Opposition — Ford Motor Credit Co. v. Colonial Ford, Inc.

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IN THE

Supreme Court of ro

United States

October ‘Term, 1978

No. 78-1818

FORD MOTOR COMPANY

Petitioner,

v.

COLONIAL FORD, INC,

Respondent.

ON PETITION FOR A WRIT OF

CERTIORARI TO

a

FILED

AUG 1979

THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF IN OPPOSITION

Daniel L. Berman

BERMAN & GIAUQUE

500 Kearns Building

Salt Lake City, Utah 84101

Counsel for Respondent

August 1979

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TABLE OF CON'TENTS

QUESTIONS PRESENTED ...00. 2

STATEMENT OF THE CASK ..................0....... 2

1. The questions Ford claims are

presented are not presented

ee ara iro ccselcvsssendcsnnonmemcioss 2

nN

The evidence, as the Tenth

Circuit twice concluded,

was not only sufficient

but overwhelming that Ford

ORI AEPIIIE A voivcvcicssviicvaridkaranesedsovesasnex: 9

A. Ford's plan to coerce

CREE RP SAR EL rata 9

B. Ford coerced Colonial

to relinquish control

of its dealership to

I aalcalas 12

C. Colonial was not a

prospective dealer and

Ford's coercive conditions

for the reinstatement of

Colonial’s franchise were

not pre-franchise conditions .................... 13

D. Ford forced Colonial to

relocate and transfer all

of its financing to Ford Credit ................ 14

il

E. Ford’s coercion caused

Colonial’s liquidity and

working capital problems ..............

REASONS FOR DENYING THE WRIT ...... 20

1. Colonial’s forced relocation and

construction of a new uneconomic

facility by Ford constituted

actionable coercion and cannot be

fragmented from Ford’s other

coercive conduct ...............0..-.- SES Tt

2. Ford deprived Colonial of the

right to control its own business

in violation of Ford's policy and

MEI Ssisbcesesacn anaes

CRATERS | sacsesinivnsernnctiuaiabcatnieinntaancchieni

TABLE OF AUTHORITIES

Cases:

American Motors Sales Corp. v. Semke,

384 F.2d 192 (10th Cir. 1967),

at UN in ee:

Colonial Ford, Inc. v. Ford Motor Co.,

577 F.2d 106 (10th Cir. 1978),

modified in part and affirmed

in part on rehearing, 592 F.2d

1126 (10th Cir. 1979), reh. denied .......

Continental Ore Co .v. Union Carbide

and Carbon Corp., 370 U.S. 690 (1962)

ill

Page

Continental TV... Inc. v. GTE

Sylvania Inc., 433 U.S. 36 (1977) 2... 20

iid Houser E nterprises, Inc. v.

General Motors Corp., 595 F.2d

Ne | | Rs eee 24

Marquis v. Chrysler Corp., 577

F.2d 624 (9th Cir. 1978) 00. L.......22, 25, 27

Milos v. Ford Motor Co., 317 F.2d

712 (3d Cir.), cert. denied,

375 U.S. 896 | SES ceed teem 24

Randy's Studebaker Sales, Inc. v.

Nissan Motor Corp., 533 F.2d

510 (10th Cir. 1976), reh. denied .................. 22, 24

Shor-Line Rambler, Inc. v. American

Motors Sales Corp., 1976-2

Trade Cas. (CCH) { 61, 130

“hy ee _ | SRS Ce econ 22, 24, 25, 27

Woodard v. Gencral Motors Corp.,

298 F.2d 121 (5th Cir.), cert.

denied, 369 U.S. 887 (1962) .............................. 24

York Chrysler-Plymouth, Inc. v.

Chrysler Credit Corp., 447 F.2d

We Ce WED osiccon ce ce n 22, 25, 26, 27

Statutes:

ace a a mets 2

iv

Miscellaneous:

S. Rep. No. 2073, 84th Cong., 2d Sess.

REI oD ONES OA TAC ONE CME 22

H. R. Rep. No. 2850, 84th Cong., 2d

TI CID leg eas schneetanpncisca een secncchonsscsanvegn 22, 26

Automobile Dealer Franchises:

Hearing Before the Subcommittee

on Antitrust of the House

Committee on the Judiciary,

84th Cong., 2d Sess. (1956) ...............c.ceccssssssoees 24

IN THE

Supreme Court of the

United States

October ‘Term, 1978

No. 78-1818

FORD MOTOR COMPANY

Petitioner,

v.

COLONIAL FORD, INC.,

Respondent.

ON PETITION FOR A WRIT OF

CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

BRIEF IN OPPOSITION

Colonial Ford, Inc. (“Colonial”) files this brief in

opposition to the petition for certiorari of Ford Motor

Company (“Ford”) seeking to overturn a jury verdict

on the ground the evidence was insufficient to support

the jury's determination that Ford had violated the

Automobile Dealers Day In Court Act (“ADDICA”).

The Tenth Circuit rejected Ford’s claim of evidentiary

insufficiency and found Ford’s coercive conduct had

2

“permeated the entire relationship” between Ford and

Colonial.

QUESTIONS PRESENTED

1. Whether Ford’s deprivation of Colonial’s right

to run its own business and to control critical aspects of

its business including its management, facilities, and

financing through a continual course of conduct in the

context of the termination and threat of termination of

Colonial’s Ford franchise constituted a sufficient ev-

identiary foundation for the jury's determination that

Ford had violated ADDICA, 15 U.S.C. §1222.

2. Whether Ford can change its story from the

trial when it categorically denied having anything to

do with changes in Colonial’s management and owner-

ship and now claim for the purpose of seeking review

in this Court it was justified in requiring such changes.

