Petition — Bob Maxfield, Inc. v. American Motors Corp.

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Office Supreme Court, U.S.

FiLeE D

81-63 a 1 198!

NO. oom

Supreme Court af the United States

OcTOBER TERM, 1981

Bos MAXFIELD, INC., d/b/a BoB MAXFIELD AMERICAN,

Bos MAXFIELD AND SONDRA MAXFIELD,

Petitioners

Vv.

AMERICAN Motors CORPORATION, MEMORIAL BANK OF

HousTon, TEXAS, AMERICAN MorTors SALES

CORPORATION, AND AMERICAN MOTORS

REALTY CORPORATION,

Respondents

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

JACK N. PRrIceE, P.C.

410 Congress Avenue

Second Floor

Austin, Texas 78701

512/474-1563

Alpha Law Brief Co., One Main Plaza, No. 1 Main St., Houston, Texas 77002

CERTIFICATE OF INTERESTED PERSONS

The undersigned counsel of record certifies that the

following listed persons have an interest in the outcome

of this case. These representations are made in order

that the Judges of this Court may evaluate possible dis-

qualification or recusal.

Bob Maxfield — Petitioner

Sondra Maxfield — Petitioner

William Fraker — Appellant

Aileen Fraker — Appellant

American Motors Corporation — Respondent

Memorial Bank of Houston, Texas —

Respondent

7. American Motors Sales Corp — Respondent

8. American Motors Realty Corp. — Respondent

sl aE I gal alt a

JACK N. Price, P.C.

410 Congress Avenue

Second Floor

Austin, Texas 78701

512/474-1563

State Bar No. 16293000

Attorney of Record for Petitioners

Bob Maxfield, Sondra Maxfield

and Bob Maxfield, Inc.

QUESTIONS PRESENTED

1. In a civil antitrust “tying” case, what type and quan-

tum of proof is necessary to establish “coercion” on the

buyer to accept the “tied” product in order to obtain the

“tying” product?

2. In acivil Automobile Dealer’s Day in Court Act case,

is it essential to proof of “bad faith” that the evidence

show a “coercive” demand that the dealer take action

contrary to the dealers’ lawful rights on the threat of

reprisal or sanctions by the manufacturer, or may “bad

faith” be proved in other ways?

3. Is the evidence in this case sufficient to raise issues

of “coercion” and “bad faith” so as to require submission

of “tying” and “DDICA” claims to the jury?

TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS .........

QUESTIONS PRESENTED ..........esecceeceeeeeens

CITATION OF AUTHORITIES ..........eseeeeeeeees

BRIEF OF APPELLANTS .........cscccecceeseeees

OPINIONS 2. cccrccccccccccscccccccccccvvcececs

JURISDICTION ....cccccccccccuacccccecs i beoes

STATUTES INVOLVED ........cec:secccceccees

CITATION OF AUTHORITIES

CASES

Advance Business Systems v. SCM, 415 F.2d 55, 1969

Trade Cases J 72,880 (4th Cir. (1969) ...............

American Motors v. Semke, 384 F.2d 192, 1967 Trade

Cases ¥ 72,223 (CA-10 1967) .....cscccccccccccccces 3

Autowest v. Peugeot, 434 F.2d 556, 1970 Trade Cases

TVR Ue CEE Gal, WOUGD cdc diecdcdiabesisecdaseces

Bergen Rambler, Inc. v. American Motors, 30 F.R.D. 334,

1962 Trade Cases {| 70,341 (E.J.B. 1962) .............

Berry Brothers Buick v. General Motors, 257 F.Supp. 542

CHAR Ts WUEED ohne coke hadederscachdct citaasoscccs

Blackwell v. Kenworth Truck Co., 620 F.2d 104 (Fifth

CO, SO iis edaweree tse bidanedads sd pacebbakes¢ece

Blenke Brothers Motors, Inc. v. sler, 189 F.Supp. 420,

1960 Trade Cases {| 69,704 (N.D. Ill. 1960) ...........

6 ae, See

9, 40, 44

CASES

Boeing v. Shipman, 411 F.2d 265 (Sth Cir. 1969) ........

Buono Sales, Inc. v. Chrysler Motors Corp., 363 F.2d 43

COO BOD Bii'ed cn eeveoiscdiuanovers’étsaveree

Driskill v. Dallas Cowboys Football Club, Inc., 498 F.2d

Bae We ls ESPON fa io che eh bai cdbs USNS be dassseses

Frank Chevrolet v. General Motors, 419 F.2d 1054, 1970

Trade Cases [72,998 (6th Cir. 1969) ..........0.005-

International Business Machines v. U.S., 298 U.S. 131,

1932-1939 Trade Cases {[ 55,112 (1932-1939) .........

International Salt Co. v. U.S., 392, 1947 Trade Cases {| 526,

BOG KADEED Sc dbcviecctesceccccesscdicsdesdobsaces

Junikki Imports v. Toyota, 335 F.Supp. 593, 1972 Trade

oe | Perr ey MOTT TPT e Tee erTe ee

McGeorge, David R. Car Co. v. Leyland Motor Sales, Inc.,

504 F.2d 52, 1974-2 Trade Cases {75,257 (4th Cir.

BOPP hide 00 ables 00's 0 kes ChU ed 00) d00 6 ees se eee

ETT . M Chrysler, 261 F. Supp. 488, 1966 Trade Cases

IE 6 cls zc ica reek asl obec bth danse Geir ioeses

Mount Lebanon Motors, Inc. v. Chrysler, 283 F.Supp. 453,

SCE TR COONE T FEUED ob caivdcdecccsvpavcccscces

Northern Pacific Railway Co., etc. v. U.S., 356 U.S. 1, 1958

Renee Caste TGC S6L CIES) oc icicigvceverecvacceves

Osborn v. Sinclair, 286 F.2d 832 (4th Cir. 1960) cert. den.

Pe GUE WibdkcbeesSsccckantaVabascstacaoeyecces

Randy’s Studebaker Sales, Inc. v. Nissan Motor Corp., 553

F.2d 510, 1976-1 Trade Cases {] 60,803 (10th Cir. 1976)

Rea and 22 Ford v. Ford Motor Co., 497 F.2d 577, 1974

Trade Cases {| 75,029 (3rd Cir. 1974) .........eeeeees

Richards v. American Motors, 1976-1 Trade Cases, {] 60,796

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

te = 601, 1976-2 Trade Cases 61,130 (7th Cir.

IDIG) cc vvcccevovadosccctesessesssdoccressoccccces

Standard Oil Co. of California v. United States, 337 US.

SEP IOEE: sd ced kutaetan se shasecdradese itt eeredss

Sunrise Toyota Ltd. v. Toyota Motor Co., 55 F.R.D. 519

CP A CROTS) weston vidasosdbhe F000 ew heed 09 coe

Times Picayune v. U.S., 345 U.S. 594, 1953 Trade Cases

DOPE CLUES) cckacccevcrspectscteddvcccesénsceee

United Shoe Machinery Corp. v. U.S., 258 U.S. 451, 1922

Trade Cases J 526,2820 (1922) .......cceececcseceees

Volkswagen Interamericana v. Rohlsen, 360 F.Supp. 437,

1966 Trade Cases {] 71,771 (1966) ........seeceeceees

Mer v. Chrysler Corp., 419 F.Supp. 824 (N.D. Ga.

BOZO) cecicccvdccsrecvecegovndetevvscerpecesovetes

York Chrysler Plymouth v. sler Credit Corp. etc., 447

F.2d 786, 1971 Trade Cases {] 73,636 (5th Cir. 1971) ..

Zarbach v. Chrysler, 235 F.Supp. 130 (D. Colo. 1964) ...

Page

6, 32, 45

NO.

Supreme Court of the United States

OcTOBER TERM, 1981

Bos MAXFIELD, INC., d/b/a BoB MAXFIELD AMERICAN,

Bos MAXFIELD AND SONDRA MAXFIELD,

Petitioners

Vv.

AMERICAN Motors CORPORATION, MEMORIAL BANK OF

HousTon, TEXAS, AMERICAN Motors SALES

CORPORATION, AND AMERICAN MOTORS

REALTY CORPORATION,

Respondents

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Bob Maxfield, Inc. d/b/a Bob Maxfield American,

Bob Maxfield and Sondra Maxfield petition that a Writ

of Certiorari be issued to review the judgment and opinion

of the United States Court of Appeals for the Fifth Cir-

cuit entered February 23, 1981.

OPINIONS BELOW

The opinion of the United States Court of Appeals for

the Fifth Circuit is reported at 637 F.2d 1033 and is

printed in the appendix at page App. 1.

JURISDICTION

The Fifth Circuit’s judgment was entered on February

23, 1981 (App. 1). Petition for Rehearing was denied

on March 23, 1981. (App. B-2). Jurisdiction is invoked

pursuant to 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1. In a civil antitrust “tying” case, what type and quan-

tum of proof is necessary to establish “coercion” on the

buyer to accept the “tied” product in order to obtain the

“tying” product?

2. Ina civil Automobile Dealer’s Day in Court Act case,

is it essential to proof of “bad faith” that the evidence

show a “coercive” demand that the dealer take action

contrary to the dealers’ lawful rights on the threat of

reprisal or sanctions by the manufacturer, or may “bad

faith” be proved in other ways?

3. Is the evidence in this case sufficient to raise issues

of “coercion” and “bad faith” so as to require submission

of “tying” and “DDICA” claims to the jury?

STATUTES INVOLVED

The statutes involved are Sec. 1 of the Sherman Act

(15 U.S.C.A. Sec. 1), Sec. 3 of the Clayton Act (15

U.S.C.A. Sec. 14) and Sec. 2 of the Automobile Dealers

Act (15 U.S.C.A. Sec. 1222), the pertinent portions of

which are as follows:

Sec. 1 of the Sherman Act:

“Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or

commerce among the several states or with foreign

nations is hereby declared to be illegal.”

Sec. 3 of the Clayton Act:

“Tt shall be unlawful for any person engaged in com-

merce, in the course of such commerce, to . . . make

a sale or contract for sale of goods, wares, mer-

chandise, machinery, supplies, or other commodities

whether patented or unpatented, for use, consump-

tion, or resale within the United States . . . on the

condition, agreement, or understanding that the. . .

purchaser thereof shall not use or deal in the goods,

wares, merchandise, machinery, supplies, or other

commodities of a competitor or competitors of the

. . . Seller where the effect of such . . . sale or con-

tract for sale or such condition, agreement, or under-

standing may be to substantially lessen competition

or tend to create a monopoly in any line of com-

merce.”

Sec. 2 of the Automobile Dealers Act:

“An automobile dealer may bring suit against any

automobile 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 respect to the amount in con-

troversy, and shall recover the damages by him sus-

tained 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 com-

plying with any of the terms or provisions of the

franchise, or in terminating, canceling, or not re-

newing the franchise with said dealer: Provided,

That in any such suit the manufacturer shall not

be barred from carpi ty, Ses defense of any such

action the failure of the dealer to act in good faith.”

STATEMENT OF THE CASE

Bob Maxfield, Inc., d/b/a Bob Maxfield American

(“Maxfield”), instituted suit against American Motors

Corp. and Memorial Bank of Houston, Texas, on July

24, 1973, for violations of the Sherman and Clayton

Acts, and the Automobile Dealers Act. R. I, Inst. 8, p.

34. By First and Second Amended Complaints, American

Motors Sales Corp. and American Realty Corp. were

added as Defendants. R. I, Inst. 12, p. 42; R. II, Inst. 36,

p. 195. The Bank answered and counter-claimed against

Bob Maxfield, Inc., for indebtedness, cross-claimed against

American Motors Sales Corp. on the basis of guarantee,

and impleaded third party Defendants Bob Maxfield and

his wife, Sondra S. Maxfield, William L. Fraker and his

wife, Aileen Fraker (Maxfield and Fraker were principals

in Bob Maxfield, Inc.) also on the basis of guarantee.

R. I, Inst. 24, p. 108. American Motors Sales Corp.

answered and counter-claimed against Bob Maxfield, Son-

dra S. Maxfield, William L. Fraker and Aileen Fraker,

seeking recovery of indebtedness that might be adjudged

against it in favor of Memorial Bank. R. I, Inst. 31, p.

153.

Maxfield American presented for filing a Third

Amended Complaint on April 7, 1977. R. III, Inst. 79,

p. 441. It added specification of the offense of “exclusive

dealing”. Previous Complaints included closely related

“tying” and “full-line forcing” claims. The trial court

denied leave to file the Third Amended Compiaint, R.

III, Inst. 82, p. 452, and granted Motion in Limine pro-

hibiting the mention of the exclusive dealing practice or

the fact Maxfield was bound by an exclusive dealing

provision in his lease. P.Ex. 10, para. 4. The Court also

prohibited evidence regarding American’s national tying

or “forcing” policy, or restrictions imposed on other

dealers, Tr. I-13, 14.

Trial commenced May 9, 1977, and was completed

May 31, 1977. Tr. I-3, XIII-2. During trial, issues in-

volving indebtedness and guarantee were severed, to be

submitted to the Court. At the conclusion of Plaintiff's

evidence, the Court rejected motions for directed verdict.

