Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Dealers ask Supreme Court to review Ford’s refusal to supply trucks, parts, (Jan 28, 2014)

By John W. Arden, J.D., LL.M.

Eleven truck dealers have requested U. S. Supreme Court review of a Third Circuit decision that overturned a breach of contract ruling against Ford Motor Company for cutting off supply of trucks and parts. The peitition for certiorari, filed January 22, 2014, challenges the appeals court ruling that the dealership agreements were not breached because Ford continued to supply the dealers with truck parts (Bayshore Ford Truck Sales, Inc. v. Ford Motor Co., Dkt. 13-886). The finding that Ford continued to supply truck parts was a factual error “developed by the panel entirely sua sponte,” the dealers charged.

The dispute arose after Ford sold its heavy truck manufacturing and parts business in 1997 to competitor Freightliner for $300 million. In the sales agreement, Ford unequivocally promised to stop producing or selling heavy duty trucks, parts, and accessories, according to the petition. Pursuant to this agreement, Ford stopped accepting orders from its dealers for heavy duty trucks and parts. As a consequence of this sale, the complaining dealers lost tens of millions of dollars in sales “during one of the strongest markets for heavy duty trucks in recent memory,” the dealers claimed. Although Frieghtliner offered the dealers an opportunity to become dealers of a new subsidiary, “the value of that franchise—for a brand with no established reputation in the market for heavy trucks—was substantially lower,” the dealers alleged.

The dealers brought a breach of contract suit against Ford in the United States District Court for the District of New Jersey on behalf of a class of Ford heavy truck dealers. Ford did not dispute that it had ceased providing heavy trucks and parts, according to the dealers, but argued that it was entitled to do so under a contractual provision permitting it to change products, product lines, or body types of heavy duty trucks. The federal district court granted the dealers summary judgment on the breach of contract claim, and a jury returned individual verdicts for the eleven dealers.

On appeal, the Third Circuit reversed the district court on the ground of factual mistake, holding that the term “company product” included truck parts and accessories and finding that Ford continued to manufacture and distribute parts and accessories to dealers. By continuing to provide “company products”—parts and accessories—to dealers, Ford satisfied its contractual obligation to the dealers, the Third Circuit held. Subsequently, the appeals court denied the dealers’ petition for panel rehearing and rehearing en banc. The federal district court concluded that it was required to apply the Third Circuit ruling.

In its petition for review, the dealers questioned “Whether in a case involving a significant harm to a substantial group of parties, a court of appeals’ sua sponte invention of an indisputably false fact that is the sole premise of its ruling so far departs from the ordinary and usual course of proceedings that the judgment should be summarily reversed.”

Attorneys: Eric L. Chase and Genevieve K. LaRobardier (Bressler, Amery & Ross, P.C.); Thomas C. Goldstein and Kevin K Russell (Goldstein & Russell, P.C.); James P. Ulwick, Jean E. Lewis, and Steven M. Klepper (Kramon & Graham, P.A.) for Bayshore Ford Truck Sales, Inc.

Companies: Bayshore Truck Sales, Inc.; Ford Motor Company

News: FranchisingDistribution