of Renault West, Inc. that its name would be changed to Autowest, Inc. and that change was effected very shortly after October 1, 1964.
14. In the discussion between plaintiff and defendant preceding the execution of the distributorship agreement between them plaintiff emphasized that the success of the Volkswagen in this country was generally believed to be traceable to its aggressive service program; plaintiff indicated that if it became the Peugeot distributor it would emphasize presentation to Peugeot purchasers and existing Peugeot car owners of an effective service organization, including parts availability, and that the dealer network would be made up of dealers who believed in and offered efficient and effective sales and service and maintained adequate parts supplies; plaintiff indicated that if it became distributor it would discontinue dealers who did not adopt an aggressive service and parts program in addition to being effective in the sales of cars, since plaintiff considered that sales of cars without the support of adequate service damaged rather than promoted the good will of cars.
15. Plaintiff indicated in the preliminary talks that if it became the Peugeot distributor, sales of Peugeots during the first year might be less than in the last preceding year, that in the second year of operation sales would be restored to the level of the year preceding the changeover, and that thereafter sales would increase. An indicated sales trend was from 42 cars a month (for example) in 1964 to 30 cars a month in 1965 with sales returning to the level of 42 (or 39) cars a month in 1966 and to 54 (or 50) cars a month in 1967.
16. During the negotiations when it was indicated to plaintiff that defendant would appoint it as distributor under its standard form of one year contract, plaintiff indicated that he was unwilling to undertake the project, which would involve his setting up on the West Coast, without some protection.
17. Apparently in talks going on with Renault, Inc. with respect to plaintiff's becoming the Renault distributor for the Western States plaintiff made the same objection and, under the somewhat different terms of the standard Renault, Inc. agreement, plaintiff arrived at an arrangement under which the absolute right of termination formally embodied in the printed Renault agreement was modified so as to provide that
". . . neither party will give notice of termination or terminate said Agreement except for good faith cause within the meaning of the Automobile Dealers' Day in Court Act (15 USC Section 1221 et seq.)."
18. The printed form of Peugeot Distribution Agreement contained the following
"32. This agreement shall continue for a period of one year from the effective date set forth at the foot of the agreement, unless terminated prior to that time according to any other provision of the agreement.
"33. This agreement will terminate automatically, without notice from either party to the other, immediately upon the happening of any of the following events: . . . (g) the expiration of one year from the effective date of this agreement.
"34. PEUGEOT may terminate this agreement at any time if the DISTRIBUTOR (a) fails to fulfill adequately its functions under the agreement; . . .
"37. This agreement may be renewed only by execution in writing of a new distribution agreement."
19. On or about October 1, 1964, and effective October 1, 1964, plaintiff and defendant signed a written Peugeot Distribution Agreement (Exhibit 1) and two supplementary letters; the first supplementary letter of October 1, 1964, Exhibit 2, added to the Agreement the two following paragraphs.
"1. You shall have primary responsibility for the promotion and development of sales of Peugeot vehicles and related products in the following states of the United States: California, Oregon, Washington, Idaho, Montana, Nevada, Utah, Arizona, and Alaska.
Peugeot will not alter such area of primary responsibility by excluding therefrom any area in which your performance as a distributor meets all the requirements of the Distribution Agreement.
"2. Notwithstanding the provision of Chapter L, Paragraph 32, of the Distribution Agreement, neither party will give notice of termination or terminate the said agreement except for good faith cause within the meaning of the Automobile Dealers Day in Court Act (15 U.S.C., Sec. 1221, et seq.) or in the event of any substantial change in the persons who own the shares of your corporation. However, the parties shall execute a new Distribution Agreement in September of each year, during which your corporation continues to be a Peugeot distributor."
20. When Anzelon took over plaintiff and it signed the distributorship agreement with defendant there was no agreement that plaintiff would be the sole and only distributor of Peugeot cars in the area defined in the supplementary letter agreement; in fact Peugeot did not sell cars to dealers in the designated territory through any other organization in the period from October 1, 1964, through February 28, 1966.
21. A second agreement executed concurrently with the Distributor Agreement related to financing (Exhibit 31); in substance defendant agreed to extend credit to plaintiff until January 11, 1965, with respect to expected arrivals in November and December of 180 1965 Peugeots ordered by Renault West, Inc. before October 1, 1964; the expected arrivals had an invoice value of $259,445.
22. The arrangement described in the preceding finding was entered into in view of the fact that, when Anzelon took over, plaintiff had an inventory in the order of $1,500,000 consisting largely of Renault cars, with which the West Coast banks had not been happy; it was recognized that plaintiff could not finance the additional 180 cars with the banks until the existing inventory had been reduced. The general terms of payment under the Distribution Agreement were that defendant would deliver the cars to the distributor at the United States Port of Entry against cash paid on or before the date of delivery; the distributor was required to pay for all other products at ten days after being billed by defendant.
23. Until January 10, 1966, plaintiff maintained an adequate staff to perform its distributor obligations; it had adequate sales and service personnel and employed up to approximately 50 people in all of the usual functions carried on by a distributor of the kind involved. Its staff included personnel qualified to give proper training to dealer personnel and to initiate them in repair and maintenance techniques as well as in parts management and other aspects of the business, including warranty claim procedures, etc.; plaintiff's physical facilities at El Segundo, California, were adequate.
24. Defendant was content with plaintiff's announced general approach to the problem of maintaining and improving the dealer network, giving increased emphasis to the extension of service, and insisting upon adequate service as a sine qua non to continued dealership; defendant had reservations about the extent to which stern supervision as distinguished from amiable cajolery would be effective in strengthening the Peugeot dealer network; defendant did not consider that Peugeot, selling only a very minor fraction of the number of cars sold by Volkswagen, could make exacting demands upon dealers and maintain their good will and effective cooperation.
25. Plaintiff did not pay the open account between it and the defendant on or before January 11, 1965 as provided by the October 1, 1964 letter agreement (Finding 21).
