company-owned stores. This was quite a variance from his
original testimony that no discussion of the Goodyear stores
took place until May 1989, almost two years later.
Getting to the crucial issue, on cross examination, Lehr
denied that there was any understanding or agreement between
Motor Age and AAAD that Motor Age could get the plaintiff's
Goodyear company-owned stores or to cause plaintiff's
membership to be terminated and that he never told Garfinkle
of such a deal. He further stated that any discussions about
Goodyear stores related to the independent stores and not to
the company-owned stores. (The Court notes that the figures in
Plaintiff's Exhibit 38 concern the plaintiff's Goodyear
company-owned stores and not Goodyear independent stores.)
As to Ted Garfinkle's testimony regarding a secret deal to
acquire the plaintiff's Goodyear stores, Lehr stated that in
January, 1987 he told Garfinkle that he was interested in
buying Forshay-Gabriel because of its Goodyear stores. The
Goodyear company-owned stores are what attracted Lehr to
The Court also notes that while Lehr testified that he asked
for only one-third of the 5.5 million dollar Goodyear
business, he circulated an inter-office memo on September 10,
1987 referring to the entire volume of "about $5 1/2 million
per year — still not too shabby". There was no reference in
this memo of only a one-third share. The clear import was that
— in some manner — Motor Age was to obtain the entire 5 1/2
million dollar Goodyear business then held by both
Forshay-Gabriel and the plaintiff. The means by which Motor Age
would obtain the plaintiff's Goodyear business is less clear.
As to the Forshay-Gabriel Goodyear accounts; they would be
purchased. As to the Automotive Electric Goodyear business; no
mention was made at that time as to the manner of acquisition.
Ultimately, fortuitously, the plaintiff's membership in AAAD
was terminated and its Goodyear business given to Motor Age.
Thus, Motor Age's expectations with regard to the plaintiff's
Goodyear business, as indicated in its inter-office memorandum
of September 10, 1987, came true.
At this point, the plaintiff Automotive Electric Service
The Defendants' Case:
ALAN HUNSAKER was formerly employed by MRI since 1983 and
has been employed since January 1990 as Director of Marketing
for AAAD. While with MRI one of his responsibilities was to
implement the AAAD Parts Plus program. Hunsaker assisted the
plaintiff in developing a Parts Plus program. He started with
plaintiff in October 1985 with a "kickoff" program in which
the plaintiff signed up fifteen jobbers within the first two
weeks. From these first fifteen jobbers, the plaintiff let the
Parts Plus program slide until they were down to very few
jobbers. Then the program was slightly rejuvenated in 1989
when the plaintiff added six jobbers.
The progress of the plaintiff in the Parts Plus program is
traced by the various service reports filed by Hunsaker. The
service report of January 29, 1986 indicated that greater
member commitment was required. Hunsaker testified that in
1986 the plaintiff failed to deliver the elements of the Parts
Plus program he had worked out for them. In Hunsaker's January
19, 1987 service report he stated that "the commitment of the
warehouse began to erode".
Alan Hunsaker testified in detail to a chronological history
of failure on the part of the plaintiff to implement a viable
Parts Plus program. He stated that the plaintiff put its Parts
Plus program "on hold" in June 1987. Further, he stated that
plaintiff delivered no Parts Plus program in 1988. However, in
September 1988 a program was finally put together for
1988/1989 which Hunsaker felt would be acceptable, if
implemented. The program provided for an initial four Parts
Plus jobbers and ten to twelve members by the end of 1989.
Instead of increasing their Parts Plus jobbers by December
1988, the members fell from four to three. In sum, Hunsaker
was of the opinion that the plaintiff lacked commitment to the
Parts Plus program and didn't deliver what it promised.
During cross-examination, Hunsaker conceded that in 1988,
the plaintiff erected a Parts Plus sign at its warehouse and
placed Parts Plus signs on its trucks. Also as of October
1988, the plaintiff's telephone was answered "Auto — Parts
Plus". Further, in the MRI memorandum dated October 4, 1988,
Hunsaker rendered a more favorable report as to the plaintiff's
Parts Plus efforts, as follows:
I feel that Automotive Electric has recommitted
to the delivery to the Part Plus program and has
developed a program which it will be possible for
them to deliver. Areas where problems occurred
previously have been addressed and specific
individuals designated as responsible for seeing
that those are remedied. The target set by
Automotive Electric of the initial four Parts
Plus members and targeting a total of ten to
twelve by the end of '89 is, in my estimation, a
realistic and controllable number.