3. Whether evidence Ford forced Colonial to re-

locate and build a new uneconomic facility, the loca-

tion, size and consequent cost of which Ford deter-

mined, in disregard of Colonial’s financial capability

and legitimate financial interest can constitute a com-

ponent element of a continuing course of coercive con-

duct by Ford in violation of ADDICA, 15 U.S.C.

§ 1222.

STATEMENT OF THE CASE

1. The questions Ford claims are presented are not

presented by the evidence. Ford fundamentally mis-

states the evidence contained in over 2,500 pages of

trial testimony and 200 trial exhibits that supports the

3

jury's verdict that Ford violated ADDICA. Ford not

only has failed to fairly summarize that evidence, but

attempts to present questions for review by this Court

that are in conflict with and not supported by that

evidence.

Ford claims one of the two questions presented for

review is whether ADDIC.A prohibits Ford from re-

quiring qualified and experienced management as a

condition to granting a Ford franchise. (lord Pet. for

Cert. at 2.) At trial, however, lord falsely but cate-

gorically denied doing anything with regard to chang-

ing Colonial’s management or ownership so as to now

preclude Ford from claiming its conduct with regard

to Colonial’s management and ownership was justified.

Colonial’s evidence was that Ford through Ford's

District Manager, Mr. Parr, under the threat of refus-

ing to reinstate Colonial’s Ford franchise, required Col-

onial to give up control of Colonial’s dealership to a

Mr. Pease and required Colonial’s president and sole

stockholder, LeGrande Belnap, to sell Mr. Pease a

49% interest in Colonial without Mr. Pease having to

pay anything. (179-89, 393-97, 399-400, 402-04: PX-4,

PX-49.)' Colonial’s evidence was that Mr. Parr de-

manded Colonial relinquish “sole and absolute control”

of the dealership to Mr. Pease under the threat of re-

fusing to reinstate Colonial’s Ford franchise. (182.)

Mr. Parr dictated the terms of the contract granting

| Page citations are to the Joint Appendix filed in the United

States Court of Appeals for the Tenth Circuit. Citations to ex-

hibits are to the exhibit numbers used in the United States Dis-

trict Court, reprinted in volumes 7, 8 & 9 of the Joint Appendix;

plaintiff's exhibits are marked PX- ; Ford Motor’s exhibits are

marked DX-_ ; and Ford Credit’s exhibits are marked DCX-

4

Mr. Pease control and selling him an interest in the

dealership (180-85, 393-96, 399-400, 402.,, and that

contract was signed on the date the contract bears,

July 29, 1969 (PX-4.), in Mr. Parr’s office at Mr.

Parr’s insistence. (402-03, 179-89.) Colonial’s evidence

was offered through the testimony of Mr. Belnap and

Mr. Summerhays, a lawyer who represented Mr. Bel-

nap in these transactions (178-89, 393-96, 399-400, 402-

04; PX-4.), and was corroborated by Mr. Summer-

hays’ business calendar which under the date of July 29,

1969, the date of the Pease-Belnap contract, contained

the notation “Colonial Ford review of Pease-Belnap

contract—at Parr’s office 3 hours.” (PX-49.)

Ford at trial did not attempt to justify placing Mr.

Pease in charge of the dealership or requiring Mr. Bel-

nap to grant Mr. Pease a buy-in in the dealership. Ford

categorically denied having anything to do with requir-

ing Colonial to relinquish control of the upeny i to

Mr. Pease or requiring Mr. Pease be given a 49% buy-

in in Colonial. Mr. Parr was the only witness who testi-

fied for Ford with regard to the Pease-Belnap trans-

actions. Mr. Parr denied having anything to do with

the Pease-Belnap transaction. (320-34.) He denied

suggesting to Mr. Belnap that Mr. Pease be given a

buy-in in Colonial. (329-31.) He categorically denied

that he did anything to deprive Colonial of the control

of its management or dealership. (329-34.) He went

further. Mr. Parr testified:

Q: Did you recommend to Mr. Belnap that Mr.

Pease be given the charge of nome? the

franchise ‘

A: No.

Q: I am using the word “recommend.”

A: I understood.

Q: Suggest!

A: No.

Q: Advise /

A: No.

Q: Hint‘

A: No.

Q: Indicate /

A: No. (330-31.)

Mr. Parr denied Mr. Belnap and Mr. Summerhays

met with him at his office on July 29 (333-34.), and

even denied under oath he had ever seen the Pease-

Belnap contract prior to the filing of Colonial’s com-

plaint. (332-37. )

The dispute between Colonial’s evidence and Mr.

Parr'’s testimony presented a question of fact for the

jury to resolve and the jury resolved it against Ford,

but Ford’s evidence did more than that. Ford cannot

have it both ways. It cannot totally deny doing some-

thing at trial, and then claim on appeal that it did it,

but what it did was justified. A manufacturer cannot

falsely deny engaging in conduct and then when that

doesn’t work claim while it engaged in that conduct

what it did was necessary te protect its legitimate busi-

ness interest. The question, therefore, that Ford claims

6

is presented with regard to Colonial’s management is

precluded by Ford's own testimony at trial.

