Danvers Motor Co. v. Ford Motor Co.

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
12-19-2005
Danvers Mtr Co Inc v. Ford Mtr Co
Precedential or Non-Precedential: Precedential
Docket No. 04-3950
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-3950
DANVERS MOTOR CO., INC., a Massachusetts
corporation;
BOB CHAMBERS FORD, d/b/a Augusta Ford, a Maine
corporation;
CONCORD FORD-LINCOLN-MERCURY, a New York
corporation;
FETTE FORD INC., a New Jersey corporation; SENATOR
FORD, INC.,
a Delaware corporation; ROSEVILLE MIDWAY FORD
COMPANY, a Minnesota
corporation; FULLERS' WHITE MOUNTAIN MOTORS, an
Arizona corporation;
CONDON FORD, INC., an Iowa corporation; G. & S.
MANAGEMENT
CORPORATION, d/b/a Tilton Ford, a New Hampshire
corporation,
on behalf of themselves and all others similarly situated,
Appellants
v.
FORD MOTOR COMPANY
ON APPEAL FROM THE UNITED STATES DISTRICT
COURT
FOR THE DISTRICT OF NEW JERSEY
(Dist. Ct. No. 02-CV-02197)
District Court Judge: Hon. John W. Bissell, Chief Judge
Argued: July 15, 2005
Before: ALITO, VAN ANTWERPEN, and ALDISERT, Circuit
Judges
(Filed: December 19, 2005 )
Counsel for Appellant
Eric L. Chase (argued)
Genevieve K. LaRobardier
Bressler, Amery & Ross, P.C.
325 Columbia Turnpike
Florham Park, NJ 07932
Barry S. Goodman
Greenbaum, Rowe, Smith
& Davis, LLP
Metro Corporate Campus One
Woodbridge, NJ 07095
Counsel for Appellees
James F. Hibey (argued)
William R. Sherman
Coke Morgan Stewart
Howrey Simon Arnold & White, LLP
1299 Pennsylvania Ave., NW
Washington, DC 20004
OPINION OF THE COURT
ALITO, Circuit Judge:
Eight automobile dealers appeal the District Court’s
2
dismissal of their claims against the Ford Motor Company for lack
of standing. Because their complaint alleges concrete and
particularized injuries that are fairly traceable to Ford’s behavior
and redressable in court, we reverse and remand.
I.
In November 2000, a putative nationwide class of Ford
dealers brought suit, claiming that Ford’s recently introduced Blue
Oval Program (“BOP”) violated state and federal law. A District
Court dismissed the case without prejudice for lack of standing.
Danvers Motor Co. v. Ford Motor Co., 186 F. Supp. 2d 530 (D.N.J.
2002) (“Danvers I”).
Instead of appealing Danvers I, the Plaintiffs revised their
complaint and filed it anew on May 6, 2002. Ford responded with
a motion to dismiss, which prompted Plaintiffs’ latest effort, an
“amended and supplemented” complaint filed on January 7, 2003.
In an unpublished opinion we will call Danvers II, the District
Court held that eight of the nine named Plaintiffs “do not yet have
an injury that will support constitutional standing.” Joint Appendix
(“App.”) at 24. The ninth Plaintiff is not a party to this appeal.
A.
“When reviewing an order of dismissal for lack of standing,
we accept as true all material allegations of the complaint and
construe them in favor of the plaintiff.” Conte Bros. Automotive,
Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221, 224 (3d Cir.
1998). We therefore relate the facts as alleged in the Plaintiffs’
complaint.
Plaintiffs sell Ford automobiles in accordance with “the
terms of a standard Ford Franchise Agreement.” Complaint ¶¶
33–36. They claim that Ford’s BOP “is part of a coordinated
objective to control and micromanage all Ford dealerships.” Id. ¶
42. Ford describes its BOP, introduced in April 2000, as a
nationwide customer service and satisfaction incentive program
designed to improve dealer performance. It is technically
voluntary, but every Ford dealer is forced to bear the costs of the
3
program, while only those who are “BOP certified” may reap its
benefits. All eight dealers on appeal have been certified.1
In order to finance its BOP, Ford charges an additional 1%
for its automobiles, leaving the Manufacturer’s Suggested Retail
Price unchanged. When dealers sell the vehicles, Ford essentially
reimburses them by giving them a “bonus” of 1.25% if the dealers
met the initial certification requirements by April 17, 2001. The
bonus drops to 1% if the dealer applied on or after April 1, 2001,
and achieved certification prior to April 1, 2002. Ford originally
planned to drop the bonus to .75% in April 2004, and to .5% in
2005, but it has since abandoned this plan. See App. at 77.