Also worth noting is the fact that as I was
waiting to see the Judelson's and noticed that
the phone was being answered as Automotive
Electric Parts Plus. Automotive has also
identified their invoices, statements, credit
memos, etc. (see attached) which both Parts Plus
and Trust logos."
In actuality, by June 1989, the plaintiff had acquired six
new jobbers in addition to the one old one and had
accomplished half of its target of ten to twelve jobbers with
additional time available to the end of 1989. Further, in the
April 7, 1989 MRI "Standards Committee Update", Hunsaker
stated that the plaintiff, "Has met the guidelines as set
forth by the Standards Committee, to a point". One month
later, notwithstanding this favorable report by the person
directly supervising the plaintiff's Parts Plus program, the
Standards Committee recommended plaintiff's termination.
MARK DARNELL MULLER was the President and Chief Executive
Officer of Muller Warehouse, Inc. a AAAD member since 1979,
operating in the Dallas-Fort Worth area. His firm has
approximately fifty-three Parts Plus jobbers. He is a member
of the Standards Committee and the Executive Committee.
In the fall of 1987 the Standards Committee focused on five
members who were deficient in meeting the standards of the
Parts Plus program, including the plaintiff. On-site meetings
were scheduled and Muller visited the plaintiff and two other
deficient members. Even though the plaintiff was asked to send
a representative to the next meeting of the Standards
Committee, the plaintiff failed to do so. While one of the
five firms went out of business, two of the firms made
progress, while the plaintiff and Forshay-Gabriel failed to do
In the Spring of 1989, the Standards Committee decided that
if the plaintiff did not show more progress it would recommend
termination. It was Muller's opinion that after five years and
no viable Parts Plus program, it was proper to terminate the
plaintiff. Muller conceded, however, that Forshay-Gabriel had
no Parts Plus program and was not terminated. Further, he
testified that the only visit by AAAD's attorney was to the
PAUL KACHAPIS, the Chairman of the Executive Committee of
AAAD, was the final defense witness. He is employed by Alden
Warehouse, a AAAD member located in Somerset, Massachusetts.
Alden has about forty-eight Parts Plus jobbers. He voted to
terminate the plaintiff in order to "raise the standards" of
In February 1987, Matlock told him that Motor Age wanted
Goodyear business. Kachapis told Matlock that none was
available. Also, he stated that he personally told Lehr on
three or four occasions that no Goodyear stores were
Of importance to this determination, Kachapis testified that
the Goodyear company-owned store data was confidential, not
available in the industry and would not be divulged to
non-members. The Court wonders why then, was the confidential
financial data of the plaintiff's Goodyear stores sent to Lehr
in September 1987, prior to his becoming a member?
whether he authorized Matlock to give Lehr the financial
information concerning the Goodyear stores, prior to Motor
Age's membership, Kachapis answered "No". Although Kachapis
later said if he was asked he wouldn't have stopped Matlock
from supplying this information, the Court does not credit
Both defendants rested.
In rebuttal, the plaintiff produced ALFRED SCHUTTINGER, an
employee of the plaintiff for thirty years, an outside
salesman and the plaintiff's Parts Plus manager. Schuttinger
told the Executive Committee that when Matlock took part in
the investigation of plaintiff's jobbers in 1989, he called on
the wrong accounts. Also, at the Executive Committee meeting
on November 16, 1989, Schuttinger produced letters from the
plaintiff's five new Parts Plus jobbers and no Executive
Committee member asked to see the letters.
Schuttinger was of the opinion that it was very difficult to
sell the Parts Plus program in the New York City area and
despite this handicap, the plaintiff signed up six new Parts
Plus jobbers in the first six months of 1989. He conceded,
however, that the plaintiff had no Parts Plus jobbers in
Nassau, Suffolk or Westchester.
All sides rested.
1. At the outset, the Court finds that the plaintiff has
failed to establish any overall plan by AAAD and the larger
members to squeeze out smaller members.
2. The plaintiff had no viable Parts Plus program in 1987
and 1988. In fact, the plaintiff's Parts Plus program was "on
hold" from the summer of 1987 to the fall of 1988.
3. New York City is a difficult area to obtain Parts Plus
4. At least by September 8, 1987, the defendant Motor Age by
Paul Lehr, its President, and the defendant AAAD by Joe
Matlock, its Executive Vice-President and authorized
soliciting representative, entered into an oral agreement,
intended to be secret, by the terms of which, in substance,
Matlock promised Motor Age that if it became a member, it
would obtain the Goodyear company-owned stores then serviced
by the plaintiff. As a part of this agreement there was also
discussion of the means by which Motor Age would get the
plaintiff's Goodyear accounts, including the possible
termination of the plaintiff for failing to commit to a viable
Parts Plus program.