26. Plaintiff paid defendant for cars only after they had been wholesaled, and meanwhile plaintiff sought to obtain financing.
27. At March 31, 1965, the open account stood at $595,000 and plaintiff had 271 cars in inventory.
28. Plaintiff had anticipated before the year-end that it would be able to obtain the conventional type of automobile distributor's financing through Bank of America; plaintiff was unable to effect the financing in part because of the unexpected insistence on the part of Bank of America that the French manufacturer of the Peugeot automobiles give as a collateral undertaking its engagement to re-purchase any financed cars that were not sold.
29. Under date of April 29, 1965, defendant advised plaintiff that effective May 1 it would commence to charge interest on open account, and it did charge $2,426.30 interest in respect to the month of May, 1965.
30. Plaintiff obtained financing with the First Western National Bank on or about July 21-27, 1965, and from and after that date with respect to the arrivals of cars at the California Ports plaintiff was able to meet the payment obligations of the distribution agreement.
31. The financing arranged through the First Western National Bank was confined to California Ports; when plaintiff's order for cars of December 1965 manufacture, due to arrive at Seattle in the last of January or first part of February, was about to arrive, defendant advised plaintiff that it would expect to be paid in cash against delivery of the documents on or before the arrival of the cars at Seattle; plaintiff had not arranged financing and it did not advise defendant that it had arranged financing until after the arrival of the vessel carrying the cars at Seattle on February 10, 1966. Payment for them was not made until a check dated February 15, 1966, was delivered to defendant in New York late in the day on February 14, 1966; the documents against which payment was to be made were at the time in California, as plaintiff knew.
32. The Seattle arrival referred to in the next preceding Finding involved a payment by plaintiff of approximately $36,000; the payment was made by a check of Columbia Funding Corp., which was not a corporation known to defendant; the defendant had earlier been advised by plaintiff that it expected to finance the Seattle arrival through the First National Bank of Seattle.
33. When plaintiff became distributor there were 55 dealers in the nine Far Western States selling Peugeot cars; a great many of these had not signed any formal franchise agreements, Renault West, Inc. not having managed to have regular dealership agreements signed, although it had been supplied with the required forms for doing so.
34. During the period October 1, 1964, through February 28, 1966, the number of dealers was reduced from 55 to 29; of the 55 dealers 3 were under notice of termination on October 1, 1964. Twenty-seven others were discontinued as dealers during the year and either 4 or 5 new dealers were added.
35. The dealers under notice of termination at October 1, 1964, were Arizona Imported Cars, Phoenix, Arizona, Nu-Car of Tucson, Arizona, which sold 9 cars in 1964 and Continental Motors of Sacramento, California, which sold 8 cars in 1964.
36. The dealers discontinued by plaintiff had sold 125 cars during the year 1964; after they were discontinued they did not return their stocks of cars on hand but continued the sales of such cars and in the balance of the year 1965 after their discontinuance accounted for the sale of 54 cars.
37. The new dealers added in the period between October 1, 1964, and February 28, 1966, were A.B.C. Motors in Tacoma, Washington, which sold 8 cars in 1965; this dealer had been arranged for before October 1, 1964, through the efforts of defendant; the second new dealership was Peninsula, in Torrance, California; Peninsula was a wholly owned subsidiary of plaintiff; it sold 26 cars in 1965. The third new dealership was Seaside at Santa Monica; it replaced a cancelled dealership and was under the direction of a former Volkswagen dealer; it accounted for the sale of 3 cars in 1965; in January of 1966 it appeared that the Seaside dealership was being offered for sale; the fourth new dealer was Max of Switzerland in Phoenix, Arizona; it did not make any sales of cars in 1965, having been appointed in December. A fifth new dealer, Johnston of Anchorage, Alaska, was in effect a replacement of another dealer involving a transfer of ownership and change of name; Johnston accounted (defendant's Exhibit A-U) for the sale of 11 cars in 1965.
38. One or more dealers that were discontinued were reinstated on one basis or another; one such dealer was Lail Bros. of Los Angeles which sold 34 cars in 1964 and 31 cars in 1965. Another dealer discontinued and reinstated was Miller of Oregon City which sold 5 cars in 1964 and 7 cars in 1965.
39. A large number of dealer terminations resulted from the failure of dealers to comply with a six point program devised by plaintiff and presented to the dealers in March of 1965.
40.Defendant was not fully advised of the exact terms of the March 1965 six point program before it was presented to the dealers.
41. The six point program was a transition program intended to secure an upgrading or a weeding-out of dealers; it set up six definite program steps to be taken over a period of six months; sales goals paralleled the six steps, starting with four new cars to be retailed in the first program month and ending with fourteen new cars to be retailed at the end of the sixth month; (plaintiff anticipated that it ought to be possible for a dealer to achieve the sales goal in approximately a year). In each program month the dealer was required to send different classifications of employees to plaintiff's distributor training school so that the dealer personnel at the end of the six month program would have received a training in sales, parts, repairs, service and general sales and dealer management; the transition program visualized installation of specific managerial controls, adoption of prescribed forms, and employment of qualified personnel.
42A.Specifically a requirement of the first month of the six point program was the ordering of a standard sign prepared under plaintiff's supervision, which advertised both Renault and Peugeot and which cost $1,100; the sign was divisible and either or both parts of it could be used. The portion of it covering Peugeot cost $420 if used separately.
42B. Defendant had not specifically approved the use of the $1,100 sign and objected to the undue prominence, as it seemed to defendant, given to the name Renault when the two names were used together; in addition, defendant considered that the sign which had been customarily used and which was available, a 6 X 6 foot sign, was adequate for dealership display and less costly to the dealers; however, defendant did not formally request or attempt to require plaintiff to delete the sign requirement from its six point transition program and at a meeting on June 3, 1965, declared the sign acceptable as a standard identification for dealers in plaintiff's area.
