Rosado v. Ford Mtr Co

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
7-23-2003
Rosado v. Ford Mtr Co
Precedential or Non-Precedential: Precedential
Docket No. 02-3356
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PRECEDENTIAL
Filed July 23, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 02-3356 & 02-3357
WILLIAM ROSADO,
Appellee in No. 02-3356; Appellant in No. 02-3357
v.
FORD MOTOR COMPANY,
Appellant in No. 02-3356; Appellee in No. 02-3357
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
(D.C. Civ. No. 00-cv-00046 )
District Judge: Honorable A. Richard Caputo
Argued April 23, 2003
Before: SCIRICA, Chief Judge,* AMBRO and
WEIS, Circuit Judges.
Filed: July 23, 2003
Carla W. McMillian, Esquire
(ARGUED)
Daniel G. Flannery, Esquire
Rosenn, Jenkins & Greenwald,
L.L.P.
15 South Franklin Street
Wilkes-Barre, Pennsylvania 18711
* Judge Scirica began his term as Chief Judge on May 4, 2003.
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John H. Fleming, Esq.
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Suite 2300
Atlanta, GA 30309
Attorneys for Ford Motor Company
Paul A. Barrett, Esquire (ARGUED)
O’Malley, Harris, Durkin &
Perry, P.C.
345 Wyoming Avenue
Scranton, PA 18503
Attorneys for William Rosado
OPINION OF THE COURT
WEIS, Circuit Judge.
In this appeal, we are asked to respond to a certified
question of law — whether a prospective purchaser of an
automobile dealership has standing to challenge the
exercise of a manufacturer’s right of first refusal. We
conclude that the Pennsylvania Board of Vehicles Act
grants only limited rights to a prospective purchaser and
they have not been infringed. Accordingly, we answer in the
negative and remand for appropriate disposition of the
case.
In 1999, John S. Lopatto, Jr. and Ann S. Lopatto, the
owners of a Ford distributorship in Plymouth,
Pennsylvania, agreed to sell their business to the plaintiff
William Rosado. The agreement included the purchase of
the dealership assets and real estate for $545,000, less
certain credits.
Pursuant to the terms of the franchise, the purchase
agreement was submitted to defendant Ford Motor
Company, which chose to exercise its contractual right of
first refusal. In accordance with statutory provisions, Ford
gave timely notice to Rosado and offered to pay his
reasonable expenses incurred in connection with the
aborted purchase agreement. In addition, the Lopattos
offered to return the $5,000 non-refundable deposit that
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Rosado had paid to them. Ford assigned its rights under
the agreement to another party in the area, who then
purchased the dealership.
Rosado alleges that as a result the Lopattos received less
compensation than they would have had they sold to him.
However, the Lopattos do not dispute that they received all
of the consideration that they were due under the terms of
the Rosado agreement.
Rosado filed suit in state court and Ford removed to the
District Court. The complaint asserted tortious interference
with contractual rights and violations of the Pennsylvania
Board of Vehicles Act, 63 P.S. §§ 818.16, and 818.12(b)(3).
The statute limits a manufacturer’s right of first refusal and
prohibits unreasonable withholding of consent to the sale of
a dealership.
The District Court granted summary judgment to Ford on
the count alleging unreasonable withholding of consent, but
concluded that plaintiff had standing to challenge Ford’s
right of first refusal. Consistent with that ruling, the Court
also denied Ford’s motion for summary judgment on
Rosado’s claim for tortious interference with contract.
Pursuant to 28 U.S.C. § 1292(b), the Court certified as a
controlling question of law “whether a prospective
purchaser has standing to claim that the selling dealer did
not receive the same or a greater consideration under
§ 818.16.” We accepted the certification.
On appeal, in addition to denying Rosado’s standing,
Ford contends that its invocation of the right of first refusal
did not constitute tortious interference with contract.
I.
The Pennsylvania Board of Vehicles Act is a
comprehensive statute governing the relationship between
automobile manufacturers and their franchise dealers. The
Act prohibits a manufacturer from unreasonably
withholding consent to the sale of a franchise to a qualified
buyer. 63 P.S. § 818.12(b)(3). To further regulate transfers,
the legislation was amended in 1996 to permit a
manufacturer to include a right of first refusal in the
franchise.
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The amended portion of the statute reads:
“A manufacturer or distributor shall be permitted to
enact a right of first refusal to acquire the new vehicle
dealer’s assets or ownership in the event of a proposed
change of all or substantially all ownership or transfer
of all or substantially all dealership assets [if certain
requirements are met, including that] . . . (2) the
exercise of the right of first refusal will result in the
dealer and dealer’s owners receiving the same or
greater consideration as they have contracted to receive
in connection with the proposed change of all or
substantially all ownership or transfer of all or
substantially all dealership assets.”