The other question Ford claims is presented is

whether ADDICA prohibits Ford from requiring a

dealer to keep its commitment to provide adequate

dealership facilities. (l*ord Pet. for Cert. at 2.) But

that question is not presented by the evidence. The

jury, indeed, was specifically instructed that Ford may

under ADDICA “require” its dealer to provide ade-

quate facilities. (993-95.) ‘The evidence was not that

Ford required Colonial to provide adequate facilities,

but uneconomic facilities. The evidence was Ford

forced Colonial to relocate and build an uneconomic

facility, the location, size and consequent cost of which

Ford determined regardless of Colonial’s financial in-

terest. (214-16, 221-22, 224-25, 429, 4382-35, 541, 616-

17, 1647; PX-10, PX-44, PX-87.) Ford forced Col-

onial to buy a site for a new dealership facility that

cost Colonial’ $70-80,000.00 an acre. (201-07.) Ford

rejected a site Colonial proposed that would have cost

Colonial $18-20,000.00 per acre, and was subsequently

acquired by the leading Chevrolet dealer in Metro-

politan Salt Lake. (201-02.) Ford even rejected a

site within 200 feet of the site it made Colonial acquire

that Colonial could have acquired at a price of

$20,000.00 per acre. (203-04.) Once Ford had forced

Mr. Belnap to acquire a new location for Colonial (214-

16; PX-10.), Ford and not Colonial determined the

size and consequent cost of Colonial’s new facility. (224-

25.) Mr. Belnap was not even consulted. (224-25, 429;

PX-44, PX-87.) Under Ford’s normal procedures

Ford conducts a feasibility study with regard to any

-

new dealership facility to determine whether the new

project is a good thing for the dealership. (432.) Con-

trary to its own procedures Ford did not conduct any

feasibility study to determine whether Colonia! could

profitably operate its dealership from the million dollar

facility that Ford required Colonial to relocate and con-

Struct. (482-35, 531, 616-17; PX-13, PX-14, PX-15.)

Ford failed to conduct a feasibility study under its

normal procedures even though two of the five Ford

dealers in Metropolitan Salt Lake had recently con-

structed new facilities and had experienced substantial

economic difficulty after moving into those facilities.’

(430-31.) The adverse impact of Colonial’s new facil-

ity on Colonial’s liquidity and profitability was ad-

mitted by Ford. (PX-50.), and is dramatically por-

trayed in the increased cost of the new facility in terms

of Colonial’s new car sales. In 1973 before Colonial

moved into its new facility, its facilities cost per new

unit sold was $42 per unit. (PX-75.. In 1974 its

facility cost per new vehicle sold, even with an increase

in sales, was $118 per unit or an increase of over 150%.

(PX-75.)

Ford at the trial did not attempt to defend Ford's

requirements for Colonial’s new facilities as necessary or

adequate for Colonial’s dealership. On the contrary the

Ford employee, Mr. Goedde, who in fact approved

Colonial’s plans for its new facility and thereby its con-

sequent size and cost (429; PX-44, PX-53, PX-84.)

simply denied doing that. Mr. Goedde denied Ford

2 The question of whether the new facility was economically

feasible for Colonial was never even discussed with Mr. Belnap.

(221-22.)

8

required Colonial to construct facilities that were sub-

stantially in accordance with Tord’s requirements.

(665.) He even denied that Ford approved the plans

for Colonial’s new facility. (667-68.) He insisted on

his denial even though he wrote a letter saying Ford

was required to approve Colonial’s facility plans. (PX-

87.) When Mr. Goedde’s letter was called to his at-

tention on cross-examination he testified:

Q: So that we just ought to erase that language

frony the letter. You didn’t mean what you

said /

A: In terms of that particular line, that is cor-

rect. (670-71.)

The evidence thus, presented a question of fact for the

jury as to whether Ford had required Colonial to build

a new uneconomic facility, the size and consequent cost

of which Ford determined without regard to Colonial’s

financial interest. But the evidence did more than pre-

sent a jury question. How can Ford now claim the

question presented for this Court is whether ADDICA

prohibits an automobile manufacturer from requiring

that a dealer provide adequate dealership facilities when

at trial Ford denied imposing any requirements with

regard to Colonial’s new facilities.

Ford again cannot deny doing it at trial alk then

on appeal claim the question presented was whether

what it did was necessary to protect its legitimate in-

terest as an automobile manufacturer.

9

2. The evidence, as the Tenth Circuit twice con-

cluded, was not only sufficient but overwhelming that

Ford violated ADDICA. Colonial’s practical prede-

cessor in interest, and indeed, the assignor of Colonial’s

original Ford franchise was Petty Ford, Inc. (197, 341-

42; PX-5, PX-42.) Petty Ford, Inc. was originally

owned by the Petty family and under the control of a

Neuman Petty. (144.) Mr. Petty’s personal problems

in 1965 resulted in the Petty family bringing in a son-

in-law, Mr. Belnap, to serve as the nominal dealer for

the dealership. (145.) Mr. Petty’s problems persisted

and over the next three to four years Mr. Belnap’s re-

sponsibility in the dealership increased, and contrary to

Ford’s claim (Ford’s Pet. for Cert. at 6-7.) by the end

of 1968 Mr. Belnap had assumed full managerial con-

trol and had acquired a 51% interest in the dealership.

(146; DX-84.) Although Mr. Belnap had managerial

control there were disputes between the Petty family

and Mr. Belnap over their ownership interest, and this

internal dispute concerned Ford. (PX-1.) Ford told

Mr. Belnap if the dispute in ownership was not re-

solved, Ford would terminate Petty Ford's franchise.

(159.) These disputes were not resolved. Ford issued

a notice to terminate Petty Ford, Inc.’s franchise on

May 15, 1969. (161; PX-2.)

