Jay Edwards, Inc. v. New England Toyota Distributor, Inc.

708 F.2d 814
CourtCourt of Appeals for the First Circuit
DecidedOctober 11, 1983
Docket82-1539
StatusPublished
Cited by70 cases

This text of 708 F.2d 814 (Jay Edwards, Inc. v. New England Toyota Distributor, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jay Edwards, Inc. v. New England Toyota Distributor, Inc., 708 F.2d 814 (1st Cir. 1983).

Opinion

LEVIN H. CAMPBELL, Chief Judge.

Jay Edwards, Inc. (“Edwards”), a New Hampshire Toyota dealership, brought this suit in February 1978 against New England Toyota Distributor, Inc. (“NET”), which at that time was the regional distributor for Toyota. Of the five counts in the original complaint, three were withdrawn by Edwards at the close of discovery. This left a claim under the Sherman Act, 15 U.S.C. § 1, and a pendent state statutory claim alleging bad faith conduct on the part of NET. At the close of the trial, the district court granted a directed verdict for NET on the federal claim. The state claim went to the jury, which returned a verdict for the plaintiff in the amount of $1,419,462, exactly the sum requested. With the addition of prejudgment interest, the award came to $1,849,459.37. NET’s motion for judgment n.o.v., new trial, or remittitur was denied, and with new attorneys it appeals from both that denial and the judgment itself.

The claim that went to the jury was based on the New Hampshire equivalent of the federal Automobile Dealers’ Day in Court Act. The New Hampshire statute prohibits a distributor from “engaging] in any action which is arbitrary, in bad faith, or unconscionable and which causes damage to any of such parties or the public.” N.H. Rev.Stat.Ann. § 357C:3(I). A distributor may not refuse to deliver reasonable quantities of cars to franchised dealers except for reasons beyond its control. Id. § 357C:3(III).

At trial, plaintiff presented evidence of a number of allegedly bad faith actions by NET. The most serious of these was an alleged malicious failure to supply Edwards with the number of cars to which it was entitled. Plaintiff also sought to show that NET had deceived it into withdrawing an objection to a competing franchise; that NET had wrongfully accused Edwards of misconduct in a sales promotion; that NET lied when it claimed a number of undelivered cars had been irreparably damaged in a storm; that NET knowingly filed a false complaint against Edwards with the state Attorney General; 1 and that NET had sent a letter terminating Edwards’s franchise for reasons it knew were specious. Throughout this period Jay Edwards, plaintiff’s president, was also president of the Toyota Dealer Alliance (“Alliance”), an organization of Toyota dealers unhappy with NET, formed to bargain with it. Plaintiff’s theory at trial was that NET’s harassment was in retaliation for Edwards’s activity as president of the Alliance. It introduced evidence tending to show that other mem *818 bers of the Alliance were also harassed by NET.

Plaintiff’s damages claim, and its ultimate recovery, rested exclusively on the alleged misallocation of cars. Edwards claimed that beginning in April 1976, immediately after the Alliance had presented NET with a list of demands, NET disregarded its own allocation formula and “shorted” Edwards. From April 1976 through December 1977, Edwards was offered 527 fewer cars (300 per year) than was Bill Dube, Inc., a comparable New Hampshire dealership that theretofore had received identical allocations. Under Edwards’s theory, it should have received what Dube had received. Edwards claimed the profits it purportedly lost because of NET’s failure to allocate to it the same number of cars offered Dube. Edwards also sought damages for profits it purportedly lost after March 8, 1978, the date on which NET ceased to be the regional distributor. According to Edwards, the reduction in sales resulting from NET’s machinations caused the new regional distributor to continue to allocate cars at an unjustifiably low rate.

Plaintiff’s calculations of lost profits stemming from NET’s shorting of cars were first presented in a 22-page document entitled “damage report” filed during pretrial procedures seven months before trial. The same calculations later went into evidence as plaintiff’s exhibit 380. The financial records on which the calculations were based, though never introduced into evidence, had been available to NET during discovery. While NET moved before trial to eliminate other evidence proffered by plaintiff, NET did not object to the damage report, and the report was received into evidence without objection.

Actual (382 Cars)
Projected (649)
Increase
Gross Profit $474,369/$1241 per unit $805,928/$1241 $331,559
Selling 50,258/ 137 84,922/ 130 34,394
Expense
Departmental 154,185/ 403 199,158/ 306 44,973
Operating
Expense
Overhead 181,091/ 474 196,405/ 302 15,314
Deductions 1,948/ 5 1,948/ 3 0
Net Profit 86,617/ 226 323,495/ 498 236,878

Edwards calculated damages as follows. First, it reduced the 300 vehicles it believed it should have been offered annually by its acceptance rate (the number of offered vehicles accepted) for each of the relevant years. It then calculated its gross per unit profit for each of the years by dividing the gross profits of the entire dealership by the number of new cars sold. It multiplied the per unit profit by the number of units (actual and hypothetical) it would have sold, then subtracted certain overhead costs. Some overhead items were assumed to be variable and correspond directly with sales volume (e.g., sales commissions); some were assumed to be semi-fixed (e.g., office supplies); and others were calculated as fixed (e.g., rent, owner’s salary). This yielded a total net profit figure, from which was subtracted actual net profit to arrive at lost profits for each year. 2

I. STATUTORY VIOLATION

The thrust of this appeal is directed at the calculation of damages, not the finding of liability. NET denies that there were any deliberate misallocations, which, if strictly true, would preclude a finding of liability as well as damages. But the jury had before it evidence of troubled relations between Edwards and NET, of possible harassment by NET, and of a sudden and entirely unexplained disparity between the allocations to Edwards and those to Dube *819 immediately after the Alliance issued its list of demands. NET provided at trial no very clear explanation of the disparity in allocations. 3 Based on the evidence presented to it, it was open to the jury to conclude that NET had engaged in “action which is arbitrary, in bad faith, or unconscionable” and had failed to deliver “reasonable quantities” of automobiles in violation of subsections (I) and (III) of N.H.Rev.Stat.Ann. § 357C:3.

II. DAMAGES

The picture as to damages is less clear. From April 1976 through March 1981 Edwards had total net profits of $210,287. It claims that, had it been offered an additional 300 cars per year, its net profits for that period would have been $1,629,749, and that it was accordingly damaged in the amount of $1,419,462.

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Bluebook (online)
708 F.2d 814, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jay-edwards-inc-v-new-england-toyota-distributor-inc-ca1-1983.