Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co. ( 2015 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 15a0127n.06
Case No. 14-3543
FILED
UNITED STATES COURT OF APPEALS Feb 12, 2015
FOR THE SIXTH CIRCUIT DEBORAH S. HUNT, Clerk
FRANKLIN PARK LINCOLN-MERCURY, )
INC., )
)
Plaintiff-Appellant, ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR
v. ) THE NORTHERN DISTRICT OF
) OHIO
FORD MOTOR COMPANY, )
)
Defendant-Appellee. )
)
BEFORE: BATCHELDER, MOORE, and SUTTON, Circuit Judges.
SUTTON, Circuit Judge. A turf war between two Lincoln-Mercury car dealerships in
Toledo, Ohio, apparently prompted this dispute. One of the dealerships, Franklin Park Lincoln-
Mercury, saw its hopes to dominate the luxury-car market in Toledo slip away when Ford Motor
helped its competition merge with a nearby Ford dealership. That led to this lawsuit, in which
Franklin Park claimed that Ford acted in bad faith in violation of the Ohio Motor Vehicle Dealer
Act. The district court disagreed and granted summary judgment for Ford. We affirm.
I.
For many years the Toledo luxury-car market included two stand-alone Lincoln-Mercury
dealerships: Franklin Park and Rouen. For many years Franklin Park told Ford Motor
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
Company, who owns the Lincoln and Mercury brands, that Toledo could support only one of the
two franchises—and that Franklin Park should be it.
Rouen is no more, but its disappearance from the market did not happen in the way
Franklin Park had hoped. In 2007, Rouen’s owner, Michael Rouen, received a lucrative offer to
sell the real estate underlying his Lincoln-Mercury dealership. He planned to accept the offer,
which would require him to sell the franchise or move it. Rouen first asked Ford if he could
move his Lincoln-Mercury operation into his Mitsubishi dealership next door, but Ford said no.
With nowhere to move the franchise, Rouen opted to sell it. He found a potential buyer in
Brondes Ford, a dealership a half a mile down the road.
News of a potential sale soon reached Rouen’s crosstown rival. Franklin Park confronted
Ford and asked if the rumors were true. Ford neither confirmed nor denied them. Franklin Park
gave Ford an ultimatum: either block the Rouen-Brondes merger (thus putting Rouen out of
business) or find someone to purchase Franklin Park.
Ford did not stop the sale and indeed ultimately facilitated it. The car company wanted to
keep two Lincoln-Mercury dealers in Toledo, as market studies revealed that doing so would
lead to greater profits and improved customer convenience. When Brondes Ford balked at
Rouen’s asking price and Rouen’s future seemed in peril, Ford came to the rescue, sealing the
deal by paying $180,000 of the price tag and offering $250,000 to update Brondes’ facilities.
The sales agreement permitted Brondes to operate the Lincoln-Mercury franchise on Rouen’s
property until the Ohio Board of Motor Vehicles approved an address change to Brondes’
location. Curiously, a separate letter of understanding suggested that Brondes would operate
there only for one day. Brondes apparently worked out of the Rouen dealership for less than a
2
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
week before moving the franchise into its Ford dealership. Only after the move did Franklin
Park receive formal notice of the merger.
Franklin Park was not happy. It filed a protest about the merger with the Ohio Motor
Vehicle Dealer Board. In its view, the relevant car-dealer law permitted it to protest Rouen’s
relocation for lack of good cause since both dealers sold the same brand of car and stood less
than ten miles apart. Ohio Rev. Code §§ 4517.50(A), 4517.57(C). Not so, the Board
determined, because the relocation fell within a statutory exception. If the relocating dealership
moves less than one mile from its original location, the statute says, no one gets protest rights,
even within a ten-mile radius. And “[t]he distance between the [Rouen] location and the
[Brondes] location,” the Board explained, “is less than a mile.” R. 21-9 at 7; see Ohio Rev. Code
§ 4517.50(C)(1). Franklin Park appealed the decision to the state courts but to no avail. See
Fleisher v. Ford Motor Co., No. 09AP-139, 2009 WL 2374554, at *4 (Ohio Ct. App. Aug. 9,
2009), appeal denied, 918 N.E.2d 525 (Ohio 2009) (table).
Meanwhile, Franklin Park filed this lawsuit in federal court. Only one of its claims
remains: that Ford “fail[ed] to act in good faith” in violation of the Ohio Motor Vehicle Dealer
Act when it “desired, facilitated, underwrote, and ultimately caused the Rouen-Brondes
transaction, over Franklin Park’s repeated objections.” Appellant’s Br. at 28; see Ohio Rev.
Code § 4517.59(1). The district court dismissed the claim on technical grounds, but we reversed.
See Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co. (Franklin Park I), 530 F. App’x
542, 544 (6th Cir. 2013). On remand, the district court granted summary judgment for Ford. See
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co. (Franklin Park II), No. 3:09-CV-792,
2014 WL 2114665, at *9 (N.D. Ohio May 16, 2014). Franklin Park appeals.
3
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
II.
