Liberty Lincoln-Mercury v. Ford Motor Co.

134 F.3d 557
CourtCourt of Appeals for the Third Circuit
DecidedJanuary 22, 1998
Docket96-5762, 97-5189 and 97-5190
StatusUnknown
Cited by4 cases

This text of 134 F.3d 557 (Liberty Lincoln-Mercury v. Ford Motor Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Third Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liberty Lincoln-Mercury v. Ford Motor Co., 134 F.3d 557 (3d Cir. 1998).

Opinion

OPINION OF THE COURT

GREENBERG, Circuit Judge.

I. INTRODUCTION

Defendant Ford Motor Company (“Ford”) appeals from an order of the district court *560 dated March 13, 1996, entered March 15, 1996, granting partial summary judgment in favor of plaintiff Liberty Lineoln-Mercury, Inc. (“Liberty”) on the grounds that Ford’s assessment of a dealer-parity surcharge (“DPS”) violated the New Jersey Franchise Practices Act, N.J. Stat. Ann. § 56:10-15(a) (West Supp.1997). Ford also appeals from the district court’s order of September 19, 1996, entered September 23, 1996, amending the March 13 order nunc pro tunc to preclude Ford from altering certain practices that were in effect as of the date of the March order. Liberty cross appeals from the district court’s March 13, 1996 dismissal of its claim alleging illegal price discrimination under the Robinson-Patman Act, 15 U.S.C. § 13(a), and from the portions of the district court’s February 26, 1997 final order entered February 27, 1997, rejecting Liberty’s claim for damages incurred before December 1991, denying recovery of certain fees, and awarding prejudgment interest at the rates set forth in New Jersey Court Rule 4:42-11.

The district court had jurisdiction over Liberty’s state law claim pursuant to 28 U.S.C. § 1332 based on diversity of citizenship and the requisite amount in controversy, and over Liberty’s federal law claim under 28 U.S.C. § 1331. This court’s jurisdiction rests on 28 U.S.C. § 1291 based on the district court’s entry of the final order dated February 26,1997, and entered February 27,1997. 1 For the reasons that follow, we will reverse the district court’s September 19,1996 order, and will vacate the district court’s order awarding attorneys’ fees and remand that issue for reconsideration. We otherwise will affirm.

II. FACTUAL AND PROCEDURAL HISTORY

On March 11, 1976, Ford and Liberty entered into a franchise agreement by executing Ford’s standard “Lincoln and Mercury Sales and Service Agreements.” Pursuant to the agreement, Ford, a motor vehicle manufacturer and franchisor, sells vehicles at wholesale prices to Liberty, which in turn sells them to consumers at retail prices. The retail vehicle sales are accompanied by a warranty issued by Ford to the consumer, guaranteeing that Ford will replace certain systems or parts in the vehicle free of charge. See app. at 38; 173.

Under the standard franchise agreement, a franchisee-dealer such as Liberty must perform warranty repairs on any vehicle brought to its dealership regardless of where the owner purchased the vehicle. Ford then must reimburse the dealer for the parts and labor associated with the warranty repairs. From 1976 until 1991, Ford reimbursed Liberty for parts used in warranty repairs pursuant to a standard nationwide reimbursement formula. Under the relevant version of that formula, Ford reimbursed dealers at 30-40% above their cost for parts depending on the model of the vehicle repaired. See id. at 115.

On December 12, 1991, Liberty wrote to Ford, asking to be reimbursed for warranty parts at its retail rate of 77% above its cost pursuant to the New Jersey Franchise Practices Act (“NJFPA”), which provides that a motor vehicle franchisor “shall reimburse” its franchisee for parts used in warranty repairs at the franchisee’s “prevailing retail price,” provided that the retail price is “not unreasonable.” N.J. Stat. Ann. § 56:10-15(a). See app. at 286. Ford responded on January 17,1992, that it intended “to offset[any] parts mark-up above 30%.” Ford explained that it would “estimate the incremental cost to [Ford] of the higher markup” Liberty had demanded and would provide Liberty “a menu of items” on Liberty’s account from which the costs could be recovered. Ford informed Liberty that it would adjust the amount of its recovery charges “periodically *561 ... to ensure that only incremental costs are recovered.” Id. at 295.

On July 7, 1992, after several months of correspondence, Ford agreed to reimburse Liberty at Liberty’s claimed rate of 77% above cost although Ford “eontinue[d] to believe that a retail markup of 77% is unreasonably high.” App. at 308. On October 1, 1992, Ford reminded Liberty “that there would be cost recovery,” and informed Liberty that it was “reviewing the nature of the recoveries that will be implemented.” Id. at 319. Ford then wrote to Liberty on November 5, 1992, confirming its agreement to reimburse Liberty at a 77% markup retroactive to December 12, 1991, the date Liberty first demanded retail-rate reimbursement, and announcing that Ford would recover the cost of paying the incremental reimbursement through a “dealer parity surcharge.” Id. at 321.

Ford explained,

[a]s you know, parity between dealers, and parity in the overall economic relationship between Ford and its dealers, is essential. It is necessary for Ford to maintain dealer parity, notwithstanding Ford’s acceptance of your request to be reimbursed for warranty parts at a markup exceeding the mark-up which Ford extends uniformly to all dealers nationally.
To maintain that parity, and to ensure fairness to the overwhelming majority of dealers who are satisfied with ... a uniform warranty parts reimbursement markup, and to recover our increased costs .... [cjosts incurred through today will be divided by the total number of vehicles in your dealership’s inventory and ... ‘in-transit’ to your dealership.... The quotient will constitute a dealer parity surcharge to your wholesale price for each such vehicle.

Id. Ford informed Liberty that after this initial cost recovery, “[ijncremental costs incurred during each period ... will be divided by the total number of vehicles invoiced.... The quotient will constitute the surcharge to your wholesale vehicle price for each such vehicle.” Id. Ford assured Liberty that, “[i]n the event the total monthly surcharge differs from the incremental [reimbursement] costs incurred by Ford, the aggregate amount of any excess or shortfall to the surcharge ... will be netted against the Costs used to determine the surcharge for the immediately subsequent Billing Period.” Id. at 322.

In correspondence dated December 21, 1992, Liberty requested additional reimbursements to supplement the below-retail reimbursements it had received for warranty parts it installed between 1986 and December 12, 1991. See id. at 326. Ford rejected that claim. See id. at 346.

On October 5, 1992, Liberty filed a class action in federal district court for the District of New Jersey on behalf of 38 New Jersey Lincoln-Mercury dealers, alleging that Ford’s warranty reimbursement practices violated the NJFPA.

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134 F.3d 557, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liberty-lincoln-mercury-v-ford-motor-co-ca3-1998.