5

Ot

A. Ford's Plan to Coerce Colonial. Upon re-

ceipt of Ford’s notice of .termination Mr. Belnap

filed an appeal with Ford’s Dealer Policy Board to

rescind the termination, and a hearing was set with

that Board for July 1, 1969. (161-62.) Before the

hearing Mr. Belnap met with Mr. Parr to discuss what

10

Ford wanted to rescind the franchise termination. (164-

65.) Mr. Parr told Mr. Belnap Ford wanted to have

the notice of termination rescinded and the dealership

continued provided lord’s conditions were met. (165-

66, 170, 387-88. )

During May and June of 1969 Mr. Parr met with

Mr. Belnap and his attorney, Mr. Summerhays, and

told them what Ford required to rescind the termina-

tion. (170, 172-73, 387-90.) Contrary to Ford’s claim

Mr. Parr and Mr. Belnap did not mutually devise a

plan for continued lord representation. (Ford's Pet.

for Cert. at 8.) Mr. Parr, with the sanction of termin-

ation hanging over the franchise, told Mr. Belnap Ford

would require five conditions for reinstatement. (165-

69, 170, 387-90.) Mr. Parr insisted that Petty Ford,

Inc., be reorganized so that only one corporation had an

interest in the dealership and Mr. Belnap acquire own-

ership of that corporation from the Petty family. (167,

DX-24.) Ford demanded that the dealership be re-

capitalized through the infusion of a substantial amount

of new capital. (165; DX-24.) The conditions of re-

organization and recapitalization were to be met before

Mr. Belnap’s hearing with the Dealer Policy Board. Id.

Ford also demanded the dealership relinquish its heavy

duty truck franchise (167-68.), the dealership relocate

(386-87; DX-24.), and finally Mr. Pease be given a

buy-in in the dealership. (166-67, 388, DX-24.) Mr.

Parr mentioned, in the May and June meetings, giving

Mr. Pease full control of the dealership, but when Bel-

nap vigorously objected, the issue was dropped. (168-

69.) Mr. Parr told Mr. Belnap if the five conditions

were satisfied there would be no question about the

ll

reinstatement of the franchise (166, 390.), and Mr. Parr

also demanded the dealership’s name be changed to

Colonial lord, Inc. (DX-24.)

Prior to July 1, Mr. Belnap resolved his disputes

with the Pettys, acquired their interest, and invested

new capital in the dealership. Mr. Belnap’s total in-

vestment in the dealership after these transactions was

$460,000.00. (170-72, 572, PX-3, 90.) Ford’s state-

ment that Mr. Belnap purchased only 51% of the deal-

ership is false. He purchased the entire interest in the

dealership. (170-72, 572; DX-84, PX-90.) Mr. Bel-

nap’s substantial investment in the dealership without

reinstatement of the franchise was a substantial risk, but

he did so in order to comply with Ford’s demands.

(166, 177.)

On July 1, Mr. Belnap and Mr. Summerhays met

with Ford’s Dealer Policy Board and told the Board

that Ford’s two conditions of reorganization and _re-

capitalization had been accomplished. (174.) He also

told the Board he would relocate the dealership even-

tually if he could do so economically (174, 389, 391-

92.); he would temporarily relinquish the heavy duty

truck franchise (391.); and he would consider giving

Mr. Pease or another general manager a buy-in. (174,

389, 391-92.) Nothing was said about giving Mr.

Pease control of the dealership. The Dealer Policy

Board told Mr. Belnap they would take the matter

under advisement. (178.) In fact, the Dealer Policy

Board decided to defer any action until Mr. Belnap

had complied with all of Ford's conditions. (PX-39,

PX-42.)

12

B. Ford coerced Colonial to relinquish control of

its dealership to Mr. Pease. Mr. Parr proceeded to

implement Ford’s plan. Between July 1 and July 29,

Ford required Mr. Belnap to give up control of the

dealership to Mr. Pease and give Mr. Pease a buy-in

in the dealership. (179-89, 393-99, 402-04.) Mr. Parr

met with Mr. Belnap after Mr. Belnap’s return from

Dearborn on July 9. (179.) Mr. Parr told Mr. Bel-

nap Ford insisted Mr. Pease be given “a 49% buy-in

and control of the dealership or there would be no re-

instatement of the franchise.” (180.) Mr. Belnap was

stunned. Id. He called Mr. Summerhays and asked

him to join the meeting. (181.) Mr. Summerhays came

and Mr. Parr repeated his demands. (181-83, 393-95,

397-98.) Mr. Summerhays told Mr. Parr that faced

with Ford’s ultimatum Mr. Belnap didn’t need a lawyer,

but a secretary. (183, 394-95.) But Mr. Parr persisted

and dictated the terms of a contract between Mr. Bel-

nap and Mr. Pease. (184-85.) On July 29, Mr. Belnap

yielded to Ford's ultimatum and executed a written

agreement giving Mr. Pease control of the dealership

and a 49% buy-in. (184-85, 402-03; PX-4.) The

agreement provided “Marshall Pease shall be in charge

of operating the franchise dealership. . . .” (PX-4.)

Contrary to Ford (Ford Pet. for Cert. at n. 7.), this

contractual provision which Mr. Parr dictated was in-

tended to give Mr. Pease full control of the dealership

and eliminate Mr. Belnap’s authority. (182, 184-85,

187-88, 397-99, 402. )

Mr. Pease under the Pease-Belnap contract, which

Ford and not Mr. Pease negotiated (401-02.), pur-

chased a 49% interest in the dealership that Mr. Bel-

13

nap had paid over $460,000.00 for, for nothing. (171-

72, 723-24; PX-4, PX-90.) Mr. Pease agreed to pay

$20,000.00 for his interest in the dealership with the re-

mainder of the purchase price to be paid out of the

dealership profits. (PX-4.) Mr. Pease in fact immedi-

ately withdrew the $20,000.00. (193-94. )

Mr. Belnap only signed the agreement to avoid

bankruptcy because Mr. Parr had told him “if he didn't

give Mr. Pease absolute control of this dealership, there

would be no reinstatement of the franchise.” (185-86. )

After Mr. Belnap capitulated and signed the Pease-

Belnap contract Mr. Pease and not Mr. Belnap con-

trolled Colonial Ford (194-96.), and Ford dealt ex-

clusively with Mr. Pease (222-23, 231, 233-34.), ex-

cept for the acquisition of a new location. (200-01.)

