Petition — Autohaus Brugger, Inc. v. Saab Motors, Inc.

Supreme Court brief1978

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FILED

In the Supreme Cowrt|\ os 7

OF THE

united States | | MICHAEL RODAK, JR.,

OctToBER TERM, 1977

No 77-14 82

AvtoHaus Bruaarr, INc.,

Petitioner,

VS.

SaaB Morors, INc., and Sais-Scanza or AMERICA, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

JEFFREY J. PARISH,

RosENBLUM, FENOLIO, PARISH,

JACK & BACIGALUPT,

114 Sansome Street,

San Francisco, California 94104,

Attorneys for Petitioner.

PERNAU - WALSH PRINTING CO. - 562 MISSION STREET - SAN FRANCISCO, CA 94105

A BOWNE COMPANY

Subject Index

. Page

Ss OP GS BD kicdnccccdcencscccvdcccccenucses 1

SS GE OCT LETT ITE 2

SE NE a's cheeks Kine sekn sececdedsows deaceuge 2

Constitutional and statutory provisions involved ... ....... 4

f Che eid Ss de ceebilkedéehbenaceees 6

A. Saab’s franchise agreements ..............eeeeeeees 6

B. Relations between the parties in 1972 .............. 8

1. Saab attempted to require ABI to inflate its in-

ventory beyond Saab’s own inventory level require-

ments, and to purchase automobiles which ABI

admittedly did not need, upon an implied threat

bi oe ein de eee ieee dd beet eee 11

Saab established an admittedly arbitrary annual

sales objective for ABI, which ABI failed to meet,

and which Saab claimed as the basis for ter-

SS IEE apa i a re Ee et ee a 15

RON GM

3. Saab attempted to coerce ABI to drop its warranty

claims, which Saab «admitted to be owing and

rs Se He I bd dn 60 06d cndwide ca cect 20

4. Saab’s “pilot scheme” required ABI to hold its

warranty claims for prior approval by Saab’s

service representative, contrary to Saab’s standard

procedure; Saab threatened to place ABI on C.0.D. 24

5. During the term of the contract, respondent failed

to ship parts to petitioner, failed to reimburse

petitioner for advertising, failed to reimburse peti-

tioner for its warranties, and failed to fill petition-

er’s order for 1973 Saabe ........cccccccccccces 27

Reasons for granting the Writ ..........cccecscccccccceee 32

1. The devision of the court below is in substantial con-

flict with the decisions of other circuit courts and

with congressional intent for a statute not heretofore

reviewed by the Supreme Court .................... 32

2. The decision of the Court of Appeals deprives peti-

tioner of its right to trial by jury under the appli-

cable decisions of this court ..............ceccecees 36

Table of Authorities Cited

Cases Pages

American Motor Sales Corporation v. Semke, 384 F.2d 192

Ce Ss ED nua adedsnseues enecnacsanucs 4, 26, 27, 32, 36

Autowest v. Peugeot, Inc., 4384 F.2d 556 (2d Cir. 1970) ...14, 32

Lavender v. Kurn, 327 U.S. 645 (1946) ................. 37

Madsen v. Chrysler Corp., 261 F.Supp. 488 (N.D. Ill. 1966),

vacated as moot, 375 F.2d 773 (7th Cir. 1967) ........ 17,18

Martin v. Campanano, 156 F.2d 127 (2nd Cir. 1946), cert.

EE Ge ee, eo dd denantaeds cdncneedsccee 29

Milton v. Hudson Sales Corp., 152 Cal.App.2d 427, 313

ee Ee nn i a cnauadaee nebeekesubeses 27

Randy’s Studebaker Sales v. Nissan Motor Corp., 533 F.2d

eG SED cca cccunedacedakes sbevicewaeeess 32

Rea v. Ford, 497 F.2d 577 (10th Cir. 1974), cert. denied

419 U.S. 868, 95 S.Ct. 126, 42 L.Ed.2d 106 ............ 14

Shor-Line Rambler, Ine. v. American Motors Sales Corp.,

fe | g@, |: % Fyre S 4, 34, 35, 36

Tennant v. Peoria & P.U. Railway Co., 321 U.S. 29 (1944) 37

York Chrysler-Plymouth, Ine. v. Chrysler Credit Corpora-

tion, 447 F.2d 786 (5th Cir. 1971) .............. 4, 33, 34, 36

Constitutions

United States Constitution, Seventh Amendment .......... 4,5

Statutes

BS UBOA., Bemba BRBEER occ ccccccvccscccccccccess 4

15 U.S.C., Section 1221(e) ............cceccceeecceecees 33

ee is SD SEED va cei edunddosddecceeeéneseecene 2

pies “ee te

TaBLe or AuTHOoRITIES CITED

Other Authorities

CCH Trade Regulation Reporter, { No. 61,857, p. No.

ee CP BE I 06 6 6 du sSd ceaccvesesceseses

United States Code, Congressional and Administrative News,

84th Congress, 2nd Session (1956), Volume 3, pp. 4596-97,

In the Supreme Court

Ynited States

OctToBER TERM, 1977

No.

AUTOHAUS BruGGER, INc.,

Petitioner,

vs.

SaaB Motors, INc., and SaaB-Scani4 oF AMERICA, INC.,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

to the United States Court of Appeals

for the Ninth Circuit

Petitioner prays that a Writ of Certiorari issue to

review the judgment of the United States Court of

Appeals for the Ninth Circuit, entered in the above

entitled case on January 18, 1978.

CITATION TO OPINIONS BELOW

The opinion of the Court of Appeals is noted in

CCH Trade Regulation Reporter, paragraph No.

61,857, page No. 73,594 (February 13, 1978). A copy

of the opinion is attached hereto as an Appendix. No

opinions were issued by the District Court.

JURISDICTION

The judgment of the United States Court of Ap-

peals for the Ninth Circuit was entered in this case

on January 18, 1978. The jurisdiction of this Court

is invoked under Title 28, U.S.C. § 1254(1).

QUESTIONS PRESENTED

The Court of Appeals reversed a judgment entered

on a jury verdict in favor of petitioner Autohaus

Brugger, Ine. (ABI) on the basis of the Court of

Appeals’ finding of insufficient evidence of a violation

of the Dealer’s Day In Court Act or of a breach of

contract by the respondent.

The evidence established to the satisfaction of the

jury that Respondent Saab-Scania of America, Inc.,

an automobile manmfacturer, terminated petitioner

automobile dealer’s franchise by one or more of the

following means, found to be coercive and in violation

of the manufacturer’s obligation to deal in good faith

under the statute and under the contract:

A. Saab attempted to require ABI to inflate

its inventory, beyond Saab’s stated inventory

level requirements, and to purchase automobiles

which ABI admittedly did not need, upon threat

of termination of the franchise;

B. Saab established an admittedly arbitrary

annual sales objective for ABI, which ABI failed

BRIE more

to meet, and which Saab claimed as the basis for

non-renewal of the franchise,

C. Saab attempted to coerce ABI to drop

warranty claims which Saab admitted owing and

which were never paid;

D. Saab required ABI, under Saab’s “pilot

scheme”, to hold its warranty claims for prior

approval by Saab’s service representative, con-

trary to Saab’s standard procedure, and threat-

ened to place ABI on C.O.D.;

E. During the term of the contract, Saab

failed to ship parts to ABI, failed to reimburse

ABI for advertising, failed to reimburse ABI

for its warranty claims, and failed to fill ABI’s

order for 1973 Saabs. Upon termination of the

franchise, Saab failed to purchase or pay for

remaining parts and automobiles, in breach of

the contract.

The decision of the Court of Appeals raises the

following questions:

A. Can any of the foregoing acts constitute a

violation of Saab’s duty of good faith under the

Dealer’s Day In Court Act or under the con-

tract ?

B. If such acts can constitute a violation, was

there sufficient evidence to sustain the jury’s ver-

dict of iiability and damages?

C. Should the issue of good faith be deter-

mined by inferences drawn from the evidence

and derived from the jury’s subjective analysis

of the facts, as determined by the Fifth Circuit

Court of Appeals in York Chrysler-Plymouth,

Inc. v. Chrysler Credit Corporation, 447 F.2d 786

(5th Cir. 1971), the Seventh Circuit Court of

Appeals in Shor-Line Rambler, Inc. v. American

Motors Sales Corp., 543 F.2d 601 (7th Cir. 1976)

and the Tenth Circuit Court of Appeals in Amer-

ican Motor Sales Corporation v. Semke, 384 F.2d

192 (10th Cir. 1967) ?

D. Did the Court of Appeals, in overturning

the jury’s verdict, improperly rely upon the tes-

timony vf defense witnesses whose testimony was

rebutted, and whose credibility is a principal

issue in the case?

EK. Did the Court of Appeals, in overturning

the jury’s verdict on the ground of insufficient

evidence, usurp the function of the jury and

deny petitioner’s constitutional right to trial by

jury, by failing to consider the evidence in a

light most favorable to petitioner, and by failing

to give petitioner the benefit of all reasonable

inferences from the evidence so considered?

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

ne en NERS

eR ene cr rR AE OIE NE CR ar wenn

on eae

Amenzment to the United States Constitution. The

statute provides in pertinent part:

“1221(e) The term ‘good faith’ shall mean the

duty of each party to any franchise, and all offi-

cers, employees, or agents thereof to act in a fair

and equitable manner toward each other so as to

guarantee the one party freedom from coercion,

intimidation, or threats of coercion or intimida-

tion from the other party: Provided, That

recommendation, endorsement, exposition, persua-

sion, urging or argument shall not be deemed to

constitute a lack of good faith.”

“§ 1222. Authorization of suits against Manu-

facturers; amount of recovery; defenses

An automobile dealer may bring suit against

any automobile manufacturer engaged in com-

merce, in any district court of the United States

in the district in which said manufacturer re-

sides, or is found, or has an agent, without

respect to the amount in controversy, and shall

recover the damages by him sustained and the cost

of suit by reason of the failure of said automo-

bile manufacturer from and after August 8, 1956

to act in good faith in performing or complying

with any of the terms or provisions of the fran-

chise, or in terminating, canceling, or not renew-

ing the franchise with said dealer: Provided,

That in any such suit the manufacturer shall not

be barred from asserting in defense of any such

action the failure of the dealer to act in good

faith.”

The statutory and constitutional provisions in-

volved in this ease are the Dealer’s Day In Court Act,

Title 15, U.S.C.A. Sections 1221-1225 and the Seventh

STATEMENT

Petitioner Autohaus Brugger, Inc. (““ABI’’) is an

automobile dealership which began selling and servic-

ing Mercedes Benz automobiles in 1965 in Palo Alto,

California. In 1968, ABI built another store in

Redwood City, California. In April 1969, ABI

executed the first of several franchise agreements with

respondent Saab Motors, Inc., the predecessor in in-

terest of respondent Saab-Scania of America, Inc.

(Respondents hereinafter are referred to collectively

as ‘*Saab”).

A. SAAB’S FRANCHISE AGREEMENTS

ABI executed separate agreements for its Palo

Alto and Redwood City stores, and during 1971 exe-

cuted additional franchise agreements for the same

locations between October and December. ( Plaintiff’s

Exhibits’ 173, 243, 169, and 282; Reporter’s Tran-

script? 64:6-10, 23-25; 68:19; 69:9).

Saab’s agreement states the following concerning

warranties:

“'.. company agrees that it will be responsible

for handling the ‘warranty’. Dealer agrees to

install new parts or to replace defective parts

without charge to the original purchaser. Reim-

bursement for such defective parts will be made

by company to dealer without cost to the latter.

(PX 166, p. 4, 114).

As part of the franchise, Saab attached its sales

policy, the purpose of which was stated as follows

on page 1:

1Hereinafter referred to as “PX”, defendant’s exhibits as “DX”’.

*Hereinafter “RT”.

PP ORE es -

~ eee

en Seer

“... to establish policies of Saab which pertain

to our dealers, to serve as a guide for our

mutual benefit in achieving the above stated ob-

jectives, and to augment the franchise agreement”

(PX 166; emphasis added).

Saab stated its franchise objectives to be:

* , . to provide our dealer organization with:

(a) prompt availability of automobiles and spare

parts; (bd) assistance in selling and servicing

Saab automobiles, in order that they may carry

out their part of our marketing program; (PX

166; RT 19:23-20:3).