Tr. XI-43. At the conclusion of all evidence, the Court

granted the Bank’s motion for directed verdict, overruled

American’s motion, and announced that the case would

be submitted upon the tying violation, and the Dealers

Day in Court claims. Tr. XI-135, 136. The Court later

reversed its position and granted motions for directed

verdict on all Maxfield’s claims. Tr. XIII-2, 3. Evidence

concerning the counter-claims, cross-claims, and third

party actions was heard immediately following this an-

nouncement. On April 23, 1979, the Court entered

Final Judgment. R. IV, Inst. 114, p. 790. »

On appeal to the Fifth Circuit, Appellants raised five

points: (1) error in directing verdict on the “tying”

claims; (2) error in directing verdict on the Dealers Act

claims; (3) error in refusing to allow trial on and evi-

dence of exclusive dealing; (4) error in excluding evi-

dence of AMC’s national “tying” or “forcing” policy,

and evidence from other dealers subjected to restrictions;

and (5) error in assessing indebtedness and attorneys fees

against Appellants. No appeal was taken from the di-

rected verdict in favor of the bank on the anti-trust and

Dealers Act claims,

The Fifth Circuit disposed of the first two points by

holding there was no evidence of coercion to sustain

a “tying” or Dealers Act claim, It found no error in

excluding evidence of exclusive dealing, national “tying”

or “forcing” policy, or other dealers subjected to re-

strictions. It therefore affirmed the granting of directed

verdict on the Appellants-Plaintiffs anti-trust and Dealers

Act claims, but remanded certain issues relating to Ap-

pellees-Defendants debt claims for re-trial.

STATEMENT OF FACTS

In the Fifth Circuit, directed verdicts are judged by

the rule of Boeing v. Shipman, 411 F.2d 365 (Sth Cir.

1969), under which all evidence is reviewed and the

facts are considered in the light most favorable to the

Plaintiff. The facts are summarized in light of this rule.

Dealership Origin

In 1971, James Robert (Bob) Maxfield, III, obtained

an American Motors Dealership. Separate franchise agree-

ments were issued for automobiles and Jeeps. Tr. I-71.

Both agreements were between Bob Maxfield, Inc., d/b/a

Bob Maxfield American, a corporation owned 70%

by Maxfield and 30% by William Fraker, and American

Motors Sales Corp., subsidiary of American Motors

Corp. The dealership facilities were constructed on prop-

erty owned by American Motors Realty Corp., another

subsidiary, in a highly desirable location in the City of

Houston. Although American had no previous sales

representation in the trade area serviced by the facility,

it represented the company’s largest investment in a retail

agency in the country. Tr. [X-44, The property was leased

to Maxfield by American Motors Sales Corp.’ The lease

* 1, Ostensibly, American Motors Corp. manufactures automobiles

and American Motors Sales Corp. sells them, However, from the

regional sales level and above, all distribution functions are handled

was for five (5) years with minimum rent of $4,000 per

month, (the maximum, calculated on basis of sales, was

approximately $8,000 per month) and contained a pro-

vision that “new automobiles manufactured by American

Motors Corporation only” could be sold. P.Ex. 10, para

4." Initial capitalization of the dealership was $250,000,

a figure suggested and represented to be adequate by

AMC. I-62, 92. A wholesale floor plan credit line of

$600,000 was secured from Memorial Bank. Tr. I-65.

The facilities were under construction when the franchise

was obtained, and were still incomplete when Maxfield

moved in the latter part of March, 1972. I-74, 75. Rent

was started April 1, 1972, Tr. I-76, and the “Grand

Opening” was held April 25, 1972. Tr. I-88.

AMC’s Position in the Market

It has been judicially recognized that American suffered

financial difficulties between 1966 and 1971, but the

early 1970’s were a time of change:

“With the introduction of new models (“Gremlins”

and “Hornets”)* American Motors began p roducin ~

cars with market appeal and were com ditive wi

other lines. Further, in 1972 American Motors initi-

by American Motors Corp., and American Motors Sales personnel

from the “zone” level and below are directly responsible to superiors

employed by American Motors Corp. XI-541. Distribution is a joint

function of the two, and, unless there is reason to distinguish them,

the two companies will be referred to as “AMC”,

2. This exhibit and many others appear in a two-volume compila-

tion entitled “Exhibits to the deposition of Bob Maxfield, III”.

3. In 1972 and 1973, the AMC line consisted of the Ambassador

and the Matador, (mid-range or standard size) and Gremlins, Hornets

and aaa (small cars). The Ambassador was discontinued in 1974

or 1975.

ated the Buyer Protection Plan which included a

comprehensive one-year or 12,000 mile warranty.

Its sales increased substantially.”

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

543 F.2d 60, 1976-2 Trade Cases 4 61,130, (7th Cir.

1976). AMC’s smaller cars were reasonably priced, and

competitive cars were becoming more expensive because

of required pollution control devices. The Government, to

help balance trade, tended to discourage importation of

foreign cars. All of this helped make AMC’s smaller cars

more desirable. A-110, 111. AMC new car registrations

were 3.03% of total U.S. registrations in 1970, 2.50%

in 1971, 2.98% in 1972, 3.46% in 1973 and 3.79%

in 1974, representing a low of 245,805 new units regis-

tered in 1971 and a high of 392,105 units registered in

1973. P.Ex. 533, p. 16. AMC’s share of the Harris

County, Texas, market was 2.4% in 1972, 3.3% in

1973 and 4.3% in 1974, representing 3019, 4582 and

5177 units, respectively.

Maxfield entered the market at an opportune time.

According to AMC, during 1972 and 1973 demand for

its small cars, particularly the Gremlin, exceeded pro-

duction. Overall industry sales were at an all time high.

In 1973 11% million new cars were sold, the largest

number in the history of the industry. Tr. VI-76.

Initial Reliance on American

In all crucial start-up decisions—amount of capital,

number and “mix” of auto inventory, parts inventory,

equipment, etc.—Maxfield relied completely on AMC, a

fact well known to (and exploited) by AMC, I-89, 90.

The $250,000 capital was not only recommended and

specified by AMC, but Semann, Zone Manager, said in

his “honest opinion” Maxfield was adequately capitalized.

Tr. VI-160. However, he conceded that capitalization was

minimal, and he knew that Maxfield would be largely

dependent on cash flow from the outset. Tr. VI-161, Rely-

ing on AMC’s advice, Tr. I-92, Maxfield thus commenced

business under circumstances which would quickly produce

financial crisis when cash flow proved inadequate to meet

current expenses.

Para. 13 of the Dealer Franchise Provisions, P.Ex. 9,

states that AMC shall establish a sales planning potential

for dealer’s market area by which dealers sales perform-

ance shall be evaluated, with the dealer responsible to

develop sales to reach potential. AMC first made a “fore-

cast”, or “planning potential” in a market study which

projected estimated sales of 600 autos and 33 Jeeps

during the first year of operation. Tr. I-56, Subsequently,

this figure was revised to 1000 autos per year, and by

the time the dealership commenced operation, it was

revised again, and Maxfield was given a planning poten-

tial “travel rate” (projected sales rate) of 1185 cars and

56 Jeeps, Tr. I-70. This was regarded as Maxfield’s “fair

share” of the Houston market. Tr, I-71.

Maxfield relied on AMC in placement of orders for

opening inventory, and initial stock orders. The number

and type of cars that he received was determined solely

by AMC, Tr. I-90, Orders for the 1973 line, introduced

in September, were placed in June, after Maxfield had

been in business only a couple of months, Tr. I-89, 99.

AMC, through Rushing, District Manager, specified the

number, type and models to order Maxfield and his sales

manager filled out the order forms, but Rushing told them

what to order, Tr. I-100.* Maxfield also placed total initial

reliance upon AMC in ordering parts inventory. Tr.

I-103, This reliance was made necessary by the fact that

Maxfield did not possess the experience to know what

would sell, and what would not, Tr. 1-118, 120; III-181,

183.

“Start-up” Problems

Maxfield experienced various “start-up” problems, A

staff was hired, and rent started, before the facilities were

fully operational.’ Tr. I-75, 78. This caused initial oper-

ating expenses to be inflated. Tr. I-75, 76; 112, 113.

Monthly fixed operating expenses exceeded $12,500, Tr.

I-88. Much of the expense incurred in March (when a

staff was hired) and April (when rent started) was

wasted because of delay in making the facility operational.

Request for suspension of the first months rent was re-

fused by AMC, Tr. I-76, 77.

There was no automatic lubricating equipment in the

service area. Mr. Maxfield found he could secure the

equipment under a lease arrangement with an oil com-

pany. AMC refused permission to install the equipment,

unless Maxfield purchased it outright, Tr. I-79, because

4. The effect of automobile inventory upon capital and floor -

cr “it line is demonstrated by consideration of dealers prices,

averaged $4,000 to $4,800 {or Ambassadors, $3,500 to $4,000 _

Ma $1,800 (basic car) to ¥, 000 (heav ly loaded) for Gremlins,

$2,500 to $5,000 for Hornets and at gpl : V-54 bg ape

lower priced ets, two cars cou oor-planned for

Matador or Ambassador,

5. Maxfield prepared a list of deficiencies in the facilities shortly

after the grand opening. Semann wrote “BS” on the list. AMC, Ex.

7. Eventually, most oi cal defects were remedied, but this expres-

sion of attitude was a harbinger of things to come,

the arrangement with the oil company would obligate

Maxfield to purchase oil products from the oil company

and reduce or eliminate usage of American oil products,

Tr. I-80, which were more expensive, Tr, III-108D, Max-

field did not have capital to install the equipment, and

AMC offered no plan comparable to that of the oil com-

pany. Tr. I-80. Permission to install the equipment was

not received until April, 1973. Tr. I-81. A time and

motion study made by Mr. Maxfield indicated that lack

of equipment caused a loss of approximately $3,000 per

month, Tr. I-86,

Because of complaints from other dealers, AMC can-

celled all unfilled orders for yellow page ads placed by

Mr. Maxfield under AMC’s cooperative advertising pro-

gram, and instructed him that he could only advertise

in his “trade territory”. Tr. I-116, 117.

Except for the lube equipment situation, the “start-up”

problems were resolved in the first few months, After an

encounter with certain employees who proved to be less

than trustworthy, a good, competent staff was assembled

in both sales and service. Tr. I-114, 1972 and 1973 were

banner sales years for AMC, in Houston and the Nation.

Tr. I-111. The dealership should have progressed profit-

ably. However, problems with AMC, more serious than

the beginning difficulties noted, were never resolved.

Deceit by AMC

AMC was guilty of deceitful acts. Two were designed

to insure that Maxfield purchase parts and autos desired

by AMC,

Some parts ordered for opening inventory on AMC's

advice were designed to fit cars dating to the 1940's, It

was realized many of the parts might not be needed. Tr.

1-103. Under the agreement with AMC, if it was dis-

covered that the parts were not what were needed during

the first 90 days, the parts could be returned for credit.

Tr. I-103.

As the 90-day limit approached, Maxfield contacted

AMC for the purpose of returning a large number of the

parts. He was advised the parts should be left in inventory

another 90 days. He was told by Aspen, Zone Parts

Manager, that he could return the parts then if they still

did not sell. Tr. III-112. Toward the end of the second

90-day period, Maxfield contacted AMC again and was

told that the parts should have been returned at the end

of the first 90-day period. Consequently, a substantial

number (estimated value $9,000) represented “dead”

investment. Tr. I-104.

In late 1972, after Maxfield had acquired some knowl-

edge of what would sell and what would not, Rushing

insisted that Mr. Maxfield buy more of the “heavier” cars

(Ambassadors and Matadors), which were very slow

moving. Mr. Maxfield did not want them, and said so.

Rushing promised that if the cars did not move, he would

see that they were “moved away”. Tr. I-120. Mr. Max-

field bought them on the strength of this promise. In

January, 1973, the cars had not moved, and Mr. Maxfield

reminded Rushing of the promise. All that Rushing did

was send a friend by, who bought one of the cars. Tr.

1-120, 121.

The most deceitful acts by AMC were brought to light

after the suit was filed. Apparently in reaction to Max-

field’s resistance to attempts to force him to buy unwanted

Ambassadors and Matadors, AMC decided early that the

dealership would be terminated, in one fashion or another.

Morgan, AMC National Sales Mgr., testified that AMC

determined from reports almost immediately after he

started business that Maxfield was “uncoachable”, i.e.,

would have “one play called from the bench and when

he got up to the line, Maxfield would call another one”.

Tr. IX-44, 46. Morgan stated that personalities were such

a strong factor that after they “agreed to disagree”, “it

was a hopeless thing”. Tr. [IX-45, 46. According to Mor-

gan, it was “just a question of time” from AMC'’s stand-

point. Tr. IX-46. Consistent with this testimony, Sand-

strom, AMC Jeep District Manager, (who considered

Maxfield a good dealer, Tr. VII-173) overheard state-

ments made by Semann in late "72 and early ’73 relating

to continuance of the Maxfield dealership. Tr. VII-181.

Derogatory comments were made by Semann and

Schneider, Ass’t Zone Mgr., and jokes were cracked (e.g.:

“How does it feel to be steering the Titanic?”). Tr. VII-

177; 178; 181.

Rather than openly state its position, AMC forced

demise of the dealership by coercing an improper product

mix (containing unsalable and slow to move autos) and

shorting supply of salable autos. See discussion infra.

Coercion by AMC

Experience quickly taught Maxfield that heavier cars,

particularly Ambassadors, moved very slowly, if at all.

