Maschio v. Prestige Motors

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
10-17-1994
Maschio v. Prestige Motors
Precedential or Non-Precedential:
Docket 94-5114
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1994
Recommended Citation
"Maschio v. Prestige Motors" (1994). 1994 Decisions. Paper 156.
http://digitalcommons.law.villanova.edu/thirdcircuit_1994/156
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 1994 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 94-5114
MAURO MASCHIO, Individually and as
President of Euro-Trade U.S.A., Ltd.;
EURO-TRADE U.S.A. LTD., (a New York Corporation),
Appellants
V.
PRESTIGE MOTORS, (a New Jersey Corporation)
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 93-02167)
Submitted Under Third Circuit LAR 34.1(a)
August 12, 1994
Before: HUTCHINSON and NYGAARD, Circuit Judges
and KATZ, District Judge*
(Opinion filed: October 17, 1994)
ANDREW J. KYREAKAKIS, ESQUIRE
Ambrosio, Kyreakakis & DiLorenzo
317 Belleville Avenue
Bloomfield, NJ 07003
Attorney for Appellants
THOMAS H. BRUINOOGE, ESQUIRE
GEORGE P. STASIUK, ESQUIRE
Bruinooge & Associates
85 Orient Way
Rutherford, NY 07070
Attorneys for Appellee
OPINION OF THE COURT
* Honorable Marvin Katz, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
NYGAARD, Circuit Judge.
Mauro Maschio appeals from a district court order
granting summary judgment against him in an action he filed under
the Automobile Dealer's Day in Court Act ("ADDCA"), 15 U.S.C.
§§1221-25. Because we conclude that the defendant, Prestige
Motors, Inc., is not a "manufacturer" within the meaning of the
ADDCA, we will affirm.
I.
Mercedes-Benz of North America is an affiliate of
Daimler-Benz, a German manufacturer of luxury automobiles.
Defendant Prestige Motors, Inc. is an authorized dealer of
Mercedes-Benz vehicles. Maschio is the principal owner of Euro-
Trade, U.S.A., Ltd., a corporation licensed to sell automobiles.
Maschio and Euro-Trade regularly purchased scarce
"high-end" automobiles from authorized dealers, including several
Mercedes-Benz dealers. They would then resell them at a profit
to customers desiring exotic vehicles not generally available in
dealers' showrooms. During 1989 and 1990, Maschio and Euro-Trade
attempted to purchase sixteen new vehicles from Prestige at
retail, intending to resell them to the general public. There
was no formal franchise agreement between Prestige and Euro-
Trade. Instead, Prestige accepted orders on the same purchase
order form it used when dealing with typical retail buyers.
Prestige honored six of these contracts, but refused to deliver
the remaining ten vehicles, allegedly because of pressure exerted
on it by Mercedes Benz of North America to refrain from selling
automobiles to Maschio.
The district court granted summary judgment in favor of
Prestige on the ADDCA claim, and after determining that
complete diversity was lacking, dismissed the pendent
state law causes of action. It held that the purchase
orders used in the series of vehicle purchases did not
constitute a franchise agreement within the meaning of
the ADDCA, a necessary element of any such case.
II.
The ADDCA is a remedial statute enacted to redress the
economic imbalance and unequal bargaining power between large
automobile manufacturers and local dealerships, protecting
dealers from unfair termination and other retaliatory and
coercive practices. See, e.g., Hanley v. Chrysler Motors Corp.,
433 F.2d 708, 710-11 (10th Cir. 1970). It is, essentially, a
supplement to the national antitrust laws, passed to counter-
balance the economic leverage a manufacturer has over its
ostensibly independent dealers, and its "control over [its]
product in what amounts to quasi-integration to the retail level
of distribution." H.R. Rep. No. 2850, 84th Cong., 2d Sess. 1, 3,
reprinted in 1956 U.S.C.C.A.N 4596, 4596, 4598. There are four
elements of an ADDCA cause of action: (1) the plaintiff must be
an automobile dealer; (2) the defendant must be an "automobile
manufacturer" engaged in commerce; (3) there must be a
manufacturer-dealer relationship embodied in a written franchise
agreement; and (4) the plaintiff must have been injured by the
defendant's failure to act in good faith. 15 U.S.C. § 1222;
Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 441 (9th
Cir. 1979).
