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Ford Motor Co. v. Darlings

Supreme Court of Maine

November 29, 2016

FORD MOTOR COMPANY
v.
DARLINGS et al.

          Argued: September 17, 2015

         On the briefs:

          Judy A.S. Metcalf, Esq., and Noreen A. Patient, Esq., Eaton Peabody, Brunswick, for appellant Darlings.

          Michael Kaplan, Esq., Preti, Flaherty, Beliveau & Pachios, LLP, Portland, for appellant Maine Automobile Dealers Association.

          Daniel L. Rosenthal, Esq., and Lee H. Bals, Esq., Marcus, Clegg & Mistretta, P.A., Portland, for cross-appellant Ford Motor Company.

         At oral argument:

          Judy A.S. Metcalf, Esq., for appellant Darlings.

          Michael Kaplan, Esq., for appellant Maine Automobile Dealers Association.

          Jessica Ellsworth, Esq., Hogan Lovells, Washington, D.C., for cross-appellant Ford Motor Company.

          Panel: SAUFLEY, C.J., and MEAD, GORMAN, JABAR, and HJELM, JJ.

          HJELM, J.

         [¶1] This is the second appeal in a long-running dispute arising out of the franchise relationship between Ford Motor Company and Darlings, an automobile dealer located in Bangor. See Ford Motor Company v. Darling's (Ford I), 2014 ME 7, 86 A.3d 35. The relationship is subject to the Business Practices Between Motor Vehicle Manufacturers, Distributors, and Dealers Act (Dealers Act), 10 M.R.S. §§ 1171 to 1190-A (2015).[1] In Ford I, we affirmed the portion of a judgment entered in the Business and Consumer Docket (BCD) (Nivison, J.) that concluded that Ford violated the Dealers Act by failing to provide Darlings with proper notice of a franchise modification. We vacated an award of damages that had been issued to Darlings by the Maine Motor Vehicle Franchise Board, however, because the Board does not have jurisdiction over that issue. Accordingly, we remanded the matter for a determination of damages by a jury.

         [¶2] On remand, following a two-day jury trial, the court (Murphy, J.) entered a judgment awarding Darlings damages of $154, 695.81 based on Fords violation of the statutory notice provision. Darlings and the Maine Automobile Dealers Association (MADA) now appeal from that decision, arguing that the court erred by limiting Darlings damages claim to a 270-day period and by reducing those damages based on certain payments that Darlings received from Ford. Ford cross-appeals, arguing that if we remand this matter for a new trial, Ford should be entitled to present evidence that it had "good cause" to modify the franchise, which would either further limit or foreclose any recovery by Darlings.[2] We affirm the judgment in part but vacate in part and remand to the BCD for a new trial on the issue of damages.

         I. BACKGROUND

         [¶3] The following facts, set out in part in Ford I, 2014 ME 7, 86 A.3d 35, bear on the issues raised in this appeal.

         [¶4] Ford Motor Company, a manufacturer/franchisor, sells automobiles through contractual agreements with dealers/franchisees such as Darlings. In 1989, Darlings and Ford entered into a service and sales agreement under which Darlings became an authorized Ford dealer and obtained the right to sell Ford vehicles and products.

         [¶5] In 2000, Ford created the Blue Oval Certified (BOC) program, which provided a special certification to dealers that met customer approval standards and entitled those dealers to receive a 1.25% cash bonus on the retail price of each vehicle the dealer sold. Darlings became certified as a BOC dealer in 2001. In August 2004, Ford announced that it would discontinue the 1.25% payments effective April 1, 2005.[3] After Ford stopped making BOC payments, it introduced new incentive programs including an "Accelerated Sales Challenge" (ASC).

         [¶6] In response to Fords actions, in December 2006 Darlings filed a twelve-count complaint with the Maine Motor Vehicle Franchise Board, see 10 M.R.S. § 1188(1), alleging that Ford had committed various violations of the Dealers Act. Darlings alleged, among other things, that Fords termination of BOC payments constituted a modification of the franchise that substantially and adversely affected Darlings rights, obligations, investment or return on investment, and that Ford therefore violated 10 M.R.S. § 1174(3) (B) by failing to provide Darlings with proper notice of the modification. Because of Fords statutory violation, Darlings sought damages equal to the loss of what it described in its complaint as contract-based BOC payments that Ford failed to make.

