Opinions of the United
1998 Decisions States Court of Appeals
for the Third Circuit
1-22-1998
Liberty v. Ford Mtr Co
Precedential or Non-Precedential:
Docket 96-5762
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Filed January 22, 1998
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 96-5762, 97-5189 and 97-5190
LIBERTY LINCOLN-MERCURY
v.
FORD MOTOR COMPANY,
Appellant in No. 96-5762
LIBERTY LINCOLN-MERCURY, INC.
v.
FORD MOTOR COMPANY,
Appellant in No. 97-5189
LIBERTY LINCOLN-MERCURY, INC.,
Appellant in No. 97-5190
v.
FORD MOTOR COMPANY
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 95-3121)
Argued December 11, 1997
BEFORE: GREENBERG, ROTH, and SEITZ,
Circuit Judges.
(Filed: January 22, 1998)
Dennis R. LaFiura (argued)
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
Morristown, NJ 07932-0950
Michael R. Feagley
Mayer, Brown & Platt
190 S. LaSalle Street
Chicago, IL 60603-3441
John J. Sullivan
Robert L. Bronston
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Washington, D.C. 20006-1882
Attorneys for Appellant and Cross
Appellee Ford Motor Company
Norman I. Klein
Goldman, Carlett
Garrison & Klein
1135 Clifton Ave.,
Clifton, NJ 07013
Eric L. Chase (argued)
Genevieve K. LaRobardier
Bressler, Amery & Ross, P.C.
P.O. Box 1980
Morristown, NJ 07962
Attorneys for Appellee and Cross
Appellant Liberty Lincoln-Mercury,
Inc.
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
Defendant Ford Motor Company ("Ford") appeals from an
order of the district court dated March 13, 1996, entered
March 15, 1996, granting partial summary judgment in
2
favor of plaintiff Liberty Lincoln-Mercury, Inc. ("Liberty") on
the grounds that Ford's assessment of a dealer-parity
surcharge ("DPS") violated the New Jersey Franchise
Practices Act, N.J. Stat. Ann. S 56:10-15(a) (West Supp.
1997). Ford also appeals from the district court's order of
September 19, 1996, entered September 23, 1996,
amending the March 13 order nunc pro tunc to preclude
Ford from altering certain practices that were in effect as of
the date of the March order. Liberty cross appeals from the
district court's March 13, 1996 dismissal of its claim
alleging illegal price discrimination under the Robinson-
Patman Act, 15 U.S.C. S 13(a), and from the portions of the
district court's February 26, 1997 final order entered
February 27, 1997, rejecting Liberty's claim for damages
incurred before December 1991, denying recovery of certain
fees, and awarding prejudgment interest at the rates set
forth in New Jersey Court Rule 4:42-11.
The district court had jurisdiction over Liberty's state law
claim pursuant to 28 U.S.C. S 1332 based on diversity of
citizenship and the requisite amount in controversy, and
over Liberty's federal law claim under 28 U.S.C. S 1331.
This court's jurisdiction rests on 28 U.S.C. S 1291 based on
the district court's entry of the final order dated February
26, 1997, and entered February 27, 1997.1 For the reasons
that follow, we will reverse the district court's September
19, 1996 order, and will vacate the district court's order
awarding attorneys' fees and remand that issue for
reconsideration. We otherwise will affirm.
_________________________________________________________________
1. Ford initially filed an interlocutory appeal from the district court's
September 19, 1996 order pursuant to 28 U.S.C. S 1292(a)(1), which
provides that "the courts of appeals shall have jurisdiction of appeals
from . . . [i]nterlocutory orders of the district courts . . . granting .
. .
injunctions . . . ." By order of this court the interlocutory appeal,
which
was docketed as number 96-5762, was consolidated with Ford's appeal
in number 97-5189 and Liberty's cross appeal in number 97-5190 from
the district court's final order. The district court on April 25, 1997,
entered a supplemental final order dated April 22, 1997, which is not at
issue in this appeal.
3
II. FACTUAL AND PROCEDURAL HISTORY
On March 11, 1976, Ford and Liberty entered into a
franchise agreement by executing Ford's standard "Lincoln
and Mercury Sales and Service Agreements." Pursuant to
the agreement, Ford, a motor vehicle manufacturer and
franchisor, sells vehicles at wholesale prices to Liberty,
which in turn sells them to consumers at retail prices. The
retail vehicle sales are accompanied by a warranty issued
by Ford to the consumer, guaranteeing that Ford will
replace certain systems or parts in the vehicle free of
charge. See app. at 38; 173.