63 P.S. § 818.16.
In addition to restrictions not at issue here, when
exercising the right of first refusal, the manufacturer must
pay “the reasonable expenses including reasonable attorney
fees” to the “proposed new owner” incurred in negotiating a
contract to purchase the dealership. 63 P.S. § 818.16(4).
In the case before us, neither the manufacturer nor the
dealer contest the exercise of the right of first refusal. The
objections come from the plaintiff who was deprived of his
opportunity to purchase the dealership after an apparently
satisfactory agreement had been negotiated with the owner.
In this diversity case, we look to the law of Pennsylvania.
In general, standing depends on whether the plaintiff has
suffered a legal injury that the law was designed to protect.
See Pennsylvania Nat’l Mut. Cas. Insur. Co. v. Dep’t of Labor
& Indus., Prevailing Wage Appeals Bd., 715 A.2d 1068,
1071 (Pa. 1998) (explaining that “[s]tanding may be
conferred by statute or by having an interest deserving of
legal protection”). “It is also clear that standing will be
found more readily where protection of the type of interest
asserted is among the policies underlying the legal rule
relied upon by the person claiming to be aggrieved.” Wm.
Penn Parking Garage v. City of Pittsburgh, 346 A.2d 269,
284 (Pa. 1975).
Ultimately, in order to have standing, a party must have
a substantial, immediate and direct interest in the subject
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matter. See Ken R. v. Arthur Z., 682 A.2d 1267, 1270 (Pa.
1996). In Sprague v. Casey, 550 A.2d 184, 187 (Pa. 1988),
the Court explained that other factors must be considered
such as “existence of other persons better situated to assert
the claim.” The Pennsylvania Superior Court in In re Seitz,
43 A.2d 547 (Pa. Super. Ct. 1945), concluded that, in the
absence of special statutory authority, a homeowner had no
standing to challenge issuance of a liquor license for
property in the same neighborhood because his interest
was only a “collateral concern” for the “indirect effect” that
issuance of the liquor license might have on the value of his
property.
Rosado relies on section 818.29 of the Act to grant him
standing as a prospective purchaser. That section reads in
pertinent part: “Any person who is or may be injured by a
violation of a provision of this Act of1 any party to a
franchise who is so injured in his business or property by
a violation of a provision of this Act . . . may bring an
action for damages and equitable relief . . . .” 63 P.S.
§ 818.29.
Rosado asserts that Ford’s exercise of its right of first
refusal resulted in a diminution of the compensation due
the Lopattos and, thus, violated the Act. That being so, he
contends that Ford has forfeited its right to a first refusal
and the original agreement remains in effect. However, even
if it be assumed that the Lopattos received less than
Rosado’s offer, Ford responds that the statutory provision
at issue here is for the benefit of the dealer, not a
prospective purchaser. Essentially the argument is that
Rosado does not have any right to litigate the merits of an
obligation that Ford owes to the Lopattos.
The Pennsylvania courts have not interpreted these
sections of the Act, but we have had the occasion to review
pertinent portions of the legislation in two instances,
Crivelli v. General Motors Corp., 215 F.3d 386 (3d Cir.
2000), and Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974
F.2d 1358 (3d Cir. 1992). Both of these cases, however,
1. The use of “of ” instead of “or” appears to be a typographical error. The
original Act used “or” rather than “of.”
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were concerned with events that occurred before 1996
when the right of first refusal was added to the statute.
In Crivelli, the franchise agreement provided the
manufacturer with a right of first refusal, a matter on
which the statute, at that time, was silent. Crivelli, 215
F.3d at 387. After the manufacturer exercised its right of
first refusal, the frustrated prospective purchaser
contended that the statutory provision preventing the
manufacturer from unreasonably withholding consent to a
sale applied to the right of first refusal as well. Id. We
discussed the difference between an unreasonable
withholding of consent and the right of first refusal, both of
which are somewhat different forms of contractual control
by manufacturers over dealership transfers.
As we explained, a right of first refusal requires the
manufacturer to match the terms of the original proposal
and, thus, protects dealers by creating two prospective
purchasers for every offer they receive. Id. at 389-90. In
most instances, the dealer would be largely indifferent to
the identity of the new owner, and the prospective
purchaser’s expectations must take into account the
uncertainty over whether the manufacturer will exercise its
rights.
In contrast, by preventing a manufacturer from
arbitrarily refusing consent to a transfer, the Act enables
dealers to sell their businesses to qualified successors.