Tr. I-118. Gremlins sold most rapidly, and other small

cars sold well. There were days when Maxfield was com-

pletely sold out of Gremlins. Tr. I-119. Customer pref-

erence was for the “basic” Gremlin in the lowest price

range, and Maxfield became overstocked in the slower

moving “loaded” Gremlins in the higher price range,

without sufficient “basic” Gremlins to balance inventory

(which would have fostered sales of the “loaded” Grem-

lins). Tr. IIl-7. Because of reliance on AMC, Maxfield’s

“product mix” became “unbalanced” with excessive num-

bers of heavy cars and “loaded” Gremlins. Maxfield

began to resist AMC’s “suggestions”. Rushing asked him

to join a sales contest. Maxfield refused, because it ap-

peared expensive and inadvisable. Tr. I-107. Rushing be-

came angry. Tr. I-107. During another “incentive” pro-

gram, Rushing asked that Mr. Maxfield put false names

on orders, to make it appear the cars had been sold. Max-

field declined, and again Rushing became unhappy. Tr.

1-108.

The prime cause of conflict involved attempts to make

Mr. Maxfield order cars he did not need. When it was

observed that several Matadors and Ambassadors present

at the grand opening were still in inventory late in the

year, Tr. I-118, Maxfield spoke to Rushing. Tr. I-119.

Rushing suggested special emphasis be put on Ambassa-

dors, the sales price be cut, and salesmen be given

incentives, stating “they needed to be sold”. Tr. I-119.

Later, in October, 1972, Rushing insisted that Maxfield

buy more of the heavy cars, despite the problems with

them. Rushing said if the cars did not move, Rushing

would move them. Tr. I-120. This promise was not kept.

See discussion under “Deceit by AMC”, supra.

Rushing stated he had an “allocation” for Maxfield

of each different type of car, and needed to get Maxfield

to order the cars so that the entire allocation would be

6. Rushing admitted that Maxfield’s initial orders were secured

on his recommendation. Tr. VII-12, 13. Schneider conceded that Max-

field relied on AMC’s advice and wound up with an unbalanced in-

ventory. Tr. XI-106.

placed, Tr. I-121 but Maxfield continued his resistance

to purchase of Ambassadors and Matadors. In No-

vember, 1972, Maxfield’s sales manager showed him

three or four orders for Ambassadors, placed by Rushing

without Maxfield’s knowledge or consent. Maxfield ad-

vised AMC that he refused to take the cars, Tr. II-22-23.

Rushing became angry. He said that if Maxfield would

take the cars, he (Rushing) would move them out

“pretty quick”, Tr. I-23. Maxfield declined.

The month after this incident, Maxfield again refused

to place an order for an Ambassador that Rushing

wanted placed. Tr. II-2. Rushing became upset, pointedly

noted the refusal on the order sheet, and circled the

notation to clearly indicate the refusal. Tr. II-3.

After Maxfield began resisting placement of orders

for heavy cars, the relationship with AMC became

strained. Deliveries began to slow down. Tr. II-4. Orders

for 99 automobiles were cancelled. Tr. II-5. Maxfield

complained about slow deliveries, and non-deliveries, and

was told that AMC was unable to produce the cars. Tr.

II-6. This did not explain the fact that the number of

autos (particularly Gremlins) delivered to Maxfield

steadily declined, while orders increased, See P.Exs. 551,

40A. In all, Maxfield placed orders for over 300 cars

which were never filled. This does not include the orders

for the 99 cars that were cancelled. See P.Ex. 547.

AMC representatives became more formal, less friendly

and less cooperative. Tr. II-4. Schneider and Rushing

began making complaints about items that were insignifi-

cant or subjective. Tr. II-9."

7. This is consistent with testimony by Sandstrom that it was

AMC’s practice, in effect, to build a “termination file’, that is to

make entries in a dealer’s file that could be used as justification

for termination. Tr. VII-183.

In February, 1973, a “sales and profits” conference

was held. Semann, Schneider, Rushing and Maxfield

were present. P.Ex. 527 was presented to Maxfield.

According to the analysis contained in the exhibit, Max-

field was 706 units behind “planning potential” travel

rate, representing a loss of profits of $211,074 at $299

per unit. No explanation was given as to how Maxfield

could sell cars when he could not get them from AMC.

During the conference, a phone call was made to

Semann’s superior, Waseiko, Regional Sales Mgr., in

Detroit. Maxfield was put on the phone with Waseiko,

and was told that the factory was “watching” Maxfield

closely, that the Ambassadors Maxfield had in stock

had “better be sold”, or Maxfield would not be in business

long. Tr. II-11. Quoting Waseiko, Maxfield said he was

told “you better get those Ambassadors sold, or Ill have

your ass”.

When Mr. Maxfield attempted to go to Morgan with

his problems, he incurred Semann’s ire. He was told

that he should not go around Semann under any cir-

cumstances,® and, if he kept doing it, Semann said he

would put him out of business. Tr. [I-13, 14.

Problems with ordering continued. Each month Rush-

ing would visit the dealership with the “spread sheet”

showing cars by line and model Maxfield was expected

to order. He would have order blanks to cover those

units. He would tell Maxfield the allocation represented

Maxfield’s appropriate share of every line of automobiles.

Tr. II-98. Ambassadors and Matadors would arrive quite

rapidly after placement of orders, but Gremlins would

8. Rushing told Maxfield “Don’t cross Semann or he'll bury

you”. II-12.

not. Tr. III-170. Initially, on advice of Meyers, Rushing’s

predecessor, Maxfield contemplated having 10% of in-

ventory in Ambassadors and Matadors. Tr. III-171. As he

gained sales experience, he did not want any Ambassa-

dors or Matadors, but he was forcefully “encouraged” to

take them in order to get Gremlins. Tr. ITI-169. Maxfield

testified that in order to get 322 Gremlins and 165 Hor-

nets received by the dealership during its tenure, he had

to buy 35 Matadors and 32 Ambassadors. AMC tried

to “persuade” Maxfield to take the heavy cars “in a very

strong manner that if I didn’t buy them, my allocation

would be less”. Rushing said “we had to work together”.

Rushing didn’t use the specific words “If you don’t buy

Ambassadors and Matadors I’m going to cut off Grem-

lins”, but he said Maxfield had to take Ambassadors and

keep a full line, “and to support the full line we had to

take the heavy cars to get the ‘light cars’”. Maxfield did

refuse to buy heavy cars on certain occasions and “I had

unfilled orders”. Tr. III-173-174.

Robert Bailey, Maxfield’s sales manager, who worked

with Rushing in placing orders, testified “when they told

you the cars to order, you had to order so many Am-

bassadors and so many Hornets and so many Gremlins,

and they specified the number of each.” Tr. VII-155.

Before June, 1972, Maxfield received 11 Ambassadors

and Matadors. Subsequently, receipts totaled 34 Mata-

dors and 32 Ambassadors. Some were “sold orders” (sold

before the order was placed). Lack of experience caused

Maxfield to rely on the first orders placed by AMC with-

out voicing objection. Tr. II-181, 183. Later, he did

not want any of the heavy cars, but he was required

to take approximately 18 additional Ambassadors and

18 additional Matadors in order to get Gremlins. Tr.

IlI-183.

Discrimination in Allocation

AMC’s allocation system was discriminatory and co-

ercive. The requirement was imposed that dealers take

the “full line” and purchase the dealer’s “fair share” of

each model in the AMC line.’ Tr. VII-185; IX-32, 33,

34; VII-148, 149. This ignored the dealer’s needs, de-

sires, market demands, and selling history. Although

supposedly “days supply” i.e., available inventory of each

model based on selling history, was taken into account

in allocating each model, the formula was inequitable

when applied to a new dealer. It established “travel rate”

after two months which did not take into account be-

ginning problems, particularly in areas with no prior

AMC sales representation (such as Maxfield’s area).

The short time to establish “travel rate” eliminated flex-

ibility and tended to produce and perpetuate improper

product mix. Starting over with a “clean slate” at intro-

duction of a new year’s model did not eliminate the

problem, because two months would again be used to

establish travel rate.’° Applying the formula literally made

it extremely difficult for a new dealer ever to reach plan-

ning potential, although, contractually, his performance

was measured by planning potential, and he was re-

sponsible for attaining it.

9. This requirement was not simply a “stocking requirement”.

As the evidence, particularly of AMC representatives, reveals, each

dealer was expected to take his “fair share” of each model, shown

on the “spread sheet” on each visit by the district manager.

10. In Maxfield’s case, orders for new models were placed within

two months after start of operation.

The inequities in the system became highly visible in

1972 and 1973. An article in the Automotive News,

dated July 2, 1973, stated that McNealy, AMC Vice

President of Marketing, openly admitted that “we didn’t

discriminate—we were as apt to hurt our friends as our

enemies”. McNealy testified that the “friends and enemies”

language was a poor choice of words, for he was really

saying that the system was inflexible to changing needs

and “hurt everybody”. Tr. VI-69. The article, continuing

to quote McNealy, stated that things got so “loused up”

in 1973 that AMC devised a new and more responsive

distribution system to go into effect with allocation of:

1974 models." Tr. VI-70-71.

In Maxfield’s case, the allocation formula was only an

incidental part of the problem. Maxfield simply did not

get the automobiles that he ordered although the orders

were picked up, according to the system, once a month

by Rushing. Maxfield could have sold every automobile

ordered, and if he had been given enough of the salable

models to match planning potential, he could have sold

them. Tr. II-6, 7. This was verified by Bailey, who re-

mained as sales manager after Maxfield’s termination.

Bailey stated that, with cars to sell, AMC made a profit

the very first month it operated the dealership. New cars

were sold as fast as they were serviced. Bailey said “if

Maxfield had been given the cars he could have sold

them and made the same profit.” Tr. VII-157, 158.

There are references in the record to AMC’s problems

in securing sufficient production to meet demand for

11. According to McNealy, the primary problem with the alloca-

tion system was the orm 4 of orders on a once a month basis,

which slowed time by AMC, Under the new system, orders

were picked up times a month, Tr. VII-70-76,

smaller cars in 1972 and 1973, but there is considerable

evidence that the failure to fill Maxfield’s orders did not

result from production problems, and that AMC could

have filled the orders had it desired.

Schneider stated that there was adequate supply of cars

in Houston when Maxfield went into business to give

Maxfield what he needed. Tr. XI-117. He further stated

that if Maxfield had corrected his “deficiencies” AMC

was willing to locate the cars Maxfield needed. Tr. XI-

118. (Schneider evaded the question of whether AMC

failed to locate the cars because Maxfield refused to take

Ambassadors he was supposed to take. Tr. XI-119).

Semann said it was possible for Maxfield to have gotten

his 1185 unit “planning potential”, if Maxfield had been

“selling’”’* Tr. XII-95, i.e., if Maxfield’s “travel rate” had

justified, Maxfield would have been furnished cars to

match his planning potential. Tr. XII-95, 96."* The ques-

tion of AMC’s ability to deliver needed cars to Maxfield

was put to rest in a question by the Trial Court directed

to Semann. Noting that there had been testimony that

demand for small cars exceeded production, the Court

asked: “Would the total of the planning potentials of all

the AMC dealers exceed the capacity of the factory to

produce the cars?” Semann replied: “That, I really don’t

know, sir.”

Thus, failure to fill orders and supply enough auto-

mobiles to meet planning potential cannot be defended

on the basis of production problems, Rather, the failure

12. The record shows that Maxfield’s sales formance as to

small cars was good, and AMC admitted that Maxfield, as all dealers,

was successful selling the smaller cars.

13. This does not, of course, explain the failure to fill orders

that were taken from Maxfield.

to deliver automobiles to Maxfield was deliberate and

arbitrary.

When Maxfield began having problems securing autos,

he visited other American dealers in the Houston area,

and found that they had in stock the automobiles he could

not get. Tr. II-158, 159.

On May 10, 1973, when Maxfield was experiencing

operating problems because of shortage of capital, he

visited Morgan, Semann, and Waseiko in Detroit. Max-

field was promised an additional 100 cars to be built in

June and July, on specified conditions. Tr. VII-41, 42;

XI-147; VI-123. No one explained why AMC could

promise 100 additional autos when it had failed to deliver

over 300 cars that had been ordered.

Conclusive evidence of the deliberate shorting of sal-

able autos was revealed after Maxfield’s termination.

P.Ex. 545, entitled “Dealers Status Report” is a com-

puter print-out relating to Maxfield showing status of

orders. It contains a “Dealer Recap” showing the number

of units ordered that were placed “in system” i.e., actually

scheduled to be built, “in transit” i.e., on the way from

the factory to the dealer, and “excess” i.e., orders re-

ceived by AMC but not filled and not placed “in sys-

tem”,

The report shows that on April 12, 1973, Maxfield

had four autos “in system”, scheduled to be built the

weeks of March 12th, March 26th, April 9th, and April

23rd. He had 99 “excess” orders which, according to

Schneider, were over and above “dealer’s allocation”,

361 “total excess” orders,"* and 10 cars were “in transit”.

14, Although there may be some question, from P. Ex. 545, or

from testimony, whether the 99 excess orders, described by Schneider

On April 23, 1973, 14 cars were taken out of the “total

excess” category and put in the “in system” category.

