Edward C. Rea and 22 Ford Inc., a Corporation, and Cross-Appellees v. Ford Motor Company, a Corporation, and Cross-Appellant

560 F.2d 554

• Court: Court of Appeals for the Third Circuit
• Decided: October 31, 1977
• Docket: 76-1982 and 76-1983
• Status: Published

Opinions

JAMES HUNTER, III, Circuit Judge:

Appellant and cross-appellant between them raise ten issues relating to the measure of damages in a judgment won by Edward C. Rea against Ford Motor Company under the Automobile Dealers’ Day in Court Act, 15 U.S.C. §§ 1221-25. After a thorough review of the record, we find merit in only one: the district court erred in deducting from gross damages $160,934.00, an amount that was already part of the assets of Rea’s Oldsmobile dealership before Ford’s violation of the Act. Hence, we vacate and remand with directions to add that amount to the judgment.

I.

This litigation is more than ten years old. Its tortuous history was set forth in an earlier opinion of the court, Rea v. Ford Motor Co., 497 F.2d 577 (3d Cir.), cert. denied, 419 U.S. 868, 95 S.Ct. 126, 42 L.Ed.2d 106 (1974). We will briefly summarize the underlying facts.

In February of 1964, Rea was given a franchise for a Ford dealership in Monroe-ville, Pennsylvania. At that time, he was already principal stockholder of an Oldsmobile dealership in Wilkinsburg, Pennsylvania. Rea told Ford that he would acquire assets to operate the Ford dealership by liquidating the Oldsmobile business, and Ford had him sign a letter committing him to take that step.

Subsequently, Rea suggested to a Ford representative that the Oldsmobile operation might not be closed after all. The Ford representative warned Rea that he might halt the shipment of Ford cars to Rea unless he got out of the Oldsmobile business, explaining that Ford believed those assets necessary to the successful operation of the Ford franchise. Shortly thereafter, Rea resigned the Oldsmobile franchise, kept part of its assets, and sold the rest. The retained assets were used in operating the Ford franchise in Monroeville.

In March, 1967, Rea filed a complaint against Ford in the Western District of Pennsylvania. It alleged breach of contract, violations of the Sherman Act, 15 U.S.C. §§ 1 and 1px solid var(--green-border)">2, and violations of the Automobile Dealers’ Day in Court Act. A jury found Ford liable under all of these theories; Ford was ordered to pay some $3,379,683 in damages. On appeal, this Court reversed and remanded. The finding of liability on the contract claim and on some of the Sherman Act claims were reversed. The rest of the Sherman Act claims were sent back for retrial because of a confusion of proofs with the other claims. Liability under the Auto Dealers’ Act was upheld, but the case was remanded for a redetermination of damages. On remand, Rea withdrew the antitrust claims, leaving only the question of damages under the Auto Dealers’ Act. The district court awarded Rea $136,635.00. Rea appealed from the court’s order denying his motion to amend the judgment to include other elements of alleged damage, and Ford cross-appeals.

II.

At the outset, Ford argues that the trial court erred in refusing to allow Ford to introduce evidence tending to establish that: (1) Ford’s acts were not the proximate cause of the sale of Rea’s Oldsmobile business; (2) Ford’s acts were not the proximate cause of any loss in profits by Rea’s corporate entities;¹ and (3) Rea failed to “mitigate” damages and, therefore, Ford had not caused any real harm. These elements of causation, says Ford, go to damages alone and were not foreclosed by this court’s affirmance of the finding of liability under the Automobile Dealers’ Day in Court Act.

We do not agree. Causation is an element of liability. Our remand left open only the amount of damages, not the fact of damage. Cf. Response of Carolina, Inc. v. Leasco Response, Inc., 537 F.2d 1307, 1320-21 (5th Cir. 1976) (must be some evidence showing casual link, in order to establish liability in antitrust case, before reaching question of amount of damages); Restatement (Second) of Torts § 430 (1965) (liability for negligence requires finding of causation).

III.

Ford also claims that the court below erred in including Rea’s projected salary and bonuses at the last Oldsmobile franchise in the damage calculation. Instead, argues Ford, damages ought to be figured to the corporate entity, with Rea being compensated as that entity’s principal stockholder.

Again, we do not agree. The corporate entity that suffered harm was the Oldsmobile franchise, which ceased to exist; the “dealer” for purposes of the action under the Auto Dealers’ Act² was Edward Rea in his capacity as a Ford dealer. Rea, supra at 584. In that capacity, he personally suffered damage not only through loss of income as a shareholder of the Oldsmobile business Ford forced him to close, but also through loss of the salary and bonuses he could have earned in that business. Since Rea was injured in both respects by Ford’s action, he can be made whole only by recovering both types of compensation.

IV.

Ford’s last point of appeal is that the trial court erred in awarding Rea damages covering the period between Ford’s successful first appeal and the retrial as to damages. Ford claims to have been “penalized” for taking an appeal.