Certification entitles dealers to a number of benefits beyond
these reimbursements. According to the complaint, dealers also
receive 10% transportation assistance allowance bonuses; 50%
discounts on all retail invoice messages; 401K plans for dealers’
employees; access to the Blue Oval Certified Healthcare Plan; and
Blue Oval National Advertising. See id. at 78.
Plaintiffs allege that the certification process is onerous,
requiring significant expenditures of time and money, and resulting
in a substantial loss of control over dealership activities.
Certification requires dealers to meet standards under a number of
performance criteria, including leadership, concern resolution,
sales, service, facilities, and customer service. See id. at 75. As
explained at length in the complaint, the criteria are detailed,
comprehensive, and difficult to meet.
A necessary condition for BOP certification is the so-called
National Voice of the Consumer Target, a creation of JD Power &
Associates. To become certified, most dealers must receive
sufficiently high survey scores from customers on four survey
questions. See Danvers I, 186 F. Supp. 2d at 532–33; App. at
79–81. If their scores are high enough, all other certification
1
Condon Ford was certified on December 10, 2000, but
subsequently lost Blue Oval Certification on March 11, 2002. Id.
¶ 137.
4
requirements are waived. Plaintiffs aver that “the only way a
dealer’s score can increase” is if a customer marks “completely
satisfied” in response to every question. Complaint ¶ 72 (emphasis
in original).
Another criterion for BOP certification is a set of facilities
requirements, which allegedly “encompass all the ordinary routine
aspects of running a dealership which are normally within the
responsibilities and concerns of the dealer, safe from the intrusion
of Ford or its agents.” Danvers I, 186 F. Supp. 2d at 533. See
also App. at 84–85. “Under the current standard, [in densely
populated areas,] J.D. Power must deem the dealers’s facility equal
to or better than two of four full-line dealerships within a ten-mile
radius.” Complaint ¶ 90.
BOP certification does not end a dealer’s obligations.
According to the complaint, the Program requires annual re-
certification, which may involve “unilaterally altered standards.”
See App. at 81. For example, from 2001 to 2002, Ford increased
the Voice of the Customer survey scores necessary to remain
certified, and demanded “[o]ne-day service appointment
availability, down from two business days.” Complaint ¶ 73. “A
dealer had to satisfy Ford’s requirements each and every year or
Ford will decertify the Certified dealers, withhold the
reimbursements, and withdraw most benefits.” Id. ¶ 74. In 2002,
due to increased certification targets, 100 dealers “fell off the
Program,” and as of November 14, 2002, about 65 remained
uncertified. Id. ¶ 77.
The complaint states that the BOP certification and re-
certification processes constitute nine violations of federal and
state law.2 More generally, it claims that “Ford’s intent, through
the Blue Oval Program . . . is, has been and will continue to be, to
2
Plaintiffs assert claims under the Robinson-Patman Act, 15
U.S.C. §§ 13(a), (d) & (e), the Automobile Dealer’s Day in Court
Act, 15 U.S.C. §§ 1221–25, and various state franchise statutes, as
well as breach of contract, and breach of the implied covenant of
good faith and fair dealing. See App. at 15–16; id. at 108–33.
5
constructively terminate virtually at will the number of dealers it
chooses and to increase control of the operations of the remainder.”
Id. ¶ 101. It seeks declaratory relief, an injunction against the BOP
“in its entirety,” damages, and attorneys’ fees.
B.
Plaintiffs allege that the BOP caused them at least four types
of injuries. They say it caused them: 1) to spend money against
their will to comply with its certification requirements; 2) to
relinquish control over certain aspects of dealership operations; 3)
to forfeit interest payments which would be otherwise earned on
money spent covering the BOP’s mandatory 1% fee; and 4) to face
the constant threat of losing certification if Ford chooses to ratchet
up BOP standards in the future.
Ford responded to Plaintiffs’ complaint with a motion to
dismiss for lack of subject matter jurisdiction and a motion to
dismiss for failure to state a claim. See Fed. R. Civ. P. 12(b)(1),
(6). Limiting its discussion almost exclusively to the fourth species
of alleged harm, the District Court granted the 12(b)(1) motion,
holding that the Plaintiffs lacked standing. It reasoned that the
ongoing threat of termination “is simply too speculative and remote
to support a finding of constitutional standing.” App. at 24. The
Court detected no “affirmative intent by Ford to terminate any
dealer who does not achieve Blue Oval Certification.” Id.“Although it seems clear that many of the dealers who are currently
certified will ‘fall off the program’ by 2006,” the Court concluded
that “these dealers do not yet have an injury that will support
constitutional standing.” Id.Only one sentence in the District Court opinion arguably
touches on the Plaintiffs’ allegations of past and present harms.