Ford turned to Mr. Belnap on the issue of relocation

“because Mr. Pease didn’t have any money’, and Ford

required Mr. Belnap to furnish the necessary capital.

Id.

C. Colonial was not a prospective dealer and

Ford’s coercive conditions for the reinstatement of

Colonial’s franchise were not pre-franchise conditions.

Contrary to Ford’s repeated claims, Colonial was not a

prospective dealer and Ford’s coercive conditions for

the reinstatement of Colonial’s franchise were not pre-

franchise conditions. (Ford's Pet. for Cert. at 2-3,

8-9.) After Mr. Belnap capitulated to Ford’s demands

to relinquish control of the dealership, the Petty Ford

franchise was assigned to Colonial on a standard Ford

form. (341; PX-5.) Ford required the assignment and

approved it (197, 341-42; PX-5, PX-42.), and Ford

14

reinstated Colonial’s franchise. (338-39, 341; PX-5

PX-42.) Ford’s own documents and Mr. Parr himself

confirmed that the Petty Ford franchise had been as-

signed to Colonial and reinstated. (338-42; PX-5, PX-

42.) Colonial was not only technically the successor

_ to the Petty Ford franchise, it was also practically the

successor. Ford required that Petty Ford be reorgan-

ized as a condition for reinstatement, it suggested the

name Colonial (DX-24.), and the Ford conditions for

reinstatement were intended to be imposed and were

imposed upon Colonial.

After Colonial’s franchise was reinstated (338-39,

341; PX-5.), Ford issued Colonial a new franchise be-

cause Ford wanted Colonial to have a franchise for a

limited term. (338-39; PX-42.) The Petty Ford fran-

chise that had been assigned and reinstated in August

of 1969, was Ford’s standard “continual franchise.” (197,

338-39, 341-42; PX-5, PX-42.) Since Colonial, how-

ever, had not complied with Ford's condition of reloca-

tion, Ford in September of 1969 issued Colonial an-

other franchise that was limited to a two-year term so

as to guarantee Colonial’s relocation. (199-201, 339;

PX-5, PX-6, PX-42.)

D. Ford forced Colonial to relocate and transfer

all of its financing to Ford Credit. By September 1969

Colonial, except for relocation, had complied with all

of Ford’s conditions for reinstatement including the re-

linquishment of its heavy duty truck franchise. (189-

92, 338-39; DX-27, DX-47.) Colonial never entered

into any contractual agreement with Ford to relocate

and only committed to relocate because Ford gave it

15

no choice. (199-201, 338-39; PX-6.) Colonial did not

relocate during the two-year term of its franchise be-

cause Ford would not approve the sites Colonial pro-

posed. (201-07; PX-7.) When Colonial had not re-

located by September 1, 1971, Ford issued Colonial a

new franchise for a one-year term and told Colonial,

that was it, it would relocate by the end of that year

or lose its franchise. (206-07; P-X-8.)

In late 1971 Ford attempted to get Colonial to

purchase its present site at a cost of $70-80,000.00 per

acre. (205-09.) Mr. Belnap was reluctant to acquire

this site because he believed it was too expensive. (207-

09; PX-7.) In the spring of 1972 Ford's regional man-

ager, Mr. Yando, came to Salt Lake to inspect the pro-

posed site. (207-08.) Mr. Belnap again expressed his

concern about the site’s cost. (207-09.) Mr. Yando

responded by telling Mr. Parr to “get Mr. Belnap with

‘Ford Credit . . .” (207.), Ford's wholly-owned finan-

cing subsidiary. Mr. Belnap was reluctant to finance

with Ford Credit because he had “heard stories about

being locked in completely with Ford Credit.” (210.)

Mr.; Belnap’s fears were justified. When Ford

Credit contacted Mr. Belnap, Ford Credit told Mr.

Belnap that it would only consider providing a capital

loan for Colonial to build a new facility and keep its

franchise if Colonial terminated its existing financing re-

lationships with local banks and placed all of its whole-

sale flooring and retail contracts with Ford Credit. (210;

PX-20.) Belnap again objected and took the issue

back to Mr. Parr. Mr. Parr in one of his more quot-

16

able epigrams said “[W ]Jell if you have to do it, give

it to them. It’s all in the Ford family.” (212.)

Mr. Belnap continued to resist and on June 2, Mr.

Parr personally came to Colonial’s office and delivered

a notice of termination of Colonial’s one-year term

franchise and issued Colonial a three-month franchise

expiring September 15, 1972. (P-X-10.) Mr. Parr made

the message clear; he told Mr. Belnap that if Colonial

didn't have a new location and building commitments

by September, Ford would terminate the franchise.

(214.)*> At this point Mr. Belnap’s investment in Col-

onial was over $600,000.00 and he had no choice. (215-

16.) Mr. Belnap capitulated and committed to Ford

Credit on June 16, 1972. (215-16; PX-11, PX-12, PX-

13, PX-14, PX-15.) Colonial was required to place

its wholesale flooring with Ford Credit, and under the

express terms of its capital loan agreement was required

to place all of its retail contracts with Ford Credit.

(PX-12, PX-20 at 14.9.) The agreements between

Colonial, Ford and Ford Credit further gave Ford the

unconditional right to occupy the new facilities, “if, for

any reason, Colonial Ford, Inc. should cease to be a

Ford dealer at the proposed location.” (228-29, 433-34;

PX-19.)