Franklin Park claims the district court erred by applying the wrong legal standard for
determining good faith under the Ohio Motor Vehicle Dealer Act. Invoking our decision in Jim
White Agency Co. v. Nissan Motor Corp., 126 F.3d 832 (6th Cir. 1997), the district court ruled
that Ford’s decision to support the Rouen-Brondes merger did not violate the Act’s good faith
requirement because the choice was not “commercially unjustifiable.” Franklin Park II, 2014
WL 2114665, at *2. No error occurred.
The Dealer Act requires vehicle manufacturers like Ford “to act in good faith” toward
their dealerships. See Ohio Rev. Code § 4517.59(A)(1). “Good faith,” the Act says, is “honesty
in the conduct or transaction concerned and the observance of reasonable commercial standards
of fair dealing in the trade . . . , including, but not limited to, the duty to act in a fair and
equitable manner.” Id. § 4517.01(BB). This definition cross-references the definition of “good
faith” under Article 1 of Ohio’s version of the Uniform Commercial Code. See id. At the time
of the Rouen-Brondes deal, the UCC defined good faith as “honesty in fact in the conduct or
transaction occurred.” Id. § 1303.01(S) (West 2007).
Jim White applied the Dealer Act’s good faith standard. In the absence of guidance from
the Ohio Supreme Court, Jim White looked to Ohio cases interpreting the UCC Article 1
definition. 126 F.3d at 834. Based on that survey, it concluded that the Dealer Act forbids
manufacturers only from treating their dealers in “commercially unjustifiable” ways. Id.
(quoting Master Chem. Corp. v. Inkrott, 563 N.E.2d 26, 31 (Ohio 1990)).
Jim White’s interpretation of good faith under the Dealer Act—whether right, wrong, or
somewhere in between—binds later panels of this Court addressing the same issue until: (1) the
Sixth Circuit overrules Jim White en banc, (2) “an intervening and binding change” in Ohio law
4
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
occurs, or (3) Ohio courts “expressly indicate[]” Jim White went astray. Bennett v. MIS Corp.,
607 F.3d 1076, 1095 (6th Cir. 2010). Jim White has never faced en banc review, and no Ohio
court has disapproved of its reasoning. The Ohio legislature, it is true, amended the UCC Article
1 definition of good faith in 2011 by adding a fair-dealing element, but that amendment does not
apply retroactively to the 2008 Rouen-Brondes merger. 2011 Ohio Laws 9, sec. 3. Jim White
and its commercial-justification standard remain the governing standard.
Franklin Park points to an intervening change to the definition of good faith, but it is a
phantom. Invoking the official UCC commentary, the dealership submits that the 2011 addition
of the fair-dealing element to Article 1 good faith “merely confirms what has been the case for a
number of years.” Ohio Rev. Code § 1301.201 cmt. for 2011 revision. If fair dealing has been
an element of good faith for years as of 2011, the argument goes, fair dealing must have been an
element of good faith in 2008. And that means, the argument concludes, that a fairness standard,
not Jim White’s commercial-justification standard, applies to determine whether Ford acted in
bad faith.
Franklin Park misreads the UCC commentary. It does not say the meaning of the Article
1 definition changed; it says everything around Article 1 changed while the Article 1 definition
stayed the same. Article 1 provides default definitions of terms the UCC commonly employs
(like good faith), which are displaced only by definitions specific to other Articles. Ohio Rev.
Code Ann. § 1301.201(A). Over time, the commentary indicates, the Ohio legislature enacted
Article-specific definitions of good faith that included a fair-dealing element such that, as of
2011, the default definition in Article 1 applied to just two of the UCC’s nine Articles. Hence
the 2011 update to Article 1. What happened outside of Article 1, however, makes no difference
here. The Ohio Motor Vehicle Dealer Act references only the Article 1 definition of good faith.
5
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
And until 2011, that definition stayed the same, no matter how good faith was changing in
Articles 2 through 9. What we are left with is this: The UCC Article 1 definition of good faith
on which Jim White relied did not change before the Rouen-Brondes merger in 2008. That
reality defeats Franklin Park’s argument and supports the district court’s decision.
III.
Franklin Park separately argues that the district court improperly granted summary
judgment because “there is enough evidence” of Ford’s bad faith “such that a jury is required.”
Appellant’s Br. at 30. The benchmark for this argument is a familiar one. The district court
properly granted summary judgment to Ford if no reasonable jury could find that Ford’s actions
were commercially unjustifiable even after giving Franklin Park the benefit of all reasonable fact
inferences from the record. Fed. R. Civ. P. 56(a); see Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986); Jim White, 126 F.3d at 834.