This sentence states: “[Plaintiffs’] allegations pertaining to the cost
of maintaining their certification in order to avoid potential
termination are just not enough to establish a concrete and
imminent, rather than conjectural, harm.” Id. (citing Complaint ¶¶
102–32, 162–206, 219–42) (emphasis in original).
The Danvers II opinion relied heavily on the reasoning of
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Danvers I as further justification for its holding. In Danvers I, the
Plaintiffs claimed that they “suffered injury-in-fact by the diversion
of dealers’ funds, personnel, equipment, and time to the application
for Blue Oval Certification, as well as from the severe financial
losses attributable to the inequities of the Program.” 186 F. Supp.
2d at 536. Nevertheless, the Court held that the Plaintiffs “have not
articulated that they themselves have suffered any concrete harm”
arising “from the mere attempt to certify.” Id. at 537.
For example, Plaintiffs aver that in order to satisfy
the “facilities” criteria, “the dealer’s investment
could have to increase sizeably.” Additionally,
Plaintiffs’ allege that the process performed by J.D.
Power, as part of Blue Oval certification, is “subject
to manipulations [ ] and to annual unilateral change.”
Plaintiffs further allege that the attempts to conform
to the BOC program “will exact a financial burden
that may jeopardize the viability of their
dealerships.” Finally, Plaintiffs declare that the
“hurdles of the Blue Oval Program will predictably
bring about over time the termination of a significant
minority of dealers.” Thus, even accepting
Plaintiffs’ allegations as true, Plaintiffs have simply
stated that implementation of the BOC program
might cause a concrete and particularized injury.
Id. at 537–38 (emphasis added in original) (citations omitted).
Based on this passage, it can be inferred that the District Court in
this case found no standing for two reasons: the threats of future
harm were not imminent, and the allegations of present and past
harm were not sufficiently “concrete,” because the statements in
the complaint were not sufficiently direct and unqualified.
II.
Constitutional standing requires (1) injury-in-fact, which is
an invasion of a legally protected interest that is (a) concrete and
particularized, and (b) actual or imminent, not conjectural or
hypothetical; (2) a causal connection between the injury and the
conduct complained of; and (3) it must be likely, as opposed to
7
merely speculative, that the injury will be redressed by a favorable
decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61
(1992); Khodara Environmental, Inc. v. Blakey, 376 F.3d 187, 193
(3d Cir. 2004) (collecting cases). “Plaintiffs bear the burden of
proving standing.” Storino v. Borough of Point Pleasant Beach,
322 F.3d 293, 296 (3d Cir. 2003).
A “legally and judicially cognizable” injury-in-fact must be
“distinct and palpable,” not “abstract or conjectural or
hypothetical.” Raines v. Byrd, 521 U.S. 811, 819 (1997); Allen v.
Wright, 468 U.S. 737, 751 (1984) (internal quotations omitted)
(quoting Warth v. Seldin, 422 U.S. 490, 498 (1975), and Los
Angeles v. Lyons, 461 U.S. 95, 101–02 (1983)). While it is
difficult to reduce injury-in-fact to a simple formula, economic
injury is one of its paradigmatic forms. In Havens Realty Corp. v.
Coleman, for example, an organization devoted to fair housing
practices suffered a “concrete and demonstrable injury” when a
realty company’s racial “steering” practices “perceptibly impaired
[its] ability to provide counseling and referral services for low-and
moderate-income homeseekers,” resulting in a “drain on the
organization’s resources.” 455 U.S. 363, 379 (1982); see also San
Diego County Gun Rights Comm. v. Reno, 98 F.3d 1121, 1130
(9th Cir. 1996) (“Economic injury is clearly a sufficient basis for
standing.”); Wright and Miller, Federal Practice and Procedure, §
3531.4 at 830 (2005 Supp.) (“Standing is found readily, particularly
when injury to some traditional form of property is asserted.”).
Wright & Miller illustrate the concept of injury-in-fact with
a simple example. “If customs officials were to institute a new and
rigorous policy for inspecting packages brought in from other
countries, . . . [s]tanding probably would be recognized for a
business firm that asserted a commercial injury arising from
increased delay or expense.” Wright & Miller, § 3531.4 at 830; see
also id. at 847 n.7 (“Standing always should exist to claim
damages, unless perhaps the theory of damages is totally
fanciful.”); Wright v. Riveland, 219 F.3d 905, 914 (9th Cir. 2000)
(prison inmates had standing to challenge a statute deducting 35%
of all funds received by an inmate from outside sources).