43. Most of the terminations of dealership effected by plaintiff in the period between October 1, 1964, and February 28, 1966, were occasioned by the failure or refusal of dealers to undertake the six point program; however, not all dealers who failed to participate in the six point program were terminated; some were continued notwithstanding their failure to participate.
44. Most of the terminations effected by plaintiff were effected during the early part of 1965.
45.Defendant was not consulted before notices of termination were sent out to dealers and it was not regularly provided with copies of the notices of termination that were sent to the dealers at or immediately after those notices were sent out.
46. Defendant first learned of the terminations from a terminated dealer at the New York Automobile Show some time on or before April 8, 1965.
47. Defendant objected specifically to plaintiff's procedure in cancelling dealerships without previous notice to defendant and indicated an expectation that it be asked for prior approval of such discontinuances of dealerships.
48. On April 13, 1965, plaintiff supplied defendant with a list of 16 dealers who were under 90 day notice of termination. The 16 dealers listed had in the Calendar Year 1964 accounted for the sale of 125 cars. Of those discontinued 3 had accounted for only one sale each; one had accounted for two sales; two had accounted for three sales each; one had accounted for a sale of four cars; one had accounted for a sale of five cars; and one had accounted for the sale of seven cars; the remaining dealers had sold nine or more cars in 1964. Defendant at once expressed to plaintiff dissatisfaction and concern over the dealer network status.
49. Under date of April 21, 1965, plaintiff supplied to defendant a list of 27 dealers; in addition, plaintiff listed as "applications forthcoming" subsidiaries of plaintiff, Peninsula Automobiles Corporation, Palos Automobiles Corp. and Wilshire Automobiles Corp.; the two latter were showrooms to be operated in conjunction with plaintiff's operation of Peninsula Automobiles Corp.
50. Under date of May 18, 1965, plaintiff supplied a classified dealer list showing 24 dealers, including plaintiff's subsidiary Peninsula, who were to be re-franchised and who had agreed to the six point transition program, and 29 dealers who were under termination notice. Of the 13 additional terminations so listed only 4 had made sales of Peugeots in 1964 and they had sold 18 cars; the remaining 9 dealers were evidently inactive. Eight additional dealers were listed as presently active but to be considered as pending review with one in process of being terminated but to remain as a service point; such dealer in 1964 had sold 3 Peugeots; the dealers regarded as "pending," presumably for review in the perspective of termination, sold 97 Peugeots in 1964 (inclusive of the 3 sold by the dealer mentioned first above who was in process of termination). Six additional dealers were listed as exempted from the six point program commitment for geographic reasons or other circumstances. The list also showed 9 service points that had been established before October 1, 1964, and 2 service points, subsidiaries of plaintiff, which had been established after October 1, 1964, in Long Beach and in Anaheim, California.
51. At a meeting in Los Angeles on June 3, 1965, defendant particularly inquired whether such dealers as Lail Bros. and Howard Motors, which together had sold 79 Peugeots in 1964, were in principle acceptable to plaintiff as exclusive Peugeot dealers, and plaintiff indicated that it would consider such dealers and not withhold approval solely on the basis that they were Peugeot exclusives provided the dealer complied with plaintiff's "Dealer Standards," including those listed on the six point program; defendant requested this special consideration for Howard and Lail based on their past records and in order to reduce 1965 vehicle inventory of plaintiff.
52. On November 8, 1965, plaintiff supplied to defendant a list of active dealers on which appeared a total of 28 dealers including plaintiff's subsidiaries Peninsula, Palos and Wilshire; the data then supplied also indicated that there were 25 service points (including plaintiff's 2 subsidiary service points), a number of which were former dealers continued as service points after they ceased to be dealers. A list of 16 terminated dealers was supplied which included European Motors, San Francisco and Century Motors, Walnut Creek, California, which had sold 35 cars in 1964; termination of European Motors resulted in there being no Peugeot dealer in the city of San Francisco, although there was such a dealer in Oakland. A supplemental list indicated that Lail bros. was to be reinstated as a Peugeot dealer and the principal list of active dealers indicated that Howard Motor Sales was being continued as a dealer.The dealer list indicated restoration to dealer status of some dealers earlier terminated, including Bel Camino, which had sold 9 Peugeots in 1964.
53. At a meeting held on November 29 in New York Peugeot indicated its dissatisfaction with the status of the dealer network; plaintiff indicated that it expected to appoint 20 new regular dealers in 1966 in Los Angeles, San Francisco and Seattle areas, that the dealers would be exclusive Peugeot - Renault dealers or not, depending on the circumstances, and that defendant's approval would be requested before appointment.
54. Defendant's dissatisfaction with the dealer network arose out of cancellations which in its judgment left geographic blanks in areas, such as San Francisco, in which there had been Peugeot representation and in which there was a need for continuing service of cars already sold; defendant was concerned also with the potential shrinkage in sales that it considered could flow from contracting the dealer network through cancelling dealerships without appointing replacement dealers.
55. Plaintiff considered the elimination of ineffective dealers important to the development of the dealer network and that geographical blanks could be avoided by establishing service points or service dealers; defendant did not consider that course an adequate substitute and particularly objected to establishing service dealers or points in metropolitan areas able to support a regular Peugeot dealer.
56. The parties sought to establish a service dealer and service point program but it led to misunderstandings including defendant's disapproval of 3 service points proposed by plaintiff which, in defendant's view, were not compatible with Peugeot's best interests.
57. Defendant made clear to plaintiff that it was not satisfied with plaintiff's handling of the dealer network problems and particularly was neither satisfied with the aggressive termination program nor satisfied with the rate of new appointments of dealers.
58. The record of Peugeot dealerships in previous years was a record of a contracting dealer network in the Far Western States; the indications are that on a national basis Peugeot dealerships were increasing somewhat although the record of the years 1958 through 1964 indicates a radical decline in average sales per dealership for Peugeot cars from a high in 1959 of 28 cars to a low of 9 cars per dealership per annum in 1963 and 1964; in the same period average sales by Renault dealers declined from a high of 116 cars in 1959 to 37 in 1964.