Under the standard franchise agreement, a franchisee-
dealer such as Liberty must perform warranty repairs on
any vehicle brought to its dealership regardless of where
the owner purchased the vehicle. Ford then must
reimburse the dealer for the parts and labor associated
with the warranty repairs. From 1976 until 1991, Ford
reimbursed Liberty for parts used in warranty repairs
pursuant to a standard nationwide reimbursement formula.
Under the relevant version of that formula, Ford
reimbursed dealers at 30-40% above their cost for parts
depending on the model of the vehicle repaired. See id. at
115.
On December 12, 1991, Liberty wrote to Ford, asking to
be reimbursed for warranty parts at its retail rate of 77%
above its cost pursuant to the New Jersey Franchise
Practices Act ("NJFPA"), which provides that a motor vehicle
franchisor "shall reimburse" its franchisee for parts used in
warranty repairs at the franchisee's "prevailing retail price,"
provided that the retail price is "not unreasonable." N.J.
Stat. Ann. S 56:10-15(a). See app. at 286. Ford responded
on January 17, 1992, that it intended "to offset[any] parts
mark-up above 30%." Ford explained that it would
"estimate the incremental cost to [Ford] of the higher mark-
up" Liberty had demanded and would provide Liberty "a
menu of items" on Liberty's account from which the costs
could be recovered. Ford informed Liberty that it would
adjust the amount of its recovery charges "periodically . . .
to ensure that only incremental costs are recovered." Id. at
295.
4
On July 7, 1992, after several months of correspondence,
Ford agreed to reimburse Liberty at Liberty's claimed rate of
77% above cost although Ford "continue[d] to believe that
a retail markup of 77% is unreasonably high." App. at 308.
On October 1, 1992, Ford reminded Liberty "that there
would be cost recovery," and informed Liberty that it was
"reviewing the nature of the recoveries that will be
implemented." Id. at 319. Ford then wrote to Liberty on
November 5, 1992, confirming its agreement to reimburse
Liberty at a 77% markup retroactive to December 12, 1991,
the date Liberty first demanded retail-rate reimbursement,
and announcing that Ford would recover the cost of paying
the incremental reimbursement through a "dealer parity
surcharge." Id. at 321.
Ford explained,
[a]s you know, parity between dealers, and parity in
the overall economic relationship between Ford and its
dealers, is essential. It is necessary for Ford to
maintain dealer parity, notwithstanding Ford's
acceptance of your request to be reimbursed for
warranty parts at a markup exceeding the mark-up
which Ford extends uniformly to all dealers nationally.
To maintain that parity, and to ensure fairness to the
overwhelming majority of dealers who are satisfied with
. . . a uniform warranty parts reimbursement mark-up,
and to recover our increased costs . . . . [c]osts
incurred through today will be divided by the total
number of vehicles in your dealership's inventory and
. . . `in-transit' to your dealership . . . . The quotient
will constitute a dealer parity surcharge to your
wholesale price for each such vehicle.
Id. Ford informed Liberty that after this initial cost
recovery, "[i]ncremental costs incurred during each period
. . . will be divided by the total number of vehicles invoiced
. . . . The quotient will constitute the surcharge to your
wholesale vehicle price for each such vehicle." Id. Ford
assured Liberty that, [i]n the event the total monthly
surcharge differs from the incremental [reimbursement]
costs incurred by Ford, the aggregate amount of any excess
or shortfall to the surcharge . . . will be netted against the
5
Costs used to determine the surcharge for the immediately
subsequent Billing Period." Id. at 322.
In correspondence dated December 21, 1992, Liberty
requested additional reimbursements to supplement the
below-retail reimbursements it had received for warranty
parts it installed between 1986 and December 12, 1991.
See id. at 326. Ford rejected that claim. See id. at 346.
On October 5, 1992, Liberty filed a class action in federal
district court for the District of New Jersey on behalf of 38
New Jersey Lincoln-Mercury dealers, alleging that Ford's
warranty reimbursement practices violated the NJFPA. On
May 14, 1993, the district court, finding that the dealers'
claims required a "part-by-part, sale-by-sale" analysis of
each dealer's retail rate, denied the motion for class
certification for lack of the requisite commonality among
the dealers' claims. Liberty Lincoln Mercury, Inc. v. Ford
Mktg. Corp., 149 F.R.D. 65, 76 (D.N.J. 1993) ("Liberty I").
The court later dismissed Liberty I without prejudice by
consent of the parties.
