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March 14, 1986

GREGORIS MOTORS, Plaintiff, against NISSAN MOTOR CORPORATION IN USA, et al, Defendants

The opinion of the court was delivered by: WEXLER


WEXLER, District Judge

 Plaintiff Gregoris Motors, Inc. (Gregoris) brings this suit against Nissan Motor Corporation in U.S.A. (Nissan), the four named Datsun dealerships (Dealerships), and the five named individual defendants (Individual Defendants), who are present or former employees of Nissan at the company's offices in Piscataway, New Jersey. Plaintiff alleges that all the defendants have violated §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1,2; the Robinson-Patman Act, 15 U.S.C. § 13(c); and the Racketeering Influenced And Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1962, 1964(c). In addition, plaintiff alleges that defendant Nissan has violated the Dealers Day in Court Act, 15 U.S.C. §§ 1221 to 1225.

 Gregoris is a Datsun dealership owned by Gerard DeGregoris. Nissan is the American branch of the Japanese manufacturer of Datsun vehicles. The gravamen of the Gregoris complaint is that Nissan together with the four Dealerships and the Individual Defendants have acted to reduce plaintiff's allocation of Datsun vehicles with the aim of harming his business, monopolizing the Datsun market in the area, and punishing plaintiff for filing this and an earlier lawsuit. Among other things, plaintiff alleges that the Dealerships have submitted false sales documents to increase their allotment of new cars, that they have bribed the five Individual Defendants in order to receive larger allotments, and that Nissan either acquiesced in or abetted these activities. In addition, plaintiff alleges that Nissan treated Gregoris disparately and with disfavor by lowering its allocations and assigning it the least desirable vehicles.

 At the outset, plaintiff sought a preliminary injunction, which this Court denied. Now Nissan, three of the Dealership defendants and the five Individual Defendants move to dismiss the Complaint for failure to state claims on which relief can be granted, and for failure to allege fraud with particularity in the RICO claim (Count 5), Rule 9(b), Fed.R.Civ.P. Defendants also request an award of costs and reasonable attorney's fees under Rule 11, Fed.R.Civ.P., and 28 U.S.C. § 1927. Alternatively, the five Individual Defendants move for dismissal of the action as to them for lack of personal jurisdiction. Rule 12(b)(2), Fed. R.Civ.P. As the parties have submitted and the Court considers material outside of the pleadings, the Court now converts the motion to dismiss to one for summary judgment where appropriate. Rules 12(b)(6), 56(b), Fed. R.Civ.P.


 The alleged anti-trust and other violations began during the period of voluntary import quotas by the Japanese car manufacturers. The quota agreement was reached in 1981 and extended in 1984. The year 1985 saw an easing of the quotas. During the voluntary restrictions, getting the new Japanese automobile of one's choice was not always easy. A purchaser did not order a vehicle, but rather, reserved the next available model with the desired opinions. As a result, consumers did a great deal of shopping for the dealer who could most quickly provide the chosen automobile, and dealers were able to exact substantial mark-ups on the most popular car models.

 Defendant Richard S. Hungerford, Nissan's Regional Sales Manager, by affidavit outlines the distribution system for new Datsun vehicles. First, the number of new Datsuns to be shipped to the United States for sale is determined for a ninety-day period. These are then divided among the dealership regions according to each region's share of national sales of the previous ninety-day period. Each regional sales office then allocates vehicles to dealerships within the region based on each dealer's share of the previous ninety-day sales, its inventory, and "orders in port" (Hungerford Affidavit P 6). This is called the Equitable Distribution System (EDS). The allocation calculation is done by computer. Of pivotal importance in the EDS is the submission of Retail Delivery Reports (RDR cards), which document the retail sales, or travel rate, that are the basis for the allocation of new cars (Hungerford Aff. P 7).

 A dealer does not have to purchase his full allotment and a dealer can purchase new cars from sources other than defendant Nissan U.S.A. For example, dealers buy and sell vehicles to each other (Affidavit of Gerard DeGregoris P 3), and buy vehicles from sources in Puerto Rico, which was not subject to the voluntary import restrictions. Sales of these cars that have not been received through the EDS are not included in the dealer's travel rate. In other words, the fewer EDCS cars a dealer sells, the lower his share for the next allocation period.

 Gregoris alleges, among other things, that defendant Dealerships have submitted false RDR cards, either by forging cards for fictitious purchasers or entering a trade to a dealer as a retail sale and submitting a RDR card. Mr. DeGregoris asserts that the resulting double sales documentation must make it obvious to Nissan that dealers are manipulating travel rates and Nissan's failure to act is an acquiescence in fraud (DeGregoris Aff. P 3). Plaintiff also alleges that Nissan has quietly abandoned the EDS and now bases its allocations solely on the travel rates (Complaint P 17). Moreover, plaintiff alleges Nissan has knowingly allowed some dealers to obtain vehicles beyond their EDS allocation by accepting false "fleet orders' (Complaint P 19). Finally, Gregoris alleges that Nissan delays shipments to plaintiff so the vehicles cannot be sold in time to be included in the travel rate (Complaint P 20), and allots undesirable models to plaintiff (Complaint P 21). Gregoris claims it receive disfavored treatment because it does not give bribes and tries to stop the false RDR cards and fleet orders (Complaint P 24).