Tr. XI-126."° On May 6, 1973, when Maxfield visited

Detroit, he had 31 cars “in system”, 295 “total excess”,

and one car “in transit”, Tr. XI-127. On May 20th, two

days before Maxfield was terminated, he had 46 “in

system”, scheduled for production during the weeks of

May 14th, May 21st, May 28th, June 11th, and June

18th, nine “in transit” and 267 “total excess”. On May

24, 1973, two days after Maxfield was terminated, 125

cars were “in system”, Tr. XI-129, and 252 were still

listed as “total excess”. The dealership, at this time, was

being operated by AMC. By June 3, 1973, 99 cars were

“in system”, 61 cars were “in transit”, and there were

“0” “excess” orders. Tr. XI-130. Thus, AMC, having

cancelled 99 orders as being in excess of allocation, con-

sistently carried from 267 to 361 of Maxfield’s other

orders as “excess”, i.e. without recording them as in

production, even though the evidence shows that AMC

had the capacity to produce and deliver them to Max-

field, and within less than two weeks after Maxfield was

terminated the “excess” orders were reduced to “0”, i.e.,

aoe Sa ae in the 361 total excess orders

the ind is to the contrary. The 99 appears by the heading

“excess week”, and correlates to the orders for 99 Gremlins that were

cancelled by AMC. The figure 361 represents the total of all the

orders in the line appearing under the heading “excess week”’.

' The figure 99 is carried forward consistently in the report, and con-

tinues to appear even after excess orders were reduced to 0, subse-

uent to Maxfield’s termination. Accordingly, it appears that the

re of 99 refers to the cancelled order for Gremlins considered in

excess of allocation, while the total excess order figure refers to the

orders coming within the dealer’s allocation but not placed “in

system”,

15. This correlates to a letter Schneider wrote dated April 23rd

saying he had put additional cars in process for Maxfield. Tr. XI-125.

all produced or placed in production. This situation gave

rise to interesting answers by Schneider:

“OQ.

o> o> OP

o> O >

Can you tell this jury why it [cars “in system”)

jumped from 46 two days before he was ter-

minated to 125 two days after he was terminated?

. No, sir, I can’t.

. What happened to all the excess orders between

May 24, 1973 and June 3, 1973?

. Sir, I don’t remember,

. Do you know, sir, that within a week after Mr.

Maxfield [was terminated], 100 cars came into

the location out on Katy Freeway?"*

Sir, I remember, I believe I had, a meeting was

held in Detroit and Mr. Maxfield was able to

et 100 additional cars,

ey built them and delivered them in a hurry

didn’t they?

. They were built for him,

. Were they, sir? How can you justify that when

two days before he was terminated he only had

46 cars in the system and nine in transit—nine

and 46, If he had gotten every one in the sys-

tem built and delivered within the space of a

week, when some of them were not scheduled

until the week of June 18th, nine and 46 only

a to 55, so where did the 100 cars come

rom

. I have no idea, Must have come from Detroit

or something.

. They must have, Do you know of anybody that

can tell us where all those cars came from?

. Distribution.

. How do you account for the fact that you say

this dealership point here was over allocation, that

16. The reference to 100 cars has to do with the fact that approxi-

mately 100 cars were delivered to the dealership within four to five

days after Maxfield was terminated, all bearing Maxfield stickers,

See discussion, infra.

within 12 days after Mr. Maxfield went out of

business, every single excess order that he had

carried ranging from about 260 up to 360 was

wiped out, and the cars either delivered or put

in the system for the new dealer. How do you

explain that, sir?

A. I don’t, sir.” Tr, XI-130-132,

Bailey remained as sales manager during the time the

dealership was operated by AMC, Tr. VII-153, 154, He

stated that within four to five days after Maxfield’s ter-

mination, approximately 100 cars arrived at the dealer-

ship. Tr. II-156. Every auto had a Maxfield sticker on it,

indicating it had been manufactured for Maxfield. Tr.

VII-156, 157. Bailey, who had been in auto dealerships

for 20 years, said he had never seen that many cars

dropped on a lot in five days in his life. Tr. VII-167.

No one with AMC offered any explanation, The in-

ference that the cars had been withheld while Maxfield

was deliberately and arbitrarily “shorted” is inescapable.

The automobiles could not possibly have been put “in

system” (production) produced, and delivered within a

week, and the record (P. Ex. 545) does not show that

sufficient cars were put “in system” while Maxfield was

a dealer to allow this sort of delivery. The only explan-

ation is that the cars were built while Maxfield was a

dealer but were withheld and were not charged against

“total excess” orders on the “Dealer Status Report” until

after Maxfield’s termination.

Termination

Sandstrom succinctly described the troubles of Max-

field in early 1973 as being caused by lack of capital and

lack of proper automobiles to sell. Tr. VII-181. Maxfield

began experiencing operating difficulties approximately

January, 1973, An overdraft, which the Bank voluntarily

carried, developed. Beginning about March, 1973, a series

of meetings were held involving Maxfield, AMC, and the

Bank. Tr, II-131. AMC presented Maxfield a letter volun-

tarily terminating the dealership on April, 23rd, but Max-

field declined to sign it. Tr. II-132. To correct the over-

draft situation, Maxfield tried to raise the capital loan

note at the Bank, which had been paid down to $120,000,

to its original balance of $150,000, Tr. II-19, 20. The

Bank agreed if AMC approved and would guarantee the

restated face amount, Tr. II-20. AMC refused, Maxfield

contacted other banks, unsuccessfully, and initiated an

SBA application, Tr. II-21-22, Semann suggested Max-

field’s father be asked to loan $50,000 to the dealership

(even though Semann testified in his opinion the dealer-

ship would still have gone under), The senior Maxfield

indicated he would do so if AMC would agree to restate

the capital loan, and give Maxfield a three-year franchise.

AMC refused, Tr. II-29-33, At Semann’s suggestion,

AMC was given authority to look for a buyer for the

dealership. Tr. II-42, Maxfield requested consideration as

a “DI’"’ dealer but was told by Schneider that AMC

would not accept him as a DI operator, although a DI

might come in as a potential buyer, Tr. II-45,

On about May 15th, a meeting was held with the

Bank and AMC representatives, and Maxfield and Fraker

were asked to personally sign a note to the Bank for the

overdraft. They refused, but a note was signed on behalf

of Maxfield American for the balance, Tr. II-38, 40,

17, Under the “Dealer Investment” program AMC finances the

dealership and retains an ownership interest and voting control during

the payout period

Seven days later, on May 22, 1973, a meeting was

called and was attended by AMC representatives

Schneider, Semann and Rushing, Dunlop, National DI

Director, Miller, a former DI operator, and Sheridan,

AMC attorney, Bank representatives Meeks, President,

Bolton, Vice-President, and Scott, attorney, and Max-

field, Fraker and their attorney, Hickey. At the time of

this meeting,’* Maxfield was still making efforts to solve

his financial problems, and awaiting the processing of

the SBA application. Immediately after the meeting con-

vened, AMC, through Sheridan announced its decision

to terminate the relationship with Maxfield. Tr. VII-21;

VIII-21. This was done even though the time for fulfill-

ment of the conditions specified as a result of the May 10

letter, issued after the Detroit meeting, had not expired.

18. Testimony of the Bank and AMC sharply conflicted regard-

ing this meeting. AMC said the Bank called the meeting (Schneider,

Tr. VI-237), and the Bank said AMC called the meeting (Bolton,

Tr. VIII-90; Meeks, Tr. VIII-16). (Rushing is in conflict with his

superiors stating Semann called him to set “| the meeting, and he in

turn called Bolton, Tr. VII-149-150). The Bank said that the first

thing that happened at the meeting was that Sheridan, AMC attorney,

announced Maxfield was in default under terms of agreements with

AMC, and AMC would no longer remain a party to the agreements.

The Bank, through its attorney Scott, then announced AMC would

no longer stand behind the guarantees. Tr. VII-21. AMC said that the

Bank first announced it would withdraw its guarantees, and that

AMC did not terminate, but the Bank took over Maxfield’s assets.

Tr. VII-165-168. Semann said Miller and ee had been summoned

by AMC because AMC “planned for eventuality.” Tr. VI-175. Ac-

cording to Semann, Miller became the interim operator for the Bank.

Tr. VII-173. (This was belied by testimony of employees who re-

mained at the dealership, working for AMC, after termination.) The

entire question of termination was left shrouded in mystery by AMC

testimony. Waseiko and Morgan stated that termination in the manner

it occurred was “impossible” because only the franchise committee in

Detroit can terminate a franchise, and it requires signatures of eight

to 12 people on a document setting forth the basis for termination.

Tr. VI-110-112. Neither Rushing, Schneider or Semann could state

the reason Maxfield was terminated. Tr. VI-243, XII-66-67.

The Bank announced it was calling all notes due. Notice

of foreclosure was waived by Maxfield and Fraker. Miller

took over operation of the dealership upon conclusion of

the meeting.

About three weeks later, a letter from AMC dated

June 7, 1973 was received by Maxfield. It stated Maxfield

was “terminated effective June 4, 1973 because your

business has been closed in excess of ten days”. P.Ex.

88. The dealership had never been closed during ordinary

business hours, while Maxfield was in control of it, nor

was it closed after AMC took it over.

At the time of termination, Maxfield was not delinquent

in any obligation to the Bank or to AMC.

REASONS FOR GRANTING THE WRIT

1. Although the opinion of the Fifth Circuit recog-

nizes that “coercion” may be implied from a course of

dealing, its holding virtually precludes circumstantial evi-

dence and requires that in order to establish coercion,

as an element of “tying”, the proof must show an express

demand that the tied product be purchased and an ex-

press threat that failure to purchase it will result in sales

of the tying product being curtailed or stopped. Even

under this test, the evidence was sufficient to require

the issue to be submitted to the jury. But the test is

wrong, for coercion, just as any other fact, may be im-

plied from a course of dealing or otherwise proved in-

ferentially or circumstantially, and on this basis the

evidence was more than sufficient.

2. The Fifth Circuit’s opinion also indicates that “bad

faith” under the Automobile Dealers Act must be “co-

ercive”, and may be shown only by proof of an express

demand that the dealer take action contrary to the dealer’s

lawful rights on the express threat of sanctions or reprisal

by the manufacturer. The evidence meets this test, but,

again, the test is improper. Bad faith may be established

in other ways, and may be proved circumstantially. Here,

the evidence revealed “bad faith” in a number of ways.

ARGUMENT

1. The evidence establishes “tying” in violation of

Sec. 1 of the Sherman Act and Sec. 3 of the Clayton

Act.

The “tying” offense has become fairly well defined

through numerous (but sometimes conflicting) opinions.

The Supreme Court had already written on the subject

at least four times. (International Salt Co., Inc. v. U.S.,

332 U.S. 392, 1947 Trade Cases 457,635 (1947);

United Shoe Machinery Corp. v. U.S., 258 U.S. 451,

1922 Trade Cases 526,2820 (1922); 1.B.M. v. U.S.,

298 U.S. 131, 1932-1939 Trade Cases 9 55,112, (1932-

1939); and Times Picayune v. U.S., 345 U.S. 594, 1953

Trade Cases 4] 67,494 (1953)) when it authored North-

ern Pacific Railway Company, etc. v. United States, 356

U.S. 1, 1958 Trade Cases 4 68,961, (1958). There,

the Court pronounced language quoted in virtually every

subsequent tying case:

“For our purposes a tying arrangement may be

defined as an agreement by a party to sell one

product but only on the condition that the buyer

also purchase a different (or tied) product, or at

least agrees that he will not purchase that product

from any other supplier. Where such conditions are

successfully exacted competition on the merits with

respect to the tied product is inevitably curbed. In-

deed ‘tying agreements serve hardly any purpose

beyond the suppression of competition’. Standard

Oil Co. of California v. United States, 337 US.

293, 305-306. They deny competitors free access

to the market for the tied product, not because

the party imposing the tying requirement has a

better product or a lower price but because of his

power or leverage in another market. At the same

time buyers are forced to forego their free choice

between competing products. For these reasons

‘tying agreements fare harshly under the laws for-

bidding restraints of trade’, Times Picayune Publish-

ing Co. v. United States, 345 U.S. 594, 606. They

are unreasonable in and of themselves whenever

a party has sufficient economic power with respect

to the tying product to appreciably restrain free

competition in the market for the tied product and

a ‘not insubstantial amount of interstate commerce

is affected’. International Salt Company v. United

States, 332 U.S. 392... .”

The elements of the offense distilled from Northern

Pacific are:

1. An agreement by a party to sell one (tying) pro-

duct on the condition that the buyer purchase a different

(tied) product (or at least refrain from purchasing that

product from another supplier);

2. Sufficient economic power in the tying product to

impose an appreciable restraint of free competition in

the tied product; and

3. The involvement of a “not insubstantial” amount

of commerce in the tied product.

The elements as defined by the Fifth Circuit are:

(1) Two separate products, the tying product and the

tied product;

(2) Sufficient market power in the tying market to

coerce purchase of the tied product;

(3) Involvement of a not insubstantial amount of

interstate commerce in the tied market; and

(4) Anti-competitive effects in the tied market.

Driskill v. Dallas Cowboys Football Club, Inc., 498

F.2d 321, 323 (Sth Cir. 1974).