5. The Court finds the said secret agreement to permit Motor
Age to take over plaintiff's Goodyear business was made before
Motor Age became a member of AAAD and the prospect of
obtaining the plaintiff's Goodyear business was a substantial
factor in inducing Motor Age to enter AAAD.
6. On or about September 8, 1987, the same day that Joe
Matlock sent Lehr the confidential financial data on the
plaintiff's Goodyear business, the defendant Motor Age sent
its "profile" to AAAD, preparatory to applying for membership.
7. At or about or shortly after the date of the Motor Age
memorandum of September 10, 1987 (Plaintiff's Exhibit 38), the
defendant Motor Age applied for admission to AAAD.
8. In a meeting with Marvin Almy in November, 1987, Richard
Judelson inquired as to the status of Motor Age and Almy said
no discussions were going on. The Court finds that, contrary
to such assertions by Almy, discussions must have been going
on, since a ballot and "application" was sent out by Almy on
November 18, 1987 including a profile from Motor Age dated
September 8, 1987.
9. The first Motor Age ballot was mailed on November 18,
1987, and it said that the Dun & Bradstreet report for Motor
Age was favorable and the report was on file in the office
(important because of the bankruptcy history of the
predecessor of Motor Age). In fact, the Dun & Bradstreet
report was dated December 11, 1987, three weeks later. Further
Almy was aware that Motor Age's predecessor had been in
bankruptcy in the late 1970s but did not report that fact to
when he recommended the admission of Motor Age.
10. Evidence of misrepresentation is demonstrated in the
applications for membership from Motor Age. The November 18,
1987 "application" (Plaintiff's Exhibit 10) includes the
"Existing national account business would remain
with the current members who are serving
This was a fraudulent misrepresentation since, prior to that
time, Lehr and Matlock entered into a secret agreement for
Motor Age to take over the plaintiff's Goodyear accounts.
11. The Motor Age application states: "Goodyear
(or other national account) considerations
This was a fraudulent misrepresentation since, prior to that
time, Lehr had made a secret agreement with Matlock to obtain
the plaintiff's Goodyear accounts.
12. The Court finds that there were no "irregularities" in
the balloting for Motor Age membership which would require
vacating its membership in AAAD.
The Court finds that the election of Motor Age to membership
in AAAD was proper, valid and substantially complied with the
13. The Court finds that the plaintiff had adequate notice
and opportunity to be heard at the November 16, 1989 Executive
Committee meeting at which time a vote to terminate the
plaintiff was passed. Therefore, there was no violation of
procedural due process with regard to the plaintiff's
14. Despite Forshay-Gabriel not having any Parts Plus
program in place, AAAD never terminated or even threatened to
terminate its membership.
The plaintiff's complaint sets forth six causes of action
against both AAAD and Motor Age, all of which arise out of the
termination of the plaintiff's membership. The six causes of
action include: (1) breach of fiduciary duty; (2) breach of
AAAD by-laws; (3) breach of the Goodyear Agreement; (4)
wrongful interference with contractual relations; (5) wrongful
interference with prospective business opportunities; and, (6)
violation of the "laws of the United States of America and the
State of New York". The plaintiff seeks damages, permanent
injunctive relief and attorney's fees.
Preliminarily, the Court notes that jurisdiction based on
diversity is proper, since each of the parties are citizens of
different states and the matter in controversy exceeds the sum
or value of $50,000 (see 28 U.S.C. § 1332).
At the outset, the Court dismisses the plaintiff's claims
for monetary relief as a matter of law. First, by reason of
the initial TRO and the subsequent interim or temporary
injunction, the plaintiff has remained a member of AAAD during
the pendency of the trial and to the present time. The
plaintiff has continued to service its Goodyear stores as a
AAAD member and, as a result, has not suffered any monetary
Although there may have been discussion at the close of the
trial concerning the postponement of proof of damages, the
Court now rules that there could not be any monetary damages
arising from the "bad faith" involved in the secret agreement
between AAAD and Motor Age. Significantly in this regard, the
plaintiff has, at all times, retained its membership in AAAD
and continued to serve Goodyear without interruption.