Colonial paid a heavy price in independence to

stay in business. Ford deprived Colonial of the man-

agement and control of its business, required Colonial

to relocate and build costly new facilities when far less

expensive alternatives were available, and required Col-

}Ford in its petition does not even mention the three-month

franchise or Mr. Parr’s ultimatum.

17

onial to sever its historic banking and financing rela-

tionships and finance its capital, wholesale, and retail

financing requirements with Ford Credit

E. Ford's coercion caused Colonial’s liquidity and

working capital problems. \ord, after Colonial relo-

cated, continued to build Colonial as a volume dealer-

ship in disregard of Colonial’s financial interest. Ford

in the first few months after Colonial moved to its new

facility increased Colonial’s planning volume by 30%.

(434; PX-22.) Planning volume is a key planning

figure for Ford. (435.) Planning volume represents

the number of new vehicles Ford estimates a dealer

should sell, and Ford’s requirements for a dealer's in-

ventory and working capital are based on the dealer's

assigned planning volume. (232, 435, 438-40, 1648-

49.) When Ford increased Colonial’s planning volume,

Ford anticipated under its own internal analysis that

Colonial’s inventory and working capital requirements

would increase. (437-38.) Ford, however, did not in-

form Mr. Belnap that the dealership’s planning volume

had increased or that the increase would require addi-

tional working capital. (212-13, 231-32, 235, 436, 441-

42.) Under Colonial’s planning volume, Ford increased

Colonial’s new car inventories so that in the first seven

months of 1974 Colonial’s average new units in inven-

tory increased by 100 per month. (440-41, 505-06.)

The build up in Colonial’s new car inventories was fi-

nanced by Ford Credit allowing Colonial to run over

the limits of its authorized flooring line in an amount

of up to $1 Million (233, 497-98; PX-72.), and was,

of course, directly a function of inadequate manage-

ment control.

18

Prior to Colonial’s move to its new facility, Colonial

had not experienced any liquidity or working capital

problems. (365-67, 441-42, 497; PX-3.) This situation

changed after Colonial moved. Ford itself analyzed the

cause of Colonial’s liquidity problem. (443; PX-50.)

Ford, in August of 1974, found the cause of Colonial’s

liquidity problem was directly attributable to the critical

areas of Colonial’s business in which Ford had deprived

Colonial of the right to run its own business—that is,

its management, facilities, and financing. (PX-58.)

Ford found that the cause of Colonial’s liquidity prob-

lem was in two basic categories of expense, new facility

expense and wholesale flooring expense. (PX-50.)

Colonial’s cost in the first seven months of 1974 for

these two categories of expense increased over the same

period in 1973 by $140,000.90. (433; PX-50.)

Colonial met its liquidity problem by floating

against Ford Credit. (PX-62, PX-63, PX-64.) Float-

ing occurs when a dealer sells a new car and rather than

paying off its wholesale financing obligation uses the

cash in its business until the lender conducts a whole-

sale audit and demands payment. Ford Credit was well

aware Colonial was floating and using the float to op-

erate its dealership. (499-501, 881-82; PX-62, PX-63,

PX-64.) Ford Credit allowed Colonial to float to fi-

nance its dealership by conducting infrequent whole-

sale audits. (879-80.) Thus, even though Ford Credit

was fully aware that Colonial was floating, it only con-

ducted three wholesale audits in the first seven months

of 1974. (879-80.)

Ford Credit expressed no concern about Colonial

19

floating to finance its liquidity (PX-64.), and just as

Mr. Belnap had not been advised about the increase

in Colonial’s planning volume, (233, 436, 441-42.), he

was not advised that Colonial’s new car inventory was

overline, that Colonial’s working capital was inadequate

or that it was floating against Ford Credit. (233-35,

95, 441-42, 446-47.) Indeed, on July 30 in an internal

memorandum, Ford Credit recommended that Colonial’s

new car flooring line be increased from $1.2 Million to

$1.7 Million and concluded that Colonial “all in all...

[had] . . . done a respectable job.” (PX-64.)

During August, however, Ford Credit’s policy

abruptly changed and it reached a decision to audit and

reaudit Colonial ‘ord to drv up Colonial’s float. (448,

501-02; PX-66, PX-67.) Qn August 26, 1974 Mr.

Belnap was informed that Colonial was out-of-trust and

would need $218,000.00 by September | to clean up

its float. (PX-25.) This was the first time that Mr.

Belnap had been informed that Colonial was floating

or that additional working capital would be required by

the dealership. (234-35. )

Pursuant to its plan, Ford Credit commenced to

audit and reaudit Colonial to dry up its float and on

September 10 when Colonial was unable to pay off a

wholesale audit, Ford Credit suspended the wholesale

line. (238, 502-03: PX-68.) When Mr. Belnap dis-

covered that Colonial had been running overline and

floating against Ford Credit, he negotiated a settlement

with Mr. Pease under which Mr. Pease resigned from

the dealership, and Mr. Belnap resumed control. (240-

43, 304.) Even though Colonial now under Mr. Bel-

20

haps active direction, was able to pay off the out-of-

trust condition within two weeks by September 24, and

was never out-of-trust again (239-40.), lord Credit

refused to restore Colonial’s wholesale line. (239, 503. )

Uaable to finance the purchase of new cars Colonial’s

new car inventory shrank month by month and it sus-

tained heavy losses. By August 1975 when the trial

court entered a preliminary injunction after an eviden-

tiary hearing, Colonial’s new car inventory was down to

35 and it was virtually out of business. (245-46;

PX-33. )

REASONS FOR DENYING THE WRIT

The evidence presented issues of facts for the jury,

not questions of statufory significance for this Court.