The injury-in-fact requirement exists to assure that litigants
8
have a “personal stake” in the litigation. See The Pitt News v.
Fisher, 215 F.3d 354, 360 (3d Cir. 2000). By ensuring that litigants
present actual cases and controversies, it is also keeps the judicial
branch from encroaching on legislative prerogatives, thereby
preserving the separation of powers. See Valley Forge v.
Americans United for Separation of Church and State, 454 U.S.
464, 473–74 (1982).
III.
The sole issue before us is whether the Plaintiffs have
standing to sue Ford for injuries suffered due to the Blue Oval
Program. Our review of a District Court’s denial of Article III
standing is plenary. See Hutchins v. IRS, 67 F.3d 40, 42 (3d Cir.
1995). To be clear, Plaintiffs allege that the BOP itself is illegal.
See Complaint ¶¶ 2–3 (describing the BOP as an “illegal” program
which was “imposed” upon the dealers); id. ¶ 47 (explaining that
although the Program is “purportedly ‘voluntary,’” it requires a
“compelled payment” by “all Ford dealers”); id. ¶ 95 (calling the
BOP requirements “coercive”). To state an injury-in-fact sufficient
to survive a motion to dismiss, they must simply plead that they
suffered some concrete form of harm because of the BOP.
See Lujan, 504 U.S. at 561 (“At the pleading stage, general factual
allegations of injury resulting from the defendant’s conduct may
suffice, for on a motion to dismiss we presume that general
allegations embrace those specific facts that are necessary to
support the claim.”) (internal quotations, brackets, and citation
omitted).
The complaint is replete with assertions of cognizable harm.
For example, page 2 of the Complaint contains a separate section
called “Standing,” which begins: “Plaintiffs are Ford dealers who
have suffered economic injury-in-fact as a result of . . . the invasion
by Defendant Ford Motor Company (“Ford”) of its dealers’ legally
protected interests, concretely and particularly described for each
Plaintiff dealer in paragraphs 88 through 228 of this Complaint.”
App. at 67. Later the point is repeated: “Ford’s Blue Oval
requirements are coercive, unreasonable, intrusive, discriminatory,
costly to the dealer, and fraught with material business
uncertainties.” Id. at 85.
9
Ford argues, and the District Court apparently found, that
these allegations were not specific enough. The dealers respond by
pointing to the body of the Complaint, which discusses four types
of injury at length.
The first kind of injury is the out-of-pocket expenses
Plaintiffs made to become BOP-certified. “The Certification and
Recertification process,” they claim, “has required and continues
to require substantial expenditures of dealership resources.”
Complaint ¶ 12. “All Plaintiffs have made, proportionally, very
significant out-of-pocket investments to comply with Ford’s
requirements to become Certified and Recertified under the Blue
Oval Program.” Id. ¶ 59. “In satisfying the required [Facilities]
criteria, however, the dealers’ investment has already increased
sizably.” Id. ¶ 94. Plaintiffs even break down the amount of
money spent per dealership.3
There can be no doubt that this financial harm counts as
injury-in-fact. Because we are bound to read the complaint as true,
we cannot ignore Plaintiffs’ claims that the BOP is
“illegal,” Complaint ¶ 3, “imposed” upon them, id. ¶ 2;
“compelled,” id. ¶ 47, and “coercive,” id. ¶ 95. Once this is
accepted, the allegations are indistinguishable from a garden-
variety civil lawsuit: a plaintiff sues a defendant for illegally
causing the plaintiff harm. See, e.g., General Motors Corp. v.
3
Danvers Motor Company avers that becoming BOP-
certified required an additional $65,000 in management
expenditures, and $25,000 more per year for an extra employee.
App. at 86. Augusta Ford says it cost $155,626 in various
expenses, less a reimbursement of $49,000. Id. at 87. Condon
Ford lost an estimated $25,000 per year due to decertification. Id.
at 90. Fette Ford spent $68,200 in dealer costs and another
$87,000 in personnel costs to become certified. Id. at 95. Senator
Ford claims losses of $116,360 in maintenance and additional
employee hours, among other things. Id. at 97. Roseville Midway
Ford allegedly spent $250,000 to become certified, id. at 99, and
Tildon Ford states that it spent $84,000 in personnel expenses, as
well as additional expenses for a consultant. Id. at 104.