59. After plaintiff sold its Renault assets (as hereinafter set forth), plaintiff revised its projection to indicate that the Peugeot sales objective would be to reach 65 cars a month by the end of 1966 or possibly by June of 1967, and to reach 100 cars a month a year later. Plaintiff estimated that the "break-even point" for the Peugeot distributorship, as separate or on a separate accounting basis, was 70 cars a month. Plaintiff did not indicate that it projected an increase in dealers by more than an additional 20 dealers; in its revised projection plaintiff anticipated that dealers, including new dealers, would not necessarily be exclusively Peugeot-Renault dealers, but that they would be established new-car dealers selling makes alongside which the Peugeot could be sold successfully.
60. There is no substantial evidence and it is not found that it was reasonably likely that the Peugeot dealer network in the distributorship territory would be adequately strengthened by plaintiff in the forseeable future, or that the goal of 20 additional dealers would be attained by the close of 1966.
61. There is no substantial evidence that and it is not found that defendant was unreasonable in considering it unlikely that the dealer network plans of plaintiff would be fulfilled.
62. When plaintiff started operating the distributorship at October 1, 1964, it was in the anticipation that the first year of sales would be less than sales of the preceding year and defendant had been so advised.
63. At October 1, 1964, the inventory of plaintiff was 99 cars. At that date 180 1965-model cars were on order and expected to arrive in November and December 1964, being 100 cars from September production and 80 cars from October production.
64. Plaintiff in mid-October ordered 165 additional cars from December production and in November ordered 96 additional cars from January production. The result was that at March 31, 1965, plaintiff's inventory was 271 cars, an excessive inventory in view of the anticipated purge of the dealer network and falling-off in sales.
65. Sales to dealers did not bring the inventory into line, although no additional orders from production of the months between January and September were placed; in June of 1965 defendant arranged for plaintiff to transfer 90 cars to the Chicago distributor; the transfer involved additional costs measured by the sum of the difference between ocean freight from France to the West Coast and ocean freight from France to Baltimore and the difference between rail freight from the West Coast to Chicago and rail freight from Baltimore to Chicago; the added costs were absorbed by defendant except to the extent of the $25 a car which plaintiff paid; the net cost to defendant of the transfer was in the order of $12,000 to $15,000.
66. Plaintiff did not again order cars until it placed an order in May for July production; plaintiff cancelled that order on June 15, 1965, the quantity of the order was transferred to the next production month, September; (August is the month of the annual Peugeot factory shutdown).
67. At the end of June plaintiff's inventory was 98 cars; it was adequate by defendant's standards provided current arrivals were in balance with current sales.However, on July 13th plaintiff advised defendant that it was not ordering any Peugeots from October production. At the end of July plaintiff's inventory was only 49 cars and the only cars in prospect were 40 cars expected to arrive out of September production in a month or a little more than a month after the close of September.
68. Defendant communicated with plaintiff and on or about August 13, 1965, plaintiff ordered 42 cars from October production; the order was about one month late and, ultimately was short-shipped by four cars. Thereafter plaintiff ordered 60 cars from November production, 56 cars from December production, 90 cars from January production and 100 cars from February production. Such orders, assuming sales to dealers of 50 cars a month, would produce an adequate inventory by the end of April 1966.
69. In mid-January 1966 plaintiff ordered from March production 144 cars and on February 14 ordered from April production 154 cars. (The order from March production had originally been higher in amount and at defendant's suggestion had been reduced.) The combined orders from March and April production even on the assumption that sales would be at the rate of 50 cars a month (although the preceding 16 month average had been about 39 cars a month) would have resulted at June 30 in an inventory approximating 290 cars and would have reproduced in aggravated form the condition that had existed at March 31, 1965, when 271 cars were in stock; the inventory would be a high inventory of 1966 cars at just the time when the 1967 cars were to be introduced into the market, and without advance knowledge of changes to be made in the 1967 models.
70. Plaintiff's new car inventory in August, September and October of 1965 was inadequate to supply the dealer network.
71. After October 1965 plaintiff's capacity to serve the dealer network depended upon arrival of cars. At the month ends of October, November and December there was only one car in inventory at plaintiff's distributorship.
72. The inadequacy of plaintiff's inventory of new cars resulted in the failure to supply needed cars to dealers and in their losing sales.
73. Plaintiff failed to maintain an adequate inventory of station wagons and, until defendant took the matter up specifically with plaintiff on October 19, 1965, it did not place adequate orders for station wagons.
74. Dealer sales of station wagons had fluctuated between five and ten cars a month through September of 1965 and thereafter declined as dealer inventory of such station wagons fell from 27 at the end of August 1965 to 11 at the end of October, November and December and to 6 at the end of January and February of 1966; plaintiff had a nil inventory of station wagons from the end of September through the end of February and on the basis of plaintiff's belated orders for station wagons it would not be in a position to rebuild dealer stocks until the end of February 1966.
75. There was no substantial evidence that and it is not found that plaintiff's new car inventory control and plaintiff's integration of orders with inventory were adquate in relation to the existing dealer network or in relation to plaintiff's overall plans for the improvement of the dealer network.
76. Defendant manifested and plaintiff understood that defendant was dissatisfied with plaintiff's management of order and inventory matters in relation to the sales planning of the distributorship.
77. There is no substantial evidence and it is not found that defendant was unreasonable in considering that plaintiff's management of orders and inventory was inadequate and unsatisfactory.
78. Plaintiff's handling of parts inventory and plaintiff's emergency resort to the parts inventory of other distributors gave rise to friction between plaintiff and defendant in the administration of the distributorship.
79. Plaintiff contended that it had received at the time of the change in ownership at October 1, 1964, an excessive inventory and that its management of the inventory, given that factor, was sound and did not justify defendant's imposition of a ten percent surcharge for emergency orders that drew on the stocks of other distributors.