The evidence demonstrated Ford, through a continual

course of coercive conduct, had deprived Colonial of the

right to run its own business and to control critical

aspects of its business including its management, facil-

ities and financing. Ford did not attempt to justify its

conduct. It denied engaging in that conduct, and the

jury resolved the factual disputes against Ford.

lord's claim of a conflict between the ‘Tenth Cir-

cuits decision and the “philosophy” of Sylvania is non-

sense, Continental TV’.. Inc. v. GTE Sylvania: Inc.,

433 U.S. 36 (1977). Sylvania required a manufactur-

ers territorial resale restrictions be judged under the

rule of reason. It did not immunize vertical restraints

from antitrust scrutiny and it did not adopt a philosophy

of “anything goes,” including dealer independence, in

the name of inter-brand competition. Sylvania, more im-

portantly, did not address ADDICA or the particular

circumstances in the automobile industry that) caused

~ Congress to supplement the antitrust laws through the

enactment of ADDICA.

Colonial did not claim and the Tenth Circuit did

not hold ADDICA. prohibited an automobile manu-

facturer from requiring adequate dealer representation

both in facilities and management. On the contrary, the

trial court: gave and the Tenth Circuit: approved an

instruction holding an automobile manufacturer may

“require” its dealers to adhere to reasonable standards

in the areas of facilities and management. Colonial

Ford, Inc. v. Ford Motor Co., 577 ¥.2d 106, 110 (10th

Cir. 1978).

Automobile manufacturers do depend upon their

franchised dealers for market representation. Unques-

tionably, legitimate manufacturer concern with the qual-

ity of that representation is a significant perspective to-

ward furthering competition between automobile manu-

facturers. But it is not the only component of competi-

tion in automotive marketing. What is good for Gen-

eral Motors is not necessarily good for its dealers or

competition. Automobile manufacturers market their

products through independent businessmen. The inde-

pendence of automobile dealers in their key business

decisions is a critical part of the competitive process.

Beyond question it was manufacturer domination

and abuse of dealers’ business independence that gave

rise to the enactment of ADDICA. Congress in the

legislative hearings leading to ADDICA found that

22

while dealers “were ostensively independent business-

men, the factory dominated and controlled almost every

phase of their operations at all times. The conflict of

interest between factory and dealer is a conflict between

parties of totally unequal economic power.” S. Rep.

No. 2073, 84th Cong., 2d Sess. (1956). Congress, more-

over, was alarmed at the heavy concentration of eco-

nomic power in the big three automobile manufacturers,

and recognized that intra-brand competition between in-

dependent dealers might provide the only remnant of

effective competition in the industry. IT. R. Rep. No.

2850, 84th Cong., 2d Sess. (1956). Congress’ funda-

mental purpose in passing ADDIC.A was to redress

the abuse and imbalance of economic power between

manufacturer and dealer and protect the independence

of automobile dealers. Marquis v. Chrysler Corp., 577

I’.2d 624 (9th Cir. 1978); Shor-Line Rambler, Inc.

v. American Motors Sales Corp., 1976-2 Trade Cas.

1 61,130 (7th Cir. 1976); Randy's Studebaker Sales,

Inc. v. Nissan Motor Corp., 533 F.2d 510 (10th Cir.

1976), reh. denied; York Chrysler-Plymouth, Inc. v.

Chrysler Credit Corp., 447 F.2d 786 (5th Cir. 1971).

lord, itself, recognized that ADDICA draws a

line between the reasonable demands of a manufacturer

and unwarranted interference with dealer independence.

In an internal operating manual lord stated ADDICA

“. . . prohibits the company from coercing dealers to

take any action or forbear any action that they have

a right to decide for themselves.” (PX-41 at 5.) The

proper perspective of the questions presented by the

evidence is whether Ford’s conduct shreaded that

standard.

23

1. Colonial’s forced relocation and construction of

a new uneconomic facility by Ford constituted action-

able coercion and cannot be fragmented from Ford's

other coercive conduct. Colonial’s Ford franchises had

an “adequate facility” provision. (P-X-G, PX-8, P-X-10.)

Colonial, however, did not have any contractual com-

mitment to relocate and construct a new facility. Id.

Colonial’s claim and proof was lord forced Colonial

-as part of a continual course of coercive conduct, to re-

locate and construct a new uneconomic facility, the size

and cost of which Ford determined without regard for

Colonial’s economic interest. Colonial’s proof demon-

strated (1) Ford forced Colonial’s relocation, site selec-

tion and new facility requirements under the threat of

franchise termination; (2) lord rejected suitable and

far less expensive sites; (3) Ford, without consulting

Colonial, determined the size and cost of Colonial’s

facilities; (4) Ford contrary to its normal procedure

did so without any feasibility analysis; (5) Ford at

trial did not attempt to justify its new facility require-

ments, but merely falsely denied imposing such require-

ments; and (6) the new facilities Ford demanded ad-

versely impacted Colonial’s profitability and liquidity by

increasing Colonial’s facility cost in terms of new vehicle

sales by over 150%.

One of Congress’ specific concerns in enacting

ADDICA was that automobile manufacturers were

forcing dealers to build new and uneconomic facilities

in disregard of the dealers’ interest. Thus, the legisla-

tive history notes:

24

One dealer attributed the death of his brother to

the pressure of seeing his life savings swept down

the drain by factory cancellation because of the

dealer's refusal to change his location. He wanted

to stay in the center of town rather than build a

monument to the factory on the outskirts. . . .

(Hearings Before the Antitrust Subcommittee

of the House Committee on the Judiciary, 84th

Cong., 2d Sess. 486-87 (1956) .)