It has been specifically held, in the context of an

Automobile Dealers Act case, that “tying” may be in-

ferred from the Defendant’s business practices and con-

duct. Westbrook v. Chrysler Corporation, 419 F. Supp.

824 (N.D. Ga. 1976). See also Advance Business Sys-

tems & Supply v. SCM, 415 F.2d 55 (4th Cir. 1969),

cert. den. 397 U.S. 920, and Osburn v. Sinclair, 286

F.2d 832 (4th Cir. 1960), cert. den. 366 U.S. 963.

No attack is made by the Fifth Circuit on proof of

any element except No. 2. The Court states that actual

coercion is an indispensable element of a tie-in, and

violation exists only if the manufacturer goes beyond

persuasion and coerces or forces a customer to buy the

tied product to obtain the tying product. The Court held

there was no “evidence that AMC coerced Maxfield into

taking unwanted large cars”. This finding purports to

be based on the following conclusions:

(1) What is missing from Maxfield’s “list of hor-

rors” is evidence that AMC ever required Maxfield

to take large cars or face cut-off of small cars.

(2) Only two conclusory statements, by Maxfield

and his sales manager, suggested that such a require-

ment existed; both statements were accompanied by

admissions that no one made a threat to that effect.

(3) Maxfield did not show one instance or occur-

rence showing an enforced requirement that it buy

big cars.

(4) On the contrary, the record shows several in-

stances in which Maxfield successfully resisted at-

tempts to place big cars with it.

(5) From December, 1972 when Maxfield refused

Ambassadors, through May, 1973, when Maxfield

was terminated, Maxfield received only five Matadors

and five Ambassadors, but 73 Gremlins and 38

Hornets, was invoiced for 51 more in May, and

promised an additional 100 to be built in June and

July.

(6) There is no evidence of an implied requirement

that Maxfield take big cars in order to get small

cars, backed by sanctions. Maxfield contends that

after it refused to take Ambassadors, AMC can-

celled orders, left orders unfulfilled, and delayed

delivery, but there is no evidence of a causal con-

nection between the refusal to take the Ambassadors

and AMC’s actions. That causal connection is not

supplied by the fact that AMC’s actions followed

Maxfield’s refusal.

(7) The uncontradicted evidence is that Maxfield’s

difficulties were encountered because of a nationwide

shortage of small automobiles. No AMC dealer re-

ceived his full order of small cars. Maxfield fared

better than most AMC dealers, a point which is

evidenced by consideration of the delivery of 100

automobiles within the week after Maxfield was

terminated. This virtually wiped out Maxfield’s back-

log of orders, and AMC’s uncontradicted evidence

was that this was a result of Maxfield’s urgent pleas

for more cars.

The lower Court’s laundry list of conclusions is con-

trary to the evidence, and its “no evidence” finding is

insupportable. Rather than follow the rule of Boeing v.

Shipman, supra, the Court ignored evidence supporting

Petitioner’s position, and viewed other evidence in the

light most favorable to Respondents.

The “laundry list” should more properly read as fol-

lows:

(1) Maxfield relied on AMC, and followed its direc-

tions as to initial inventory orders. When the heavier

cars did not sell and Maxfield resisted ordering more,

he was told that he had an “allocation” of each type of

car that “needed” to be placed with him. Tr. I-121. Am-

bassadors were ordered for him by AMC without his

consent. Refusal caused AMC to become angry. Tr. I-23,

D-2, 3. Maxfield was told he’s better sell the heavier cars

or AMC would “have his ass” and he would not be in

business long. Tr. II-11.

(2) Both Maxfield and his sales manager testified they

were told each month the cars to order, and had to order

the cars specified, representing an “allocation” of the

“full line”. Though AMC did not use the specific words

“If you don’t buy Ambassadors and Matadors, I’m going

to cut off Gremlins,” AMC “persuaded” Maxfield to take

the heavy cars “in a very strong manner, that if I didn’t

buy them, my allocation would be less” and told Maxfield

he had to support the full line and “to support the full

line we had to take the heavy cars to get the ‘light cars’.”

Tr. I-173, 174.

(3) Maxfield testified he reached the point where he

did not want any of the heavy cars, but was required to

take Ambassadors and additional Matadors to get Grem-

lins, Tr. III-183.

(4) Maxfield was successful in refusing larger cars

when AMC deceitfully ordered for him without his knowl-

edge, and on one or two other occasions, but each time

AMC responded angrily and, as a result, Maxfield had

unfilled orders, Tr, III-173, 174.

(5) By June, 1972, Maxfield had received 11 Am-

bassadors and Matadors. Subsequently, receipts totalled

34 Matadors and 32 Ambassadors. Maxfield began re-

sisting purchase of the heavy cars when experience taught

the effect of buying them, Tr. III-181-183. After he

determined he did not want any more of the larger cars,

and so informed AMC, Maxfield was required to take

approximately 18 additional Ambassadors and 18 addi-

tional Matadors in order to get Gremlins, Tr. III-183.

This occurred during a period that was economically

critical to his dealership.

(6) After Maxfield began resisting placement of orders

for heavy cars the relationship with AMC became strained.

Deliveries began to slow down, Tr. II-5, Orders for 99

automobiles were cancelled, Tr. II-5. Maxfield was deter-

mnied to be “uncoachable”, and after disagreement with

AMC, according to AMC’s national sales manager, “it

was a hopeless thing” and “just a question of time” until

the relationship was terminated. Tr. Px-45, 46. AMC

had the ability to produce and deliver the cars needed

by Maxfield, but, in addition to cancelling the orders

for the 99 cars and delaying deliveries, it left orders for

361 cars unfilled.

(7) Although there was talk of a shortage of small

cars, the uncontradicted evidence is that the alleged short-

age had nothing to do. with Maxfield’s problems, AMC

admitted that it had enough cars to allow Maxfield to

live up to his “planning potential”, Tr. XI-17, and if

Maxfield had corrected his “deficiencies” AMC was will-

ing to locate the cars he needed, Tr, XI-18, At another

point, AMC admitted it was possible for Maxfield to

have gotten his 1,185 unit “planning potential”, if he

had been “selling”, although AMC admitted that Maxfield

was successful in selling the smaller cars, Tr. XII-95.

A third time, in the record, AMC said if Maxfield’s

“travel rate” had justified, he would have been furnished

cars to match his planning potential. Tr. XII-95, 96."°

Orders for 99 small cars were cancelled, deliveries were

delayed and orders for 361 small cars were never de-

livered, The conclusion that Maxfield was deliberately

and arbitrarily shorted is compelled by evidence of de-

livery of over 100 automobiles to Maxfield’s dealership

facility the week after Maxfield was terminated. The

automobiles all bore stickers showing they were manu-

factured for Maxfield, not any other dealer or zone

“reserve”. Tr. VII-156, 157. Only one conclusion can be

drawn, The cars were built while Maxfield was a dealer,

for Maxfield’s dealership, but withheld without recording

(on P. Ex. 545) the fact they had been placed in pro-

19. The lower Court's statement that “uncontradicted” evidence

showed Maxfield’s problems to be due to a “Nationwide shortage” is

shown to be totally without record su by a question by the

Trial Court to the highest ranki ae aoe were ae

testify for AMC during the trial. Noting that there had testi-

mony that demand for small cars exceeded production, the Court

asked: “Would the total of the planning potentials of all the AMC

dealers exceed the capacity of the factory to produce the cars?”

Semann replied: “That, I really don’t know, sir.” AMC did not

produce any testimony that it was not able to produce enough to

satisfy all dealers “p ng potential,” yet Maxfield received far

fewer vehicles than his “ potential” number,

duction. (They were delivered immediately after Max-

field’s termination, and apparently only then were they

credited against “excess orders” (on P, Ex, 545).*°

It is unrealistic, in the face of the record, to hold that

the issue of coercion, requisite to tying, is not raised by

the evidence. The Fifth Circuit opinion is predicated on

lack of direct testimony that AMC told Maxfield that

if Ambassadors and Matadors were not purchased, supply

of Hornets and Gremlins would be cut off."* The Court

does recognize that an “implied” requirement “backed

by sanctions,” may be shown, but the effect of the opinion

is to make it virtually impossible to prove tying without

evidence of an express requirement and threat. This is

contrary to the rules of circumstantial evidence, which,

20. The Court’s observation that the record shows that Maxfield

was treated better than other dealers, a fact supported by evidence of

delivery of approximately 100 vehicles to his dealership the week

after he was terminated, is perhaps the worst example of “reverse”

application of Boeing v. Shipman, The premise is directly contrary

to AMC records testimony. Although the Court’s opinion cites

the promise to build 100 cars made to Maxfield on May 10 as a

response to Maxfield’s urgent pleas for small cars, and says that the

t termination delivery was a result of Maxfield’s urgent pleas, it is

ble for the May 10 conditional promise to have had any con-

with the post-termination delivery. Production of the

mised 100 cars was not planned until June and July, and Maxfield

had not and could not possibly have met the pre-conditions by the

time of his termination on May 22. There is not a single word of

evidence to su the Court’s statement that the delivery of more

than 100 cars the week after Maxfield was terminated was

“according to AMC’s uncontradicted evidence” “a result of Maxtield’s

urgent pleas for more small cars”, There is gr no way that 100

cars could have been scheduled and built for Maxfield and delivered

during the period May 10- May 29. It is physically impossible and

poiace, Mya gio with the “Dealer Status Report” P. Ex. 545. The

were manipulated and Maxfield was shorted.

21. It would be highly unusual, in view of AMC’s previous

— ae with tying, if its representatives were found to be

s cated.

in antitrust cases, is often the only evidence available.

In this case there is both direct and circumstantial evi-

dence that trying was in fact practiced, and that Maxfield

was coerced to comply with the practice. The issue should

have been submitted to the jury.

2. The evidence establishes a violation of the Auto-

mobile Dealers Act.

Title 15, Sec. 1222, U.S.C.A., known as the Auto-

mobile Dealers Act, or the Dealers Day in Court Act

(DDICA), provides that an automobile dealer may bring

suit against any automobile manufacturer who fails to

act in good faith in performing or complying with any

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

nating, cancelling, or not renewing the franchise of a

dealer.

Sec. 1221(e) defines good faith as meaning the duty

of each party to any franchise to act in a fair and equit-

able manner toward each other so as to guarantee the

one party from coercion, intimidation, or threats of

coercion or intimidation from the other party.

The Act, which is regarded as an “extension” of the

antitrust laws, was adopted because of abuses in auto-

mobile distribution by manufacturers. H.R. 2850. These

abuses stemmed from an exaggerated economic disparity

between manufacturers and dealers, in an excessively

concentrated industry, which allowed manufacturers to

impose upon dealers franchise agreements by virtue of

which the dealer

“. .. agrees to conduct his business according to the

standards and desires of the manufacturer.”

The principal effect of the bill was to give the dealer

a right of action against the manufacturer where the

manufacturer failed to act in a fair and equitable manner.

“Good faith” is to be determined in the context of co-

ercion or intimidation. According to the House Report:

“The existence of coercion or intimidation depends

upon the circumstances arising in each particular

case and may be inferred from a course of conduct.

For example, manufacturer pressure, direct or in-

direct, upon a dealer to accept automobiles, 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. Similarly, coercion or intimidation may

be found where the manufacturer attempts to re-

quire the dealer to handle exclusively, or sell a

specified quota of, parts, accessories, and tools made

or approved by the manufacturer . . . if the manu-

facturer goes beyond normal sales recommendation

or persuasion, in appropriate circumstances, his ac-

tivities could give rise to a cause of action under

the bill... .”

Three types of coercion or “bad faith” envisioned by

the House Report are immediately recognizable in the

facts of this case: (1) manufacturer pressure to accept

automobiles and parts the dealer did not want or need;

(2) the requirement that the dealer handle AMC auto-

mobiles and parts exclusively; (3) actions going beyond

normal sales recommendation or persuasion (recognized

by the Fifth Circuit to amount to “obnoxious cajolery”)

to enforce the manufacturer’s desires.

Reported decisions expand on the meaning of good

faith. Blenke Brothers Motors, Inc. v. Chrysler, 189 F.

Supp. 420, 1960 Trade Cases 4 69,704 (N.D. Ill. 1960)

pointed out:

“Compulsion is synonymous with coercion and

means in general some actual or threatened exercise

of power possessed by the parties exercising it; but

coercion can be accomplished by indirect means, as

coercion which is implied from acts. Thus, coercion

and intimidation is not necessarily limited to exer-

cise of positive force or direct threat, but may result

from any pressure which puts one in actual fear of

loss of property or injury to business.” (Emphasis

supplied)

Bergen Rambler, Inc. v. American Motors, 30 F.R.D.

334, 1962 Trade Cases 4 70,341 (D.N.J. 1962) recog-

nizes that “tie-in” sales practices amount to a lack of

good faith under the DDICA.

Volkswagen Interamericana v. Rohlsen, 360 F.2d 437.

1966 Trade Cases § 71,771 pointed out that:

“Particularly suspect under the Act are conditions

which benefit only, or primarily, the manufacturer—

for example, requirements that a dealer purchase

large stocks of vehicles, spare parts, special tools or

advertising matter.”

The case held that termination because of plaintiff's

rejection of the defendant as a partner would be “a clear

violation of the Dealers Act”.

Madsen v. Chrysler, 261 F.Supp. 488, 1966 Trade

Cases § 71,950 (D.C. Ill. 1966), held that the termin-

ation of a dealer for failure to meet contract quotas

(“MSR”) violated the DDICA because the quota pro-

vision, actually used as a performance goal, was arbitrary,

coercive and unfair, and would have permitted termina-

tion of 1/3 to 1/2 of the dealers at any time.

American Motors v. Semke, 384 F.2d 192, 1967 Trade

Cases § 72,223 (CA-10 1967) held that the action of

an AMC representative in refusing to take orders from

Semke for fast selling models because of Semke’s refusal

to order slow selling models was a violation of the Act.

The proof showed Semke voluntarily resigned the dealer-

ship after refusal to take the orders. The Court concluded

that it was reasonable to interpret the Act as covering

an action based on wrongful termination “where the

dealer was forced to terminate because of the coercive

and intimidative acts of the manufacturer”.

In Mt. Lebanon Motors, Inc. v. Chrysler, 283 F.Supp.

453, 1968 Trade Cases 4 75,523, (D.C. Pa. 1968) the

dealer contended he was terminated because of personal

animosity arising from his prominent part in promoting

opposition by privately financed dealers to the manufac-

turers operation of “factory stores”. The manufacturer

contended the dealer was terminated for lack of sales.

The Court held it was a jury question whether the action

was motivated by honest business judgment or by personal

animosity, and, if by the latter, a cause of action existed.

In Autowest v. Peugeot, 434 F.2d 556, 1970 Trade

Cases 9 73,392 (2nd Cir. 1970), a damage award in

favor of the plaintiff under the DDICA was affirmed.

Autowest had argued to the jury that Peugeot tried to

coerce it into following suggested distributor pricing to

dealers and that failure to go along was the reason for

termination. The Court said:

“. .. the fact that this is a fringe area of antitrust

law is an important factor in our conclusion that

the coercion and termination in this case are unlaw-

ful, for the Automobile Dealers Day in Court Act

was designed in part to supplement the antitrust

laws. . . . (citing authorities )’’*

The Fifth Circuit upheld a jury verdict under the

DDICA in York Chrysler v. Chrysler Credit, 447 F.2d

786, 1971 Trade Cases 4 73,636 (Sth Cir. 1971). The

dealer contended the manufacturer wanted a high volume

dealership, and proposed a “dealer enterprise” operation.

When the dealer refused to go along, the manufacturer

and its sales subsidiary allegedly pursued a course of con-

duct designed to coerce and intimidate the dealer into

complying. The Court held that the jury might properly

conclude that the total conduct was violative of the Act.

(citing Semke, supra). The fact that Chrysler may have

had grounds for lawful termination did not permit the

Court to set aside a jury verdict after a trial which pro-

vided ample opportunity for the defense to be asserted

(citing Frank Chevrolet v. General Motors, 419 F.2d

1054, 1970 Trade Cases 472,998 (6th Cir. 1969)).”

Junikki Imports v. Toyota, 335 F.Supp. 593, 1972

Trade Cases § 73,911 (N.D. Ill.) held that the manu-

facturer can not claim it had no duty to supply auto-

mobiles because no obligation was stated in the dealer’s

contract, that the manufacturer had a duty to supply

enough vehicles to allow the dealership to be successful,

and that deliberately undersupplying stock needed to

22. The case also contains a pertinent discussion of damages. The

Court upheld damages based on a 10-year projection of lost profits

very similar to that in the present case.

23. In respect to Ch ’s contention of lawful ground for termi-

nation, the case is remarkably similar to the case at hand, for York

was precariously short of capital for an extended period, was “out of

trust” and ton heey and its assets were taken over by Chrysler.

cover Plaintiff's overhead, to force Plaintiff out of busi-

ness, constituted a violation of the Act.

Rea and 22 Ford v. Ford Motor Company, 497 F.2d

577, 1974 Trade Cases 4 75,029 (3rd Cir. 1974) held

it was a violation of the DDICA for the manufacturer

to use coercion on the dealer to cancel a competing

(Oldsmobile) dealership owned by the dealer,** saying

that in applying the definition of good faith, it is neces-

sary to consider not only whether one party brought

pressure to bear on the other, but for what reason it

did so.

The case of McGeorge Car Company v. Leyland Motor

Sales, Inc., 504 F.2d 52, 1974-2 Trade Cases 4 75,257

(4th Cir. 1974), involved anti-trust and DDICA claims.

Although the court found the conduct complained of did

not amount to tying (because McGeorge was free to and

did handle cars competitive to the “tied” product, i.e.

Rover automobiles) it did

“agree with the District Court that Leyland’s con-

duct in ‘shorting’ McGeorge in the delivery of Tri-

umphs in an attempt to compel it to accept the

Rover and Land Rover lines constituted a lack of

good faith on its part under the Dealers Day in

Court Act.””*

24. This point was suggested sua sponte by the trial court at

conclusion of the Plaintiff's evidence, and embraced by Plaintiff.

Even though the point was not previously alleged, the Appellate

Court found no prejudice resulted to the Defendant.

25. It is in that, in apparent contradiction to this reason-

ing, the Court held that it was proper for Leyland to cancel Mc-

because McGeorge would not “dual” Triumphs with Rovers,

saying that this was an entirely separate act dictated by sound

business judgment and not “continuing bad faith” infected by the

discrimination in the allocation to force the handling of Rovers.

In Richards v. American Motors, 1976-1 Trade Cases

q 60,796, (D.C. Utah 1976), the Court held that at-

tempts to force the dealer to move, to make him take on

other lines, and add a facility he could not afford “is the

type of coercive pressure that violates the Automobile

Dealers Day in Court Act”.

In Randy’s Studebaker Sales, Inc. v. Nissan Motor

Corp., 533 F.2d 510, 1976-1 Trade Cases 4 60,803 (10th

Cir. 1976) competing dealers complained to Nissan about

Randy’s price and Nissan warned Randy to keep its gross

margin, and thus the retail price, high. Later a new means

of allocating cars, based on a dealer’s “planning poten-

tial”, was introduced. Randy maintained that it was

arbitrary and served to diminish his supply and increase

the other dealers. Randy’s allocation was insufficient for

him to break even. Noting that the specific language of

H.R. 2850, condemns the practice, the Court said:

. an effort to compel a dealer to sell a specified

quota of its automobiles, parts or accessories would

be coercion. This is in contrast to normal sales

recommendation or persuasion.”*®

The dealer in Shor-Line Rambler, Inc. v. American

Motors Sales Corporation, supra, contended that AMC

terminated his dealership in bad faith as part of a plan

to reduce the number of its small dealerships, and ob-

tained a jury verdict and judgment. The circuit court

Though this may offend logic, it is not pertinent to the situation

at hand, since Maxfield was forced out of business because of the

arbitrary “shorting”.

26. This case contains a review of evidence of damages, in which

a 10-year profit projection was also employed. The approach was

parallel to that used by Dr. Stafford to calculate the Maxfield dam-

ages. The award was affirmed.

affirmed, saying the issue of bad faith “. . . is a factual

determination for the jury”.”’

Coercion, within the meaning of the Dealer’s Act, may

be implied, and a consistent pattern of conduct, in De-

fendants’ sum total of actions, construable as coercion

or intimidation is sufficient to sustain a cause of action.

Zarbock v. Chrysler, 235 F.Supp. 130 (D. Colo. 1964).

Not only is it a violation to exert pressure on a dealer

to take parts or automobiles he does not want or need,

Berry Brothers Buick v. General Motors, 257 F.Supp.

542 (E.D. Pa. 1966), but it has been held to be a viola-

tion for a manufacturer to discontinue manufacturing a

model it had contracted to sell. Buono Sales, Inc. v.

Chrysler Motors Corporation, 363 F.2d 43 (3rd Cir.

1966). Allegations that a manufacturer supplied less than

an equitable share of cars for the dealer’s region are

sufficient to state a cause of action. Sunrise Toyota Ltd.

v. Toyota Motor Co., 55 F.R.D. 519 (S.D. N.Y. 1972).

Imposing condition on renewal or continuance of a

dealership, and not allowing sufficient time to meet the

conditions, was held coercive and sufficient to sustain a

verdict for violation of the act by the Fifth Circuit in

Blackwell v. Kenworth Truck Co., 620 F.2d 104 (Sth

Cir. 1980).

In the case at hand, the authorities support a finding

of “bad faith” or “coercion” in a variety of ways. Under

Bergen Ramblers v. AMC, supra, AMC’s tying practice,

imposed on Maxfield, amounts to a lack of “good faith”

27. Damages in this case were also projected over a 10-year

period. The award was upheld, the Court quoting Semke that “to be

meaningful, such damages must include the amount of money that

- ee have obtained in the future from the profits from

ran \

under the DDICA. Even if AMC’s actions fall short of

establishing “tying” under the antitrust laws, AMC’s

efforts to force sale of the Ambassadors and Matadors

give rise to a DDICA claim on the authority of Semke v.

AMC, supra and McGeorge v. Leyland, supra. The

animosity of AMC directed toward Maxfield was suffi-

cient to create a cause of action under Mt. Lebanon v.

Chrysler, supra, as was AMC’s conduct designed to in-

timidate Maxfield into compliance with AMC’s wishes.

York Chrysler v. Chrysler Credit, supra. AMC violated the

manufacturer’s duty to supply sufficient saleable vehicles

to allow the dealership to be successful and deliberately

undersupplied Maxfield, which sustains an action on

authority of Junikki Imports v. Toyota, supra. And the

pressure, through both deceit and coercion, to take un-

wanted and unneeded parts and cars is one of the basic

abuses the act was designed to prevent. H. R. 2850,

supra.

Under the authorities, the jury was entitled to pass on

AMC’s intentions in light of its actions. Its good faith

was a question for the jury’s factual determination. The

lower courts erred in failing to obtain that determination.

CONCLUSION

The Fifth Circuit opinion ignores essential facts sup-

porting the Petitioner’s position, and assumes advocacy

of Respondent’s factual position, even to the extent of

stating the converse of evidence elicited from AMC repre-

sentatives and records. The basic principle of Boeing

v. Shipman is, therefore violated but, more fundamentally,

the right of trial by jury is denied, for the court usurped

the fact finding function.

The temptation for a Court to become the arbiter of

facts is ever present. Coloration of the facts that is in-

consistent with or unsupported by the record can make

the result appear justifiable when it is not. Usurpation of

the fact finding function, and surreptitious encroachment

on the jury system, must be carefully avoided. It is for

this reason that the Boeing v. Shipman rule was designed

to test grants of directed verdict. The right of trial by

jury requires that juries resolve issues of fact.

It is respectfully submitted that this Petition should be

granted, and the decisions of the lower courts should be

reversed and the cause remanded for trial.

Respectfully submitted,

JACK N. Price, P.C.

410 Congress Avenue

Second Floor

Austin, Texas 78701

512/474-1563

State Bar No. 16293000

CERTIFICATE OF SERVICE

I do hereby certify that a true and correct copy of the

above and foregoing document has been forwarded to the

opposing counsel of record, postage prepaid and properly

addressed on this the __ day of June, 1981.

JACK N. PRICE

APPENDIX

A-l

APPENDIX A

BOB MAXFIELD, INC., d/b/a Bob Maxfield

American, et al.,

Plaintiffs-Appellants,

and

William Fraker and Aileen Fraker,

Plaintiffs-Cross Appellees,

Vv.

AMERICAN MOTORS CORPORATION, et al.,

Defendants-Third Party Plaintiffs-Appellees-

Cross-Appellants,

Vv.

James R. MAXFIELD, III, et al.,

Third Party Defendants-Appellants-Cross Appellees.

No. 79-2150

UNITED STATES COURT OF APPEALS

Fifth Circuit

Unit A

Feb. 23, 1981

Automobile dealer brought action against automobile

manufacturer alleging antitrust violations and violation

of the Automobile Dealers Act. The United States District

Court for the Southern District of Texas, Ross N. Sterling,

J., granted judgment for the manufacturer and the dealer

appealed. The Court of Appeals, Wisdom, Circuit Judge,

held that: (1) district court did not abuse its discretion

A-2

in refusing to allow dealer’s tardy amendment seeking

to add allegations of “full-line forcing”; (2) dealer could

not recover against manufacturer for alleged antitrust

violations, in the absence of evidence that the manufac-

turer used any coercion to force dealer to accept un-

wanted big cars in order to obtain small cars; (3) dealer

presented no substantial evidence that manufacturer used

any coercion and therefore dealer could not recover under

the Automobile Dealers Act; and (4) district court did

not abuse its discretion in excluding dealer’s proffered

evidence of manufacturer’s alleged attempt to force other

dealers to take unwanted cars.

Affirmed in part, vacated in part and remanded.

Appeals from the United States District Court for the

Southern District of Texas.

Before WISDOM, GARZA and REAVLEY, Circuit

Judges.

WISDOM, Circuit Judge:

This is an action for damages brought under section 1

of the Sherman Act, 15 U.S.C. §1 (1976); section 3

of the Clayton Act, id. § 14; and the Automobile Dealers

Act, id. §§ 1221-1225. There are also counterclaims,

cross-claims, and third party complaints arising out of

notes and guaranties made by the plaintiff and its prin-

cipals. At the close of a jury trial, the district court

granted a directed verdict for the defendants on all of

the plaintiff's claims. In a separate bench trial, the court

granted judgment for the defendants on the counterclaims.