When asked by the Court what monetary damages the plaintiff
is claiming, the plaintiff's counsel raised only the following
issues: 1) the AAAD cancellation of the plaintiff's John Deere
contract; 2) inclusion of Motor Age in AAAD; 3) additional
discounts made to Motor Age and not the plaintiff; 4) AAAD
steering jobber leads to Motor Age rather than the plaintiff;
and, 5) attorney fees.
The Court finds that none of these alleged theories of
damages are viable. In fact, counsel for the plaintiff
conceded that there are no damages in the event that the Court
finds that the plaintiff would be entitled
only to an injunction directing reinstatement of its
membership, as follows:
"MR. FRANK: Under your Honor's hypothetical
— I would submit that, under those limits, you had
circumstances we would not be entitled to damages,
other than an injunction for restoration, and of
course the plaintiff would ask at that time for an
affirmative prohibition against any type of
The Court also rejects the plaintiff's claim for attorney's
fees. It is well settled that absent an agreement, statute or
court rule, under our present judicial system, under the
"American Rule" such attorney's fees are not available
(see Hooper Assocs., Ltd. v. AGS Computers, Inc., 74 N.Y.2d
487, 492, 548 N.E.2d 903, 904, 549 N.Y.S.2d 365, 366 ).
The plaintiff has not provided the Court with any such
agreement or statute, nor has the Court independently been able
to find any authority justifying such an award under these
circumstances (cf. Lewis v. S.L. & E., Inc., 629 F.2d 764, 773
[2d Cir. 1980] [district court erred in entering award of
attorney's fees absent agreement or statute]).
Accordingly, assuming that the plaintiff is successful on
the merits of any cause of action, the only relief properly
available at this time is reinstatement as a member of AAAD
pursuant to the terms of a permanent injunction. Specifically,
as to injunctive relief, the plaintiff seeks: (1)
reinstatement as a member of AAAD; and, (2) termination of
Motor Age's membership. The Court now turns to the applicable
substantive law underlying the causes of action in the
complaint to determine whether the plaintiff has established
any of the six causes, and if so, whether an injunction should
For the reasons that follow, the Court finds that the
plaintiff has succeeded on the merits of the second cause of
action, namely, breach of the AAAD by-laws. As to the
remaining five causes of action, the Court finds that they are
either without merit as a matter of law, or that the plaintiff
has failed to sustain its burden of proof.
Accordingly, the five causes of action that are dismissed
are initially reviewed, followed by a discussion of the second
cause of action and the applicable standard for a permanent
1. Breach of Fiduciary Duty.
With respect to the first cause of action, the parties
agree, and the Court finds, that Illinois, rather than New
York law applies (see First Nat'l City Bank v. Banco Para El
Comercio Exterior de Cuba, 462 U.S. 611, 621, 103 S.Ct. 2591,
2597, 77 L.Ed.2d 46 ; Treco, Inc. v. Land of Lincoln Sav.
& Loan, 749 F.2d 374, 377 [7th Cir. 1984]). In any event, as to
the elements of a fiduciary relationship, the laws of the two
states apparently do not differ (see Sound Video Unlimited,
Inc. v. Video Shack Inc., 700 F. Supp. 127, 133 [S.D.N.Y.
Under the law of Illinois, a fiduciary relationship arises
between parties when one reposes trust and confidence in
another, and the latter achieves substantial dominance and
influence over the actions of the former (see In re Estate of
Shedrick, 122 Ill. App.3d 861, 866, 78 Ill.Dec. 462, 466,
462 N.E.2d 581, 585 [1st Dist. 1984]). The existence of such a
relationship "must be shown by proof so clear and convincing,
so strong, unequivocal and unmistaken that it leads to only one
conclusion" (Carey Elec. Contracting, Inc. v. First Nat'l Bank,
74 Ill. App.3d 233, 237-38, 30 Ill.Dec. 104, 108,
392 N.E.2d 759, 763 [2d Dist. 1979]; see also Maguire v. Holcomb,
169 Ill. App.3d 238, 242, 119 Ill.Dec. 932, 934, 523 N.E.2d 688,
690 [5th Dist.], appeal denied, 122 Ill.2d 577, 125 Ill.Dec. 220,
530 N.E.2d 248 ). Whether there is a fiduciary
relationship is a question of fact, not law (see BA Mortgage &
Int'l Realty Corp. v. American Nat'l Bank & Trust Co.,
706 F. Supp. 1364, 1372 [N.D.Ill. 1989], citing In re Estate of
Wernick, 151 Ill. App.3d 234, 244, 104 Ill.Dec. 486, 493,
502 N.E.2d 1146, 1153 [1st Dist. 1986], aff'd in part, rev'd in
part, 127 Ill.2d 61, 129 Ill.Dec. 111, 535 N.E.2d 876 ).