Regarding the importance of service, the policy

states:

“ . . because of the unique design characteristics

of the Saab automobile, Saab Motors recognizes

the seriousness of each dealer providing adequate

and efficient service to owners . . . Likewise,

achievement of our sales objective will be seri-

ously weakened, if dealers do not recognize their

responsibility for providing such services” (PX

166, Sales Policy, p. 4).

For handling of dealer warranty claims from Saab,

the objective states:

“Saab Motors recognizes that to achieve its sales

objective, strong factory and distributor sup-

port of its automobiles by the warranty program

is necessary .. .” (PX 166, Saab Sales Policy,

p. 5).

Mr. Brugger, President of ABI, testified that he

relied on Saab’s statements in entering into the Saab

franchise agreements (RT 18:11-23:8).

In 1971, ABI executed several apparently over-

lapping franchises with Saab. In February, ABI’s

predecessor executed a franchise for the Palo Alto

store (PX 167); in September, ABI executed a fran-

chise for the Burlingame store (PX 281, RT 64:23-5) ;

executed two franchise agreements in October for

Palo Alto (PX 173, PX 243; RT 64:6-10), and again

in October for Burlingame (PX 169; RT 64:23-5) ;

and in December another franchise agreement for

Palo Alto (PX 282; RT 68:19-69:4).

Mr. Brugger testified that he did not understand

the need for so many identical franchises, that he

asked Saab why he should execute so many duplicate

franchises and that Saab did not provide an answer

(RT 64:14-65:25). As a result of this confusion, nei-

ther Saab nor ABI knew which franchise agreement

was operative for which store.

This was the context in which renewal of the fran-

chise arose later in 1972. The agreements expired

according to their terms on September 30, 1972. The

parties treated the agreement as continuing there-

after, and Brugger expressed his desire to renew in

October and November. In December, Saab announced

that the franchise would not be renewed.

B. RELATIONS BETWEEN THE PARTIES IN 1972

Since execution of its first franchise, the evidence

showed that ABI had serious problems with Saab

over various matters including Saab’s failure to re-

— a

imburse ABJ for certain advertising expenses and

warranty work performed by ABI (RT 523:7-524:3;

32 :21-38:1; 74:12-75:4; 759:23-762:9; PX’s 87, 196,

245, 260, 284); Saab’s unrealistic and incomplete flat

rate manual (a book specifying time that various

repairs should take and which was used by Saab to

determine the amount of reimbursement to which

ABI was entitled for warranty work) (RT 1087:12-

1094:17); as well as Saab’s poor parts and service

systems. These deficiencies, according to the evidence,

impaired ABI’s customer relations (RT 78:14-79:20).

Saab acknowledged at least some responsibility for

these problems (PX 14; RT 99:11-100:13; RT 700:17-

701:2; 759:23-762:9; 722:1-723:15; 734:23-735:20;

739 :7-740 :10).

As noted below, Saab engaged in various breaches

of its obligation of good faith throughout the year

1972. ABI nevertheless sought to renew the franchise

agreement.

In the introduction to its: opinion, the Court of

Appeals goes straight into the resolution of conflict-

ing evidence and finds that “there is convincing un-

rebutted evidence in the record to show that Saab

tried repeatedly to get ABT to renew [the franchise ].”

(Appendix, p. ili). The Court goes on to cite all of

the testimony supporting Saab’s version of the dispute,

relying principally on Michael Long, Saab’s district

manager, and overlooks the weight of the evidence.

Mr. Long’s claim that he offered a renewal of the

franchise to Mr. Brugger on August 24, 1972, is be-

lied by the fact that his dealer contact report for

NSE een

that date (filled out in order to inform his superiors,

contemporaneously with the events) says nothing at

all about the alleged offer and refusal of a franchise

renewal (PX 101). The “‘ourt wholly ignores Brug-

ger’s testimony that he wanted to be a Saab dealer in

August and September of 1972 (RT 456) and he

av ‘ted the usual procedures to be commenced by the

manufacturer (RT 461). Brugger testified that he

wanted very much to be a Saab dealer, despite all of

the problems (RT 314) and explained his reasons at

trial (RT 317-318). He specifically told Boli that he

wanted to be a Saab dealer in a meeting in October

(RT 464). Saab did not offer a dealer agreement for

his signature (RT 465). Brugger had instructed

Charles Grelle to seek renewal of the franchise agree-

ments on his visit to the Saab Dealer Meeting in

Southern California in November 1972 (PX 290; RT

465-466; 551:15-554:13; 581). The jury had ample

opportunity to observe the testimony of Mr. Brugger

and Mr. Long, and to consider the circumstantial evi-

dence such as Long’s failure to mention any offer of a

franchise renewal in his dealer contact reports. They

concluded that Brugger did want renewal, and Saab

did not. There is no basis for reversing the jury’s

determination in this case.

In furtherance of its efforts to retain the franchise,

in November 1972, ABI ordered fourteen Model 1973

Saab automobiles (PX 113; RT 334). At trial, Saab

questioned Brugger’s sincerity. The Court of Appeals

resolved the question of Brugger’s good faith as fol-

lows:

“Hubert Brugger testified that his order was a

serious good faith order. However, a review of

Peter Widdershoven’s testimony indicates that

Brugger’s order was not a good faith order, but

instead was merely a method to find out where

Autohaus stood as a dealer for Saab.” (Appen-

dix, page xxvii; emphasis added).

In this instance, the Court plainly admits to re-

solving a conflict in testimony which can only be

based on the credibility of the witnesses. This is

solely the function of the jury, and the Court’s in-

trusion into this determination is wholly unjustified.

1. Saab Attempted To Require ABI To Inflate Its Inventory

Beyond Saab’s Own Inventory Level Requirements, And To

Purchase Automobiles Which ABI Admittedly Did Not

Need, Upon An Implied Threat Of Termination.

Saab’s district manager Michael Long testified that

during the summer of 1972 he had “a lot of cars to

sell” to the dealers in his district, he was “pushing”

them more than usual, and tried to sell them to Auto-

haus Brugger regardless of the adequacy of ABI’s

inventory (RT 1232:18-1233:5). Saab’s own policy

called for an inventory equivalent to a 45 day supply

(RT 644:6-25). Mr. Long was apparently unaware of

the company policy and felt that a dealer should

have on hand a 60 day supply (RT 1225:19-24). The

supply is measured by sales: thus, if one month’s

sales equal ten units, then twenty units on hand con-

stitute a two month supply.

Whichever standard is applied to ABI’s inventory

during the summer of 1972, the evidence is clear that

it was more than adequate. ABI’s inventory in July

included 28 Saabs, while sales in July amounted to

11 units; for August, the sales were 6, the inventory

21 units (PX 287, DXBP, RT 1228, 1230). In each

ease, substantially more than a two month supply was

on hand.

Long nevertheless pressed for more sales (RT

1232 :18-1233:5).

Long visited ABI on August 24, and reported to

his superiors as follows:

“Mr. Brugger gave an ultimatum that Saab

pay his request for warranty claims—or else. He

refused to order cars to bring his inventory up

to a satisfactory level. He will not voluntarily

terminate and he will not cooperate.” (PX 101;

emphasis added).

This report, a contemporaneous business record,

plainly gives rise to the inference that Long was

telling Brugger to order more cars and that the alter-

native was termination. Long’s testimony at trial fur-

ther supports this inference:

“Mr. Brugger, I mean that he would not vol-

untarily terminate. Mr. Brugger refused to sign

a selling agreement, he refused to buy cars. He

was twenty-five percent of my business and he

was putting me out of business. I said ‘would

you sign the selling agreement?’ He refused.

I said ‘will you terminate so I can get somebody

that. will do the job?’ It was just that simple.”

(RT 1673-74).

The jury was by no means obliged to believe Long’s

claim that he had offered a selling agreement. The

dealer contact report makes no reference to any offer

of a selling agreement. Surely the jury is entitled

to infer that Mr. Long would not have omitted an

important event if it had actually happened. Brugger

testified that nobody from Saab, through the end of

September 1972, ever asked him to sign a new fran-

chise agreement (RT 456:6-9). The jury was faced

with a clear conflict in the evidence, to be decided on

the basis of the credibility of the witnesses and cir-

cumstantial evidence.

The jury was entitled to believe the underlined

portions of Long’s dealer contact report, reinforced

by the testimony of Long as quoted above, and to dis-

believe Long’s other statements.

This was Saab’s first attempt to terminate Brug-

ger’s franchise. The attempt was clearly made in the

context of Brugger’s refusal to order additional cars,

beyond what was concededly an adequate inventory

in terms of Saab’s company policy and even in terms

of Long’s personal requirements. There can be no

doubt that this kind of attempted coercion consti-

tutes bad faith under the statute:

“(T]he existence of coercion or intimidation

depends upon circumstances arising in each par-

ticular case and may be inferred from a course

of conduct. For example, manufacturer pressure,

direct or indirect, upon a dealer to accept auto-

mobiles, parts, accessories, or supplies which the

dealer does not need, want, or feel the market

is able to absorb, may in appropriate instances

constitute coercion or intimidation . . .” (H.Rep.

No. 2850, 84th Congress, 2nd Session (1956),

cited in Rea v. Ford, 497 F.2d 577, 585, n.13 (10

Cir. 1974), cert. denied, 419 U.S. 868, 95 S.Ct.

126, 42 L.Ed.2d 106.

The Congressional statement of purpose was cited

with approval by the Second Circuit Court of Appeals

in holding that a manufacturer which requires a

dealer to maintain a large inventory is “particularly

suspect” of violating the statute. Autowest v. Peugeot,

Inc., 4384 F.2d 556 (2d Cir. 1970).

The Ninth Circuit’s treatment of this evidence and

its relation to the statute cannot withstand analysis.

The Court stated that it could not find, from its re-

view of the evidence, any coercion in Long’s attempt

to sell Autohaus cars, and finds that Long’s attempts

to solicit orders were nothing more than “recommen-

dation, endorsement, exposition, persuasion, urging,

or argument normal in competitive commercial rela-

tionships” (Appendix, p. xxvi). This treatment by the

lower court amounts to nothing more than a rereading

of the evidence, to edit out that which supports peti-

tioner’s contentions and to enhance everything which

supports the respondent. Long admitted at trial that

he asked Brugger to terminate, and the Ninth Circuit

is unable to see the coercion or the attempted coercion

in that act, and finds it to be the sort of persuasion

permitted under the statute. This finding cannot be

squared with the facts or the clear meaning of the

statute.

The lower court also fails to see the causal connec-

tion between the coercion and something which Auto-

haus had a right not to do. Autohaus clearly had a

a ee. een. ot eee meee

right not to order additional cars. Saab clearly at-

tempted to coerce Autohaus to do just that.

The Ninth Cireuit does not comment on the stat-

ute’s express prohibition against attempted coercion,

nor does it refer to Long’s dealer contact report or

his express admission that he asked Brugger to ter-

minate. This provision of the statute, and these items

of evidence, are critical to the determination of lia-

bility and were properly considered by the jury. The

violation of the statute could not be more plain, and

the Ninth Circuit’s reversal on this point is clear

error.

2. Saab Established An Admittedly Arbitrary Annual Sales

Objective For ABI, Which ABI Failed To Meet, And Which

Saab Claimed As The Basis For Termination.

Saab’s stated excuse for nonrenewal of ABI’s fran-

chise was set forth in the termination letter of De-

cember 20, 1972 sent to ABI by Saab’s national sales

manager, W. Donald Carmack:

“The reason for our decision concerns your

inability to sell the number of Saab automobiles

that both of us have projected as the reasonable

amount given the population, affluence and other

factors connected with the areas in which you

have been operating.” (PX 115; emphasis

added).

The projected number referred to by Carmack was

the so-called annual sales objective or ASO (RT

1763-1764). ABI’s annual sales objective had been

set at 120 units (PX 7). Mr. Long admitted that the

annual sales objective was a performance goal and

not customarily treated as a requirement (RT 1354:

14-22, 1355:12-19). He stated that the annual sales

objective had no factual backing, and was noth-

ing more than speculation or a “guesstimate.” (RT

1356 :18-1357 :3). The annual sales objective, once es-

tablished, was never changed, either from year to

year or during the course of the year (RT 1354:1-17).

Long was not aware of any use whatsoever of the

annual sales objective (RT 1354:23-1355:10), other

than as a guide or goal.