We do not agree. The court merely exercised its ordinary powers. Lost profits are recoverable in an action for the destruction or interruption of an established business, whenever they are not merely speculative or conjectural. Roseland v. Phister Mfg. Co., 125 F.2d 417, 420 (7th Cir. 1942). And, in general, a court has the power to award damages occurring up to the date of the ultimate judgment in the case. Calhoun v. United States, 354 F.2d 337, 339, 173 Ct.Cl. 893 (1965). Ford does not claim that the damages were too speculative; indeed the fact that the injured party — Rea—had survived the intervening period meant precisely that any objection that he might not have lived to suffer “future damages” — those occurring after the first trial — was obviated. As for the supposed “penalty,” Ford might likewise claim that it was “penalized” by defending the action at all, since that also prolonged the period for which lost profits might have been recovered.

V.

Rea argues that the injured party is the corporation in which the Ford franchise is lodged. Therefore, he says, damages should have been awarded to the corporation.

We noted above, however, that our first decision in this case attributed the cause of action to Rea himself. Rea, supra at 584. Besides, the corporation holding the Ford franchise never owned any part of the Oldsmobile business, so it could not have been injured by the loss of the Oldsmobile dealership. Hence, the damages were properly computed with respect to Rea personally-

VI.

Rea also argues that the trial court erred in deducting from the damages suffered by the Oldsmobile dealership corporation — which were awarded to Rea as former principal shareholder — an amount representing federal and state corporate taxes.

If Rea had prevailed in arguing that the Ford dealership was — as some kind of alter ego of the Oldsmobile dealership corporation — the injured party, then this argument would require our close attention. We have already held, however that Rea — not the Ford dealership — was the party injured by the closing of the Oldsmobile operation. Thus, corporate taxes were properly deducted from any amounts awarded to him as compensation for lost corporate profits.

VII.

Rea contends that the amounts awarded to him representing lost salary and bonus at the Oldsmobile dealership were too low. He compares the amounts to those he actually earned at the Ford dealership, which were substantially higher.

The Ford dealership, however, was twice as large and produced correspondingly greater profits, on which bonuses are figured. After thoroughly reviewing the record, we are unable to say that the trial court’s figures were clearly erroneous.

VIII.

Rea insists that the trial court should have awarded him pre-judgment interest. Again, we do not agree.

In general, pre-judgment interest is not awarded on unliquidated claims, such as the one before us. Miller v. Robertson, 266 U.S. 243, 258, 45 S.Ct. 73, 69 L.Ed. 265 (1924). It may be awarded in the sound discretion of the trial judge when necessary to arrive at fair compensation. Id. The trial court in this case ruled that allowance of interest would create the possibility of double recovery, since some allowance for growth had been made in figuring the sales base on which profits had been figured. We cannot deem this an abuse of discretion.

IX.

Rea’s last contention is that the court should not have deducted from the award $160,934.00, the value of the assets transferred from the liquidated Oldsmobile operation to the new Ford Dealership. We agree that this deduction was error.

In our previous opinion in this case, we mentioned the $160,934.00 as one of the items for which some adjustment ought to be made in the redetermination of damages:

However, the jury’s award here failed to reflect the fact that in 1964 Rea Olds sold certain of its assets for $60,000. and that this cash and the remaining assets of the company were thereafter devoted to the operation of the Monroeville Ford franchise. To award 22 Ford recovery of anticipated profits from the Oldsmobile franchise without any deduction for the asset sale or for the fact that it benefited by having the retained cash and assets available for the operation of the new Ford franchise is to permit a double recovery. Cf. Gustafson v. General Motors Acceptance Corp., 470 F.2d 1057, 1061 (8th Cir. 1973). The award of damages in favor of plaintiffs for defendant’s violation of the Dealers’ Act will, therefore, be vacated and the case remanded for a re-determination of such damages in light of this opinion.

Rea, supra at 587 (footnote omitted).

The trial court determined the interest on this amount — $177,940.00. It then deducted $338,874.00, the total of the value of the transferred assets ($160,934.00) plus the interest these assets would have earned ($177,940.00), in order to reflect the benefit of “having the retained cash and assets available for the operation of the new Ford franchise.” See App. at 862a.

Deduction of the interest those assets could have earned was proper. The court recognized our concern that Rea was not harmed to the extent that the freeing of his assets in the Oldsmobile business merely allowed him to earn money elsewhere on those same assets. The asset value itself, though, was an amount that Rea’s Oldsmobile operation had already earned. It should not have been deducted from the future profits. It cannot be likened to a loan, which would have to be paid back, from the Oldsmobile dealership to Rea and then to the Ford franchise; instead, it was money that Rea, as a risker of capital, took out of the Oldsmobile venture and put into the Ford operation.

Therefore, we will vacate the judgment of the district court and remand with instructions to add $160,934.00 to the judgment.

1 . The dissent suggests that there was no finding “that Rea had unlimited capacity . . . to perform as manager of both dealerships” simultaneously. We do not agree. Our affirmance of liability below was premised on such a finding. Otherwise, there could have been no liability.

2 . 15 U.S.C. § 1221(c) provides as follows:

The term “automobile dealer” shall mean any person, partnership, corporation, association, or other form of business enterprise . operating under the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons.