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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1981
- **Citation:** 454 U.S. 860

## Text

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.

II
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) ...........

a]

6 ae, See

27

9, 40, 44

IV

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

43
30

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.

2

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.”

4

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

5

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

6

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

7

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.

9

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

10

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,

11

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

12

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

13

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,

14

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.

15

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.

16

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.

17

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

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.

19

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,

20

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.

21

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

22

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.

23

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.

24

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

25

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

26

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.

27

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-

28

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

29

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:

30

(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-

31

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.

32

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

33

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-

34

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,

35

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.

36

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.”

37

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.

38

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,

39

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

40

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.

41

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.

42

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.

43

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 \

Ad

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.

45

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.

As

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

A-10

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_2505%3A1. Public record. Not legal advice.