NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0741n.06
Filed: October 5, 2006
No. 05-5458
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
PAUL F. CARUANA, )
)
Plaintiff-Appellee, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
) MIDDLE DISTRICT OF TENNESSEE
GENERAL MOTORS CORPORATION, )
)
Defendant-Appellant. )
Before: COOK, McKEAGUE, Circuit Judges, and WILHOIT, District Judge.*
COOK, Circuit Judge. Paul Caruana was the sole shareholder and operator of a General
Motors dealership, Tennessee Motors, Inc., until March 2001, when financial setbacks caused him
to sell a majority interest to several investors. Caruana then sued Defendants General Motors
Corporation (“GM”), General Motors Acceptance Corporation (“GMAC”), and several additional
defendants under, among other things, the Automobile Dealers’ Day in Court Act (“ADDCA”) and
the federal antitrust laws. GM moved to dismiss Caruana’s ADDCA and antitrust claims for lack
of standing. The district court denied GM’s motion, but certified these standing questions for
*
The Honorable Henry R. Wilhoit, Jr., United States District Judge for the Eastern District
of Kentucky, sitting by designation.
No. 05-5458
Caruana v. Gen. Motors Corp.
interlocutory appeal, which this court accepted. We hold Caruana lacks standing under both the
ADDCA and federal antitrust laws.
I.
Caruana owned all the stock and also managed Tennessee Motors, a GM dealership. To
stimulate sales, Caruana adopted a full disclosure, consumer-oriented approach known as “invoice
price selling” and thereby sold significantly more cars than anticipated. Caruana claims that other
dealers, struggling to compete with Caruana’s low pricing, complained to GM, who bowed under
the dealers’ pressure and retaliated against Caruana and Tennessee Motors by (1) refusing to ship
vehicles to Tennessee Motors, (2) refusing to fill orders for sold vehicles, and (3) providing
inadequate support and assistance.
Caruana also claims that GMAC followed GM’s lead in applying pressure by its refusal to
provide financing to Caruana’s customers on the same terms under which it financed other dealers’
customers. When GMAC also demanded that Caruana infuse $275,000 cash into Tennessee
Motors—which it could do because Caruana was “out of trust” with GMAC as a result of
comptroller theft—or it would terminate Tennessee Motors’s financing, Caruana sold part of his
interest in Tennessee Motors to several investors to raise the cash. Caruana now holds only a 32%
interest in the company and no longer manages the dealership. According to Caruana, GM intended
this result when it made financial demands on him that it knew he could not meet and otherwise
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discriminated against him. Also, Caruana claims that GM and GMAC conspired with the investors
who purchased equity in Tennessee Motors.
Caruana sued GM, GMAC, and several of the investors. The Defendants moved to dismiss
under Fed. R. Civ. P. 12(b)(6). Relevant to this appeal, the district court denied GM’s motion to
dismiss Caruana’s claims under both the ADDCA and federal antitrust laws, concluding that
Caruana had standing to pursue his claims. We review the standing questions pursuant to 28 U.S.C.
§ 1292(b).
II.
“To survive a motion to dismiss under Rule 12(b)(6), a complaint must contain either direct
or inferential allegations respecting all the material elements to sustain a recovery under some viable
legal theory. Nonetheless, conclusory allegations . . . will not suffice to prevent a motion to
dismiss.” Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005) (internal citation omitted). We review
such judgments de novo. Id.
A. Automobile Dealers’ Day in Court Act
GM first contests the district court’s determination that Caruana has standing to pursue his
ADDCA claims. Because the Act provides a cause of action for an “automobile dealer” when an
“automobile manufacturer” fails to act in good faith in carrying out a franchise agreement, we must
consider whether Caruana himself is an “automobile dealer,” the district court having concluded that
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Caruana could not maintain a derivative claim. 15 U.S.C. §§ 1221–1225; see id. § 1222. An
“automobile dealer” is “any person, partnership, corporation, association, or other form of business
enterprise . . . operating under the terms of a franchise and engaged in the sale or distribution of
passenger cars, trucks, or station wagons.” Id. § 1221(c). A “franchise” is “the written agreement
or contract between any automobile manufacturer engaged in commerce and any automobile dealer
which purports to fix the legal rights and liabilities of the parties to such agreement or contract.” Id.
