Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ohio App. Ct.: Jury verdict for Ford on dealer’s contract claims reinstated, (Dec 15, 2014)

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

A jury verdict in favor of Food Motor Company on breach of contract claims brought by a truck dealer was reinstated by the Ohio Court of Appeals. Claims that the manufacturer’s competitive price assistance program—which set "unrealistically high" published wholesale prices and "secretive unpublished discounts"—violated the terms of Ford’s standard franchise agreement with its truck dealers were rejected (Westgate Ford Truck Sales, Inc. v. Ford Motor Co., December 11, 2014, Gallagher, S.).

Westgate Ford Truck was a medium and heavy duty truck dealer from 1987 until Ford ceased wholesaling that line in 1997. In the early 1980s, Ford had introduced a Competitive Price Assistance (CPA) program, part of which permitted dealers to petition Ford for an individual discount on the wholesale listed price of a truck in order to combat market competition.

After participating in the CPA program for more than 10 years, Westgate took exception to the program because, in order to obtain a discount under the appeal level CPA program, the dealer was required to submit pricing information, including the desired profit on a vehicle. Westgate alleged that the program violated the terms of paragraph 10 of the standard franchise agreement, which required dealers to sell trucks at prices and discounts that were published in the dealer "Terms of Sale Bulletins."

The trial court granted summary judgment to Westgate, holding that the CPA program systematically violated Paragraph 10, and set the matter for trial on damages. Eventually, the trial court awarded nearly two billion dollars in class-wide damages. The appellate court reversed the decision granting partial summary judgment, determining that the paragraph was ambiguous and that Ford’s interpretation was reasonable.

On remand, the breach of contract claim proceeded to a second jury trial, resulting in a general verdict in Ford’s favor on all claims. The trial court granted judgment notwithstanding the verdict and set the damages issue for another trial. Ford appealed, claiming that the trial court erred in granting judgment notwithstanding the verdict. The appellate court agreed.

The issue on appeal was whether Ford breached its duty to sell trucks at published prices as required by the standard franchise agreement. Westgate’s position was that Ford breached its duty under paragraph 10 to sell trucks at prices and discounts set forth in the price schedules or other notices "published in accordance with the truck terms of sales bulletins." In an earlier decision, the appellate court specifically determined that paragraph 10 was ambiguous because it was unclear what it meant by "other notices" made in accordance with the truck terms of sales bulletin. The appellate court concluded that Ford’s interpretation of the ambiguous language—that the CPA program complied with paragraph 10—was reasonable, especially in light of the parties’ course of conduct.

The ambiguity of the contractual provision was a question of law. Because the appellate court had found the paragraph ambiguous, it could not be determined as a matter of law that the CPA program breached the standard franchise agreement. "The trier of fact needed to resolve the ambiguity in the language to determine whether the parties intended the SFA to allow the appeal level CPA program as Ford implemented it, especially in consideration of Westgate’s course of conduct in participating in the program." Thus, the trial court’s granting of judgment notwithstanding the verdict was reversed.

Because the contract language was ambiguous, the jury was free to consider the parties’ course of conduct throughout the 10 years that the franchise agreement bound Ford and Westgate. It was free to deem Westgate’s evidence of its interpretation as incredible based on its course of conduct in actively pursuing participation in the CPA program.

The case is Nos. 101073 and 101136.

Attorneys: James A. Pikl (Scheef & Stone, LLP), Douglas R. Cole (Organ Cole & Stock, LLP), Robert M. Foote (Foote, Mielke, Chavez & O’Neil, LLC), and Dennis G. Pantazis (Wiggins Childs Quinn & Pantazis, LLC) for Westgate Ford Truck. Irene Keyse-Walker (Tucker Ellis LLP), Brian D. Boyle (O’Melveny & Myers, LLP), and Clay A. Guise (Dykema Gossett LLP) for Ford Motor Co.

Companies: Westgate Ford Truck Sales, Inc.; Ford Motor Co.

Cases: FranchisingDistribution OhioNews