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EMPIRE VOLKSWAGEN, INC. v. WORLD-WIDE VOLKSWAGEN C

January 27, 1986

EMPIRE VOLKSWAGEN, INC., et al., Plaintiffs, against WORLD-WIDE VOLKSWAGEN CORP., Defendant


The opinion of the court was delivered by: KRAM

MEMORANDUM OPINION AND O R D E R

SHIRLEY WOHL KRAM, U.S.D.J.

 Plaintiff Empire Volkswagen, Inc. ("Empire Volkswagen"), was previously engaged in the retail sale of automobiles in Poughkeepsie, New York, pursuant to a franchise agreement with defendant. Plaintiff Empire Volkswagen d/b/a Empire Porsche Audi, Inc. ("Empire Porsche Audi"), sold Porsche and Audi automobiles, also in Poughkeepsie, pursuant to a franchise agreement with the defendant. Plaintiff Empire City Motors, Inc. ("Empire City"), sold Ford automobiles at the same location in Poughkeepsie. Plaintiff Donald Amerling alleges he was the majority owner of the three businesses at all relevant times. Plaintiff Susanne Properties Corp. ("Susanne Properties"), owned the premises occupied by the three car dealerships. Defendant World-Wide Volkswagen Corp. ("World-Wide"), distributes Volkswagen in New York, Connecticut, and New Jersey.

 Plaintiffs bring eight claims against the defendant, all arising out of the franchise relationship between Empire Volkswagen, Empire Porche Audi, and World-Wide Volkswagen, which began in September, 1975 and ended in February, 1981. Plaintiffs bring their claims under the federal and state antitrust laws, federal and state legislation protecting automobile franchises, and common law contract and tort principles. Defendant asserts two counterclaims for the purchase price of goods it allegedly sold to plaintiffs.

 The case is currently before the Court on defendant's motion for judgment on the pleadings and in the alternative, for summary judgment. For the following reasons, defendant's motion is GRANTED in part and DENIED in part.

 A party is entitled to a judgment on the pleadings if, based on the pleadings themselves, the party is entitled to relief. Fed. R. Civ. P. 12(c). When matters outside the pleadings are presented to the Court, the motion shall be treated as one for summary judgment under Fed. R. Civ. P. 56. Since the parties have made extensive submissions in the form of affidavits and exhibits, the Court will treat the motion as one for summary judgment.

 A motion for summary judgment lies only when there is no genuine issue of material fact. This Court's role is to determine whether there are issues to be tried. Heyman v. Commerce and Ind. Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir. 1975). The burden is on the moving party to show that no such issues exist. Adickes v. Kress and Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). In testing whether the movant has met this burden, the Court must resolve all ambiguities against the movant. Heyman, 524 F.2d at 1320. Nonetheless, "the mere possibility that a factual dispute may exist, without more, is not sufficient to overcome a convincing presentation by the moving party." Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 445 (2d Cir. 1980) (emphasis in original). Speculation, conclusory allegations, and mere denials are not enough to raise genuine issues of fact.

 I. Federal Antitrust Claims

 A. Exclusive Dealing

 Plaintiffs allege that following its commencement as a Ford dealer in May, 1977, defendant attempted to impose an exclusive car dealing policy on them through a number of discriminatory actions, including decreasing the number of cars it shipped to them for sale. This, plaintiffs claim, violated Section One of the Sherman Act, 15 U.S.C. § 1, and Section Three of the Clayton Act, 15 U.S.C. § 14.

 Section 1 of the Sherman Act prohibits contracts, combinations, or conspiracies in restraint of trade. 15 U.S.C. § 1. Section 3 of the Clayton Act prohibits a person from selling goods on the condition that the purchaser not deal in the goods of a competitor, where the effect of such condition might lessen competition in the particular line of commerce. 15 U.S.C § 14. Exclusive dealing requirements are not per se illegal, but rather, are prohibited under both Acts only if performance of the exclusive dealing arrangement will foreclose competition in a substantial share of the line of commerce affected. Tampa Electric Co. v. Nashville Coal Co., 365 U.S. 320, 327, 5 L. Ed. 2d 580, 81 S. Ct. 623 (1961). The threshold question under both Acts, however, is whether an exclusive dealing arrangement did in fact exist. Id. at 330.

 Defendant has shown there are no material facts at issue regarding plaintiffs' exclusive dealing charges. In September, 1975 Empire Volkswagen opened. In October, 1975, Empire Porsche Audi opened. Neither of the franchise arrangements required plaintiffs to deal exclusively in Volkswagens, Porsches, or Audis. Empire Volkswagen and Empire Porsche Audi both operated out of the same facility. In May, 1977, Empire City commenced operations as a Ford dealership, using the same showroom and facilities as Empire Volkswagen and Empire Porsche Audi.

 The defendant's policy concerning exclusive dealing was to allow its dealers to sell the automobiles of another manufacturer provided they did so from a separate facility. Plaintiffs clearly understood this to be defendant's policy.

 The undisputed established facts show the dealership arrangement defendant attempted to impose on plaintiffs was not an exclusive arrangement. Plaintiffs remained free to sell automobiles provided by other manufacturers, provided they did so from other facilities. See White and White, Inc. v. American Hospital Supply Corp., 540 F. Supp. 951, 1028 (W.D. Mich. 1982) (if the buyer retains the freedom to purchase the product from sellers of its own choosing, there is no exclusive arrangement), rev. on other grounds, 723 F.2d 495 (6th Cir. 1983). Although plaintiffs recognize that they were free in principle to deal with Ford, they argue that this freedom was illusory because plaintiffs did not have the capital to open a separate facility. This argument is misguided. Defendant did not attempt to coerce the plaintiffs into an exclusive dealership arrangement, but to require plaintiffs to sell Ford cars from separate facilities. Defendant was permitted to impose this restriction, regardless of plaintiffs' financial circumstances.

 Plaintiffs also have submitted evidence indicating that defendant induced them to begin their dealership even though it was undercapitalized, and knew about plaintiffs' financial difficulties when defendant urged them to open new facilities. They thus allege defendant's actions were in bad faith. Such allegations of bad faith dealing are not cognizable antitrust claims.

 B. Resale Price Maintenance

 Plaintiffs' second antitrust claim is that defendant penalized them for failing to sell cars at defendant's suggested retail prices. They allege that defendant's actions were in furtherance of a retail price maintenance scheme in violation of 15 U.S.C. § 1.

 Resale price maintenance schemes are per se illegal under Section One of the Sherman Act. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752, 104 S. Ct. 1464, 1469, 79 L. Ed. 2d 775 (1984). However, unilateral action by a party to set retail prices is not illegal. Id. An antitrust ...


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