Although the district court granted summary judgment in
favor of Prestige, concluding that the sixteen purchase orders
did not constitute a franchise agreement, we will assume, without
deciding, that there was a valid franchise agreement.1 We will
further assume, without deciding both, that Euro-Trade was a
dealer within the meaning of the Act, and that Prestige
terminated its "franchise" in other than good faith. We will
instead simply analyze the narrow question of whether Prestige
was a manufacturer under the ADDCA, which we conclude determines
the outcome of Maschio's appeal.
It is axiomatic that our inquiry begins with the
language of the statute. 28 U.S.C. § 1221 defines the term
"automobile manufacturer" as
any person, partnership, corporation,
association, or other form of business
enterprise engaged in the manufacturing or
assembling of passenger cars, trucks, or
station wagons, including any person,
partnership, or corporation which acts for
and is under the control of such manufacturer
or assembler in connection with the
distribution of said automotive vehicles.
1"An appellate court may affirm a correct decision by a
lower court on grounds different than those used by the lower
court in reaching its decision." Erie Telecommunications, Inc.
v. City of Erie, 853 F.2d 1084, 1089 n.10 (3d Cir. 1988) (citing
cases).
Prestige, of course, does not manufacture or assemble
automobiles. To be liable as a manufacturer, then, Prestige must
be found to be both "acting for" and "under the control of"
Mercedes-Benz.
Only three courts of appeals have had occasion to
interpret § 1221(a). The first considered "the 'control'
requirement [to be] satisfied by showing corporate ownership and
confluence of interest." Colonial Ford, Inc. v. Ford Motor Co.,
592 F.2d 1126, 1129 (10th Cir. 1979). In the other two, the
issue was resolved by reference to agency law. Stansifer v.
Chrysler Motors Corp., 487 F.2d 59, 64 (9th Cir. 1973);
Volkswagen Interamericana, S.A. v. Rohlsen, 360 F.2d 437, 441
(1st Cir. 1966).
These cases usually arise, however, in the context of
distributors or importers that stand between the dealer and the
physical manufacturer. In those circumstances, courts will be
justifiably concerned that physical manufacturers might attempt
to avoid the ADDCA's requirements by placing a strawman between
themselves and their dealers, thus insulating themselves from the
duty to act in good faith. In Rohlsen, for example, the court
stated that "the inclusion of certain distributors in section
1221(a) was designed only to prevent a manufacturer from
circumventing its responsibilities under the act by transacting
business with its dealers through alter egos." 360 F.2d at 437.
That context is not present here. Mercedes-Benz of
North America never agreed to accept Euro-Trade as a dealer. Nor
did Mercedes-Benz employ Prestige as an alter ego to impose
onerous terms on Euro-Trade without running afoul of the ADDCA;
each operated independently. At most, Mercedes-Benz pressured
Prestige to cease doing business with Euro-Trade because it
objected to Euro-Trade's business. Such a desire not to deal
does not implicate the same sort of anticompetitive concerns that
apparently motivated the drafters of the ADDCA, nor is it
indicative of any motive on the part of the physical manufacturer
to oppress the local "dealer" -- in this case Euro-Trade -- with
whom the manufacturer never intended to deal at all.
III.
In sum, we decline to hold that Prestige became a
"manufacturer" the moment it sold automobiles to Euro-Trade. Nor
do we conclude it was under a manufacturer's "control ... in
connection with the distribution ..." of the automobiles.
Instead, we hold that non-physical manufacturer status is limited
to those situations in which the physical manufacturer has the
potential to control an intermediary that acts for the
manufacturer to avoid its duty to treat its dealers with good
faith, thereby subverting the ADDCA. For this reason, we will
affirm the judgment of the district court.