Only one or two dealers of the fifteen in Mr. Long’s

district met their annual sales objective in 1972 (RT

1717:5-9). Most of the dealers in the San Francisco

Bay Area sold substantially fewer cars than their

ASO (RT 1720:2-22). Only one other dealer in Mr.

Long’s district was terminated in 1972 (RT 1818:25-

1819:10).

Nevertheless, the ASO was the standard to which

ABI was held on pain of termination of the fran-

chise.

Judged by any other measure, ABI’s sales perform-

ance was excellent. ABI sold 97 vehicles in 1972,

which placed it third out of 15 dealers in its district

(RT 1203:21-1204:6). ABI’s sales were more than

double the nationwide average for Saab dealers of 41

ears in 1972 (PX 296).

Saab’s intended measure of performance, for all

but ABI, was not the annual sales objective but rather

a minimum of 25 units per year. This policy was

developed in 1972, and Mr. Carmack and his su-

— ee

eee

periors determined that sales of fewer than 25 units

per year rendered a dealership unprofitable for the

dealer and unacceptable to Saab (RT 692 :9-693:16).

The 25-unit standard was far more than a guideline

or a goal, and in fact if a dealer failed to reach

25 units per year, Saab recommended that he ter-

minate (RT 1709:19-1710:19). ABI’s sales placed it

substantially above the level regarded as acceptable

for other dealers.

By its use of a double standard, and by setting an

arbitrarily high annual sales objective, which few

of its dealers were able to meet, Saab retained an

ever-ready excuse for termination. This practice was

condemned by the Court in Madsen v. Chrysler Corp.,

261 F.Supp. 488 (N.D. Ill. 1966), vacated as moot,

375 F.2d 773 (7th Cir. 1967). In that case the Court

found that an arbitrary performance standard could

not form the basis of a valid notice of termination:

“TW ]e conclude that MSR [minimum sales re-

quirement] calculated simply as provided in the

Chrysler dealership agreements without adjust-

ment for the various factors herein discussed and

which results at all times in a substantial num-

ber of dealers being in technical default, is an

arbitrary, coercive and unfair provision since it

would enable Chrysler to terminate roughly one-

third to one-half of its dealerships at any time.”

(261 F.Supp. at 506; emphasis added).

The Court went on to find that the termination,

based upon failure to achieve MSR, constituted a

violation of the Dealer Act. Id.

The vice of an arbitrarily high annual sales objec-

tive is that it gives the manufacturer an excuse for

termination or non-renewal where such an act is

otherwise unjustified. The arbitrary sales objective

gives the manufacturer the very weapon against which

Congress sought to provide a shield for the dealer

in the Dealer’s Day In Court Act.

The ruling of the Court of Appeals on this issue

in this case is based upon several findings of fact

arising from conflicting evidence, directly contrary

to the jury’s findings. The Court finds that: “Saab

and Autohaus agreed that as a 12 months sales ob-

jective, Autohaus would try to sell 120 units.” (Ap-

pendix, p. xxiii). This ignores Brugger’s testimony

that Saab established the goal of 120 units (RT 61).

Moreover, the Court fails altogether to account for

Saab’s admission of the arbitrariness of an ASO

which was nothing more than a “guesstimate.”

The opinion below correctly notes that a violation

of the statute may occur when the manufacturer sets

an unrealistic goal (which none of its dealers can

meet) and then selectively terminates one dealer for

failure to meet that goal (Appendix, page xxiii, cit-

ing Madsen v. Chrysler Corp., supra). As noted above,

that is precisely what happened in this case. The

Court wholly ignores the evidence and offers a find-

ing that:

“(F jirst, Saab did not use as grounds for the

non-rencwal of the franchise the fact that Auto-

haus had not sold the 120 cars. Rather, Saab

did not renew the franchise because of Saab’s

are erwessase oo nen

analysis of Autohaus’ selling performance which,

as we have discussed, supra, was not very good.”

(Appendix A, page xxiv).

The evidence that Carmack’s letter of termination

was based upon the 120 unit ASO is uncontroverted.

Carmack’s letter squarely bases the decision on ABI’s

“|. . inability to sell the number of Saab automobiles

that both of us had projected . . .” The only sales

projection by anyone was the ASO (PX 7; RT 1763-

64; emphasis added). On its face, the ASO appeared

to have been “projected by both [ABI and Saab],” in

the terms of Carmack’s letter, although Brugger testi-

fied that the number had been established by Saab.

The number specified was 120 units (PX 7).

The Court’s finding that Autohaus’ selling perform-

ance “was not very good” is similarly unsupported by

the evidence. As noted above, Autohaus was perform-

ing at a rate better than twice the national average,

and was in the top twenty percent of dealers in Mr.

Long’s district. In fact, Saab cited ABI on Novem-

ber 1, 1972 (a month after the expiration of the

franchise date and six weeks before the termination)

as one of the “top Saab dealers” in a national pro-

gram (RT 351).

The Court of Appeals also finds no evidence that

the annual sales objective was used to coerce ABI.

First, the Court ignores the letter of September 14,

1972 from Saab’s western regional manager, Mark

Boli, to Hubert Brugger (PX 105). The principal

subject of the letter is the warranty claims which

continued to be disputed. The objective of the letter

was plainly to coerce Brugger to reduce his warranty

claims. Boli concludes the letter with a complaint

about “low sales volume” and tells Brugger “to cor-

rect this problem immediately and start moving for-

ward in sales . . .” Secondly, Saab claimed that the

ASO was the basis of the termination itself, the

ultimate act of coercion. Certainly the jury was en-

titled to infer from this precisely what the Court of

Appeals refused to see.

3. Saab Attempted To Coerce ABI To Drop Its Warranty

Claims, Which Saab Admitted To Be Owing And Which

Were Never Paid.

The Court of Appeals devotes the bulk of its re-

view of the evidence to consideration of the warranty

dispute which extended through the year 1972 and

even beyond the termination. The jury reviewed

dozens of inconsistent documents and heard hours of

conflicting testimony on the subject, and concluded

that Saab wrongly attempted to coerce ABI to drop

its warranty claims.

The Court of Appeals, in its review of the evidence,

simply rejects the inferences drawn by the jury and

wholly ignores other evidence.

Autohaus Brugger kept track of warranty claims

in a warranty claims register (PX 196). This reg-

ister was explained at great length. The Court of

Appeals finds that the warranty claims register

showed a claim as owing, even if Saab had rejected

the claim and the rejection was proper. This con-

clusion flies in the face of the testimony of the book-

keeper, who stated that all rejections by Saab were

noted in the register, and that where ABI agreed

that the rejection was proper, credit was given (RT

1493-1494).

The Court points out that ABI submitted certain

claims calling for reimbursement for, e.g., 44% hours

labor on a repair for which Saab’s “flat rate manual”

allowed 3 hours. Saab admitted that the flat rate

manual provided insufficient times for certain jobs

(RT 734 :23-735 :20) and allowed adjustments in some

cases and disallowed them in others (RT 1100:21-

1101:22). Such adjustments were discussed by the

parties in their continuing dialogue on the subject of

warranty reimbursement during 1972.

One noteworthy aspect of this dialogue is Saab’s

failure to offer its own contemporaneous, regularly-

kept business record of ABI’s warranty account. Nor

did Saab offer any proof of payment of the claims

it admitted owing.

The Court of Appeals finds that most of ABI’s

claims, if not all, were improper (Appendix, p. vi).

No evidence is cited for this proposition, and Saab’s

clear admissions of liability are ignored.

Saab admitted owing more than $5,000.00 on war-

ranty claims as of September 14, 1972 (PX 105).

Some of the ABI warranty claims had gone unpaid

for a year (PX 196) and Saab never offered any

proof that even the $5,000.00 admittedly owed had

been paid.

On the contrary, at least some part of the ad-

mittedly owed warranty claims went unpaid, not only

through the end of 1972, but to this day.

Petitioner offered in evidence the following inter-

rogatory and answer:

Interrogatory No. 69:

What amount, if any, is currently owed by Saab

to plaintiff in connection with any matter what-

soever, including amounts owed in connection

with warranty claims made by plaintiff?

Answer:

$2,905.58 (RT 939; emphasis added).

Saab’s failure to explain or qualify its answer

clearly gives rise to the inference that it admits

owing this amount on warranty claims as of the date

of trial. The Court of Appeals refuses to draw this

inference, and purports to derive support for a con-

trary interpretation from other Saab interrogatory

answers, which were neither offered nor accepted in

evidence (Appendix, p. xii, n.4).

Other interrogatory answers which were admitted

in evidence support petitioner’s interpretation, and

acknowledge that the debt is based in part on “the

amounts due for warranty work.” (RT 1668).

Failing to acknowledge this evidence, the Court of

Appeals finds that the acknowledged debt was based

upon the “normal expenses which Saab would incur

when winding up a franchise arrangement such as

that with Autohaus.” (Appendix, page xii). Despite

Saab’s admissions, the Court goes on to find that no

warranty monies were due (in direct contravention

of the evidence) and therefore the warranty claims

could not have been used to coerce ABI (Appendix,

pages Xil-xili).

Mr. Grelle, on behalf of ABI, and Mr. Soane,

Saab’s national service manager, reviewed all of the

available evidence in connection with the warranty

dispute, and agreed upon a compromise which they

recommended to their principals (RT 1398-1402).

Brugger agreed to accept the Grelle-Soane recom-

mendations, and Boli rejected the proposal (RT 1404-

1408; PX 216; RT 1425-1426).

The fact that ABI was willing to follow the pro-

cedure proposed by Saab’s national service manager

is substantial evidence of ABI’s good faith in the

matter. Conversely, Saab’s rejection of the proposal

shows bad faith.

Even as of March 1973, some of the claims making

up the $5,000.00 admittedly owed had not been paid,

which claims had arisen before June 1, 1972 (RT

1436-1437).

The Court of Appeals quotes Charles Grelle as

testifying that “as far as he kney there was no claim

which Saab admitted it owed . had never been

paid (RT 1391)” (Appendix, p. x; emphasis added

by Court).

What Grelle said was that he could not identify a

specific unpaid claim (RT 1391:11-13):

“Q. As you are sitting here today, can you

point to any given claim that you and Mr. Soane

analyzed, that Mr. Soane said payment was due

and owing on, where payment hasn’t been made?

A. Not on any specific claim. I don’t remem-

ber any.”

He testified, however, that some $2,647.92 in claims

were still unpaid as of his most recent review of the

situation in March, 1973 (RT 1437-1440). The court’s

re-reading of the evidence is simply unjustified.

Brugger had made his plea for payment of the

warranty claims early and often throughout 1972.

Saab’s response was to threaten to place him on

C.0.D. and to impose a “pilot scheme” for the han-

dling of warranty claims.

4. Saab’s “Pilot Scheme” Required ABI To Hold Its Warranty

Claims For Prior Approval By Saab’s Service Representative,

Contrary To Saab’s Standard Procedure; Saab Threatened

To Place ABI On C.0.D.

In June 1972, Saab imposed its “pilot scheme” on

ABI’s Palo Alto store (PX 74). Mr. Coyne, Saab’s

national service manager, testified that dealers were

placed on the pilot scheme if their warranty claims

were “high eost” (RT 763:1-764:2). Under this

scheme, the d aler had to hold its warranty claims

for prior approval by a Saab service representative.

Only eight to ten dealers out of the entire western

region were subjected to this program (RT 955:24-

956 :2).

The jury properly concluded that the “pilot scheme”

was unjustified in the case of ABI, particularly in

view of the fact that Saab admitted that valid war-

ranty claims had gone unpaid for months and even

years. The pilot scheme was clearly imposed to re-

duce ABI’s warranty claims, and under the circum-

stances was coercive.

The Court of Appeals dismisses this claim, based

upon its finding of fact (again, contrary to the jury’s)

that it was justified.

On several occasions Saab threatened to place ABI

on a C.O.D. status, even though ABI had a credit

balance with Saab (PX 75, 76, 99, 100; RT 272:8-

274:5; 318:11-320:6; 613:21-614:8, 623:14-625:21).

Saab’s national sales manager admitted that under

the circumstances Saab should not have contemplated

termination of ABI’s credit (RT 704:13-705:9).

The consequences of C.O.D. status are dire indeed.