Similarly, prospective purchasers’ opportunities to acquire
dealerships may not be thwarted by manufacturers’
obstinate and unjustifiable blocking of sales. Without the
statutory provision, manufacturers, at no risk or expense,
could foreclose transfers advantageous to both dealers and
prospective purchasers. A violation of the unreasonably
withholding consent provision would directly injure both
dealers and qualified prospective purchasers. Thus, the
unreasonable withholding consent provision offers more
protection to purchasers than a right of first refusal.
Crivelli concluded that, because the two contractual
clauses were substantially different, the manufacturer’s
right of first refusal should not be subject to the existing
statute’s ban on unreasonable denial of consent. In short,
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the Court upheld the freedom to contract in the absence of
limiting legislation.
The case had been tried on the merits and therefore the
standing issue was not raised by the parties. However, in a
footnote we commented that “[a]lthough some courts have
dismissed such cases on lack of standing [citations] in
interpreting the Pennsylvania Act, we held that prospective
purchasers have standing.” Crivelli, 215 F.3d at 392 n.3
(citing Big Apple, 974 F.2d at 1383). Under Pennsylvania
law, standing may be waived by the parties. See In re
Duran, 769 A.2d 497 (Pa. Super. Ct. 2000). Because it was
not a subject of the appeal in Crivelli, the footnoted
reference is dictum insofar as it might be read to apply to
standing of prospective purchasers in right of first refusal
controversies.
Obviously, the footnote was inserted to acknowledge Big
Apple’s superficial relevance. In that case, a significant
issue was whether a prospective purchaser had standing
under the Vehicles Act to pursue a claim against a
manufacturer that unreasonably withheld consent to the
transfer of a franchise. We decided in that circumstance
section 818.29 (previously section 818.20), granting a cause
of action to anyone injured by violation of the Act, conferred
standing on a prospective purchaser. Big Apple, 974 F.2d at
1382-3. The withholding consent provision, section
818.12(b)(3), implies at least some concern for prospective
purchasers by the reference to those who are qualified and
who are capable of obtaining a dealer’s license, and might
appear to give some protection to prospective purchasers.
However, Big Apple’s holding on standing in the
unreasonable withholding context does not logically carry
over to the first refusal setting. The holding in that case on
standing must be read in light of the fact that the claim
was limited to a contention that consent was unreasonably
denied.
The statute does, however, require the manufacturer to
give timely notice and to reimburse a prospective purchaser
with reasonable expenses incurred from negotiating the
original agreement with the owner. Obviously, a prospective
purchaser would have standing for violation of those
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statutory provisions, and to that extent Big Apple and the
footnote in Crivelli are applicable. But there are no such
violations at issue here. The fact that the Act grants the
prospective purchaser specific benefits tends to negate any
suggestion that other limitations on the right to contract
were intended to be included. Nothing in the Act confers
authority on one party to seek recovery on the part of
another.
Here, it is critical that the prospective purchaser’s
complaint is based on the contention that the owner did
not receive what he was entitled to under the Act when
Ford exercised its right of first refusal. But, if the
prospective purchaser prevailed on that theory, it would not
be he, but the owner, who would be entitled to the loss
resulting from the violation by the manufacturer. See
Sprague, 550 A.2d at 187 (noting as a standing factor “the
existence of other persons better situated to assert the
claim”).
In reality, it is not the loss that the Lopattos might have
suffered that Rosado seeks. Rather, he wants to recover the
benefits of his bargain. Unfortunately for him, the Act only
grants prospective purchasers the right to timely notice and
reimbursement of reasonable expenses incurred from
negotiating the original sales contract.
Ultimately, the Crivelli footnote does not aid Rosado
because it is dictum and, by its dependence on Big Apple,
is limited to the unreasonable withholding of consent
context. That is all the more obvious in view of the
enactment of the 1996 amendment to the Board of Vehicles
Act.
We conclude that our response to the question certified
to us must be in the negative. A prospective purchaser
lacks standing to claim that the selling dealer did not
receive the same or greater consideration under section
818.16.
II.
The parties have also briefed the issue of whether
Rosado’s claim for tortious interference with contractual
rights continues to be viable.
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Our scope of review is not limited to the issue articulated
in the section 1292(b) certification motion. Generally, we
may address any question fairly included within the
certified order because it is the order, and not the
controlling question of law, that is appealable. Abdullah v.
American Airlines, 181 F.3d 363, 366 (3d Cir. 1999).
Here, the tortious interference claim obviously depends
on whether the defendant acted in violation of the Vehicles
Act. Crivelli denied a similar claim, finding that
Pennsylvania law would not allow a recovery in such
circumstances. We need not repeat Crivelli’s thorough
analysis of the tortious interference issue. It clearly applies
here and mandates denial of recovery.
We conclude that the District Court erred in failing to
grant summary judgment in favor of Ford Motor Company
on the tortious interference claim.
Accordingly, we will remand the case to the District Court
for the entry of the appropriate orders.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit