Tuesday, March 3, 2015

Sixth Circuit Court of Appeals Considers Good Faith and Fair Dealing Underthe Ohio Motor Vehicle Dealer Act

Sixth Circuit Court of Appeals Considers Good Faith and Fair Dealing Under the Ohio Motor Vehicle Dealer Act


In the decision from earlier this year, the Sixth Circuit Court of Appeals considered whether Ford Motor Company violated the obligation of good faith and fair dealing under the Ohio Motor Vehicle Dealer Act. In this instance, where Ford assisted one Ford dealership in acquiring another, the court determined that the obligation of good faith and fair dealing had not been violated.  Franklin Park Lincoln-Mercury, Inc. v. Ford Motor Company, Case No. 14-3543 (6th Cir. Feb. 12, 2015).
There were two Lincoln-Mercury car dealerships in Toledo Ohio. The plaintiff in this action, Franklin Park Lincoln-Mercury (“Franklin Park”) had repeatedly asserted to Ford Motor Co. (“Ford”) that the Toledo market could only support one such dealership. That other dealership, Rouen, would ultimately receive an offer to acquire its underlying real estate. Rouen would ultimately determine that he would sell his Lincoln-Mercury dealership, and another existing Ford dealer, Brondes, wanted to be the buyer. Crucially, the Rouen and Brondes dealerships were within a half-mile of one another. When Franklin Park got wind of the proposed transaction, it “gave Ford an ultimatum: either block the Rouen-Brondes merger (thus putting Rouen out of business) or find someone to purchase Franklin Park.”  Slip op. at 2.
Ford did nothing to block the deal; in fact they made it possible by affording certain financial concessions and advances to bring the deal about. Franklin Park filed a protest with the Ohio Motor Vehicle Dealer Board, asserting a right to protest based upon statutory provisions applicable when both dealers sell the same brand and stand less than 10 miles apart. That Board would determine that, in contrast, the relocation fell within the statutory exception where the relocating dealership moves less than 1 mile. That determination was upheld by the Ohio Court of Appeals, and the Ohio Supreme Court denied discretionary review. Slip op. at 3.
In the meantime, Franklin Park brought suit against Ford in federal court, asserting a lack of good faith consequent to Ford having “desired, facilitated, underwrote, and ultimately cause the Rouen-Brondes transaction, over Franklin Parks that’s repeated objections.” Summary judgment was ultimately granted to Ford, leading to this appeal to the Sixth Circuit. On appeal, that grant of summary judgment would be affirmed.
The Ohio Motor Vehicle Dealer Act requires manufacturers “to act in good faithtowards dealerships, with good faith being defined as “honesty in the conduct or transaction concerned in the observance of reasonable commercial standards of fair dealing in the trade, including, but not limited to, the duty to act in a fair and equitable manner.” Ohio Code 4517.01(BB). Slip op. at 4. The definition of good faith as well cross-references that in the Ohio enactment of the Uniform Commercial Code, it at the applicable time having been defined as “honesty in fact in the conduct or transaction occurred.Ohio Code § 1303.01(S). Ultimately affirming the determination that Ford had acted in good faith, the Court determined that, inter alia, Ford had a legitimate business reason for supporting the Rouen-Brondes merger, namely that it could make more money from the Toledo market by having more than one Lincoln-Mercury dealership therein.  Furthermore, there had been introduced no evidence indicating that Ford sought to deprive Franklin Park of any of the benefits of being an equal participant in that Toledo market.  Responding to the assertion that the question should go to a jury, the Sixth Circuit determined that:
With two legitimate business rationales to support Ford’s actions and with no evidence of bad faith conduct by Ford, a jury could not reasonably infer bad faith here. Slip op. at 7.

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