Mr. Brugger testified that a manufacturer would put

a dealer on C.O.D. only if it wanted to “get rid of

him because they know he will be dead in his com-

munity.” (RT 319:23-320:2). Brugger testified that

it would be very bad for the dealer’s reputation in

the business community, having an effect on the line

of credit, the banker, other suppliers and other man-

ufacturers (RT 149:20-21, 150:8-9).

The Court of Appeals once again fails to acknowl-

edge the evidence. Moreover, it fails to find any

causal connection between the threat and some actior

which Autohaus would be coerced to take in the

alternative (Appendix, page xxvi).

The Court of Appeals’ treatment of various spe-

cific instances of implied threats, each one in isola-

tion, fails to give effect to the law’s condemnation of

a coercive course of conduct. The “pilot scheme” and

the C.0.D. threat were consistent with the overall

course of conduct employed by Saab in attempting

to foree ABI to drop its warranty claims and to

purchase beyond the usual inventory requirements.

Other circuits have recognized a similar course of

conduct to be coercive under the statute.

In American Motor Sales Corporation v. Semke,

384 F.2d 192 (10th Cir. 1967), the Court ruled that

evidence relating to the refusal of an automobile

manufacturer to honor and/or credit the franchised

dealer with services performed under the warranty

arrangements of the franchise agreement was for the

jury to consider in determining whether the manu-

facturer’s overall course of conduct with the dealer

was coercive under the Dealer’s Day In Court Act.

In examining the conflicting claims regarding the

warranty work, the Court took note of the support

in the legislative history for permitting the jury to

infer the existence of coercion or intimidation from

a manufacturer’s course of conduct:

“However, it would seem proper for the jury to

consider what transpired between Semke and

Mr. Irwin, regarding the warranty work to be

done on the cars in determining the appellant’s

overall course of conduct with Senike. It should

be noted that the legislative history states that

‘The existence of coercion or intimidation de-

pends upon the circumstances arising in each

particular case and may be inferred from a course

of conduct.’ See U.S. Code, Congressional and

Administrative News 1956, p. 4603.”

American Motor Sales Corporation v. Semke,

384 F.2d at 197-198.

Recognizing the conflict in the evidence, the Court

of Appeals for the Tenth Circuit ruled that the deal-

er’s evidence on the warranty issue was sufficient to

support the jury’s verdict of a violation of the Deal-

er’s Day In Court Act. 384 F.2d at 198.

The Ninth Circuit apparently would require an

express threat (as opposed to implied threat) and

a completed act of successful coercion (as opposed

to attempted or threatened coercion). This is incon-

sistent with the rule followed in other circuits, and

ith the purpose of the statute.

rm Of The Contract, Respondent Failed To

Petitioner, Failed To Reimburse Petitioner

, Failed To Reimburse Petitioner For Its

d Failed To Fill Petitioner’s Order For

ination of the franchise, Saab failed to

or pay for remaining parts or automobiles,

all in breach of the contract. In addition to specific

obligations, the contract imposes an obligation to deal

in good faith. Milton v. Hudson Sales Corp., 152 Cal.

App.2d 427, 313 P.2d 936 (Cal. 1957).

The evidence plainly pointed to a number of

breaches of the franchise agreement, all occurring

before September 30, 1972, which Saab takes to be

the date of expiration of the agreement. Saab fre-

quently failed to deliver parts which had been ordered

and were urgently needed (RT 245:2-246:22; 1025:

10-1026 :13 ; 1021 :2-1022 :13 ; 1085 :13-1086 :7). Saab fre-

quently cancelled ABI’s back orders for parts with-

out informing ABI (RT 1022:14-1023:18). All of

these practices were in breach of the well-established

practice of the automobile industry (RT 1023:14-

1024:5).

Similarly, Saab was continuously late in its re-

imbursements to ABI for advertising and sometimes

did not reimburse ABI at all (RT 265:14-266:11).

The evidence demonstrated the damage inflicted by

this breach on ABI’s new car business (RT 247 :25-

249:17).

While the franchise agreements expired, according

to their terms, on September 30, 1972, the parties

plainly treated them as extending beyond that date.

There had been multiple franchise agreements signed

for the year 1972, and therefore the need for signing

another one would have been by no means apparent.

ABI continued to purchase cars from Saab, sell them

to the public, purchase parts from Saab, perform

warranty repairs, and do all the other things which

it did under the agreements. Saab continued to send

dealer mailings and bulletins to ABI (RT 944:19-22,

333 :16-21, 937 :23-938 :6; 333 :20-25, 368 :24-369:11, PX

189). On November 1, 1972, more than a month after

the purported expiration of the agreements), Saab

listed ABI as one of its best overseas delivery deal-

ers (PX 146; RT 351:10-19), and invited ABI to

Saab’s dealer meeting on November 30, 1972 (RT

1424 :3-14).

Saab issued a “cancellation bulletin” to announce

the end of the agreement (PX 117) and so informed

the California Department of Motor Vehicles (PX

121). In both instances Saab identified the effective

date of cancellation as December 20, 1972 (RT 374:

22-375:2). Saab’s national sales manager also iden-

tified the effective date of the end of the agreement

as December 20, 1972:

“While the appropriate date for their effective-

ness [of the provisions relating to termination]

would otherwise be October 1, 1972, in view of

the apparent confusion relating to the status of

the selling agreements the appropriate date to be

utilized in connection with those paragraphs

should be the date of this letter.” (PX 115).

It is well settled that when an agreement expires

by its own terms, if, without more, the parties con-

tinue to perform as before, an implication arises that

they have mutually assented to a new contract con-

taining the same provisions as the old. Martin v.

Campanano, 156 F.2d 127 (2nd Cir. 1946); cert. de-

nied 67 S.Ct. 112 (1946).

Under these circumstances, the question of whether

the franchise was intended to be extended was prop-

erly left to the determination of the jury. They con-

cluded that the agreement was extended, and that

the acts noted above constituted breaches of the

agreement.

The non-renewal of the agreement itself can be

traced to Saab’s admitted breaches of the contract.

That is, but for Saab’s breaches of contract, the agree-

ment clearly would have been renewed. Each of the

acts analyzed above in terms of the Dealer’s Day In

Court Act also constitutes a breach of the implied

term of geod faith in the contract itself. The jury

was entitled to conclude that if Saab had not

committed any of the breaches of good faith, the rela-

tionship of the parties would have continued as be-

fore. Both Long and Boli testified on behalf of Saab

that they wanted to renew the agreement with Brug-

ger, at least until October 19, at which time Boli

says that a franchise agreement to be offered to

Brugger was contained in Long’s briefcase and may

have been put on the table at a meeting with Brug-

ger (RT 1827-1832). Mr. Boli implied that the agree-

ments would have been signed if warranty claims and

advertising claims had been settled (RT 1831-1832).

Since the events which caused the failure to renew

the agreement were also breaches of contract by Saab,

the verdict must prevail on that theory as well. More-

over, since these breaches occurred before September

30th as well as after that date, the finding of an

extension of the franchise agreements is unnecessary

to support the verdict.

With respect to damages, the Court of Appeals

notes parenthetically that it finds the evidence “wholly

insufficient to support the award of $200,000.00.” (Ap-

pendix, p. ii, n.l). No further explanation is of-

fered. Since no error in the admission of evidence was

found, the question becomes whether there was evi-

dence to support the jury’s award in that amount.

ABI proved a loss of $3,400.00 by reason of Saab’s

failure to purchase leftover parts after the termina-

tion (RT 1044:7-17; 1046:7-19; 1047:1-5 and 1048:3-

14) and $5,226.00 for the refusal to purchase new

Saab automobiles at the end of the franchise (RT 449,

1498, PX 253). Additionally, the warranty claims

noted above, Saab admitted a debt of approximately

$2,900.00 in its interrogatory answers, and had admit-

ted in correspondence that more than $5,000.00 in war-

ranty claims had been unpaid.

The termination also resulted in lost profits due

to lost sales for at least the three-year term of the

franchise, which became Saab’s standard term in 1972.

With respect to lost profits, four factors enter into

the computation. Each of the factors was considered

by a qualified expert, and each was based upon sub-

stantial evidence. The four factors were as follows:

a. Projected sales of 160 new Saabs per year.

This figure was established on the basis of Mr.

Brugger’s estimate (RT 985-986), the expert’s

agreement (RT 786), and the actual experierce

of ABI’s successor in the Palo Alto area (RT -

919) ;

b. A gross profit per new vehicle of $500.00

was established by Saab’s own advertisements

(PX 194) and Saab’s regional manager’s testi-

mony to the effect that the gross profit per ve-

hicle was $575.00-$650.00 (RT 645-646) ;

e. A multiplier was applied to the $500.00 gross

profit per new vehicle to derive gross profits from

used cars plus service and parts. Plaintiff’s ex-

pert based this upon (1) a National Automobile

Dealer’s Association study, which showed that

2.14 was an average multiplier (RT 794), (2)

the experience of comparable dealers (a multi-

plier of 2.04), and (3) ABI’s historical experience

(a multiplier of 1.86) (RT 795). This evidence

would plainly justify the use of a multiplier of

2.0;

d. The expert testified that a gross profit to

net profit of 2.55 to 1 was reasonable in terms of

ABI’s experience and the experience of compa-

rable dealers included in the expert’s study (RT

794).

Multiplying these four factors results in a lost profit

figure of nearly $63,000 per year or about $188,000

over a three year period. When added to the out-of-

pocket damages noted above, this more than justifies

the verdict of $200,000.00.

The verdict was plainly proper under the decisions

of other circuit courts concerning damages under the

statute. Randy’s Studebaker Sales v. Nissan Motor

Corp., 533 F.2d 510 (10th Cir. 1976); Autowest v.

Peugeot, Inc., 434 F.2d 556 (2d Cir. 1970); Ameri-

can Motor Sales Corp. v. Semke, 384 F.2d 192 (10th

Cir. 1967).

REASONS FOR GRANTING THE WRIT

1. THE DECISION OF THE COURT BELOW IS IN SUBSTAN-

TIAL CONFLICT WITH THE DECISIONS OF OTHER CIR-

CUIT COURTS AND WITH CONGRESSIONAL INTENT FOR A

STATUTE NOT HERETOFORE REVIEWED BY THE SU-

PREME COURT.

This Court has not yet reviewed a case arising

under the Dealer’s Day In Court Act. The statute

was characterized by Congress as necessary to remedy

“the manifest disparity in the ability of franchised

dealers [of automotive vehicles] . . . to bargain with

their manufacturers.” United States Code, Congres-

sional and Administrative News, 84th Congress, 2nd

Session (1956), Volume 3, pp. 4596-97. Quoted in

York Chrysler-Plymouth, Inc. v. Chrysler Credit

Corp., 447 F.2d 786 (5th Cir. 1971), at 793, n.7.

The statute deals with the obligation of good faith,

which is imposed in terms of a strict dichotomy. It

prohibits coercion, intimidation, or threats of coercion

or intimidation in connection with performing, termi-

nating or renewing an automobile dealer’s franchise,

but expressly excludes from that prohibition, “recom-

mendation, endorsement, exposition, persuasion, urg-

ing or argument...” 15 U.S.C. §1221(e).

The line between “attempted coercion” on the one

hand, and “persuasion” of the sort allowed by the

statute on the other, is necessarily a question to be

decided on a basis of inferences. The Second Circuit,

so noting, also observed that the determination of

good faith derives from “a subjective analysis of the

facts.” York Chrysler-Plymouth, Inc. v. Chrysler

Credit Corporation, 447 F.2d 786, 792 (5th Cir. 1971).

Whether the manufacturer acted to coerce or intimi-

date a dealer is a question peculiarly appropriate for

jury determination.

The legislative history of the Act tells us that the

existence of coercion or intimidation depends upon the

circumstances arising in each particular case and may

be inferred from a course of conduct. U.S. Code, Con-

gressionai and Administrative News (1956) 84th Con-

gress, 2nd Session, Volume 3, Page 4603, cited in

York Chrysler-Plymouth, supra, at 793, n.7 and in

American Motor Sales Corporation v. Semke, supra,

at 197-198. In these two cases, the Fifth Circuit and

the Tenth Circuit ruled that the entire course of deal-

ing between a manufacturer and dealer may be con-

sidered and it may then be concluded by the jury that

the total conduct was in violation of the Act. The

Ninth Cireuit has implicitly rejected this doctrine, by

presuming to review the evidence itself and reject all

of the jury’s inferences which led to a finding of

liability under the statute.