The three circuit cases cited by Ford are not in

conflict with this legislative history or the Tenth Cir-

cuit’s decision. Woodard v. General Motors Corp., 298

F.2d 121 (5th Cir.), cert. denied, 369 U.S. 887 (1962) ;

Ed Houser Enterprises, Inc. v. General Motors Corp.,

595 F.2d 366 (7th Cir. 1978); Milos v. Ford Motor

Co., 317 F.2d 712 (3d Cir.), cert. denied, 375 U.S. 896

(1963). In those cases there was no factual dispute.

The dealers’ facilities were inadequate. Other circuit

decisions have held that a manufacturer’s demand for

a new and uneconomic facility constitutes coercion with-

in ADDICA’s prohibition. Shor-Line Rambler, Inc. v.

American Motors Sales Corp., supra; Accord, Randy's

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

Shor-Line, just as the Tenth Circuit’s decision, no more

holds that ADDICA prohibits a manufacturer from re-

quiring adequate dealership facilities than the three

circuit cases cited by Ford hold ADDICA grants a

manufacturer a license to impose any facility require-

ments it desires. The cited circuit decisions are entirely

consistent. They properly fall on either side of the line

drawn by ADDICA. Reasonable manufacturer re-

quirements with regard to facilities are sustained. Un-

reasonable and oppressive facility demands in disregard

25

of a dealer's economic interest, on the other hand, dem-

onstrate coercion. The Fifth Circuit has expressly ac-

cepted this synthesis in York Chrysler-Plymouth, Inc.

v. Chrysler Credit Corp., supra. In York, the }ifth

Circuit pointed out with regard to the facility require-

ments of manufacturers:

That certain specific conduct has been held not

to constitute a violation of the Act in certain

cases does not lead to the conclusion that such

conduct would not violate the Act in the setting

of another case.* The actions of the manufac-

turer must be considered under the circumstances

arising in each particular case. York Chrysler-

Plymouth, Inc. v. Chrysler Credit Corp., 447

I'.2d 786, 793 (5th Cir. 1971).

Ford, moreover, improperly attempts to fragment

Colonial’s claim with regard to Ford’s coercion. Ford

attempts to separate Ford’s conduct with regard to re-

location from the entire course of Ford’s dealings with

Colonial. Ford’s coercion with regard to Colonial’s re-

location cannot be practically separated from Ford's

coercion with regard to Colonial’s financing relation-

ships with Ford Credit or Ford’s coercion with regard

to Ford’s deprivation of Colonial’s control over its deai-

ership. Fragmentation of antitrust claims has been re-

jected by this Court, Continental Ore Co. v. Union

Carbide and Carbon Corp., 370 U.S. 690 (1962) ;

Congress in ADDICA’s legislative history made it

clear, and the courts unanimously hold that coercion

may be found in the entire course of dealings between

manufacturer and dealer, and may be inferred from a

continual course of conduct. Marquis v. Chrysler Corp.,

supra; Shor-Line Rambler, Inc. v. American Motors

26

Sales Corp., supra; York Chrysler-Plymouth, Inc. vt.

Chrysler Credit Corp., supra; American Motors Sales

Corp. v. Semke, 384 1'.2d 192 (10th Cir. 1967), reh.

denied; H. R. Rep. No. 2850, 84th Cong., 2d Sess.

4603 (1956).

2. Ford deprived Colonial of the right to control

its own business in violation of Ford’s policy and AD-

DICA. Ford's effort to portray Ford’s conduct with

regard to the Pease-Belnap transactions as nothing

more than an attempt to involve a “car man” in the

management of the dealership is a fictional account of

the evidence. Ford insisted as a condition of reinstating

Colonial’s franchise that Mr. Pease be given full and

absolute control of the dealership. (181-82, 185, 188,

397-99, 402.) The written contract Ford forced Belnap

to sign expressly placed Pease “in charge” of the dealer-

ship, and left Belnap without authority over Pease or

the dealership. (PX-4.) Ford at trial never attempted

to justify its participation in the Pease-Belnap trans-

action, but falsely denied having anything to do with

that transaction. ['ord’s conduct, morevver, violated

Ford's own policy. The highest Ford official to testify

at trial was a Mr. Geoffrey C. Curran, Ford’s director

of marketing operations. Mr. Curran categorically testi-

fied:

Q: Would it be contrary to Ford’s policies, Mr.

Curran, to condition the granting of a fran-

chise or the renewal or continuation of a

franchise . . . on the dealer relinquishing

— and management of his own dealer-

ship ¢

A: Very much contrary. (535.)

27

How can Ford now attempt to present a question to

this Court based on a claim that its demands with re-

gard to Colonial’s management were reasonable when

it categorically denied making any such demands at

trial, and the demands that the evidence demonstrated

it did make violated its own corporate policy ‘

An automobile manufacturer's claim that it has the

right to determine who should control a dealership and

compel the donation of a 49% interest in a dealership is

manifestly inconsistent with the protection afforded by

ADDICA, and the circuit courts have so held. York

Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., supra;

Shor-Line Rambler, Inc. v. American Motors Sales

Corp., supra; Marquis v. Chrysler Corp., supra. The

Tenth Circuit's concurrence in this line of authority

does not warrant further review by this Court.

CONCLUSION

The questions Ford claims are presented are not

presented by the evidence, and the petition for cer-

tiorari should be denied.

DATED this 8th day of August, 1979.

Respectfully submitted,

Daniel L. Berman

BERMAN & GIAUQUE

500 Kearns Building

Salt Lake City, Utah 84101

Telephone: (801) 533-8383

Attorney for Respondent,

Colonial Ford, Inc.