Franklin Park I goes a long way toward resolving this argument. There, we considered
whether Ford’s support of the Rouen-Brondes merger amounted to a “predatory practice” under
the Dealer Act. See Ohio Rev. Code § 4517.59(A)(15); 530 F. App’x at 550. Franklin Park
argued that Ford was trying to put it out of business but had no direct evidence backing up its
allegation. Never mind, Franklin Park argued: The circumstances alone permitted an inference
of predatory intent. We disagreed. That inference was not reasonable, we held, because Ford
had a “legitimate . . . business reason” for supporting the Rouen-Brondes merger: Two viable
dealerships will make more money for Ford than one. 530 F. App’x at 550.
That insight prompts a similar conclusion here. Ford wanted to keep two Lincoln-
Mercury dealerships in Toledo to improve its overall sales. That by itself is an acceptable
commercial justification for Ford’s support of the Rouen-Brondes merger. But it is not the only
6
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
one. Ford also felt that having two dealerships would make customers happier than one because
the two locations would facilitate repair and other dealership visits by customers. Nor has
Franklin Park any direct evidence of bad faith. As the district court found the first time around,
and as is still true today, “There is absolutely no evidence in the record to support the charge that
[Ford] wanted to drive [Franklin Park] out of the Toledo market.” Franklin Park Lincoln-
Mercury, Inc. v. Ford Motor Co., No. 3:09-CV-792, 2011 WL 5361738, at *6 (N.D. Ohio Oct.
31, 2011). No emails, no letters, no affidavits—nothing at all shows that Ford’s conduct was
motivated by a bad faith effort to harm Franklin Park. With two legitimate business rationales to
support Ford’s actions and with no evidence of bad faith conduct by Ford, a jury could not
reasonably infer bad faith here.
Franklin Park counters that one key fact and two new affidavits permit an inference of
bad faith. The dealership sees bad faith in the fact that the letter of understanding permits
Brondes to operate the Lincoln-Mercury franchise at Rouen’s location for a single day. It claims
that Ford structured the deal so that Rouen would technically move less than a mile—at least for
a day—thus triggering the one-mile exemption for dealer protest rights and avoiding a costly
protest proceeding. But that does not make sense. Brondes Ford already sat just a half mile
away from Rouen Lincoln-Mercury. That means Franklin Park would not have had protest
rights anyway. We cannot infer bad faith from an action that everyone knew could not possibly
harm Franklin Park under this feature of state law.
Nor do the affidavits of Franklin Park President Robert Fleischer and the dealership’s
expert witness, Dr. John Matthews, save Franklin Park’s case. Fleischer’s affidavit at most
shows that he inferred bad faith from the circumstances surrounding the deal. Whether that
inference is reasonable is a legal conclusion. “That [Franklin Park’s] president would reach a
7
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
different legal conclusion than the district court is not sufficient to defeat a motion for summary
judgment.” FRC Int’l, Inc. v. United States, 278 F.3d 641, 643 (6th Cir. 2002). Dr. Matthews
for his part states that “a single Lincoln store in Toledo would be sufficient to penetrate the
market” and that “the Toledo market would be better served by one store.” R. 106-7 at 3–4.
Maybe so. But that opinion does not support the inference he attempts to draw—that the Rouen-
Brondes deal was done in bad faith and was neither “commercially reasonable” nor “justifiable.”
Id. at 9. That Ford and Dr. Matthews have a different take on what would be the best business
plan for Toledo—two luxury-car dealerships or one—does not suffice to create a cognizable
claim of bad faith. Even on its own terms, moreover, the Matthews’ affidavit has flaws. Rich on
undisputed facts and conclusions, it displays scant analysis. “Simply having experts restate
general facts and announce legal conclusions without any analysis does not create a genuine
issue of material fact.” Doe v. Magoffin Cnty. Fiscal Court, 174 F. App’x 962, 974 (6th Cir.
2006).
Franklin Park offers one other reason for reversing the district court. “That there is a
business reason, or even several reasons, for conduct,” it says, “cannot mean that the conduct is
automatically commercially justifiable.” Reply Br. at 5. True enough. But neither can it be true
that every allegedly commercially unjustifiable action by a car company or dealer prompts a jury
trial so long as the claimant identifies business reasons for not taking the course of action of the
defendant. Commercial unjustifiability is a proxy for bad faith. One does not show bad faith
merely by identifying a competing business plan. One must show that the plan adopted by the
defendant did not make sense even on its own terms. That was not true here, as our prior opinion
confirmed: “Ford made a business decision in what it perceived to be in its own best interest.
There is nothing in the record to indicate that it was anything more than that.” Franklin Park I,
8
Case No. 14-3543
Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Co.
530 F. App’x at 551. This is not a case in which Ford took an unusual or for that matter
draconian action for a nonexistent benefit. It merely consolidated two crosstown dealerships
because it believed that keeping two Lincoln-Mercury dealers in the Toledo market best served
its interests. That choice does not exceed the bounds of reason or create a fact dispute about
whether its actions were commercially justifiable.
For these reasons, we affirm.
9