The Seventh Cireuit Court of Appeals, in consid-

ering a closely analogous fact situation, found that the

following requirements, imposed by the manufacturer,

constituted actionable coercion under the statute. The

dealer was required (no doubt the manufacturer

would say “requested”’) to:

1. Attain his planning potential [ASO] of

360 cars;

2. Inerease his wholesale credit line and main-

tain a 60 unit new car inventory ;

3. Aequire a used car lot and new car storage

facilities ;

4. Hire a full time sales manager;

5. Hire and train four additional salesmen;

6. Participate in American Motors’ Loaner

Programs; and

7. Participate in American Motors’ Corporate

Identity program.

Shor-Line Rambler, Inc. v. American Motors

Sales Corp., 543 F.2d 601, 603 (7th Cir. 1976).

o-_

The Court noted that “Shor-Line alleged that the

demands were arbitrary, unreasonable and impossible

to comply with.” The manufacturer “offered contrary

evidence but the jury found for Shor-Line.” Jd. at

603. The Court ruled that the issue of the manu-

facturer’s bad faith “involves its intentions as mani-

fested by its actions,” and that this is a factual

determination for the jury.” Id. at 604. Even though

some evidence was introduced to support the con-

tention that the manufacturer may have been justified

in terminating the dealer, the jury heard the evidence

and returned its verdict for the dealer. The Court

declined to disturb the verdict on appeal. Jd. at 604.

The most that can be said of Saab’s case here is

that some evidence was introduced to support its

contention that it was justified in terminating ABI,

and this evidence was all edited, recited, and believed

by the court below.

The course of action found to violate the statute

in Shor-Line Rambler is hardly more coercive than

that followed by Saab in the case at bar. Both manu-

facturers required the dealers to attain an unrealistic

sales objective, increase inventory, and participate

in certain manufacturer’s programs. The opinion

in Shor-Line does not indicate whether the inventory

requirement was excessive, or the exact requirements

of the manufacturer’s loaner and corporate identity

programs. Here, the manufacturer’s “pilot scheme”

and threat to place the dealer on C.O.D. had plainly

coercive intent. Similarly, the annual sales objective

and inventory requirements in the case of ABI

were considerably more onerous than the standards

imposed on Saab’s other dealers.

The approach followed by the Ninth Circuit in this

case simply cannot be reconciled with the Fifth Cir-

cuit’s decision in York Chrysler-Plymouth and the

Seventh Circuit’s decision in Shor-Line Rambler and

the Tenth Circuit’s decision in Semke. It is respect-

fully submitted that the time has come for this Court

to review the statute, and to uphold the legislative

intent.

2. THE DECISION OF THE COURT OF APPEALS DEPRIVES

PETITIONER OF ITS RIGHT TO TRIAL BY JURY UNDER

THE APPLICABLE DECISIONS OF THIS COURT.

It is important to note that the Ninth Cireuit did

not find any error to have been committed by the

court below. ‘The meaning of the statute was fairly

conveyed by the court’s jury instructions, and the

requirement of coercion received considerable em-

phasis through the inention of the words “coercion”

or “intimidation” some nineteen times (RT 1877-

1880). Given proper instructions, it is the jury’s

function to review the evidence and determine lia-

bility.

This Court has clearly delineated the jury’s function

as follows:

“It is the jury, not the court, which is the fact-

finding body. It weighs the contradictory evidence

and inferences, judges the credibility of witnesses,

receives expert instructions, and draws the

——

ultimate conclusion as to the facts. The very-

essence of its function is to select from among

conflicting inferences and conclusions that which

it considers most reasonable.”

Tennant v. Peoria & P.U. Railway Co., 321

U.S. 29, 35 (1944)

Where there is an evidentiary basis for the jury’s

verdict, the jury is free to discard or disbelieve what-

ever facts are inconsistent with its conclusion. Where

there is a reasonable basis in the record for the jury’s

verdict, the Appellate Court may not weigh conflict-

ing evidence, judge the credibility of witnesses, and

arrive at a conclusion opposite from the one reached

by the jury. Lavender v. Kurn, 327 U.S. 645 (1946).

For the foregoing reasons, petitioner respectfully

submits that the petition should be granted.

Dated, San Francisco, California,

April 12, 1978.

J EFFREY J. PARISH,

ROSENBLUM, F'ENOLIO, PARISH,

JACK & BACIGALUPI,

Attorneys for Petitioner.

(Appendix Follows)

APPENDIX

Appendix

In the United States Court of Appeals

for the Ninth Circuit

No. 75-2338

Autohaus Brugger, Inc., |

| Plaintiff-Appellee,

Vs.

Saab Motors, Ine., and Saab-Scania

of America, Inc.,

Defendants-A ppellants. j

[ Jan, 18, 1978]

On Appeal from the United States District Court

for the Northern District of California

OPINION

Before: BARNES and ANDERSON, Circuit Judges,

and CRAIG,* District Judge.

J. BLAINE ANDERSON, Circuit Judge:

In this case Autohaus Brugger, Ine. (Autohaus),

a franchised automobile dealer, brought suit against

Saab Motors, Ine. (Saab), alleging breach of their

franchise agreement and violation of the Automobile

Dealers Day in Court Act [15 U.S.C. §§ 1221-1225].

The jury found in favor of Autohaus and awarded

*Honorable Walter E. Craig, Chief Judge, United States

District Court, District of Arizona, sitting by designation.

$200,000 in damages. The trial court denied Saab’s

post-trial motions for judgment n.o.v., directed ver-

dict, and new trial. Saab appeals. Because we find the

evidence wholly insufficient to support either a breach

of contract claim or a violation of the Dealers Day in

Court Act, we reverse.’

15 U.S.C. § 1222 allowed the dealer to bring his

action in the district court below. Our jurisdiction

rests with 28 U.S.C. § 1291.

BACKGROUND.

Autohaus is an automobile dealership located in

Redwood City, California, and is a wholly-owned sub-

sidiary of Brugger Marketing Systems (BMS). Hu-

bert Brugger is the President of Autohaus, as well as

the majority shareholder of BMS. Autohaus came into

existence in 1965 and had, at that time, one store (a

dealership selling point) which was located in Palo

Alto, California. At that time it sold and serviced

only Mercedes Benz automgbiles. In 1968, Autohaus

built another store in Redwood City. The Palo Alto

store was then managed by another subsidiary of

BMS, which in 1969 executed the first of several non-

exclusive one-year franchise agreements with Saab to

sell and service Saab automobiles in the Palo Alto

area. In 1971 Autohaus executed a similar agreement

to become a franchised Saab dealer in the Burlingame,

California area.

*We would also reverse on the grounds that the evidence is

wholly insufficient to support the award of $200,000 in damages.

However, since we find no liability, we need not discuss this

issue.

iii

These one-year franchise agreements were renewed

in 1971 and in effect until September 30, 1972, when

they came up again for renewal. These agreements

were not renewed by either party, although there is

convincing, unrebutted evidence in the record to show

that Saab tried repeatedly to get Autohaus to renew.

Finally, on December 20, 1972, Saab wrote to Auto-

haus and stated that Saab would not be renewing the

franchise agreements. Shortly thereafter, Saab

granted the franchise to another dealer who took over

the sales and” service of Saab automobiles for that

area.

I. RELATIONSHIP BETWEEN THE PARTIES.

A. The warranty claims.

The key to this case is the issue of warranty claims.

A warranty claim is a dealer’s claim to the automobile

manufacturer for reimbursement of the cost of parts

and labor that a dealer has put into repairing a re-

tailed automobile which is still covered by the manu-

facturer’s warranty.

Under the franchise agreement’? between Saab and

Autohaus, Saab agreed to reimburse Autohaus for de-

*This agreement in pertinent part states:

“Company agrees that it will be responsible for handling

the ‘Warranty.’ Dealer agrees to install new parts to replace

defective parts without charge to the original purchaser.

Reimbursement for such defective parts will be made by

Company to Dealer without cost to the latter. Company

agrees to credit Dealer with the labor cost involved in in-

stalling such parts, provided that the replaced parts are

determined to be defective by Company. Labor credit shall

be based upon a suggested Time Schedule and Dealer War-

ranty Labor Rate established by Company, which said

Schedule may be amended by Company from time to time at

fective parts covered by the factory warranty and to

reimburse Autohaus for the labor cost involved ir

installing these parts. The amounts for which Saab

agreed to reimburse Autohaus on the labor charge

were based on a suggested time schedule and labor

rate established by Saab. This rate schedule is re-

ferred to as a “flat rate manual.” For example, if an

automobile was still within the factory warranty

period and the crankshaft was found defective, then

Autohaus would replace it. If the “flat rate manual”

lists this job as a ten-hour job on a Saab model 99,

(see e.g., Plaintiff’s Exhibit #291), then a proper

claim to Saab for reimbursement would include the

cost of the crankshaft as well as ten hours for labor

charges.

From the beginning of their relationship these war-

ranty claims created problems. Autohaus several

times complained to Saab that the warranty claims

were not promptly and fully reimbursed. These com-

plaints increased in 1972, and, as shall be seen, were

a substantial factor in the nonrenewal of the franchise

relationship.

These warranty claims are the key to this case be-

cause Autohaus alleges that Saab owed reimbursement

on these claims to Autohaus, that Saab refused to pay,

its sole discretion. Dealer agrees to submit Warranty claims

directly to Company in accordance with the existing Com-

pany Policy.

“Dealer agrees to perform warranty work on all SAAB

automobiles covered by the terms of the ‘Warranty’, whether

or not such automobiles have been sold by Dealer, and Com-

pany agrees to honor all legitimate warranty claims made by

dealer whether or not such claims pertain to automobiles

sold by Dealer.” (Pl. Ex. 166, p. 4).

that Saab tried to coerce Autohaus into dropping the

claims, and finally that Saab terminated Autohaus be-

cause the claims were not dropped. Autohaus contends

that this was a violation of the Automobile Dealers

Day in Court Act, supra.

Our first inquiry then is to determine whether there

is any evidence from which the jury could determine

that Saab in fact owed any warranty monies to Auto-

haus, and, if so, whether they used them to coerce

Autohaus in any manner.

At different times Autohaus made varying claims to

Saab of amounts which Autohaus considered due. On

November 30, 1971, Autohaus wrote to Saab and

stated that according to their books Saab owed

$4,627.04 on old warranty claims (Pl. Ex. #9). In

June of 1972 this figure was both $10,054.70 (Pl. Ex.

#86) and “over $8,000.00” (Pl. Ex. #87). In Sep-

tember this figure was both $19,386.23 (Pl. Ex. #104)

and $15,008.08 (Pl. Ex. #105).

Autohaus arrived at these figures through its war-

ranty claims register. Whenever Autohaus would per-

form work it felt was warranty related, it entered the

claim into the warranty register. If Saab paid (or

credited) the claim to Autohaus, then the bookkeeper

would credit the warranty register and the amount

would no longer be shown as owing. However, if Saab

did not give Autohaus credit for the warranty work

done or only paid the claim partially, then the re-

mainder of the claim was still shown as owing in the

warranty register. This situation occurred even if

Saab’s rejection and nonpayment of the claim was

perfectly valid. This, of course, meant that Autohaus

would be carrying a claim that the warranty register

said was owing, but which, in fact, was not owing.

The evidence shows that most, if not all, of the

remaining claims in the warranty register were the

type of claims which Autohaus had improperly sub-

mitted or Saab had already validly rejected.

For example, if Saab would receive a warranty

claim and the reimbursable labor time claimed by

Autohaus was over the allowed “flat rate” time, then

Saab would reimburse for the agreed upon “flat rate”

time and would reject the remainder of the warranty

claim for the excess time. The warranty register still

carried the claim for the excess time. Hubert Brugger

admitted on cross-examination that “some of these

claims showed higher labor than Saab allowed for

that particular job to be paid.” (R.T. 410) Gary

Martin, a parts and service manager for Autohaus,

testified that if a warranty repair took four and one-

half hours to perform, and if the flat rate manual

allowed three hours, then he would “regularly” submit

a claim to Saab for the full four and one-half hours.