80. Defendant contended that the inventory had been excessive but had been very largely relieved of excess by re-purchases effected both before and after October 1, 1964; defendant insisted that plaintiff's orders for emergency lines of repair and replacement parts exceeded those of comparable distributorships and that the surcharge was warranted.
81. Plaintiff and defendant differed also in respect of the general size of inventory in relation to sales, plaintiff contending for a smaller inventory made more effective through improved inventory control methods.
82. There is no substantial evidence that, and it is not found that, the differences between the parties in respect of inventory of parts amounted to a ground of dissatisfaction with the distributorship generally or represented a fundamental inadequacy in the performance of an integral distributor service; the differences between the parties over parts inventory exacerbated the relation because of its co-existence with other substantial disagreements in policy.
83. Plaintiff did not maintain separate books and records with respect to its sales and distribution of Peugeot products; this fact has not been shown to have been unknown to the defendant and there is no evidence that defendant complained of it.
84. Defendant was in the practice of suggesting to its distributors a price for their sales of Peugeot cars to their dealers; it was also defendant's practice to suggest a retail price for dealer sales to customers; there is no suggestion on the part either of plaintiff or defendant that this practice was unknown to them both, or that the suggested price practice represented, or was a vehicle for, an agreement between them to fix the price at which plaintiff would sell cars to dealers and at which dealers in turn would sell cars to the public.
85. Plaintiff espoused the theory that the spread between the distributor price to the dealer and the suggested retail price to be charged by the dealer should be narrow enough radically to limit the range in which the dealer would be able to manipulate his pricing of the cars to retail customers; defendant on the other hand considered that dealers preferred and would exact from the distributor as wide a spread as they were accustomed to get in the trade generally so that they would have room to maneuver for sales by manipulating price.
86. Under 15 U.S.C. §§ 1231-1233 before any new automobile is delivered to a dealer there must be securely affixed to its windshield or side window a so-called "Monroney label" expressing the "manufacturer's" suggested retail price, the separate prices of certain accessories and optional items, the cost of transportation to the dealer, and certain identifying data. In the case of imported Peugeots defendant was required to affix the label, or plaintiff was so required if plaintiff were regarded as either the importer of the motor vehicles or a person under the control of defendant as importer.
87. Plaintiff in pursuance of its price theory and without approval from defendant initiated the use of a second label which was affixed to the car window below the "Monroney label"; the second label identified plaintiff as "Western distributor for Peugeot" and then stated a total suggested retail price for the nine Western States that was lower than the Peugeot suggested price that appeared on the "Monroney label."
88. Defendant objected to plaintiff's use of the second label but plaintiff continued to use the label until on June 3, 1965, at a meeting in Los Angeles it was agreed between the parties that plaintiff would discontinue the use of its label effective June 22, 1965.
89. On its sales of Peugeot cars to dealers plaintiff charged $40 more than the resale price suggested by defendant; defendant did not formally disapprove of this charge but it made its dissatisfaction with the charge known to plaintiff, and continued to do so until the termination of the dealership.
90.In December of 1964 defendant announced to its distributors an incentive program for retail sales under which defendant undertook to pay to dealers a bonus on their sales of Peugeot cars that could be as much as $150 a car if the dealer sold more than a designated amount of cars in a month.
91.The incentive program, effective for the first-quarter of 1965, was made available to plaintiff; defendant favored plaintiff's utilization of the incentive program and favored plaintiff's making it available to its dealer network; plaintiff opposed the incentive program and declined to participate in it or to make it available to its dealer network.
92. Plaintiff opposed the incentive program on the ground that the bonus payments would encourage dealer price manipulation and cheapen the product rather than promote its sales.
93. Defendant's dissatisfaction with plaintiff's failure to adopt the incentive plan increased as plaintiff's inventory situation worsened during the first-quarter of 1965 and defendant urged plaintiff to use the plan to relieve inventory.
94. An incentive program was also made available by defendant to dealers in the second-quarter of 1965; plaintiff participated in the incentive program for the second-quarter of 1965 and made it available to its dealer network.
95. As late as January 24- 28, 1966, defendant was in disagreement with plaintiff about plaintiff's prices for cars to dealers and the issue was essentially unresolved at February 28, 1966.
96. Defendant supplied the blank "Monroney labels" to plaintiff and in effect imposed on it the duty of having the labels affixed to the cars before they were delivered to the dealers; defendant wanted uniformity in the labels that appeared on the cars on the floors of the dealers' showrooms and did not want dealers to be able, by the entries they made on the label, to represent differing suggested retail prices as the suggested retail price of the "manufacturer."
97. For some part of the period October 1, 1964, through February 28, 1966, plaintiff failed to complete and affix the "Monroney labels" to the motor vehicles before they were delivered to the dealers, and in some instances plaintiff sent the "Monroney labels" to the dealers for the dealers to affix.
98. As late as January of 1966 defendant received indications that plaintiff had not filled out and affixed "Monroney labels" in all cases before delivering cars to the dealers.
99. The disagreement between plaintiff and defendant about price policy and price management was resolved as to the "Monroney label" matter but was not resolved as to the price to dealers; on the present record it is inferable that both areas of price policy disagreement were factors affecting defendant's decision in February of 1966 to terminate the relation between the parties.
100. Commencing with the first-quarter of 1965, defendant made available, in addition to its regular national advertising, an allowance of $50 a car for use in cooperative local advertising programs arranged between distributors and their dealers.
101. Under the program defendant supplied mats for advertising copy; to earn the $50 a car under the cooperative advertising scheme the distributor and dealer had together to show expenditure of an equal amount per car and exhibit tear sheets demonstrating that the advertising had been run; the advertising copy used had to have defendant's approval.
