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LYON FORD, INC. v. FORD MKTG. CORP.

July 7, 1971

LYON FORD, INC., Plaintiff,
v.
FORD MARKETING CORPORATION et al., Defendants


Judd, District Judge.


The opinion of the court was delivered by: JUDD

MEMORANDUM AND ORDER

JUDD, District Judge.

 The case is before the court on (1) a motion by plaintiff to remand to the Supreme Court, Suffolk County, (2) a motion by plaintiff for a preliminary injunction to keep in effect certain marketing agreements for Ford cars and trucks, and (3) a motion by defendants Ford Marketing Corporation and Obringer to dissolve the ex parte temporary restraining order granted by the New York State Supreme Court, Suffolk County.

 This case is a companion case of Lyon Ford, Inc. v. Ford Motor Company, 71-C-347, which was also begun in the Supreme Court, Suffolk County, and removed to this court. Plaintiff is now represented by different counsel from those who filed No. 71-C-347.

 In 71-C-347, this court filed a Memorandum and Order dated May 10, 1971 denying a preliminary injunction against the termination of the same marketing contracts and dissolving a prior stay.

 Plaintiff seeks to continue as the Riverhead dealer of Ford motor vehicles under agreements which had been in effect from 1959 until they were terminated by written notice from Ford, originally stated to be effective March 15, 1971. The contracts were kept in effect by stays until this court's Memorandum and Order of May 10, 1971. In denying a preliminary injunction after evidentiary hearings, the court found in 71-C-347 that plaintiff had shown no reasonable probability of proving that it had fulfilled its obligations under the contracts, because the record indicated that

 
(1) Lyon Ford due to financial difficulties lacked sufficient net working capital to carry out and perform its dealership duties; (2) Lyon Ford failed to receive Ford Motor Company's consent prior to relocation in 1970; and (3) at the time Ford proposed to terminate the franchise, Lyon Ford was in a state of insolvency as that term is employed in the agreements.

 The explanation for the institution of a second action is that Ford Motor Company had assigned its rights under the dealership agreements to Ford Marketing Corporation, a wholly owned subsidiary, before the notice of termination was given. This court ruled in 71-C-347 that Ford Motor Company was nevertheless a proper party defendant because it was a signatory to the contracts and could not terminate its obligations to plaintiff by a mere assignment of rights to a subsidiary. The complaints also differ in that 71-C-738 is based on Section 197 of the New York General Business Law, McKinney's Consol. Laws, c. 20, which forbids termination of a dealership agreement for new motor vehicles except "for cause." The prior action was based on a claim that the termination was made in violation of the agreements and requested that the agreements should be declared to be in full force and effect.

 Plaintiff contends that removal of the present case is improper because two New York parties, Thomas Hart and J.J. Hart & Sons, Inc. have been joined as defendants. The complaint charges that J.J. Hart & Sons, Inc. and Mr. Hart, who is its chief stockholder and officer, were parties to a continuing conspiracy from prior to September 3, 1970, when the first notice of termination of the dealer contracts was sent to plaintiff. The purpose of the conspiracy is alleged to have been to deprive plaintiff of its dealership and confer it on J.J. Hart & Sons, Inc., a "favorite son" dealer of Ford Marketing Corporation and defendant Obringer, who is the district sales manager of Ford Marketing Corporation.

 Defendant responds that the Hart's have been improperly joined in this action because the complaint states no cause of action against them. It also asserts that any claims against the Hart's are separable and therefore do not prevent removal.

 Plaintiff was given an opportunity to present evidence in support of its motion for a preliminary injunction, but declined to do so until the motion for remand was decided.

 1. The Question of Remand

 In the light of the history of the prior action and plaintiff's failure to disclose the relevant facts in the papers which it submitted to the state court, there is reason to consider that the Hart's were made defendants in order to defeat federal jurisdiction. The first step in the new action was an order to show cause for a preliminary injunction, but no injunction was sought against the Hart's, either in the complaint or in the motion papers. The complaint seeks damages of $1,500,000. Ford can presumably pay any judgment that can be obtained. The presence of the Hart's in the case adds little to enhance plaintiff's possibility of collecting any damages to which it may be entitled.

 The complaint purports to state a single cause of action and cites Sections 197 and 197-a of the General Business Law of the State of New York. Section 197 provides that a manufacturer or distributor of new motor vehicles may not terminate an agreement with a dealer except for cause. Section 198 provides that a court may grant a preliminary injunction in an action under Section 197. Section 197-a, which forbids any refusal to renew a dealership contract, ...


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