(R.T. 1092) He stated that “if I felt we deserved the

time we spent legitimate time on the car, certainly I

would claim it.” (R.T. 1099) When asked if Saab

would honor that additional time, Martin said “In

most cases, no.” (R.T. 1099)

Charles Grelle was Autohaus’ parts and service

director. After stating that part of the problem with

these warranty claims may have been Saab’s fault,

he also testified :

Vii

“Q. In the course of analyzing the claims and

meeting with Mr. Soane, did you form the opinion

that part of the reason for the [warranty] dis-

pute was fault on Autohaus Brugger’s end?

A. [Grelle] Yes.

Q. And were you able to determine what

seemed to be the reason for the fault on Auto-

haus Brugger’s end?

A. Well, the only thing that I could say was

I could not substantiate some of them. That’s not

to say there wasn’t substantiation somewhere,

but I couldn’t find it. Therefore I couldn’t very

well consider that a proper claim.

Q. Were there any of Autohaus Brugger’s

claims that you felt had been submitted in an

incomplete form?

A. Yes.” (R.T, 1367-1368)

On April 5, 1972, Saab’s Regional] Manager, Mark

Boli and its District Sales Manager, Michael Long,

met with Hubert Brugger and his assistant, Ronald

Bartolucci, to try and clear up these warranty prob-

lems. Boli told Bartolucci that he would leave soon

for Saab’s headquarters in Orange, Connecticut, and

he asked Bartolucci to give him copies of the disputed

claims and with respect to each claim the claim num-

ber, owners’ name and chassis number, so that he

could have Saab’s home-office staff examine them in

an effort to resolve the difficulties, (Pl. Ex. #88)

It was not until three months later, on June 27,

1972, when Bartolucci sent Boli a list of 70 claims

(Pl. Ex. #87). However, Saab claims these were

without the claim numbers, owners’ names, and chassis

numbers as Boli had requested at the April 5 meeting.

On July 3 Boli acknowledged receipt of the claims,

and told Bartolucci that Saab would review them as

soon as Autohaus provided it with complete infor-

mation as requested. (Pl. Ex. #88)

Shortly after this letter, Bartolucci left Autohaus

and the warranty claims problem was assigned to

Charles Grelle. In August, Saab’s service manager,

George Soane, met with Grelle and together the two

of them reviewed each of the unpaid claims Saab

had not paid, and they took a sampling of those Saab

had partially paid. They concluded that Saab owed

Autohaus on some of the claims and not on others.

On some claims Saab had actually overpaid Auto-

haus. There were other claims on which they could

not reach agreement. (Pl. Ex. #105)

On August 24, Boli again met with Brugger to try

and resolve the warranty dispute. At that time,

Brugger claimed that Saab owed Autohaus $15,008.08

on the warranty claims. (Pl. Ex. #204) He suggested

as a compromise that Saab pay the amount it con-

ceded it owed and that the remainder be split on a

“fifty-fifty” basis. Boli instead offered to spend what-

ever time was necessary to review each of the re-

maining claims, but he was not willing to split the

claims on a certain percentage basis regardless of

their. merit. Brugger adamantly refused to spend

any more time in reviewing the remaining claims.

Shortly thereafter, on September 1, 1972, Brugger

wrote to Saab and demanded payment for the war-

ranty claims. He claimed in this letter that $19,386.23

was due. He also stated:

“It is our intention to obtain legal assistance for

the collection of our receivables, if the accounts

are not completely cleared by the 11th of Sep-

tember 1972” (Pl. Ex. #104).

On September 14, 1972, Boli replied to Brugger,

stating that:

“According to the information that you pre-

sented, you had $15,008.08 on your books as un-

paid warranty claims by Saab. ... Mr. Garelli

[Grelle] and Mr. George Soane have reviewed

your warranties and ‘per your spreadsheet’ you

showed we owed $9,095.43. Of this figure we have

agreed we owe $5,067.45, which includes resub-

mitted claims. Also, there is $158.61 of which

you claim we owe 50%. There is $2,569.18 which

Mr. Garelli [Grelle] stated we did not owe, and

$1,300.19 is in dispute.

* * *

“You also presented another spread sheet which

you considered partial payments, total amount of

$5,912.60. In discussing this I explained to you

that these have been paid and were not brought

up in review of warranty claims by Mr. Barto-

lueci, your former vice president, and were just

handed to us by Mr. Garelli [Grelle]. We did not

feel that this was eligible for review as these

claims had been paid and if there were any

shortages in payment, they should have been

brought up at that time.

- * ”

“Enclosed is a detailed analysis for me by Mr.

Soane explaining the disposition of each war-

ranty claim presented to us for review. ...I am

- sure if you make a thorough investigation of this

situation, you will find a great amount of these

problems to be internal.” (Pl. Ex. #105).

Attached to this letter were numerous sheets of

warranty claims, which set forth an explanation for

the manner in which Saab handled each claim. A

sampling of these explanations reads like this:

“This claim was reduced on the labor rate.

Claimed for 27.1 hours—reduced to 8.5 hours”;

“This claim is for a 1,000 mile service, not war-

ranty” ;

“Work on R.O. is not warranty work, claim copy

does not show chassis No. or date of sale.”

While Brugger received this letter and the detailed

analysis of the claims, he testified that he did not

review it in any detail. He referred the analysis to

Charles Grelle, but never received back any counter-

analysis of the claims from him. At trial, Brugger

was unable to point to any specific claim or claims

which were legitimately owed by Saab. He was not

concerned with the individual claims, but rather was

concerned only with the total balance showed owing

by the warranty register (which, as indicated above,

was not necessarily correct). And Charles Grelle testi-

fied that as far as he knew there was no claim which

Saab admitted it owed which had never been paid.

(R.T. 1391)

In order to satisfy its burden of proof that war-

ranty claims were owed by Saab, Autohaus needed

to present specific evidence of that fact. This, they

cannot do. At trial, in their brief, and at oral argu-

ment here, Autohaus has totally failed to produce

any evidence of any single warranty claim which was

definitely owed by Saab and which was not paid. We

have searched the entire 1,896 pages of the transcript

in this case and still can find no evidence of a single

claim which was validly owed by Saab and not paid.

True, the warranty register shows that certain

amounts were “claimed” by Autohaus, but in no sense

does this mean that the amounts were legitimately

owed. As we have already discussed, Autohaus con-

ceded that many of the claims in the warranty

the franchise agreement had agreed to pay. Soane’s

analysis of the outstanding claims shows why Saab

had rejected the claims. In the appendix to its brief,

Saab lists eleven claims (showed as owing in the

warranty register), which Saab contends were validly

rejected and not owing. Autohaus was unable at trial,

and is unable here, to present any evidence to refute

Saab’s position that the claims were not legitimately

owing. — .

The only evidence which Autohaus can point to

to suggest that Saab owed Autohaus on the warranty

claims is interrogatory No. 69. In the answer to this

interrogatory, Saab agreed that it owed Autohaus

$2,905.58. However, where Autohaus suggests that

this answer shows that Saab owes this amount on

warranty claims (Autohaus’ Opening Brief, p. 8),

this is misleading because the interrogatory itself

reads:

®‘This figure should read $2,876.73 due to a mathematical cor-

rection (RT 1887).

“What amount, if any, is currently owed by Saab

to plaintiff in connection with any matter what-

soever, including amounts owed in connection

with warranty claims made by plaintiff?” (C.R.

93, R.T. 939) (emphasis added).*

Of this $2,905.58 figure, Autohaus cannot point to one

single specific warranty claim which is included in

the figure and was not paid. Nor can Autohaus prove

that this figure is anything other than the normal

expenses which Saab would incur when winding up

a franchise arrangement such as that with Autohaus.

Our inquiry through the record, the trial trans-

eript, and the many exhibits in this case leads us to

the inescapable conclusion that Autohaus has failed

to carry its burden of proof and show that legitimate

warranty claims were owed by Saab. We find that

there is just no evidence from which a reasonable

jury could find that Saab owed money to Autohaus

on the warranty claims. It follows then, that with no

‘Interrogatory No. 68 reads: “Commencing on what date did

Saab refuse ray Basel plaintiff for warranty work performed

by plaintiff on Saab Automobiles?”

The answer to Interrogatory No. 68 reads: “Saab never re-

fused to reimburse plaintiff for warranty work performed by

plaintiff on Saab automobiles. See also answer to Interrogatory

No. 50.” (CR 93)

Interrogatory No. 50 reads: “State the basis on which Saab

refused to reimburse plaintiff a warranty work performed

by plaintiff after December 20, 1972.”

The answer to Interrogatory No. 50 reads: “Saab did not

refuse to reimburse plaintiff for Saab warranty work performed

by plaintiff after December 20, 1972. All warranty claims sub-

mitted by plaintiff were processed in accord with standard pro-

cedures. To the extent that individual claims were refused, such

refusal was based on the failure of the particular claim to qualify

under Saab’s standard warranty policies.” (CR 88)

eer

warranty monies due, Saab could not have used them

to “‘coerce” Autohaus as Autohaus alleges.

B. Franchise Renewal Efforts:and Who Wanted

To Terminate Whom?

In July of 1972, while the warranty dispute was

going on, Michael Long went to Autohaus’ outlet in

Burlingame to obtain an order for cars. Long was

Saab’s district manager and responsible for selling

cars to the dealers. He tried to sell some new cars

to Autohaus because he felt that Autohaus’ inventory

was falling to a comparatively low level considering

the market where Autohaus was located. At that time

Brugger told him that Autohaus refused to order

any more cars until Saab satisfied the warranty

claims. (R.T. 180-182). Brugger also instructed Gar-

rison Paul, the manager of the Burlingame store,

Jurgen Von Beekum, the general manager of the

Palo Alto store, and Peter Widdershoven, a sales

manager, that they were to order no more Saab ears

for inventory until Saab settled on the warranty

claims (R.T. 180, 677, 1275, Pl. Ex. #93).

On August 24, 1972, Long returned to Autohaus to

secure an order for cars. Brugger again refused. In

his report back to Saab, Long wrote:

“Mr. Brugger gave an ultimatum that Saab pay

his request on warranty claims today—or else.

He refused to order cars to bring his inventory

up to a satisfactory level. He will not voluntarily

terminate and he will not cooperate.” (Pl. Ex.

#101).

xiv

Four days later, on August 28, Long again con-

tacted Brugger to try and sell Autohaus some new

cars for inventory. Brugger’s response when asked

to buy more cars was “No, I will not.” (R.T. 304).

He indicated he would not order any more cars until

Saab settled the warranty dispute around his “pro-

posal” which was the fifty-fifty split of the contested

claims (R.T. 180, 677, 1275, Pl. Ex. #93).

Brugger exhibited the same attitude about renewing

the franchise agreements. That is, he didn’t want

to discuss renewal until the warranty situation was

cleared up. The evidence also showed that Brugger

was disenchanted with the franchise with Saab and

had a desire to get out from under the agreement. At

one point in July of 1972, Brugger observed to Garri-

son Paul that he would like to get out from under

the agreement because it was “driving him crazy

with the expense and so-forth” (R.T. 199). He also

observed to Paul that he would have to let Saab

terminate him since under that situation Saab would

“have to settle the whole thing up and take back the

parts. ...” (R.T. 199). Peter Widdershoven testified

that sometime during the summer or early fall of

1972, he asked Brugger about getting rid of Saab.

Brugger replied “Let’s wait and see what happens.

I’d rather have them terminate me than vice versa.”

(R.T. 1286). Widdershoven also testified that some-

time prior to December of 1972 Brugger had told

him that he was attempting to maneuver Saab into a

position where he could sue them. (R.T. 1296). And,

finally, the minutes of an Autohaus staff meeting

held late in 1972 show that “A.B.I. [Autohaus] is in

a more advantageous position by having Saab cancel

franchise and not us.” (R.T. 485).

While we find substantial evidence in the record

to show that Saab tried te get Autohaus to renew the

franchise agreement both before and after the Sep-

tember 30 expiration date, we find no evidence that

Autohaus ever sought out or made any request to

Saab that the franchise be renewed.

All during this controversy in 1972 the sales of

Saab cars at Autohaus continued to drop, as did the

inventory. (R.T. 152). For example, in October of

1972 Autohaus took delivery of only two cars from

Saab and none thereafter. (R.T. 944).

By mid-December of 1972 Saab still had not re-

ceived any indication whatsoever from Autohaus that

it genuinely wished to continue as a franchised dealer.