10
Tracy, 519 U.S. 278, 286 (1997) (customers who pay more for a
product because of a regulation allegedly “forbidden under the
Commerce Clause satisfy the standing requirements of Article III”)
(citing Bacchus Imports, Ltd. v. Dias, 486 U.S. 263, 267 (1984));
NRA of America v. Magaw, 132 F.3d 272, 281 (6th Cir. 1997)
(gun manufacturers and dealers have standing to challenge the
constitutionality of a law banning certain types of guns because the
law caused them “immediate economic harm”).
Monetary harm is a classic form of injury-in-fact. See
Adams v. Watson, 10 F.3d 915, 920–25 & n.13 (1st Cir. 1993)
(collecting cases). Indeed, it is often assumed without discussion.
In Videon Chevrolet, Inc. v. General Motors Corp., for example, a
dealer challenged the “Chevrolet Dealer Association Marketing
Initiative,” which (like the BOP) added a “mandatory surcharge”
of 1% on every vehicle sold to the dealer without adjusting the
manufacturer’s suggested retail price. 992 F.2d 482, 483–84 & n.1
(3d Cir. 1993). The Court discussed at length whether General
Motors violated any law, but it never questioned Videon’s
standing. The obvious fact that Videon was forced to pay money
it otherwise would have kept for itself was sufficient to confer
Article III standing. The same principle applies here: Plaintiffs
unequivocally state that Ford’s “illegal” BOP forced them to spend
money against their will.4
The second form of injury Plaintiffs allege is a loss of
control over day-to-day dealership activities. They allege that
“[t]he Certification and Recertification process illegally intrudes
into the dealers’ operations.” Id. ¶ 12. “The Blue Oval Facilities
criteria include all the ordinary routine aspects of running the
dealership that have always been and are the normal
responsibilities and concerns of the dealer, without Ford’s or its
4
Plaintiffs’ complaint in this case is more direct than the one
before the Danvers I Court. It repeatedly states that the Plaintiffs
have suffered injuries because of the BOP, not that they might
suffer them in the future. Because the latest version of the
complaint is not speculative, the Danvers I rationale cannot control
here.
11
agents’ intrusion.” Id. ¶ 88; see also id. ¶ 45 (“The Blue Oval
Program lays out highly detailed requirements . . . [which] exceed
the obligations of the dealer in the Franchise Agreement.”); id. ¶ 94
(“In satisfying the required [Facilities] criteria, however, the
dealers’ . . . freedom and control of [their] investment [in Facilities]
to satisfy their respective markets has proportionally declined.”).
Although this injury is more difficult to monetize, it is no
less cognizable under Article III. At its heart, the alleged injury is
an invasion of the Plaintiffs’ property rights. Without the BOP, the
dealers claim that they had greater freedom to organize and run
their businesses as they saw fit. This form of harm, whether it
sounds in tort (loss of control over dealership operations) or
contract (violation of Plaintiffs’ franchise agreements),
undoubtedly “affect[s] the plaintiff in a personal and individual
way.” Lujan, 504 U.S. at 560 n.1.
We hold that these two forms of injury—forced
expenditures of money and loss of control—are sufficiently
concrete for the purposes of Article III. Because they alone
suffice, we need not address Plaintiffs’ two other forms of alleged
injury: loss of interest payments on the 1% per vehicle mark-up and
the future threat of de-certification.5
IV.
Injury-in-fact is not Mount Everest. See Bowman v.
5
We do not address other questions that Plaintiffs raise
relating to antitrust standing, because Plaintiffs proffered before the
District Court that constitutional standing would be the only issue
on appeal, the District Court thereby certified the appeal under Fed.
R. Civ. P. 54(b) as relating only to its denial of the motion to
dismiss for lack of constitutional standing, and Ford agrees that the
issue is inappropriate for consideration in this appeal. App. at
49–51; Ford’s Brief at 19. Cf. Bagot v. Ashcroft, 398 F.3d 252,
256 (3d Cir. 2005) (“[i]t is well established that failure to raise an
issue in the district court constitutes a waiver of the argument in
this Court” (internal citation and quotations omitted)).
12
Wilson, 672 F.2d 1145, 1151 (3d Cir. 1982) (“The contours of the
injury-in-fact requirement, while not precisely defined, are very
generous,” requiring only that claimant “allege[] some specific,
‘identifiable trifle’ of injury”). Plaintiffs alleged that the BOP
illegally caused them economic injury and a loss of control over
dealership activities. On a motion to dismiss, this much is
sufficient.
We reverse order of the District Court, and remand for
further proceedings.
13