§ 1221(b).
Caruana argues that he qualifies as an “automobile dealer” by virtue of his being a party to
the franchise agreement, which emphasized his personal role. He highlights the clause designating
the agreement as a “Personal Services Agreement, entered into . . . on Dealer’s assurance that Dealer
Operator will provide personal services by exercising full managerial authority over Dealership
Operations.” To show that he and his dealership were essentially indistinguishable, Caruana notes
that he signed the agreement on behalf of Tennessee Motors, he was the “Dealer Operator” referred
to in the agreement, and GM could terminate the franchise agreement if Caruana became
incapacitated. Yet the contract delimits Tennessee Motors as the “only party to [the] Agreement
with General Motors,” and Tennessee law instructs that we construe the contract “according to its
plain terms.” Pitt v. Tyree Org. Ltd., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002) (citations omitted).
Caruana also contends that he qualifies as a dealer because he is “an intended third party
beneficiary of the Agreements.” Under Tennessee law, however, a third party may enforce a contract
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only if, among other things, the parties have not otherwise agreed. Owner-Operator Indep. Drivers
Ass’n, Inc. v. Concord EFS, Inc., 59 S.W.3d 63, 70–71 (Tenn. 2001). The franchise agreement
provides, “This Agreement is not enforceable by any third parties and is not intended to convey any
rights or benefits to anyone who is not a party to this Agreement.” Caruana thus may not assert the
rights of Tennessee Motors as a third party beneficiary.
Caruana essentially seeks to sue as a shareholder for the corporation’s injuries. In this circuit,
individual shareholders, even sole shareholders, generally do not have standing under the ADDCA
to sue for the corporation’s injuries. As we explained in Dienstberger v. General Motors Corp., No.
94-4336, 1995 WL 559374, at *1 (6th Cir. Sept. 20, 1995) (unpublished opinion), a plaintiff who
sues “in his sole capacity as a shareholder . . . lacks standing to challenge [the manufacturer’s]
action. Only the corporate entity . . . could sue [the manufacturer] . . . .” Dienstberger applied the
well-established doctrine, articulated in Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals., Inc.,
862 F.2d 597, 602–03 (6th Cir. 1988), that shareholders and officers of a franchisee lack standing
to sue the franchisor for the franchisee corporation’s injuries. The district courts in this circuit apply
this rule to ADDCA claims, and we see no reason here to depart from it. See, e.g., Salem Mall
Lincoln Mercury, Inc. v. Hyundai Motor Am., No. C-3-95-231, 1998 WL 1572766, at *3 (S.D. Ohio
Aug. 18, 1998) (“When the dealership is doing business in the corporate form, ‘the statute contains
no hint that it intends a departure from the established principle that the locus of the right of action
is the corporation.’” (quoting Vincel v. White Motor Corp., 521 F.2d 1113, 1120 (2d Cir. 1975));
Hagen v. Gen. Motors Corp., No. C-1-75-321, 1976 WL 1304, at *2 (S.D. Ohio Aug. 27, 1976).
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Many of our sister circuits apply this standing limitation without exception. See, e.g., Tucker v.
Chrysler Credit Corp., No. 97-1364, 1998 WL 276266, at *4 (4th Cir. May 29, 1998); Pearson v.
Ford Motor Co., 68 F.3d 1301, 1303 (11th Cir. 1995); Olson Motor Co. v. Gen. Motors Corp., 703
F.2d 284, 289–90 (8th Cir. 1983); Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 439–40
(9th Cir. 1979); Vincel, 521 F.2d at 1120.
Several circuits have recognized exceptions to the rule against shareholder standing, and
Caruana argues that his case fits one of these exceptions. In Kavanaugh v. Ford Motor Co., 353 F.2d
710, 716 (7th Cir. 1965), the Seventh Circuit allowed a shareholder of a franchisee corporation to
sue Ford because the corporation was “substantially owned and controlled by Ford.” This
relationship, the court reasoned, “effectively insulates Ford from liability under the act.” Id. at 717.