As Saab notes, “all indications were to the contrary”

(Saab Opening Brief, p. 13). Finally, on December

20, 1972, W. Donald Carmack, Saab’s vice president

of sales and marketing, wrote to Autohaus and stated

that they would not renew the franchise. In his letter

he stated:

“As you know, the term of both of those agree-

ments ended on September 30, 1972. After con-

siderable analysis of your selling performance,

it has been determined that we will not be re-

newing those Agreements. The reason for our

decision concerns your inability to sell the number

of Saab automobiles that both of us have pro-

jected as a reasonable amount given the popula-

tion, affluence, and other factors connected with

the areas in which you have been operating.”

(Pl. Ex. #115).

Autohaus rejected the reason given by Saab for

the nonrenewal of the franchise and instead claimed

that the real reason for the nonrenewal was Saab’s

“attitude towards payment of [the] warranty claims.”

(Pl. Ex. #119). This litigation followed.

II. Sranparp oF REVIEW

As mentioned, Saab moved for a directed verdict,

a judgment n.o.v., or in the alternative a new trial.

Upon denial of these motions, Saab appeals.

The standards for granting a judgment n.o.v. and

for a directed verdict are the same. Cocicrum v. Whit-

ney, 479 F.2d 84, 85 (9th Cir. 1973).

When considering the propriety of the grant or

denial of a motion for judgment n.o.v. or a directed

verdict, the correct standard is:

“|. whether or not, viewing the evidence as a

whole, there is substantial evidence present that

could support a finding, by reasonable jurors,

for the nonmoving party. Butte Cooper & Zine

Co. v. Amerman, 157 F.2d 457, 458 (9th Cir.

1946). ‘Substantial evidence is more than a mere

scintilla.’ Consolidated Edison Co. v. NLRB, 305

U.S. 197, 229, 59 S.Ct. 206, 217, 83 L.Ed. 126

(1938); Butte Cooper & Zine Co., supra. The

evidence must be examined in a light most favor-

able to the nonmovant, Continental Ore v. Union

Carbide & Carbon Corp., 370 U.S. 690, 696 & n.

6, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962), and there

can be no weighing of evidence. Tenant v. Peoria

& Pekin Union Ry., 321 U.S. 29, 35, 64 S.Ct. 409,

88 L.Ed. 520 (1944). Finally, appellant here is

entitled to the benefit of all reasonable infer-

ences that may be drawn from its evidence.

Standard Oil Co. v. Moore, 251 F.2d 188, 198

(9th Cir. 1957), cert. denied, 356 U.S. 975, 78

S.Ct. 1139, 2 L.Ed. 2d 1148 (1958).” Chisholm

Brothers Farm Equipment Co. v. International

Harvester, 498 F.2d 1137, 1140 (9th Cir. 1974),

cert. denied, 419 U.S. 1023.

After reviewing the entire record with these prin-

ciples in mind, we are left with “the definite and firm

conviction that a mistake has been committed” by

the trier of fact. United States v. United States

Gypsum Co., 333 U.S. 364, 394-395 (1948); Anderson

_ v. United States, 555 F.2d 236, 237 (9th Cir. 1977).

We hold under the facts of this case that the evidence

is wholly insufficient to support a reasonable jury’s

finding in favor of Autohaus on either the breach of

contract claim or violation of the Dealers Day in

Court Act. Brady v. Southern Railroads, 320 U.S.

476 (1943). A motion for directed verdict should be

granted “where there is no substantial (or ‘believ-

able’) evidence to support” any other verdict. Haw-

kins v. Sims, 137 F.2d 66, 67 (4th Cir. 1943); 5A

Moore Federal Practice 150.02 [1] 2d Ed., 1968 and

cases cited therein; Boeing Co. v. Shipman, 411 F.2d

365, 374 (5th Cir., en bane, 1969), Wagle v. Murray,

560 F.2d 401 (9th Cir. 1977). Therefore, the trial

court’s denial of Saab’s motion for judgment notwith-

xviii

standing the verdict was error and we reverse and

vacate the judgment.

III. Deaters Day In Court Act®

The purpose® of the Dealers Day in Court Act is to

supplement the antitrust laws of the United States

*The pertinent portions of this Act read:

“1221(e) The term ‘good faith’ shall mean the duty of each

party to any franchise, and all officers, employees, or agents

thereof to act in a fair and equitable manner toward each

other so as to guarantee the one party freedom from coercion,

intimidation, or threats of coercion or intimidation from the

other party: Provided, That recommendation, endorsement,

exposition, persuasion, urging or argument shall not be

deemed to constitute a lack of good faith.”

“§ 1222. Authorization of suits against Manufacturers;

amount of recovery; defenses

An automobile dealer may bring suit against any auto

mobile manufacturer engaged in commerce, in any district

court of the United States in the district in which said

manufacturer resides, or is found, or has an agent, without

to the amount in controversy, and shall recover the

by him sustained and the cost of suit by reason

of the failure of said automobile manufacturer from and

after August 8, 1956 to act in good faith in performing or

complying with any of the terms or provisions of the

franchise, or in terminating, canceling, or not renewing

the franchise with said dealer: Provided, That in any such

suit the manufacturer shall not be barred from asserting in

defense of any such action the failure of the dealer to act

in good faith.

*One of the major reasons for passage of the Dealers Day in

Court Act was to balance the power between the automobile

manufacturers and the dealers. In its reasons for the Act, the

House Report stated:

Concentration of economic power in the automobile manu-

facturing industry of the United States has developed to

the point where legislation is required to remedy the manifest

disparity in the ability of franchised dealers of automotive

vehicles to bargain with their manufacturers. Investigations

of the automobile industry, moreover, demonstrate a con-

tinuing trend toward greater concentration, as well as abuse

by the manufacturers of their dominant position with respect

to their dealers. These investigations have disclosed practices

xix

and permit a franchised automobile dealer to bring

suit for damages in the United States district courts

for the failure of the automobile manufacturer to act

in good faith in performing or complying with any of

the terms or provisions of the franchise, or in termi-

nating, canceling, or not renewing the dealer’s fran-

chise. House Report No. 2850, 84th Cong. 2d Sess.

(1956), 1956 U.S. Code Cong. & Admin. News, p.

4596.

Good faith is defined as the duty of a dealer and

a manufacturer “to act in a fair and equitable man-

ner toward each other so as to guarantee the one party

freedom from coercion, intimidation, or threats of co-

ercion or intimidation from the other party.” 15

U.S.C. § 1211(e).

There is no question that the failure to exercise

good faith within the meaning of the Act has a lim-

ited and restricted meaning. It is not to be construed

liberally. Miles v. Ford Motor Co., 317 F.2d 712

(3rd Cir. 1963), cert. denied, 375 U.S. 896. It does

not mean “good faith” in a hazy or general way, nor

does it mean unfairness. The existence or nonexist-

ence of “good faith” must be determined in the con-

text of actual or threatened coercion or intimidation.

Lawrence Chrysler-Plymouth, Inc. v. Chrysler Corp.,

and conditions which require new legislative methods and a

change in established concepts. The bill as amended pro-

eeeds from the conclusion that in the automobile industry

concentration of economic power has increased to the degree

that traditional contractual concepts are no longer adequate

to protect the automobile dealers under their franchises.

House Report No. 2850, 84th Cong. 2d Sess. (1956) 1956

U.S. Code & Admin. News, pp. 4596-97.

461 F.2d 608 (7th Cir. 1972), cert. denied, 409 U.S.

981; Salco Corp. v. General Motors Corp., 517 F.2d

567 (10th Cir. 1975); Overseas Motors, Inc. v. Import

Motors Limited, 519 F.2d 119 (6th Cir. 1975), cert.

denied, 423 U.S. 987; Rea v. Ford Motor Co., 497 F.2d

577 (3rd Cir. 1974), cert. denied, 419 U.S. 868;

McGeorge v. Leyland Motor Sales, Inc., 504 F.2d 52

(4th Cir. 1974), cert. denied, 420 U.S. 992; Autowest,

Inc. v. Peugeot, Inc., 434 F.2d 556 (2nd Cir. 1970) ;

Cecil Corley Motors Co., Inc. v. General Motors Corp.,

380 F. Supp. 819 (M.D. Tenn. 1974).

In order to lack good faith the manufacturer’s ac-

tions must be unfair and inequitable in addition to

being for the purpose of coercion and intimidation.

Randy's Studebaker Sales, Inc. v. Nissan Motor Corp.,

583 F.2d 510 (10th Cir. 1976).

Coercion or intimidation must include a wrongful

demand which will result in sanctions if not complied

with, Fray Chevrolet Sales, Inc. v. General Motors

Corp., 436 F.2d 683 (6th Cir. 1976), and it is neces-

sary to consider not only whether the manufacturer

brought pressure to bear on the dealer, but also his

reason for doing so. Rea v. Ford Motor Co., supra

(497 F.2d at 585), Overseas Motors, Inc. v. Import

Motors Limited, supra (519 F.2d at 124).

When a termination or nonrenewal of a franchise

is involved, there must be a “causal connection” be-

tween the dealer’s resistance to the coercive conduct

and the termination or nonrenewal for there io be a

lack of good faith under the Act. Autowest, Inc. v.

Peugeot, Inc., supra (434 F.2d at 561).

xxi

The existence of coercion or intimidation depends

upon the circumstances arising from each particular

case. However, unless the transactions between the

parties involve coercion or intimidation, or threats

» oar or intimidation, the duty of good faith

imposed by the Act does not prohibit a manufacturer’s

“recommendation, endorsement, exposition, » + ware

urging or argument normal in competitive commercial

relationships.” House Report 2850, supra (1956 U.S.

Code Cong. & Admin. News at p. 4596).

If the evidence discloses normal sales recommenda-

tion or persuasion, the manufacturer will not be liable.

The Act also does not prohibit the manufacturer from’

terminating or refusing to renew the franchise of a

dealer who is not providing the manufacturer with

adequate representation. Nor does the Act curtail

the manufacturer’s right to cancel or not to renew

an inefficient or undesirable dealer’s franchise. (Id.

at p. 4603).

In Randy’s Studebaker Sales, supra, the Tenth Cir-

cuit noted several examples of what actions did not

constitute lack of good faith:

“Thus, a manufacturer who refuses to renew a

franchise is not guilty of lack of good faith where

the dealer has failed to comply with the franchise

terms for a long period of time. Nor in the case

of one who has had sub-standard sales perform-

ance. Or if the dealer should have inadequate

financial resources, termination of the franchise

is not in bad faith. Elimination of a dealer who

has sold its manufacturer-approved location and

seeks to move to a location not in keeping with

the manufacturer’s metropolitan planning does

not establish a lack of good faith on the part of

the manufacturer. And where the dealer refuses

to take all of the manufacturer’s line of cars,

choosing instead to continue to deal in competitor

ears, lack of good faith is not shown by refusal

to renew the franchise.” (Footnotes omitted)

(533 F.2d at 515).

For some examples of where courts have found

that manufacturer’s actions do lack good faith and

violate the Act, see McGeorge v. Leyland Motor Sales,

Inc., 504 F.2d 52 (4th Cir. 1974) (where the manu-

facturer tried to compel the dealer to accept an unde-

sirable line of cars by withholding delivery to the

dealer of a highly successful line of cars); Rea v.

Ford Motor Co., 497 F.2d 577 (3rd Cir. 1974) (where

the manufacturer threatened to cease shipping Ford

cars, unless a separate corporation, in which dealer

was a principal stockholder, resigned its franchise

as an Oldsmobile dealer in a neighboring town) ; Aw-

towest, Inc. v. Peugeot, Inc., 434 F.2d 556 (2nd Cir.

1970) (where the manufacturer terminated the dealer

because the dealer resisted the manufacturer’s co-

ercion to follow the suggested resale price) ; Randy’s

Studebaker Sales, Inc. v. Nissan Motor Corp., supra

(where the manufacturer used the nonrenewal wea-

pon, as well as curtailment of car deliveries in order

to coerce the dealer into a program of retail price fix-

ing) ; and Shor-Line Rambler, Inc. v. American Motor

Sales, 543 F.2d 601 (7th Cir. 1976) (where the manu-

facturer put unreasonable and unrealistic demands on

the dealer to build new facilities, increase credit, and

eee

make extensive personnel changes, then terminated

the dealership when it could not comply.)

Autohaus contends that there are seven areas where

the evidence shows that Saab violated the Dealers

Day in Court Act. While we disagree that these show

any evidence of a violation of the Act, we shall briefly

discuss each claim. These claims are:

(1) That Saab attempted to intimidate Autohaus to

drop its warranty claims.