The Court finds here that the plaintiff failed to establish
by clear and convincing
proof that there exists a fiduciary relationship between AAAD
and its members. The plaintiff concededly entered AAAD for
business purposes. No proof was adduced at trial showing that
the plaintiff may have been a "servient" party in the
relationship or that AAAD exercised substantial dominion or
control over the plaintiff's day-to-day business operations or
decision making. Rather, the proof shows that the plaintiff
independently made all necessary business decisions and did
not "blindly obey" AAAD's orders.
A slightly dominant business position by one of the parties
over the other does not, by itself, operate to convert an
ordinary business relationship or contractual arrangement into
a confidential or fiduciary relationship (see Carey Elec.
Contracting, Inc. v. First Nat'l Bank, supra, 74 Ill. App.3d at
p. 238, 30 Ill.Dec. at pp. 108-09, 392 N.E.2d at pp. 763-64
["[a] confidential relationship only goes to a situation where
one party, because of some close relationship, relies very
heavily on the judgment of the other"]).
The Court finds that AAAD did not dominate or influence the
actions of the plaintiff. The only actions AAAD had "control"
over, if any, are those which the plaintiff obligated itself
contractually to do, namely, comply with the membership
standards, which included participation and development in the
Parts Plus marketing program. Clearly, under such
circumstances, there is an interdependence between the
parties, rather than one achieving substantial dominance,
influence or control over the other. The plaintiff has shown
nothing more than the usual contractual business relationship
between a trade organization and a member, not a confidential
or fiduciary relationship (see Seaboard Seed Co. v. Benis Co.,
Inc. 632 F. Supp. 1133, 1136-37 [N.D.Ill. 1986]).
The plaintiff has failed to prove that there was a fiduciary
relationship between AAAD and the plaintiff-member. Instead,
the proof submitted at trial amply supports a finding that the
plaintiff was acting as an independent party in its business
relations with AAAD (see Zeilenga v. Stelle Indus., Inc.,
52 Ill. App.3d 753, 757, 10 Ill.Dec. 581, 584, 367 N.E.2d 1347,
1350 [4th Dist. 1977] [no fiduciary relationship existed
between not-for-profit manufacturing concern and its members,
since plaintiff acted as independent rather than servient
Accordingly, the first cause of action is dismissed.
2. Breach of the Goodyear Contract.
The third cause of action in the plaintiff's complaint
alleges that AAAD breached the April 22, 1985 contract,
regarding the servicing of Goodyear company-owned stores in
the New York-metropolitan area.*fn1 The parties agree that as
to this cause of action, pursuant to the Goodyear Agreement,
Tennessee law governs.
Under the law of Tennessee, the essential elements of a
breach of contract claim are the existence of a contract,
breach of that contract, and injuries or damages proximately
caused by the breach (see Tedder v. Raskin, 728 S.W.2d 343, 351
[Tenn. App. 1987]). Since there is no dispute as to the
existence of a valid contract, the issues are whether there has
been a breach, and if so, whether the plaintiff has suffered
Without reaching the issue of whether there has been a
breach, the Court finds that there are no damages, since the
plaintiff was permitted to continue to service the Goodyear
account. Accordingly, the third cause of action is dismissed.
3. Interference with Contractual Rights/Benefits.
The plaintiff's fourth cause of action, to be determined
under New York law as the parties have agreed,*fn2 is based
upon a theory of wrongful or tortious interference
with contractual relations. Although not clear from the
plaintiff's, submissions, the Court agrees with the
defendants' interpretation that the claim stems from either
the by-laws and/or the Goodyear Agreement.
Under New York law, it is well settled that in order to
prevail on a claim for tortious interference with contractual
relations, the following elements must be proven: (1) the
existence of a valid contract between the plaintiff and a
third party; (2) knowledge of the contract on the part of the
defendant; (3) the defendant's intentional procurement of a
breach of the contract by the third party; and, (4) resultant
damages caused by the breach (see Universal City Studios, Inc.
v. Nintendo Co., Ltd., 797 F.2d 70, 75 [2d Cir.], cert. denied,
479 U.S. 987, 107 S.Ct. 578, 93 L.Ed.2d 581 ;
Pennsylvania Engineering Corp v. Islip Resource Recovery
Agency, 710 F. Supp. 456, 464 [E.D.N.Y. 1989]; Israel v. Wood
Dolson Co., 1 N.Y.2d 116, 120, 134 N.E.2d 97, 99, 151 N.Y.S.2d
1, 5 ; Giannelli v. St. Vincent's Hosp., App. Div., 553
N.Y.S.2d 677, 681 [1st Dep't 1990]; see generally 2 F. Harper,
F. James & O. Gray, The Law of Torts §§ 6.5-6.10 [2d ed. 1986]
[overview of elements and application of the tort]).