The Seventh Circuit relied on the “settled doctrine that the fiction of corporate entity will be
disregarded whenever it has been adopted or used to evade the provisions of a statute.” Id. Caruana
alleges no such facts regarding his adoption of the corporate form. Later analysis of Kavanaugh has
essentially limited it to situations where the manufacturer also owns a controlling interest in the
dealership. See Salem Mall, 1998 WL 1572766, at *4 (rejecting plaintiffs’ reliance on Kavanaugh
as misplaced when they made no showing that the manufacturer “forced” the corporate form on them
or that the manufacturer controlled the dealership); see also Vincel, 521 F.2d at 1120 (“the
circumstances in [Kavanaugh] which induced the court to disregard the corporate entity were
compelling”).
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Caruana also urges us to adopt the exception articulated by the Fifth Circuit in York Chrysler-
Plymouth v. Chrysler Credit Corp., 447 F.2d 786 (5th Cir. 1971). In York, the Fifth Circuit
recognized that “individuals would not come within the scope of the Act merely because they were
sole stockholders, officers and directors of the corporate franchise holder,” id. at 790, but because
the franchisees in York “were so inextricably woven” into the franchise agreement, the court granted
them standing. Id. This reasoning, however, fails to respect the plain language of the ADDCA. As
the court in Salem Mall explained, “the York court misinterpreted the holding in the . . . Kavanaugh
decision, in reaching a conclusion that ‘essential’ persons—or as the Plaintiffs characterize it, those
persons having a ‘personal commitment’—enjoy an exception to the plain language of the ADDCA.”
1998 WL 1572766, at *5. The district court in this case followed Salem Mall in correctly rejecting
Caruana’s reliance on York, in keeping with several circuits that have criticized or declined to follow
York. See, e.g., Tucker, 1998 WL 276266, at *4; Pearson, 68 F.3d at 1303; Olson Motor Co., 703
F.2d at 289 n.5; Sherman, 601 F.2d at 440 n.11; Vincel, 521 F.2d at 1120.
The district court also discussed and relied on Imperial Motors, Inc. v. Chrysler Corp., 559
F. Supp. 1312 (D. Mass. 1983), in determining Caruana’s standing. Although Imperial Motors’s
facts resemble those in this case, Imperial Motors relied on York and Kavanaugh in permitting
plaintiff suits beyond the purview of the plain language of the statute, id. at 1314–15, and as
previously discussed, we find these extensions unsupported by the ADDCA.
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Caruana bemoans 12(b)(6) dismissal as denying him the opportunity to present facts
establishing his standing to sue under the Act. Such dismissals require courts to accept all factual
allegations contained in the complaint as true and “determine whether the plaintiff undoubtedly can
prove no set of facts in support of his claims that would entitle him to relief.” In re DeLorean Motor
Co., 991 F.2d 1236, 1240 (6th Cir. 1993) (citing Meador v. Cabinet for Human Res., 902 F.2d 474,
475 (6th Cir. 1990)). Though Caruana alleges in his complaint that he is an “automobile dealer” as
defined by the ADDCA, this allegation is a legal conclusion, and “we need not accept as true legal
conclusions or unwarranted factual inferences.” Morgan v. Church’s Fried Chicken, 829 F.2d 10,
12 (6th Cir. 1987). Without allegations of fact to support “dealer” status, 12(b)(6) dismissal fits.
We hold that the district court erred by permitting Caruana to assert claims under the
ADDCA.
B. Antitrust Standing
Caruana asserts several antitrust claims under the Sherman Act, 15 U.S.C. § 1, the Clayton
Act, 15 U.S.C. § 15, and the Robinson-Patman Act, 15 U.S.C. § 13. In essence, Caruana claims that
Defendants GM, GMAC, and some other unknown individuals conspired to engage in a resale-price-
maintenance scheme to harm Tennessee Motors and end its practice of “invoice price selling.”
