Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION-6th Cir.: Facilitating dealership sale to maintain two Toledo franchises was justifiable, (Feb 17, 2015)

By Linda O’Brien, J.D., LL.M.

Ford Motor Company’s decision to facilitate the sale of a dealership in order to maintain two dealerships in the Toledo market was commercially justifiable and did not constitute bad faith toward one of the two dealerships, the U.S. Court of Appeals in Cincinnati has ruled, upholding a federal district court decision (Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Company, February 12, 2015, Sutton, J.).

Franklin Park and Rouen Auto Group operated the two standalone Lincoln-Mercury auto dealerships in Toledo. In 2007, Rouen’s owner opted to sell its franchise and found a potential buyer in Brondes Ford, a dealership about a half mile from Rouen. Franklin Park, upon learning of the sale, confronted Ford Motor Company and sought to block the sale. Ford, wanting to keep two Lincoln-Mercury dealers in Toledo as market studies indicated that doing so would lead to greater profits and improved customer convenience, facilitated the sale.

After Brondes moved the franchise to its Ford dealership, Franklin Park filed a protest with the Ohio Motor Vehicle Dealer Board, stating that the relocation lacked good cause as both dealers sold the same brand of car and were less than ten miles apart. The Board determined that the relocation fell within an exception, since the relocated dealership moved less than one mile from its original location. Franklin Park then sued Ford, alleging that the auto maker failed to act in good faith in violation of the Ohio Motor Vehicle Dealer Act. The district court granted summary judgment for Ford, and Franklin Park appealed.

The district court properly granted summary judgment to Ford, since no reasonable jury could find Ford’s actions were commercially unjustifiable, the appellate court held. Invoking the court’s decision in Jim White Agency Co. v. Nissan Motor Corp., 126 F.3rd 832 (1997), the district court ruled that Ford’s decision to support the Rouen-Brondes sale did not violate the Act’s good faith requirement, as the decision was not “commercially unjustifiable.”

Franklin Park’s argument that Ford was attempting to put it out of business was rejected, since there was no direct evidence to support the allegation and an inference of predatory intent was not reasonable. According to the appellate court, Franklin Park presented no evidence that Ford’s conduct was motivated by a bad faith effort to harm Franklin Park. Rather, Ford’s decision to keep two Lincoln-Mercury dealerships in Toledo in order to improve overall sales was an acceptable commercial justification to support the Rouen-Brondes sale.

Moreover, Ford made a business decision on the belief that two Lincoln-Mercury dealers in the Toledo market would best serve its own interests. Since Ford had a legitimate business reason for supporting the Rouen-Brondes sale, there was no factual dispute about whether its actions were commercially justifiable, the appellate court concluded.

The case is No. 14-3543.

Attorneys: Timothy P. Nackowicz (Allota & Farley LLP), Christopher Michael DeVito (Morganstern, MacAdams & DeVito LLP), and Reginald Sherman Jackson, Jr. (Connelly, Jackson & Collier LLP) for Franklin Park Lincoln-Mercury, Inc. Dominic Francis Perella (Hogan Lovells LLP) for Ford Motor Co.

Companies: Franklin Park Lincoln-Mercury, Inc.; Ford Motor Co.

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