102. Plaintiff failed materially to take advantage of defendant's successive cooperative advertising programs in effect during 1965. $103. In the first-quarter of 1965, plaintiff submitted advertising copy to defendant which mentioned plaintiff's suggested retail price for Peugeot cars rather than defendant's suggested price; defendant declined to pay for the advertisement because the copy had not been approved, and, specifically, on the ground that the price mentioned was not defendant's suggested price.
104. In the second-quarter of the year plaintiff apparently employed advertising which qualified for cooperative reimbursement from defendant.
105. In the third-quarter and on or about July 19 plaintiff initiated a cooperative advertising program with its dealers under which the dealer had to give with each car sold a "Total Service Agreement" providing free service and repair of the car for 12,000 miles; the program involved a payment per car of $110 by plaintiff and $50 by the dealer plus an estimated $30 for the free servicing cost. The advertising allowance could be used only for newspaper, radio and TV advertising.
106. Defendant did not approve the free service cooperative advertising program and made no reimbursement to plaintiff with respect to it.
107. Under date of September 10, 1965, plaintiff sent to all of its dealers a cooperative advertising program under which plaintiff would contribute $75 and the dealer $25 per car to cover local newspaper advertising; the bulletin announcing the program required a forecast of retail sales one month in advance and based certain partial reimbursements on the sales forecast.
108. On September 15 the bulletin was amended to eliminate the requirement of a sales forecast. Neither the September 10 nor the September 15, 1965, bulletin was regarded by defendant as qualifying for reimbursement; it did not mention any Peugeot contribution to the program; no reimbursement was made by Peugeot with respect to the September 10 and September 15 advertising programs.
108A. Effective November 17, 1965, plaintiff announced to its dealers a program calling for $150 a car advertising allowance of which defendant would pay $50, plaintiff $75 and the dealer $25; defendant regarded the November 17, 1965, program as qualifying for cooperative advertising reimbursement.
108B. On December 28, 1965, plaintiff sent to its dealers a bulletin announcing the renewal for the first four months of 1966 of defendant's cooperative advertising program, involving a $50 a car allowance by defendant and $25 participating payments by plaintiff and the dealer.
108C.There is substantial evidence that until the November 17, 1965, bulletin disagreement between the parties about the cooperative local advertising programs was a continuing source of mutual dissatisfaction.
109. Before October 1, 1964, Renault West, Inc. had used three Ports of Entry on the West Coast, Los Angeles, San Francisco and Seattle, Washington; plaintiff discontinued the arrivals at Seattle for a period of seven or eight months and confined all arrivals to the two California Ports until the arrival of February 10th, 1966, which marked the reopening of Seattle as a Port of Entry.
110. Elimination of Seattle as a Port of Entry meant increased transportation costs to five or six dealers normally served from Seattle and in the instances in which they were required to pay the freight from San Francisco to the dealership they objected to the increased cost.
111. Plaintiff eliminated the practice of charging each dealer with the land freight from the Port of Entry to the dealer's place of business and substituted a uniform freight charge on all dealers in the nine state area; the dealers whose costs were increased expressed dissatisfaction; plaintiff reverted to the earlier practice of charging freight from Port of Entry to the dealer's place of business.
112. Defendant at various times objected to plaintiff's practices with respect to handling customer complaints, to plaintiff's practice of having warranty cards routed through plaintiff's organization rather than directly to defendant, and to plaintiff's delays in attending to its correspondence with defendant.
113. The matters of closing the Port of Seattle, of changing the freight billing from Port to dealership, and of handling customer complaints, warranty cards and correspondence were irritants occurring in the relation between the parties; it is inferable that these irritants formed background of the decision of defendant to terminate the relation with plaintiff and were not a determinative element.
114. On September 30 defendant wrote plaintiff that in view of the important differences between the parties there should be a meeting to consider all aspects of the problems in order to determine whether they could be satisfactorily resolved. Pending such a meeting, which it was indicated could not occur earlier than the last part of October, defendant suggested that the Distribution Agreement be extended for one month under the same terms and conditions.
115. Plaintiff did not disagree with the idea of the letter of September 30; however, it did not write any concurrence in the extension and the end of October passed without any meeting or any further expression of understanding with respect to a new agreement or the status of the Distribution Agreement. After receiving the letter of September 30 plaintiff arranged with defendant for a meeting and that meeting occurred on November 29.
116. Before the parties met in New York City on November 29, 1965, Renault, Inc. asked plaintiff if it would consider surrendering that part of the latter's franchise which related to the Northern half of the Western area and plaintiff countered with the proposal that Renault repurchase the entire franchise; negotiations then began to that end.
117. Thereafter and on November 29, 1965, the plaintiff and defendant met in New York to consider in detail the pending problems between them; defendant's treasurer prepared minutes of the meeting and the parties agree that they express what occurred at the meeting.
118. Exhibit 6 contains the minutes of the meeting.
119. There is no evidence that and it is not found that plaintiff disclosed to defendant before or during the November 29th meeting that discussions were under way with Renault, Inc.
120.At the meeting of November 29, 1965, no specific statement was made on either part that a formal agreement (as contemplated by Exhibit 2) would be executed and no explicit statement was made, that there would or would not be a renewal, extension, or new agreement; the minutes of the meeting reflect assent to the continuance of certain practices and changes of other practices and prognostications of future action which would not be understandable, given the form in which they are expressed, unless the parties were proceeding on the assumption that their relation was to continue; since there is no evidence that defendant knew of the pending transaction with Renault, Inc., there is no basis for any inference as to the effect such knowledge might have had on defendant's conduct of the meeting.
121. No "new Distribution Agreement" (as provided in Exhibit 2) was made between the parties with respect to the period after September 30, 1965, and neither party adverted overtly to the necessity, for or the preparation and execution of, such an agreement after the November 29, 1965, meeting.
122. On December 3 or 4, 1965, plaintiff for the first time advised defendant that Renault, Inc. had raised with him the question of a change in relation and of Anzelon's expectation that he would in any case continue as the Peugeot distributor. Anzelon had, in February or March, 1965, indicated to defendant an interest in being a distributor of Peugeots only, provided he was given a much larger territory, or was given the whole United States; there had been no significant response to that indication.