Caruana’s right to proceed hinges on his ability to overcome challenges to his standing under the
antitrust laws. Antitrust plaintiffs must prove more than economic injury; they “‘must prove antitrust
injury, which is to say injury of the type the antitrust laws were intended to prevent and that flows
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from that which makes the defendants’ acts unlawful.’” Valley Prods. Co. v. Landmark, A Div. of
Hospitality Franchising Sys., Inc., 128 F.3d 398, 402 (6th Cir. 1997) (quoting Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). This heightened standard obtains because the
antitrust laws “were enacted for ‘the protection of competition, not competitors.’” Brunswick, 429
U.S. at 488 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)). Schooled by the
Supreme Court’s articulation of factors relevant to antitrust standing in Associated General
Contractors of California Inc. v. California State Council of Carpenters, 459 U.S. 519, 537–45
(1983), this circuit then adopted that formulation:
(1) the causal connection between the antitrust violation and harm to the plaintiff and
whether that harm was intended to be caused; (2) the nature of the plaintiff’s alleged
injury including the status of the plaintiff as consumer or competitor in the relevant
market; (3) the directness or indirectness of the injury, and the related inquiry of
whether the damages are speculative; (4) the potential for duplicative recovery or
complex apportionment of damages; and (5) the existence of more direct victims of
the alleged antitrust violation.
Southaven Land Co. v. Malone & Hyde, Inc., 715 F.2d 1079, 1085 (6th Cir. 1983) (citing Associated
Gen. Contractors, 459 U.S. at 537–45). “All five factors must be balanced, however, with no one
factor being determinative.” Indeck Energy Servs., Inc. v. Consumers Energy Co., 250 F.3d 972, 976
(6th Cir. 2000). Nonetheless, “[t]he Sixth Circuit, it is fair to say, has been reasonably aggressive
in using the antitrust injury doctrine to bar recovery where the asserted injury, although linked to an
alleged violation of the antitrust laws, flows directly from conduct that is not itself an antitrust
violation.” Valley Prods., 128 F.3d at 403. With these guidelines in mind, we assess the Southaven
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factors as they apply to this case.
We first examine “the causal connection between the antitrust violation and harm to the
plaintiff and whether that harm was intended to be caused.” Southaven, 715 F.2d at 1085. As the
district court aptly observed, “The majority of the antitrust violations averred by Caruana stem from
Defendants’ alleged use of [resale] price maintenance. However, any antitrust infraction that may
have been perpetrated was directed at [Tennessee Motors], as a corporate entity, not at Caruana as
an individual. Thus, Caruana’s injury is only incidental to the alleged misconduct . . . .” Caruana,
No. 3:01-1567, slip op. at 21. But the district court then reversed course: despite its initial focus on
the distinction between shareholder injury and corporate injury, the concept of GM and GMAC
targeting Caruana personally for his advocacy of invoice-price selling moved the court to find
standing. There is no reconciling the court’s initial determination that the pricing conspiracy aimed
“to prevent [Tennessee Motors] from utilizing invoice price selling . . . and not Caruana
individually,” Caruana, No. 3:01-1567, slip op. at 21–22, with its conclusion that the conspiracy
sought to “force a change in ownership and control in [Tennessee Motors] directed at Caruana
personally because of his advocacy of invoice price selling.” Id. at 22. We see the chain of
causation between the alleged conspiracy to harm the business and injury to Caruana’s
ownership/management interest as too attenuated to be “injury of the type the antitrust laws were
intended to prevent.” Valley Prods., 128 F.3d at 402 (quoting Brunswick, 429 U.S. at 489).
We buttress this conclusion by consideration of the second and conceptually-related factor,
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“the nature of the plaintiff’s alleged injury including the status of the plaintiff as consumer or
competitor in the relevant market.” Southaven, 715 F.2d at 1085. Caruana is neither a consumer
nor a competitor in the relevant market; he is a shareholder and employee of a competitor. He
suffered investment and employment losses, while Tennessee Motors suffered any alleged “antitrust
injury” here. In Peck v. General Motors Corp., 894 F.2d 844 (6th Cir. 1990), a factually analogous
case, the former employees and shareholders of a car dealership driven into bankruptcy by an
antitrust conspiracy did not have standing to assert antitrust claims. As the court explained, “[t]he
Pecks’ loss of employment income, benefit incentives and personal investments place them in no
. . . position to assert standing. . . . Accordingly, the Pecks’ damages are derivative and militate
against granting them antitrust standing.” Id. at 847.