 In Counts 1 and 2 of the Complaint Gregoris claims that its allocations of new cars from Nissan was substantially reduced in the first quarter of 1984, as compared to the same quarter of 1983, to the point of threatening to destroy the business. Gregoris further alleges that from march 1981 to March 1984 the four Dealerships submitted false orders and sales reports and bribed the Individual Defendants in order to secure their cooperation and increase their allocations, and such increased allocations were at the expense of plaintiff's allotments or otherwise gave the other dealers a market advantage to plaintiff's detriment.

 The Court must first examine the anti-trust claims to determine whether the rule of per se liability or rule of reason applies. The rule of per se liability applies when the agreement or practice at issue appears on its face to be one that would almost always act to restrict competition within a market. Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1, 19-20, 99 S. Ct. 1551, 1562, 60 L. Ed. 2d 1 (1979). Generally, the per se rule is applied only to practices with which the courts have had considerable experience. id. at 8, 99 S. Ct. at 1556. Here, plaintiff is not complaining of the EDS, but of means used to avoid or alter its effect. The conduct outlined in the Complaint lacks the purposefulness and coherency to approach a recognized category of per se restraint. Moreover, plaintiff appears to be alleging the sort of vertical, non-price fixing restraint that the United States Supreme Court held should be scrutinized under the rule of reason standard. Continental T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 97 S. Ct. 2549, 53 L. Ed. 2d 568 (1977). Accordingly, the defendant's alleged violations of the Sherman Act must be examined under the rule of reason.

 Under the rule of reason, plaintiff must demonstrate a precise harm caused by the defendant's activities. That harm must be a restraint on competition, not merely damage to a competitor. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S. Ct. 690, 697, 50 L. Ed. 2d 701 (1977). Damage to a competitor can lessen competition within a market. Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S. Ct. 705, 3 L. Ed. 2d 741 (1959). Nevertheless, injury to a competitor alone is not enough to invoke the anti-trust laws. Rather, it must be demonstrated that the injury to the competitor causes a lessening of competition in the market as a whole. Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 133 (2d Cir. 1978), cert. denied, 439 U.S. 946, 99 S. Ct. 883, 58 L. Ed. 2d 338 (1979).

 By and large, summary judgment is not a favored means of disposing of anti-trust claims. Where, however, allegations of the complaint fail to establish requisite elements of an anti-trust claim, summary judgment is appropriate. Havoco of America, Ltd. v. Shell Oil Co., 626 F.2d 549, 553 (7th Cir. 1980). Plaintiff here alleges that by the actions of the defendants, Gregoris was allocated fewer Nissan cars of less desirable types in 1984 than in the same period in 1983. Plaintiff makes the conclusory claim that as a result its business had been injured, its continued existence is threatened, and competition is reduced (Complaint § 28). Assuming for the purposes of defendants' motions that plaintiff received fewer cars from Nissan solely as a result of defendants' actions, Gregoris fails to establish the requisite element of anti-competitive impact. In fact, plaintiff has failed to establish monetary injury to itself. At this point the Court takes notice of material submitted in opposition to the motion for a preliminary injunction. For April 1983, Gregoris Motors showed a net profit of $21,030.00 and paid owner Gerard DeGregoris a salary of $15,625.00 (Gregoris Motors Financial Statement for April 1983, Exhibit C of the June 14, 1984 Reply Affidavit of Richard S. Hungerford). For April 1984, Gregoris Motors had a net profit of $22,606.00 and paid Mr. DeGregoris $14,000.00 in salary (Gregoris Motors Financial Statement of r April 1984, Exhibit D of June 14, 1984 Hungerford Reply Aff.). Mr. Hungerford's summary comparison of the first quarters of 1983 and 1984 from Gregoris Motors' monthly financial status is as follows: Number of New Vehicles Sold Net Profit Owner's Salary 1983 1984 1983 1984 1983 1984 January 65 59 $15,449 $29,996 $12,500 $14,000 February 51 51 4,4 07 6,813 12,500 14,000 March 65 55 33,993 19,189 12, 500 17,500 April 64 49 21,030 22,606 15,625 14,000 TOTAL 245 214 $74,879 $78,604 $53,125 $59,500

 (Corrected Affidavit of Richard Hungerford in Opposition to the Motion for Preliminary Injunction at 10).

 The Financial Statements for July and August 1984 show a net loss for July $13,368.00 and a net profit for August of $44,678.00. While the Gregoris dealership is not always profitable, it does not approach insolvency.

 In addition, it appears that there was a thirty percent decrease in the availability of Nissan cars in the New York region in the first quarter of 1984 as compared to the first quarter of 1983. This is evidenced not only by the affidavits of the owners of defendants Five Town Pontiac-Datsun, Amity Datsun, and Bayview Datsun, but by the comparison chart of 1983 and 1984 first quarter sales for thirty-five regional dealerships (June 14, 1984 Hungerford Reply Aff. Exhibit B). That comparison chart shows only two regional ...

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