A cause of action for tortious interference with contractual
relations does not lie, however, if the contract is one
terminable at will (see Kaminski v. United Parcel Serv.,
120 A.D.2d 409, 501 N.Y.S.2d 871 [1st Dep't 1986]), unless there is
a showing of fraud, misrepresentation, unfair conduct or other
wrongful acts (see Koeppel v. Schroder, 122 A.D.2d 780, 505
N.Y.S.2d 666 [2d Dep't 1986]; see generally 72 N.Y. Jur.2d,
Interference § 9 [1988 & Supp. 1990] [collecting cases]).
As to the defendant AAAD, it is a party to both the by-laws
and the Goodyear Agreement. Accordingly, the claim against
AAAD is legally insufficient and fails as a matter of law,
since it is well settled that such a claim may not be asserted
against a party to the contract (see Payne v. Kathryn Beich &
Nestle, 697 F. Supp. 612, 615-16 [E.D.N.Y. 1988] [citing
cases]). Put simply, AAAD cannot be held liable for inducing
the breach of a contract to which it is a party (see Murphy v.
Capone, 120 A.D.2d 714, 502 N.Y.S.2d 511 [2d Dep't 1986]; see
also Koret, Inc. v. Christian Dior, S.A., App. Div., 554
N.Y.S.2d 867, 869 [1st Dep't 1990] ["[i]t is well established
that only a stranger to a contract, such as a third party, can
be held liable for tortious interference with a contract"]).
The claim against Motor Age, however, requires a more
detailed analysis with respect to both the Goodyear Agreement
and the by-laws.
As to the Goodyear Agreement, as noted above, the Court
finds that this was a valid contract between the plaintiff and
AAAD, and that it is properly characterized as a contract
terminable at will upon notice. Although generally such an
at-will contract would bar recovery under this theory (see
Kaminski v. United Parcel Serv., supra), the Court finds here
that as a result of the wrongful acts and bad faith of Motor
Age, there was attempt to intentionally interfere or procure
the breach of the contract so as to bring even an at-will
contract within the ambit of this tort (compare Guard-Life
Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183,
406 N.E.2d 445, 428 N.Y.S.2d 628  [absent proof of wrongful
conduct, no liability exists for the alleged interference with
exclusive distributorship contract terminable at will]). In
sum, the Court finds that Motor Age was aware of the existence
of this contract and that Motor Age intentionally attempted to
procure its breach.
Notwithstanding the proof of the first three essential
elements, the plaintiff's claim must be dismissed for failure
to prove the fourth, namely, that the plaintiff has sustained
damages as a result of the interference. The absence of
damages, of course, is fatal to the success of this cause of
action (see Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc.,
709 F. Supp. 438, 453 [S.D.N.Y. 1989]). As stated by the New
York Court of Appeals in Simon v. Noma Elec. Corp., 293 N.Y. 171,
177, 56 N.E.2d 537, 539 (1944), "to recover on the cause
of action for wrongful interference . . . plaintiff had to
prove damages resulting
from that interference". To the extent that the plaintiff
relies on the attorney's fees it incurred as part of the
damages, the Court finds no applicable exception to the
general rule that attorney's fees are not recoverable as
damages (see, e.g., Goldberg v. Mallinckrodt, 792 F.2d 305, 309
[2d Cir. 1986] [exception applies where party's wrongdoing
exposes another to litigation with a third party, in which
first party is not involved]).
Accordingly, the fourth cause of action is dismissed as
against both defendants.
4. Interference With Business Opportunities.
The fifth cause of action alleges prospective interference
with the plaintiff's business opportunities. The parties agree
that New York law governs.
The Second Circuit summarized this tort under New York law,
"In order to prevail on a claim of tortious
interference with prospective economic advantage,
a plaintiff is required to show `the defendant's
interference with business relations existing
between the plaintiff and a third party,
either with the sole purpose of harming the
plaintiff or by means that are "dishonest, unfair
or in any other way improper."'. . . If the
defendant's interference is intended, at least in
part, to advance its own competing interests, the
claim will fail unless the means employed include
criminal or fraudulent conduct."