As we have already extensively discussed, the record

is barren that Saab owed and withheld any legitimate

warranty claims from Autohaus. With no warranty

claims owing, it would not be possible for Saab to use

these to “coerce” Autohaus into doing something it did

not want to do.

(2) That Saab imposed arbitrary and coercive sales

quotas.

During the early days of their franchise relation-

ship, Saab and Autohaus agreed that as a twelve-

month-sales objective, Autohaus would try and sell 120

units. (Pl. Ex. #171). Autohaus did not reach this

number of sales for any twelve-month period, nor did

very many other Saab dealers, as Saab nationwide

faced strong »mpetition in the import field.

It is true that a violation of the Act may occur

when a manufacturer sets an unrealistic goal (which

none of its dealers can meet) and then selectively

terminates one dealer for failing to meet that goal.

See, e.g., the reasoning of Judge Will in Madsen v.

Xxiv

Chrysler Corp., 261 F. Supp. 488 (N.D. Ill. 1966), va-

cated as moot, 375 F.2d 773 (7th Cir. 1967). However,

in this case, for Autohaus to suggest that Saab violated

the Dealers Day in Court Act by merely agreeing to

or establishing the sales objective, completely misses

the mark. First, Saab did not use as grounds for the

nonrenewal of the franchise the fact that Autohaus

had not sold the 120 cars. Rather, Saab did not renew

the franchise because of Saab’s analysis of Autohaus’

selling performance which, as we have discussed,

supra, was not very good. Secondly, and even more

importantly, there is not one shred of evidence to

suggest that Saab ever used the 120-unit sales objec-

tive to coerce Autohaus (i.e., Saab never threatened

Autohaus either to make the sales objective or to be

terminated). Quite the contrary, the evidence strongly

shows that even though Autohaus did not make the

sales objective, Saab still tried repeatedly to obtain

Autohaus’ renewal of the franchise agreement.

(3) That Saab threatened to place Autohaus on

C.0.D. status for parts.

At times, during the franchise, Hubert Brugger

admitted that Autohaus was in default on some of

his payments for parts purchased from Saab (R.T.

319). Because of these delinquencies, some of the in-

ternal personnel at Saab suggested amongst them-

selves that Autohaus be placed on C.O.D. status for

parts. Brugger testified that on August 24, 1972, Boli

mentioned to him that Saab was “contemplating” put-

ting Autohaus on C.0.D. status. Apparently, sometime

around this period it was discovered that Autohaus

xXV

was not delinquent in its parts account and Auto-

haus was never put on C.O.D. status.

Even if we were to assume that this C.0.D. issue

was directed as a threat to Autohaus (which we do

not feel the evidence demonstrates), we find no way

for this to be a violation of the Act. Once a dealer

has become delinquent in its accounts, the manufac-

turer has every right to protect itself. Nor do we find

any “causal connection” between the “threat” and

some action which Autohaus would be coerced to take

in the alternative. Autohaus obliquely argues in its

brief that the “threat” was that Autohaus drop its

warranty claims or else be put on C.0.D. Keeping

in mind our discussion, supra, of the warranty claims

issue, we find this argument to be without merit.

(4) That Saab attempted to coerce Autohaus to in-

flate its inventory

The legislative history of the Dealers Day in Court

Act clearly states that one of the violations of the

Act would be for the manufacturer to coerce the

dealer into accepting “automobiles, parts, accessories,

or supplies which the dealer does not need, want, or

feel the market is able to absorb.” The legislative

history goes on to provide that this “may in appropri-

ate instances constitute coercion or intimidation.”

(1956 U.S. Code Cong. & Admin. News at p. 4603)

(emphasis added).

True, Michael Long did visit Autohaus several times

and solicit orders for Saab cars. This was his job.

He solicited orders from all of the dealers in his sales

district. Here again, we find absolutely no evidence of

xxvi

any coercion in Long’s attempts to sell Autohaus some

ears. Nor do we find any “causal connections” between

the alleged “coercion” and something which Autohaus

was supposed to be “coerced” into doing, and which it

had a right not to do (other than the same oblique

allegation regarding the warranty claims).

We find Long’s attempt to solicit orders from

Autohaus for new cars to be nothing more than the

“recommendation, endorsement, exposition, persuasion,

urging, or argument normal in competitive commer-

cial relationships” which is clearly permitted under

the Act. House Report No. 2850, supra, (1956 U.S.

Code Cong. & Admin. News at p. 4596).

Autohaus’ statement in its brief (p. 22) that “Mr.

Long testified he told Mr. Brugger that he must co-

operate or terminate,” is nothing other than pure mis-

statement of the record.’

(5) That Saab improperly denied Autohaus’ order

for 1973 models

On November 28, 1972, some two months after the

franchise expiration, Peter Widdershoven, Vice Pres-

ident and Sales Manager of Autohaus, per Hubert

™Michael Long’s testimony, which Autohaus refers to on this

matter was: '

“Mr. Brugger, I meant that he would not voluntarily

terminate. Mr. Brugger refused to sign a selling agreement,

[the franchise renewal] he refused to buy cars. He was

twenty-five percent of my business and he was putting me

out of business. I said ‘Would you sign the selling agree-

ment?’ He refused. I said “Will you terminate so I can get

somebody that will do the job?’ It was just that simple.

(RT 1673-74)

Brugger’s specific instructions, ordered fourteen new

1973 model cars from Saab. This order did not spe-

cify any colors which was customary for car orders.

Saab wrote a/etter back stating that not all of the

units orde as ailable, that the new 1973 models

were in short\sufply, and that these cars were being

shipped to dealers who already had “sold orders” for

the new models.

Hubert Brugger testified that his order was a seri-

ous good faith order. However, a review of Peter

Widdershoven’s testimony indicates that Brugger’s

order was not a good faith order, but instead was

merely a method to find out where Autohaus stood as

a dealer for Saab. Brugger told Widdershoven some-

thing to the effect of “Let’s order some ’73 cars and

see what happens.” (R.T. 1281). It should also be

kept in mind here that Brugger also told Widders-

hoven at one point that he was attempting to maneu-

ver Saab into a position where he could sue it. (R.T.

1296).

A willful and arbitrary refusal by a manufacturer

to deliver to a dealer the models ordered can violate

the Dealers Day in Court Act where there is coercion,

intimidation, or threats of coercion or intimidation

which|is\‘ causally connected” to the refusal to deliver.

See, e.y., Rea v. Ford Motor Co., supra, (533 F.2d

510).

Even if the jury were to find in this case that

Autohaus’ order for new cars was bona fide and that

Saab had the cars but refused to deliver them, there

is no evidence from which a jury could find that Saab

tried to coerce or intimidate Autohaus by withholding

the cars.

(6) That Saab’s “Pilot Scheme” was coercive.

Saab put certain dealers with above average war-

ranty costs on a “pilot scheme” whereby the warranty

work was watched more closely. Under this scheme

Autohaus and some other dealers were required to

withhold some of their warranty claims until the Saab

service representative had given his approval.

Autohaus argues that the scheme was an attempt

by Saab to force Autohaus to reduce its warranty

claims. Autohaus contends that the scheme was coer-

cive because Saab merely selected Autohaus on the

basis of high cost “without any indication that [Au-

tohaus’] claims were improper” (Autohaus Opening

Brief, p. 26) (emphasis in original). This statement

by Autohaus is a patent fabrication. As we have dis-

cussed, supra, Saab had numerous indications that

Autohaus’ warranty claims were improper, either in

their submission or the claim itself. And, furthermore,

at trial, Hubert Brugger, as well as several of his

employees, admitted that many of the claims submitted

were improper.

In any event, we find no evidence from which the

jury could have found that the “pilot scheme,” insti-

tuted by Saab to watchdog excessive warranty claims,

was in any way coercion in violation of the Dealers

Day in Court Act.

‘ xxix

(7) That Saab threatened to replace Autohaus with

another dealer.

The evidence here again is insufficient to show that

there was a threat to replace Autohaus with another

dealer. There is also no evidence to suggest that if

there was a threat, that it was used to coerce or in-

timidate Autohaus.

And, as the legislative history points out, appointing

a new dealer in the same area is not a violation of the

Act unless the action is used as a method of coercion.

House Report No. 2850 states:

“The [Act] does not freeze present channels or

methods of automobile distribution and would not

prohibit a manufacturer from appointing an ad-

ditional dealer in a community provided that the

establishment of the new dealer is not a device by

the manufacturer to coerce or intimidate an ex-

isting dealer. The committee emphasizes that the

[Act] does not afford the dealer the right to be

free from competition from additional franchised

dealers. Appointment of added dealers in an area

is a normal competitive method for securing bet-

ter distribution and curtailment of this right

would be inconsistent with the antitrust objectives

of this legislation.” (1956 U.S. Code Cong. &

Admin. News, at pp. 4603-04).

ITV. BReEAcH or Contract CLAIM

Autohaus’ primary argument* on the breach of

contract claim is that as a matter of law the fran-

*Autohaus raises several other points which they contend show

Saab’s breach of contract. However, from our review of the

evidence, we find them to be without merit and we need not

discuss them.

xxx

chise agreement was continued after the September

30, 1972, expiration date. Autohaus then contends that

with the franchise agreement in effect, Saab’s “ter-

mination” on December 20, 1972, was a breach of the

continued agreement. We disagree.

Autohaus contends that the franchise agreement

was extended by the conduct of the parties. Such con-

duct which Autohaus contends continued the agree-

ment is that Autohaus continued to sell, service and

do warranty work after September 30, 1972, that Saab

continued to send literature to Autohaus, and that one

of Autohaus’ employees attended a Saab dealership

meeting in November. Autohaus relies on Martin v.

Campanaro, 156 F.2d 127. (2nd Cir. 1946), cert. denied,

329 U.S. 759, which states:

“A contract implied in fact derives from the

‘presumed’ intention of the parties as indicated

by their conduct. When an agreement expires

by its terms, if, without more, the parties con-

tinue to perform as theretofore, an implication

arises that they have mutually assented to a new

contract containing the same provisions as the

old.”

Autohaus stops the quote at this point. However,

the quote continues on to read:

“Ordinarily, the existence of such a new contract

is determined by the ‘objective’ test, ie., whether

a reasonable man would think the parties in-

tended to make such a new binding agreement—

whether they acted as if they so intended.” (156

F.2d at 129.)

xxxi

We find as a matter of law that the franchise

agreement here did not continue in effect past the

September 30, 1972, expiration date for two reasons.

First, under the standards of the Martin case, the

evidence as discussed, supra, leads to the inescapa-

ble conclusion that Hubert Brugger did not want the

franchise to continue. In short, we find no way that

a reasonable person would think that Autohaus (Hu-

bert Brugger) “intended to make such a new binding

agreement.” Secondly, and most importantly, the orig-

inal franchise agreement itself, which Brugger signed,

states that acceptance of orders of continuance of sales

or any other act by Saab after termination’ of the

agreement “‘shall not be construed as a renewal of this

Agreement for any further term.” (Pl. Ex. #171)

(emphasis added).”°

CONCLUSION

The verdict of a jury should not lightly be set

aside—certainly not for the mere reason that a court

may disagree with it. However, in this case we are

convinced that this verdict for the plaintiff, if allowed

to stand, would be a legally unjustified windfall to

the plaintiff and a miscarriage of justice. Therefore,

we are compelled to reverse. Since Saab has admitted

that a sum of $2,876.73 is the final balance owing on

*We find that the terms “termination” and “nonrenewal” as

used in this particular circumstance are synonymous.

°We note in passing that the trial court erred when it left

the interpretation of the franchise contract up to the jury. The

interpretation of a written contract is a question of law for the

court to determine. See 4 Williston on Contracts §§ 616, p. 649,

et seq.

xxxii

the Autohaus account (see jury instruction, R.T. 1882-

1883, 1886-1887), we reverse and vacate the judgment

below and remand this case to the district court for

the entry of a judgment in favor of Autohaus in that

amount (Neely v. Eby Construction Co., 386 U.S. 317

(1967), 28 U.S.C. 2106), together with interest from

the date of the original judgment. Rule 37, F.R.A.P.

Costs are allowed to appellant. Rule 39(a) F.R.A.P.

REVERSED, VACATED and REMANDED with

instructions.

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