         [¶7] In May 2008, the Board issued a decision concluding that Ford violated the Dealers Act because it had not given Darlings the type of notice of the decision that was statutorily required in order to discontinue the BOC payments. The Board imposed a civil penalty of $10, 000 and awarded Darlings damages of $145, 223.08. Those damages represented the amount of BOC payments that Darlings would have earned during a 270-day period beginning on April 1, 2005, when Ford stopped making the payments, less the amount that Darlings had earned through other incentive programs, including the ASC program, during that same period. The Board arrived at the 270-day damages period by combining the ninety-day period within which a dealer may file a protest with the Board after receiving notice of a manufacturers proposed modification of the franchise with the subsequent 180-day period within which the Board must decide the matter. See 10 M.R.S. §1174(3)(B).

         [¶8] Pursuant to M.R. Civ. P. 80C, both Ford and Darlings filed separate petitions in the Superior Court for review of the Boards decision.[4] Among other things, Ford sought modification and reversal of the Boards decision regarding the adequacy of Fords notice to Darlings, and Darlings argued that the Board erred by limiting its recovery to damages incurred during the 270-day statutory period and also by offsetting those damages by the amount Darlings received through other sales incentive programs. The petitions were consolidated and transferred to the BCD. There, MADA sought and was granted intervenor status.

         [¶9] In March 2011, a jury trial was held on the factual question of whether discontinuation of the BOC payments constituted a modification of the franchise that had a substantial and adverse effect on Darlings investment or return on investment, and the jury returned a verdict favorable to Darlings. By agreement of the parties, the court (Nivison, J.) did not submit the issue of damages to the jury but rather exercised its appellate jurisdiction and reviewed the administrative record to determine whether that record supported the Boards damages award. Based on the jurys verdict and the courts legal conclusion that Ford failed to provide notice to Darlings in a way that complied with section 1174(3)(B), the court issued orders affirming both the Boards award of one civil penalty pursuant to 10 M.R.S. § 1171-B(3) and the Boards damages award.

         [¶10] On appeal by Darlings and MADA, and cross-appeal by Ford, we affirmed most aspects of the judgment, including the conclusions that Fords termination of BOC payments was a franchise modification that triggered the ninety-day notice requirement under the Dealers Act, and that Ford did not satisfy that requirement. See Ford I, 2014 ME 7, ¶¶ 27, 31, 86 A.3d 35. We held, however, that pursuant to 10 M.R.S. § 1188, the Board lacks jurisdiction to award damages for violations of the Act. Id. ¶¶ 43, 46. We therefore vacated that portion of the judgment affirming the Boards award of damages and remanded the matter to the BCD for a determination of damages by a jury. Id. ¶¶ 3, 48.

         [¶11] Despite the Boards finding, which we affirmed in Ford I, that Ford had not provided Darlings with effective notice of the franchise modification, Ford chose to not cure the problem. During the remand proceedings, Ford explained to the court that for "business reasons" it had not given Darlings statutorily sufficient notice so as to not invite similar challenges from other dealers. The consequence of Fords continuing refusal to provide the required notice was that Darlings did not have an opportunity to file a protest, which would have triggered the Boards responsibility to determine whether there was good cause for the proposed franchise modification. See 10 M.R.S. § 1174(3) (B). Nonetheless, Ford argued that it should be entitled to present evidence of whether it had good cause to modify the franchise as a part of the trial on the issue of damages.

         [¶12] In response, Darlings moved in limine for a court order precluding Ford from arguing that it had good cause to modify the franchise. The court granted Darlings motion, concluding that whether Ford had good cause for the termination was not relevant to the determination of damages because Ford had not satisfied the statutory prerequisite necessary to raise that issue-namely, providing Darlings with proper notice of the modification. The court further concluded that "[a]llowing Ford to adjudicate the question of good cause absent compliance with section 1174(3)(B)s notice requirement would run counter" to the purpose of the Dealers Act.

         [¶13] Additionally, the court issued a pretrial ruling that, as a matter of law, Darlings damages arising from Fords violation of the statutory notice provision are limited to the 270-day period following the discontinuation of BOC payments on April 1, 2005. The court also ruled that the jury would decide as a factual issue whether payments made under new sales incentive programs were a substitute for ...


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