A-3

On appeal, the plaintiff asserts several errors: (1) the

district court abused its discretion in refusing to permit

the plaintiff to amend its complaint; (2) the directed

verdicts on the antitrust and Dealers Act charges were

improper; (3) the trial judge improperly excluded certain

testimony offered by the plaintiff; and (4) the judgment

on the counterclaim was improper under Texas law. We

affirm the judgment of the district court in all respects

as to the plaintiff’s antitrust and Dealers Act complaint.

We remand the judgment on the claims for indebtedness,

however, for a new determination of the amount of the

award,

This case concerns the unhappy relationship between

American Motors Corporation (“AMC”), a major auto

manufacturer, and Bob Maxfield, Inc., one of AMC’s

retail dealers in the Houston area.’ Maxfield opened busi-

ness as an AMC dealer in March 1972. In May 1973

AMC terminated Maxfield’s franchise and took over

operation of the dealership.

1. The original plaintiff in the antitrust and Dealers Act suit is

Bob Maxfield, Inc., a ng reong owned by Bob Maxfield and his

business backer, William Fraker. The defendants are AMC, its sub-

sidiaries American Motor Sales Corp. and American Motors Realty

Corp., and Memorial Bank of Houston. Memorial Bank counter-

claimed against Bob Maxfield, Inc. for indebtedness. It also cross-

claimed against American Motors Sales and impleaded Bob Maxfield,

William Fraker, and their wives, Sondra Maxfield and Aileen Fraker,

all of whom guaranteed the debt of Bob Maxfield, Inc. American

ep Sales cross-claimed against the Maxfields and the Frakers on

ty.

trial judge granted the Bank’s motion for a directed verdict at

the close of evidence in the antitrust and Dealers Act trial. That

ruling is not

We refer to all of the American Motors defendants collectively as

“AMC”. For purposes of the antitrust and Dealers Act issues, we

mad = the plaintiff as “Maxfield” and to its principal as “Bob

A-4

Disputes with AMC marred Maxfield’s tenure as a

dealer almost from the start.2 AMC provided Maxfield

with an initial inventory of parts; Maxfield could return

unneeded stock for full credit within 90 days. Maxfield

alleges that AMC urged it to keep the parts for another

90 days, promising to take them back at the end of that

time. AMC, it says, reneged on the promise. AMC denies

having made the promise. Again, Maxfield alleges that

AMC wrongfully delayed giving it permission to install

certain lubricating equipment leased from another com-

pany.

By far the most important source of friction, however,

was the problem of product mix in the line of cars AMC

sold to Maxfield. During 1972 and 1973 AMC made

two lines of small cars, the Gremlin and the Hornet.

These models were very popular—so much so that AMC

suffered a nationwide supply shortage and rationed the

cars among its dealers. At the same time, AMC’s two

models of large cars, the Ambassador and the Matador,

were considerably less successful on the retail market.

The heart of Maxfield’s complaint is that AMC made it

take large cars that it did not want and could not sell

in order to obtain the small cars it needed. AMC, it

alleges, made peremptory demands and used hard-sell

salesmanship to get Maxfield to take the “full line” of

AMC cars. AMC promised to take back unsold big cars

and then broke the promise. Finally, when Maxfield re-

2. There were numerous disputes between AMC and Maxfield that

may have entered into AMC’s decision to terminate the dealership.

These concerned the plaintiff's failure to maintain its net working

capital at the required $200,000 sum, submission of allegedly false

financial statements which inflated the net working capital, poor sales

performance, financial problems, and personnel problems, Maxfield

does not complain about the termination.

A-5

fused to cooperate, allegedly AMC retaliated by cutting

back Maxfield’s supply of small cars. AMC denies that

there was any coercion, deceit, or discrimination.

I. Denial of Leave to File Third Amended Complaint

The original complaint and first amended complaint

in this case were filed on July 24, 1973, and February

11, 1974, respectively. Both alleged the same antitrust

violation; an illegal tie-in arrangement, in violation of

section 1 of the Sherman Act and section 3 of the Clayton

Act. The second amended complaint, filed November 7,

1975, added allegations of “full-line forcing”, in violation

of these same sections, and an attempt to monopolize

through a dual distribution system, in violation of section

2 of the Sherman Act.

On April 7, 1977, about a month before the trial date

and nearly four years after the commencement of the

suit, Maxfield sought leave to file a third amended com-

plaint, adding an allegation of illegal exclusive dealing.

The basis for the new allegation was the provision in

Maxfield’s franchise agreement prohibiting it from ob-

taining a dealership from any other auto manufacturer.

[1-3] The mere existence of an exclusive dealing clause

in a contract does not establish an antitrust violation.

As the Supreme Court has held,

[E]ven though a contract is found to be an exclusive

dealing arrangement, it does not violate [section 3

of oe Clayton Act] unless the court believes it

probable that performance of the contract will fore-

close competition in a substantial share of the line

of commerce affected.

Tampa Electric Co. v. Nashville Coal Cc., 1961, 365

US. 320, 327, 81 S.Ct. 623, 628, 5 L.Ed.2d 580, 586-

87. To determine whether the foreclosed competition is

“substantial”, the court must look at “the relative strength

of the parties, the proportionate volume of commerce

involved in relation to the total volume of commerce in

the relevant market area, and the probable immediate

and future effects which pre-emption of that share of the

market might have on effective competition therein”.

Id., 365 U.S. at 329, 81 S.Ct. at 629. The court must

also determine the relevant line of commerce and geo-

graphic market. Jd., 365 U.S. at 327-28, 81 S.Ct. at 627-

AMC opposed Maxfield’s motion, pointing out that this

was the first time in the suit that Maxfield had asserted

any injury resulting from its inability to do business with

other auto manufacturers. Because the proposed amend-

ment was filed only one month before the trial, AMC

had no opportunity to conduct discovery on any of the

points mentioned in Tampa Electric. In particular, AMC

had not undertaken any discovery as to whether Maxfield

would have sought another dealership but for the fran-

chise clause and, if so, whether it could have obtained

one and at what cost. Yet if Maxfield were to show any

effect on competition, it would have had to show at least

some likelihood that it would have sought and obtained

a dealership from one of AMC’s competitors. In these

circumstances, the district court did not abuse its dis-

cretion in refusing to allow the tardy amendment. Fed.

R. Civ. P. 15(a); Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 1971, 401 U.S. 321, 330-31, 91 S.Ct. 795,

802, 28 L.Ed.2d 77, 87-88; Wealden Corp. v. Schwey,

5 Cir. 1973, 482 F.2d 550, 552; Nevels v. Ford Motor

A-7

Co., 5 Cir. 1971, 439 F.2d 251, 257; Jones v. Metzger

Dairies, 5 Cir. 1964, 334 F.2d 919, 925-26, cert. denied,

379 U.S. 965, 85 S.Ct. 659, 13 L.Ed.2d 559 (1965).

II. The Antitrust Directed Verdict

Maxfield’s antitrust case relies on two theories: an

illegal tie-in, in violation of section 1 of the Sherman Act,

and an illegal full-line forcing policy, in violation of

section 3 of the Clayton Act.’ The two theories of lia-

bility are substantively synonymous. Heatransfer Corp.

v. Volkswagenwerk, A.G., 5 Cir. 1977, 553 F.2d 964,

976, cert. denied, 434 U.S. 1087, 98 S.Ct. 1282, 55

L.Ed.2d 792 (1978); L. Sullivan, Handbook of the Law

of Antitrust § 153 (1977). We have said that an illegal

tying arrangement has four characteristics:

(1) two separate products, the tying product and

the tied product;

(2) sufficient market power in the tying market to

coerce purchase of the tied product;

(3) involvement of a non insubstantial amount of

interstate commerce in the tied market; and

(4) anticompetitive effects in the tied market.

Driskill v. Dallas Cowboys Football Club, Inc., 5 Cir.

1974, 498 F.2d 321, 323.

[4, 5] The trial judge properly granted AMC’s motion

for a directed verdict on this charge because Maxfield

presented no evidence that AMC used any coercion to

force it to accept Ambassadors and matadors. We have

3. Maxfield’s second amended complaint also alleged an attempt

to monopolize retail sales. Maxfield does not appeal the district court’s

great of Giveciad verdict fer AMC én that count.

A-8

held that actual coercion is an indispensable element of

a tie-in charge. A manufacturer may use strong persua-

sion, encouragement, or cajolery to the point of obnox-

iousness to induce his retailer to buy its full line of

products. An antitrust violation occurs only if it goes

beyond persuasion and coerces or forces its customer to

buy the tied product in order to obtain the tying product.

Ogden Food Service Corp. v. Mitchell, 5 Cir. 1980, 614

F.2d 1001, 1002; Response of Carolina, Inc. v. Leasco

Response, Inc., 5 Cir. 1976, 537 F.2d 1307, 1327-28.*

We cannot see any evidence that AMC coerced Max-

field into taking unwanted large cars. Viewing the record

in the light most favorable to Maxfiield,’ we can see that

AMC’s representatives tried vigorously to sell big cars

to Maxfield. On numerous occasions they “informed”

Bob Maxfield or his sales manager of the numbers of each

model they wanted Maxfield to buy. They “persuaded”

or “encouraged” Maxfield to take the suggested number

of big cars, and they sometimes became angry when it

refused. On one occasion an AMC representative ordered

Ambassadors on Maxfield’s behalf, without its consent.

(Maxfield refused delivery.) Another time a representa-

tive talked Maxfield into taking big cars by promising to

“move them awiy” if they did not sell—a promise not

kept. AMC’s policy was to persuade all of its dealers to

take the full line, and there were strong job incentives

4. In Ogden Food we noted that the coercion requirement does

not apply in suits brought by third party competitors of a supplier

who ties his products together. We reaffirmed the Response rule as

it applies in suits brought by a franchisee against his franchisor.

614 F.2d at 1002 n.3, citing Heatransfer Corp. v. Volkswagenwerk,

AG., 5 Cir. 1977, 553 F.2d 964, 978, cert. denied, 434 U.S. 1087,

98 S.Ct. 1282, 55 L.Ed.2d 792 (1978).

5. Boeing Co. v. Shipman, § Cir. 1969, 411 F.2d 365 (en banc).

A-9

for AMC management personnel to carry out that policy.

What is entirely missing from this list of horrors, how-

ever, is any evidence that AMC ever required Maxfield

to take large cars or face a cutoff of small cars. At most,

there are two ambiguous, conclusory statements by Bob

Maxfield and his sales manager suggesting that such a

requirement existed—statements accompanied by admis-

sions that no one ever made any actual threat to that

effect. In twelve days of trial, Maxfield did not show one

instance of any particular occurrence or statement show-

ing an enforced requirement that it buy big cars. On the

contrary, the record shows several instances in which

Maxfield successfully resisted attempts to place big cars

with it.

From December 1972, when plaintiff refused Ambassa-

dors, through May 1973, the last month of the plaintiff's

tenure as a dealer, the plaintiff received only 5 Matadors

and 5 Ambassadors, but also received 73 Gremlins and

38 Hornets, was invoiced for approximately 51 more in

May, and was promised an additional 100 cars to be built

in June and July.

Nor was there any evidence of an implied requirement

backed by sanctions. Maxfield’s case on this point is

simple: after it refused to buy big cars, AMC started

cancelling orders for small cars, leaving other orders

unfilled, and delaying delivery. Here the missing piece is

any causal connection between Maxfield’s refusal to take

the unwanted cars and AMC’s reluctance to supply small

cars. The weakness in Maxfield’s argument is the fallacy,

post hoc ergo propter hoc. In fact, according to AMC’s

uncontradicted evidence, the reason for Maxfield’s diffi-

culty in obtaining Gremlins and Hornets was that there

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was a nationwide shortage of them. No AMC dealer was

receiving his full orders of small cars; indeed, the record

shows, Maxfield fared better than most AMC dealers.°

III. The Direct Verdict on the Automobile

Dealers Act

[6] Section 2 of the Automobile Dealers Act provides

in part that:

An automobile dealer may bring suit against any

automobile manufacturer . . . and shall recover the

damages by him sustained and the cost of suit by

reason of the failure of said automobile manufac-

turer ... to act in good faith in performing or com-

plying with any of the terms or provisions of the

franchise, or in terminating, cancelling, or not re-

newing the franchise with said dealer.

15 U.S.C. § 1222 (1976) (emphasis added). By using

a standard of “good faith”, the Act seems on first reading

to give a wider protection to dealers such as Maxfield

than do the tie-in provisions of the antitrust laws. On

closer examination, however, it is apparent that the Act

6. Consider, for example, the mysterious incident of the hundred

Gremlins and Hornets. Only a few days after AMC took over Max-

field’s dealership, AMC trucks delivered one hundred Gremlins and

Hornets there, virtually wiping out the dealership’s backlog of unfilled

orders. One witness said he had never seen so many cars dumped on

one lot at a single time before. Maxfield speculates, with no further

factual support, that this proves AMC was holding back Maxfield’s

small cars, keeping them in some unknown storage field. On the con-

trary, AMC’s uncontradicted evidence shows that this delivery was a

result of Maxfield’s urgent pleas for more small cars. About a month

before termination, AMC responded to those pleas by promising to pro-

duce a hundred cars specially for Maxfield. There is no evidence whatso-

ever of any connection between the promise and delivery, on one

hand, and the decision to terminate Maxfield’s franchise, on the other.