123. When plaintiff advised defendant of the pending transaction with Renault on the telephone and by a follow-up letter of December 9, 1965, it was presented in terms of a complete separation of the Peugeot from the Renault distribution and Anzelon was envisaged as continuing to act as a distributor for Peugeot only; in that context Anzelon presented as a program that he would expect to appoint at least 20 new dealers in 1966, to increase sales in 1966 50% above 1965 levels to about 65 new cars a month, and to achieve in 1967 100 new car sales a month; the program visualized relocation in San Francisco within one year, expanding personnel as required to meet the sales objectives, and reinvestment of all profits for two years to develop the market. A table of organization was submitted to defendant and Anzelon asked to be advised of defendant's attitude not later than December 20.
124. Defendant did not reject or criticize the outline presented by Anzelon and did not advise Anzelon of its attitude until the week following Christmas of 1965; at that time, on the assumption that Anzelon would re-sell the stock of plaintiff to Renault, Inc. and set up a new Peugeot distributorship, defendant indicated that it would reject that type of arrangement in large part, if not exclusively, because transfer of plaintiff's stock to Renault, Inc. might or would result in plaintiff's Peugeot distributorship passing back to Renault, Inc.
125. It is not clear from the evidence and no finding is made as to whether defendant's position was that there was a franchise in existence which would pass to Renault, Inc. on the sale to it of plaintiff's stock or whether defendant's position was that there was a risk of that which prevented contemplation of the form of new Peugeot distributorship visualized by Anzelon.
126. After plaintiff had been advised of defendant's attitude with respect to a sale of plaintiff's stock to Renault, Inc., plaintiff proceeded in the Renault, Inc. negotiation to the point at which on or about January 8 or 9, 1966, an agreement was reached under which all of the Renault distributorship assets were to be sold by plaintiff to Renault pursuant to an agreement dated January 10, 1966; the gross consideration was $881,515.64 but the net cash amount payable to plaintiff was $72,428.25.
127. The Renault transaction resulted in the transfer to Renault of all of the physical assets and leasehold improvements of plaintiff, including the Peninsula dealership leasehold, and resulted in the release for reemployment with the Renault successor of all except ten of the fifty or so employees of plaintiff; plaintiff's lease on the El Segundo property expired at December 31, 1965, and plaintiff did not renew the lease.
128. On January 10 plaintiff advised defendant of the transaction by telephone and on January 11 defendant took the position with plaintiff that the Renault transaction created an entirely new situation which defendant wanted to study carefully; to that end it requested financial data as of the preceding year end and a financial statement giving effect to the sale transaction, both to be certified; pending receipt of those statements defendant asked for information regarding the financial strength of the plaintiff after giving effect to the Renault transaction and requested a balance sheet of plaintiff supported by rounded-off figures.
129. Plaintiff promptly advised defendant that the lease on the El Segundo premises having expired, it was moving to Long Beach in the week of January 17, that, since it would no longer be a Renault distributor, it would no longer operate subsidiary retail outlets that handled Renaults, and that it would continue to distribute Peugeot cars and looked forward to the advantage of devoting its exclusive efforts to marketing and developing Peugeot sales in the West. It also advised defendant that it would present a proforma statement as requested.
130.Not having heard anything after a lapse of some days, defendant on January 20, 1966, inquired further about the status of the dealer network, plaintiff's policy with respect to obtaining new dealers, particularly as to whether they would be exclusively Renault-Peugeot dealers, the status of plaintiff's two subsidiary dealers, the status of the two subsidiary service centers, the average inventory of parts expected to be maintained and the success of plaintiff in obtaining bank or finance corporation financing for the impending shipment to Seattle. Defendant stated that it sought this information to assist it in determining whether plaintiff would be able to continue to perform the duties of a Peugeot distributor in spite of the sale of a substantial part of its assets to Renault, Inc.
131. A proforma balance sheet was supplied to defendant indicating that plaintiff would have $100,000 cash after the completion of the transaction with Renault and would have a net worth of $270,000 with fixed assets of $30,000 and a parts inventory of $90,000.
132.The parties met on January 24, 1966, in Long Beach, California at the premises of the new operation.At that meeting defendant did not indicate that the new premises were physically inadequate; there was discussion of the personnel that were available to plaintiff after the release of roughly four-fifths of the employees to Renault; plaintiff took the position that it would be an advantage to have new personnel who were thoroughly indoctrinated with the sponsorship of the Peugeot car and who were not and had never been interested in Renault sales. Defendant took the position that the question was whether or not plaintiff would become or continue as a distributor, and plaintiff took the position that it was in fact the distributor; defendant suggested a division of the existing territory and this proposition was unacceptable to plaintiff. There was discussion of the financing of the expected arrival at Seattle; plaintiff took the position that it had expected defendant to finance the arrival; defendant insisted on payment at or before arrival. There was renewed and heated discussion of the plaintiff's continued practice of charging dealers a price in excess of that suggested by defendant.
133. After the sale of the Renault assets plaintiff had no personnel training facilities to serve an enlarging dealer structure, and it had no qualified technical personnel except to the extent that Anzelon and his brother (who had acted as Comptroller of plaintiff) were qualified technically. Plaintiff had arranged to engage the services of Thomas Newall as, essentially, a service manager but he was employed by a dealer at the time on a temporary basis. The remaining personnel of plaintiff were primarily clerical employees.
134. The sale of the Renault assets had included the sale of the Peninsula and Wilshire dealerships, and after the sale the two Los Angeles service centers were closed.
135. Plaintiff did not furnish detailed or audited financial data as of December 31, 1965, or as of the completion of the Renault transaction; the work incident to the Renault sale made that very difficult if not impossible to do before February 15, 1966; plaintiff is not shown to have made any substantial effort to give defendant any substitutional indicia of its prospective financial stability.