PPX Enters., Inc. v. Audiofidelity Enters., Inc., 818 F.2d 266,
269 (2d Cir. 1987) (citations omitted); see also Lerman v.
Medical Assocs. of Woodhull, P.C., App. Div., 554 N.Y.S.2d 272,
273 (2d Dep't 1990).
Additionally, the tort "usually involves interference with
a `business relationship not amounting to a contract'"
(PPX Enters., Inc. v. Audiofidelity Enters., Inc., supra, 818
F.2d at p. 270, quoting 32 N.Y. Jur., Interference § 40
), and involves either a severance or injury to that
relationship (see id.).
Presumably, the relationship which is the subject of the
claim as against AAAD, is between the plaintiff and Goodyear.
This relationship arises solely out of the contract between
the plaintiff and AAAD over the servicing of the Goodyear
account. The plaintiff has not adduced proof showing that
Motor Age's "sole motive was to inflict injury". However, the
plaintiff has established that Motor Age employed unfair, and
improper means to interfere with plaintiff's advantageous
business relationship with Goodyear (see e.g. Nifty Goods Corp.
v. Great Atl. & Pac. Tea Co., 614 F.2d 832, 838 [2d Cir.
1980]). Nevertheless, similar to the discussion concerning the
fourth cause of action sounding in wrongful interference with
contract, the plaintiff failed to establish any damages.
Based upon the foregoing, the fifth cause of action is
5. Violation of "The Laws of The United States and The State
of New York".
The plaintiff's all-encompassing sixth cause of action
includes allegations of unlawful and unfair trade practices in
violation of both federal and state law. Although not
specified in the plaintiff's papers or during the course of
trial until the last day, it appears that the claim is based
on the alleged violations of section 1 of the Sherman Act,
15 U.S.C. § 1, and New York's counterpart antitrust law, the
Donnelly Act, N.Y.Gen.Bus.Law § 340.
Not only has the plaintiff failed to allege the requisite
elements of this cause of action under either the Sherman Act
or the Donnelly Act, but the evidence adduced by the plaintiff
does not establish any price fixing whatsoever.
As to the Sherman Act, nothing was offered to prove the
existence of a conspiracy among competitors to fix prices with
respect to certain goods (see International Distribution
Centers, Inc. v. Walsh Trucking Co., 812 F.2d 786, 793 [2d Cir.
1987]). The proof required to sustain such a claim includes,
inter alia, evidence of a relevant product and geographic
market, reduction of that market by reason of the conspiracy,
and an anti-competitive effect outweighing any pro-competitive
benefits (see International Distribution Centers,
Inc. v. Walsh Trucking Co., supra, 812 F.2d at pp. 793-95; see
also United States Football League v. National Football League,
842 F.2d 1335, 1360 [2d Cir. 1988]). No such proof was offered
To the extent that the plaintiff attempts to state a claim
under the Donnelly Act, it is also deficient, since section
340 of the Donnelly Act is patterned after section 1 of the
Sherman Act and its application is governed under the same
standards as those developed under the Sherman Act (see, e.g.,
Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp.,
814 F.2d 90, 98 n. 4 [2d Cir. 1987], citing Hsing Chow v. Union
Central Life Ins. Co., 457 F. Supp. 1303, 1308 [E.D.N.Y. 1978]).
Accordingly, the plaintiff's failure to establish a Sherman Act
violation is equally fatal to its Donnelly Act claim.
Therefore, the sixth cause of action is dismissed in its
6. Breach of AAAD By-laws.
Having dismissed five of the six causes of action, the Court
now turns to the remaining cause of action; namely, the second
cause alleging breach of the membership by-laws by AAAD. As to
this cause of action, the parties dispute what state law
governs. The plaintiff contends that Illinois law applies;
AAAD argues that New York law should control. Thus, a
threshold consideration for the Court is to determine this
conflicts of law issue.
A federal district court adjudicating a diversity action is
required to apply the choice of law rules of the forum state
within which the court sits (see Klaxon Co. v. Stentor Elec.
Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477
). However, the Court need only apply choice of law rules
where there is a "true conflict" (see Phillips Petroleum Co. v.
Shutts, 472 U.S. 797, 838, 105 S.Ct. 2965, 2988, 86 L.Ed.2d 628
; Norlin Corp. v. Rooney, Pace, Inc., 744 F.2d 255,
263-64 [2d Cir. 1984]). Otherwise, the controversy is
considered a "neutral" case, and the Court is free to apply the
law of either one of the states involved.