A-11

means less than it purports to say, for it gives “good

faith” a much narrower meaning than it has in ordinary

legal usage. “Good faith” is defined in section 1(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, expo-

sition, persuasion, urging, or argument shall not be

deemed to constitute a lack of good faith.

15 U.S.C. § 1221(e) (1976) (emphasis added). Accord-

ingly, it is well established that actual coercion, intimida-

tion, or threats are an essential element of a cause of

action under the Act. Southern Rambler Sales, Inc. v.

American Motors Corp., 5 Cir. 1967, 375 F.2d 932,

935, cert. denied, 389 U.S. 832, 88 S.Ct. 105, 19 L.Ed.2d

92 (1967); Woodard v. General Motors Corp., 5 Cir.

1962, 298 F.2d 121, 127, cert. denied, 369 U.S. 887,

82 S.Ct. 1161, 8 L.Ed.2d 288 (1962); see H.R.Rep. No.

2850, 84th Cong., 2d Sess. 9, reprinted in [1956] U.S.

Code Cong. & Ad. News, pp. 4596, 4603."

7. Accord, e.g., Sherman v. British Leyland Motors, Ltd., 9 Cir.

1979, 601 F.2d 429, 445; Minson Plymouth, Inc, v. Chrysler Motors

Corp., 4 Cir. 1977, 554 F.2d 1266 (per curiam); Fray Chevrolet

Sales, Inc. v. General Motors Corp., 6 Cir. 1976, 536 F.2d 683, 685;

Lawrence Chrysler Plymouth, Inc. v. Chrysler Corp., 7 Cir. 1972, 461

F.2d 608, 610, cert. denied, 409 U.S. 981, 93 S.Ct. 317, 34 L.Ed.2d

245 (1972); Autowest, Inc. v. Peugeot, Inc., 2 Cir. 1970, 434 F.2d

556, 561; Hanley v. Chrysler Motors Corp., 10 Cir. 1970, 433 F.2d

708, 712; Kotula v. Ford Motor Co., 8 Cir. 1964, 338 F.2d 732,

734, cert. denied, 380 U.S. 979, 85 S.Ct. 1333, 14 L.Ed.2d 273

(1965); Globe Motors, Inc. v. Studebaker-Packard Corp., 3 Cir.

1964, 328 F.2d 645, 646.

A-12

[7] Maxfield’s primary allegation under the Dealers Act

is the same as its antitrust allegation: AMC coerced it

into buying Ambassadors and Matadors it did not want.

As we held with regard to the antitrust complaint, there

is no substantial evidence that AMC used any coercion,

intimidation, or threats against Maxfield to force it to

take big cars.

Maxfield also contends that AMC violated the Act by

three lesser sins: its wrongful delay in permitting Max-

field to install another manufacturer’s lubrication equip-

ment; its deceitful and unkept promise to take back an

overstock of parts; and its deceitful and unkept promise

to “move away” certain Ambassadors if Maxfield could

not sell them. Assuming that AMC committed these acts

(and even assuming that it did so in “bad faith” in the

usual sense of the term), however, it is clear that these

acts cannot be characterized as coercive, intimidating, or

carrying threats. Accordingly, we hold that Maxfield

presented no substantial evidence of coercion to support

an allegation under the Dealers Act; the directed verdict

for AMC was proper.

IV. The Excluded Testimony

[8,9] Maxfield sought to bolster its case on coercion

by presenting testimony* by two former AMC dealers and

a former AMC official concerning AMC’s alleged at-

tempts to force the two other dealers, Robert Semke and

8. Only Robert Semke appeared to testify in person. His testi-

mony was taken outside the presence of the jury. Maxfield sought to

introduce depositions of Robert Dilmore and William Morgan.

Semke’s testimony and Dilmore’s deposition were excluded entirely.

Parts of Morgan’s deposition, relat to Maxfield’s dealings with

AMC, were read into evidence, but court excluded other parts

dealing with Morgan’s testimony in a civil suit brought by Dilmore.

A-13

Robert Dilmore, to take unwanted cars. Such testimony

is logically relevant to Maxfield’s case, within the mean-

ing of Fed. R. Ev. 401, because it bears on the likelihood

that AMC exerted similar coercion against Maxfield.

Nevertheless, we conclude that its exclusion was not

error. Fed. R. Ev. 403 provides:

Although relevant, evidence may be excluded if

its probative value is substantially outweighed by the

danger of unfair prejudice, contusion of the issues,

or misleading of the jury, or by considerations of

undue delay, waste of time, or needless presentation

of cumulative evidence.

Here, the probative value of the excluded testimony is

small. Neither the record nor the excluded testimony con-

tains any evidence of any national AMC policy of tying

big cars to small cars. On the contrary, Maxfield’s con-

sistent theory throughout the case has been that particular

AMC representatives acted to force it to take Ambassa-

dors and Matadors. Neither of the two dealers were in

the same sales region as Maxfield, and one sold his AMC

dealership nearly ten years before Bob Maxfield started

his. Neither dealt with the same AMC personnel. Max-

field did not call any of the 17 AMC dealers who had

been in business in the Houston area from 1966 to 1976.

On the other side of the balance, the possibility of con-

fusion and waste of time is considerable. Admission of

the testimony would have required collateral argument

as to the merits of the two dealers’ complaints. Moreover,

AMC has seventeen dealers in the Houston area and

more than two thousand nationally. Admission of the

testimony would have impelled AMC to bring in evidence

a large number of dealers who, AMC asserts, would cor-

roborate its assertion of lack of coercion. In these circum-

A-14

stances it was no abuse of discretion to exclude this

evidence.’

V. The Counterclaim

Having disposed of Maxfield’s claims under the anti-

trust laws and the Dealers Act, we now must address

several issues relating to Memorial Bank’s counterclaim.

This portion of the case involves three sets of transactions.

First, Bob Maxfield, Inc. issued a promissory note to the

Bank in March 1972 for $150,000 plus interest, in con-

sideration of the Bank’s loan for Maxfield’s original capi-

talization. Backing the note was a security agreement

between the Bank and Bob Maxfield, Inc., and two

guaranty agreements. One was signed by Bob Maxfield,’’

William Fraker, and their wives Sondra Maxfield and

Aileen Fraker. The other was a guaranty or take-out letter

from AMC. Second, the Bank extended a $600,000 line

of credit to Bob Maxfield, Inc. to fund its “floor plan” or

continuing inventory of cars. Box Maxfield, Inc. issued a

separate promissory note for each car or small set of cars.

This floor plan debt was backed by a security agreement

from Bob Maxfield, Inc. and by a guaranty agreement

signed by the Maxfields and the Frakers. Third, in the

spring of 1973 Bob Maxfield, Inc. had run up an over-

draft of about $60,000. It issued a new promissory note

9. Even if the exclusion of the testimony was erroneous, it was

harmless. Maxfield presented no evidence that it particularly was

coerced. Without that evidence, AMC was entitled to a directed

verdict, even if Maxfield had shown a national tying policy. See

Ungar v. Dunkin’ Donuts, 3 Cir. 1976, 531 F.2d 1211, 1224-25,

cert. denied, 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1976);

Halverson v. Convenient Food Mart, Inc., 1974, N.D. Ill, 69 F.R.D.

331, 335-36; Abercrombie v. Lum’s, Inc., 1972, S.D. Fla., 345 F.Supp.

387, 391; Lak v. Shell Oil Co., 1970, S.D. Ohio, 50 F.R.D. 198.

10. Bob Maxfield’s full name is James R. Maxfield III.

A-15

to the Bank for $60,000, backed by a security agreement

and an assignment to the Bank of all of Bob Maxfield,

Inc.’s factory receivables from AMC.

At trial, the Bank recovered its outstanding deficiencies

on all three debts, plus interest and contractual attorney’s

fees, from Bob Maxfield, Inc. It made a similar recovery on

the capital note guaranty and floor plan guaranty from

the Maxfields and the Frakers. AMC had already paid

the Bank a large sum on its capital note guaranty, but the

Bank recovered a judgment against AMC for the re-

mainder on that note and for factory receivables payable

to Bob Maxfield, Inc. and assigned to the bank. AMC

recovered its capital note payment, as well as interest on

the factory receivables, from Bob Maxfield, Inc. and the

four individuals.

[10] A. Maxfield’s Setoffs. The Maxfields and Bob

Maxfield, Inc."* contend that the trial judge erroneously

gave judgment for the whole amount of the debt, ignoring

several thousand dollars in “setoffs”. The setoffs include

financial and physical assets of Bob Maxfield, Inc. seized

by the Bank; assets seized by AMC when it took over the

dealership; rent for the dealership facilities for the period

between the takeover and the foreclosure; and unauthor-

ized charges against Maxfield’s parts account.

The Bank argues that the Maxfield parties may not

raise these setoffs because they did not plead them as

11. Since this appeal was filed, the Frakers have entirely satisfied

the judgments entered against them. The Bank assigned all of its

rights under the judgment to the Frakers. In effect, then, the Bank

pod en ety tld oe Bagh. , and the Frakers now occup

the Bank’s former tion as appellees with respect to the indebted-

ness issues. In the interest of clarity, we will continue to refer to the

appellees in this matter as “the Bank”,

A-16

affirmative defenses. Fed. R. Civ. P 8(c); Chicago Great

Western Ry. v. Peeler, 8 Cir. 1944, 140 F.2d 865. It is

not clear to use that these items are setoffs; arguably they

bear directly on the amount of the debts outstanding. We

need not decide that question, however, because the

record shows that both the Bank and AMC consented to

litigate these claims at trial. See Dale Benz, Inc. v. Ameri-

can Casualty Co., 9 Cir. 1962, 303 F.2d 80, 84.

The district court made no findings of fact concerning

these claims. We vacate the judgments on the debts and

remand for reconsideration of the amounts in light of the

proof concerning Maxfield’s asserted setoffs.

[11] B. Order of Application. The Bank, asserting

its rights under three security agreements, foreclosed on

the assets of Bob Maxfield, Inc. The Bank’s calculations,

accepted by the district court, apply the proceeds of the

foreclosure first to attorney’s fees, then to the unguaran-

teed overdraft note, and finally to the debts guaranteed

by the Maxfields and the Frakers. The Maxfields contend

that this order of application is inequitable. But the

guaranty agreements expressly provide that the Bank is

empowered to apply any funds from Bob Maxfield, Inc.

first to unguaranteed debt. The guarantors, therefore, have

contractually waived any equitable right they might other-

wise have had to control the order of application.

{12, 13] C. Attorneys’ fees. All of Bob Maxfield,

Inc.’s notes provide for an attorney’s fee of ten percent

of the amount due at the time that the notes are put into

the hands of an attorney for collection. The Maxfields

and Bob Maxfield, Inc. contend that fees should be

awarded on only the deficiency remaining after the fore-

closure sale (plus subsequent interest), and not on the

A-17

entire original amount due when the debtor defaulted.

We disagree. Under Texas law, when an attorney acts

as trustee to foreclose on a deed of trust but performs no

services in his professional capacity, he may not collect

the contractual attorney’s fee. Hodges v. Star Lumber &

Hardware Co., Tex. Civ. App. 1976, 544 S.W.2d 185;

American National Insurance Co. v. Schenck, Tex. Civ.

App. 1935, 85 S.W.2d 833. Here, however, the Bank’s

attorney took numerous legal steps in preparation to fore-

close on the Maxfield assets. It does not matter whether

his professional services were directed toward a fore-

closure or some other avenue of collection; in either case

the notes were put into the hands of an attorney for

collection.

[14] The Maxfields contend that they are not person-

ally liable as guarantors for attorney’s fees. This is con-

tradicted by the text of their guaranty agreements under

which they guarantee “all indebtedness . . . not exceeding

the aggregate principal plus interest [on the notes]. .. .

together with and plus all . . . costs of collection wwing

and which may become owing thereon or in connection

therewith”. Record at 120, 130 (emphasis added).

The district court’s judgment is AFFIRMED as to the

antitrust and Automobile Dealers Act complaints. The

judgment as to indebtedness is VACATED and RE-

MANDED for reconsideration of the amount in accord-

ance with this opinion.

B-1

APPENDIX B

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 79-2150

BOB MAXFIELD, INC., d/b/a

Bob Maxfield American, ET. AL.,

Plaintiffs-Appellants,

and

WILLIAM FRAKER and AILEEN FRAKER,

Plaintiffs-Cross-Appellees,

versus

AMERICAN MOTORS CORPORATION, ET. AL.,

Defendants-Third Party Plaintiffs-Appellees,

Cross-Appellauts,

versus

JAMES R. MAXFIELD,

Third Party Defendants-Appellants, Cross-Appellees.

Appeal from the United States District Court for the

Southern District of Texas

ON PETITION FOR REHEARING

(MARCH 23, 1981)

B-2

Before WISDOM, GARZA and REAVLEY, Circuit

Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing filed

in the above entitled and numbered cause be and the

same is hereby DENIED.

ENTERED FOR THE COURT:

/s/ REYNALDO G. GARZA

United States Circuit Judge

CLERK’S NOTE:

SEE RULE 41 FRAP AND LOCAL

RULE 17 FOR STAY OF THE

MANDATE

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