136. Plaintiff sustained a loss of $450,000 in its operation of the Peugeot and Renault distributorships in the fifteen months from October 1, 1964, to December 31, 1965. The loss sustained in the conduct of the Peugeot distributorship from October 1, 1964, to February 28, 1966, was estimated by plaintiff at $250,000.
137. The gross profit, or spread on distributor sales to dealers of Peugeot 403 cars (the most popular of the Peugeot cars) were $190 or $195 per car.
138. No dealers terminated their franchises in the interval between January 10 and February 28, 1966, or indicated that they intended to do so.
139. On February 15, 1966, defendant delivered to plaintiff a letter dated February 15, 1966, advising plaintiff that it had failed to fulfill adequately its function under the Distribution Agreement and that defendant had therefore decided to terminate plaintiff's status as a distributor effective as of the end of February 28, 1966. (Exhibit 20).
140. There is no substantial evidence that and it is not found that at any time after January 10, 1966, plaintiff had the capacity to, or a reasonable expectation that it would approximate the sales goals indicated in its letter of December 9, 1965, or its goal of obtaining 20 additional Peugeot distributors in the territory in 1966.
141. The contraction of the dealer network during the 17 months from October 1, 1964, through February 28, 1965, and the relatively unimportant extent of dealer replacement, taken in connection with the sales level attained in the last part of the year 1965, and in January, 1966, support an inference that defendant could and did reasonably conclude that plaintiff had failed and would continue to fail adequately to fulfill its functions as a distributor.
142. During the year 1965 defendant's sales in the United States were slightly higher than in 1964. Sales in the Far Western States and in the Southwestern territory were lower in 1965 than in 1964, and 1965 sales in the Gulf States remained even, but 1965 sales in the East Coast and New York areas increased 25% over 1964, and New England sales increased 40% over 1964.
143. There is no evidence that and it is not found that the parties adverted to the question of the continuance, extension or renewal of the distributor franchise agreement for any definite term of one year or otherwise at any time on or after September 30, 1965.
144. The minutes of the meeting of November 29, 1965, were not such a "new Distribution Agreement" as was contemplated by plaintiff's Exhibit 2.
145. On the evidence adduced on the present motions, defendant did not and has not acted in an unfair or inequitable manner toward plaintiff, and it has not exerted coercion or intimidation or brought threats of coercion or intimidation to bear on plaintiff.
146. On the evidence adduced on the present motions, defendant did not fail to act in good faith in sending the letter of February 15, 1966, to plaintiff.
147. There is no substantial evidence that the reasons assigned in the letter of February 15, 1966, were assigned in bad faith or that they did not reflect with reasonable accuracy beliefs in good faith entertained by defendant which led it to the conclusion that plaintiff had failed to fulfill adequately its functions under the Distribution Agreement.
148.The letter of February 15, 1966 (Exhibit 20) is not a complete expression of all of the primary and background reasons that contributed to defendant's decision; specifically, in addition to the matters detailed inthe letter defendant was influenced by plaintiff's conduct on matters of price including the price at which it sold cars to the distributors and the earlier practice with respect to the use of the distributor label in addition to the "Monroney label."
149 Defendant was additionally influenced in releasing the letter of February 15, by what it regarded as the unsatisfactory manner in which the financing of the Seattle arrival was handled.
150. Defendant was not influenced in the decision to release the letter of February 15, 1966, by the excessive order for new cars sent to defendant by plaintiff under date of February 14, 1966; however, in considering whether or not plaintiff was adequate to function as a distributor, the size of that order is properly taken into account.
151. On February 18, 1966, by letter addressed to each dealer, defendant advised them that effective March 1, 1966, a new organization, Peugeot Western Distributors, Inc., would distribute Peugeot products in the Western States under the general managership of James McLaughlin, who had been Peugeot's regional representative in the Western States during the preceding 17 months' period. It was indicated that effective March 1, 1966, arrangements would be made to initiate a program of entering into new dealer agreements. The letter advised the dealers that defendant would not be liable for any debts of plaintiff.
152. By telegram of February 25, 1966, defendant advised plaintiff of its willingness to buy from plaintiff all its new undamaged and unused Peugeot products (including motor cars) at current invoice price provided they were offered by the close of business February 28, 1966.
153. On February 25, 1966, plaintiff, through its counsel, wrote to each dealer stating that counsel considered the franchise agreements between plaintiff and the dealers in full force and effect and that any effort of defendant to terminate the distributor status of plaintiff was illegal. The letter further advised the dealers they would be held strictly accountable in damages for any breach of the dealer franchise agreement as well as for prompt payment of any indebtedness due to plaintiff; the letter charged defendant with "flagrant breach of its contractual obligations" and "total disregard of proper business ethics."
154. Certain dealers have indicated that until the controversy between the parties has been adjusted they will not place orders for Peugeot products.
155. Plaintiff's February 25, 1966, communication to the dealers is not shown to have been false in any facts it stated, nor does it appear that at the time it was sent it was a consciously erroneous statement of the legal claims that plaintiff could reasonably advance in the premises.
156. It has not been shown that plaintiff threatens to repeat the positions taken in the letter of February 25, 1966, or that defendant has not means of meeting any adverse trade effects of the letter without measurable increase in its present exposure to legal liability.
157. The present action was commenced February 28, 1966.
Conclusions of Law
1.The distribution agreement (Exhibit 1) was not in effect for any definite term on February 15th or on February 28th.
2. Defendant's letter of February 15, 1966, Exhibit 20, was effective to terminate the distribution agreement, Exhibit 1, on February 28, 1966.
3. The evidence introduced on the present motion does not suffice to show a failure on the part of defendant to act in good faith in complying with any term of the distribution agreement, Exhibit 1, or in not renewing that agreement or in terminating or cancelling it.
4. Plaintiff is not entitled to a preliminary injunction as prayed by its motion of February 28, 1966.
5. Defendant is not entitled to an injunction as prayed by its motion of March 7, 1966.
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