It appears that both New York and Illinois law are
substantially the same with respect to the key issue of the
standard of judicial review with regard to the termination or
expulsion of members from a private association (compare
Purpura v. Richmond County Country Club, 114 A.D.2d 460, 461,
494 N.Y.S.2d 371, 372 [2d Dep't 1985] [New York law], with
Dannhausen v. Business Publications Audit of Circulation, Inc.,
797 F.2d 548, 551 [7th Cir. 1986] [Illinois law]). In both
states, the courts are generally reluctant to take a role in
dispute resolution between a private, voluntary association and
its members, with, however, certain limited exceptions such as
bad faith, bias or other wrongful conduct. Applying the law of
either state, the Court finds that the plaintiff has sustained
its difficult burden proving "bad faith" on the part of AAAD
and Motor Age so as to establish its cause of action for breach
of the by-laws and that judicial intervention is warranted.
The by-laws of AAAD are an agreement between the association
and its members. On this subject, in Bowman v. Armour & Co.,
17 Ill.2d 43, 46, 160 N.E.2d 753, 755 (1959) the Supreme Court of
Illinois held as follows:
"The charter or articles of incorporation of an
Illinois corporation is a contract of a
three-fold nature. It is operative as between the
corporation and the State and it creates rights
and duties as between the corporation and its
shareholders, as well as between the shareholders
themselves" (citations omitted).
The threshold consideration for the Court's determination is
whether the Court may properly intervene at all in this
dispute. Traditionally, the courts relied upon contract,
property or tort theories to justify judicial intervention in
disputes arising between a private association and its members
(see generally Developments in the Law — Judicial Control of
Actions of Private Associations, 76 Harv.L.Rev. 983, 998-1005
 [summarizing various theories]). This approach has
changed in favor of judicial review of an association's
disciplinary proceedings only where a member's
expulsion, technically in strict compliance with the
association's by-laws, is influenced by bias, prejudice or
lack of good faith (see Illinois Supreme Court Review —
Judicial Reinstatement of Members Expelled From Voluntary
Associations, 67 Nw.U.L.Rev. 659, 746-54 ; see generally
Annotation, Propriety of Suspension or Expulsion, From Trade
Association, 72 A.L.R.3d 422 [1976 & Supp. 1990] [collecting
Under Illinois law, "[a] court will not review the actions
of a voluntary association with respect to its members; when
a court does intervene, however, the scope of its intervention
is exceedingly narrow" (National Ass'n of Sporting Goods
Wholesalers, Inc. v. F.T.L. Mktg. Corp., 779 F.2d 1281, 1285
[7th Cir. 1985]). Accordingly, "judicial inquiry into the
affairs of private, voluntary associations is limited to the
question of whether an association has treated its members in
accord with its bylaws and rudimentary due process" (Dannhausen
v. Business Publications, supra, 797 F.2d at p. 551 [emphasis
supplied]; see also Virgin v. American College of Surgeons,
42 Ill. App.2d 352, 368-71, 192 N.E.2d 414, 422-24 [1st Dist.
1963]), such as when the association acts in "bad faith" in
expelling a member (see Illinois Supreme Court Review —
Judicial Reinstatement, supra, 67 Nw.U.L.Rev. at p. 754).
In the leading case of Van Daele v. Vinci, 51 Ill.2d 389,
282 N.E.2d 728, cert. denied sub nom. Certified Grocers of Ill.,
Inc. v. Sparkle Feed Center, Inc., 409 U.S. 1007, 93 S.Ct. 438,
34 L.Ed.2d 300 (1972), the Supreme Court of Illinois granted
injunctive relief in the form of reinstatement to a member of a
voluntary retail grocers' association, where the association's
disciplinary procedure deprived the member of basic,
"rudimentary" due process because of the existence of bias and
bad faith accompanying the termination process. In Van Daele,
the applicable rule was clearly set forth, as follows:
"We agree `that a private organization,
particularly if tinged with public stature or
purpose, may not expel or discipline a member
adversely affecting substantial property,
contract or other economic rights, except as a
result of fair proceedings which may be provided
for in organization by-laws, carried forward in
an atmosphere of good faith and fair play'
(McCune v. Wilson (Fla. 1970), 237 So.2d 169,
173.)" (Id. at p. 394, 282 N.E.2d at p. 732).
The Court reasoned in Van Daele that blind adherence to the
association's by-laws with respect to the disciplinary
procedure does not insulate the actions from judicial review if
the action itself was undertaken in bad faith. This decision
directly followed the established principle that courts should
not intervene in the affairs of private associations, absent a
showing of bad faith or bias.