We see no relevant distinction between Caruana’s and the Pecks’ injury. Caruana claims that
the defendants’ resale price maintenance scheme harmed Tennessee Motors and that, as a result of
the dire financial straits caused by the scheme, Caruana was forced to seek outside investors and
ultimately lost control of the Tennessee Motors business. This is no different than the Pecks’ injury:
Caruana suffered economic loss deriving from the effects of an antitrust conspiracy directed at the
corporation itself. And Caruana’s status as sole shareholder during part of the alleged conspiracy
fails to distinguish his case from Peck because this court has refused to find that sole-shareholder
status confers antitrust standing. Meyer Goldberg, Inc. of Lorain v. Goldberg, 717 F.2d 290, 294
& n.2 (6th Cir. 1983) (sole shareholder of a bankrupt corporation lacked antitrust standing).
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Caruana points us to some instances in which an individual not fitting into the category of
competitor or consumer in the relevant market may have standing to bring antitrust claims. See Blue
Shield of Va. v. McCready, 457 U.S. 465 (1982). McCready is inapposite to Caruana’s case. As this
court explained in Southaven, “McCready instructs that an injury ‘inextricably intertwined’ with the
injury sought to be inflicted upon the relevant market or participants therein may fall ‘within the area
of congressional concern’ so as to satisfy the [standing] inquiry.” Southaven, 715 F.2d at 1086
(quoting McCready, 457 U.S. at 484). Caruana, however, does not contend that he has standing
under an “inextricably intertwined” theory, nor could he. To merit standing under the “inextricably
intertwined” category, a plaintiff must assert that defendants used him as a “a fulcrum, conduit or
market force to injure competitors or participants in the relevant product or geographical markets.”
Id.
McCready concerned a purchaser of psychotherapy services and not a competitor of the
alleged conspirators. The Supreme Court ruled the purchaser nevertheless had antitrust standing
“because her injury was integrally connected to the harm the conspirators sought to inflict [and she]
was actively manipulated by conspirators. . . .” Peck, 894 F.2d at 847 (citing McCready, 457 U.S.
at 483–84). Just as in Peck, though, Caruana claims injury derived from the effects of the conspiracy
perpetrated against Tennessee Motors; he was not manipulated or used by defendants in carrying out
their conspiracy. See id.
As regards the third and fourth Southaven factors, the directness or indirectness of the injury,
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whether the damages are speculative, and the potential for duplicative recovery or complex
apportionment of damages, because Caruana asserts only shareholder injury not cognizable under
the antitrust laws, we bypass questions of the nature of his damages as inapposite to this case.
Southaven, 715 F.2d at1085.
And finally, the fifth Southaven factor examines the existence of more direct victims of the
alleged antitrust violation. 715 F.2d at 1085. The district court found that “[i]f Caruana is denied
standing to sue, no one else has incentive to restore competition to the automotive market and these
antitrust injuries to [Tennessee Motors] and the market remain unaddressed.” Caruana, No. 3:01-
1567, slip op. at 23–24. While the district court’s observation may have been correct, it does not
cure the central defect with Caruana’s complaint, i.e., his injuries are not antitrust injuries, but
merely derivative injuries. Moreover, if there were a conspiracy between GM and the other
unidentified defendants to terminate price-cutting car dealers, at least two more direct victims of the
violation exist: Tennessee Motors and the consumers themselves.
After considering each Southaven factor, we find that Caruana does not establish standing
to assert his antitrust claims.
III.
We hold that the district court erred in finding that Caruana established standing to pursue
claims under the ADDCA and the federal antitrust laws. We therefore reverse the district court’s
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denial of GM’s motion to dismiss and remand for proceedings consistent with this opinion.
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