Liberty then filed this action on June 30, 1995. In its
complaint and amended complaint Liberty alleged that
Ford's imposition of the DPS violated the NJFPA's mandate
that Ford reimburse Liberty for warranty parts at Liberty's
prevailing retail price. Liberty also alleged that by imposing
the DPS on Liberty but not on its competitors, Ford had
engaged in unlawful price discrimination in violation of the
Robinson-Patman Act, 15 U.S.C. S 13(a).2
Liberty moved for summary judgment as to liability on
both claims and Ford moved to dismiss Liberty's price
discrimination claim. By order dated March 13, 1996, the
district court granted Liberty's motion for summary
judgment as to its NJFPA claim and granted Ford's motion
to dismiss Liberty's price discrimination claim. The district
court found that Ford was "engaged in a shell game, the
purpose of which is to avoid, altogether, the costs of
complying with the NJFPA." Slip op. at 9. Finding that the
DPS, by effectively reducing Liberty's reimbursements from
_________________________________________________________________
2. Liberty consented to the dismissal of several other claims which are
not at issue in this appeal.
6
Liberty's retail rate to Ford's standard rate, "essentially
nullified [Ford's] compliance and created an end-run
around the Act," the district court concluded that it "would
be formalistic, in the extreme," to find that Ford had paid
Liberty the requisite reimbursement "when [Ford] charges
back the very benefits which the Act intends to confer." Id.
at 8-9. The court thus held that the DPS violated the "clear
language of the NJFPA" by denying Liberty reimbursement
at its retail rate. Id. at 11. The court concluded, however,
that because the DPS placed Liberty in the same economic
position as competitors who received only standard
reimbursements at 30-40% above cost, it did not give rise
to a price discrimination claim under the Robinson-Patman
Act. See id. at 12-13.
Thereafter Ford discontinued the DPS, and on April 29,
1996, wrote to all New Jersey dealers announcing new
policies for processing retail-rate reimbursement claims.
The policies required dealers to document their claimed
retail prices as to each warranty part by attaching retail
customer repair orders for the same part installed in
similar vehicles within the preceding six months. See app.
at 513, 516. Ford also informed the dealers that "payment
of warranty parts reimbursement at levels higher than
[standard] reimbursement levels will be recovered . . . as
with other regulatory compliance costs." Id. at 514.
On May 15, 1996, Liberty submitted a request for retail-
rate reimbursement for warranty parts installed during
April and May 1996. Ford rejected the request for failure to
satisfy Ford's new documentation requirements. See app. at
736-42. On June 20, 1996, Liberty filed a "Motion to
Enforce the Order of March 13, 1996" challenging Ford's
new policies as imposing insurmountable burdens designed
to prevent Liberty from receiving retail-rate reimbursement,
in violation of the NJFPA and the district court's March
order. Liberty sought sanctions and an order enjoining Ford
from implementing the new requirements.
Ford responded that the issues raised in Liberty's Motion
to Enforce were beyond the scope of the complaint and the
March order, which had addressed only the legality of the
DPS and were silent as to the proper methods for
establishing a dealer's retail rate. Ford contended that its
7
new policies were appropriate in light of Liberty I's
pronouncement favoring a "part-by-part, sale-by-sale"
analysis of each dealer's retail rate, 149 F.R.D. at 76, and
sought discovery and the opportunity to develop a factual
record regarding the nature of the new policies and the
burdens they entailed. See app. at 729-30.
The district court, without allowing discovery or holding
an evidentiary hearing, held on September 19, 1996, that in
adopting its new reimbursement policies Ford had "ignored
or evaded" the "clear thrust" of the March opinion. Slip op.
at 1. The court found that the new procedure "appears to
be onerous in the extreme and designed to frustrate any
attempt to obtain statutory reimbursement . . . at the
dealer's prevailing retail rate." Finding, however, that the
terms of the March order were not "explicit," the court
denied Liberty's Motion to Enforce, but amended the March
order nunc pro tunc to forbid Ford from altering its prior
reimbursement procedure absent Liberty's consent or leave
of the court. The court also enjoined Ford from"any further
or other financial imposition on . . . Liberty . .. as a
recoupment" of Ford's NJFPA compliance costs. Slip op. at
2-3.
Liberty also moved for summary judgment as to the
issues of damages, interest, costs and fees. In afinal order
dated February 26, 1997, and supplemental final order
dated April 22, 1997, the district court granted Liberty's
motion in part, awarding Liberty a total of approximately
$800,000 in damages, attorneys' fees, costs and
prejudgment interest. This appeal and cross appeal
followed.
III. DISCUSSION
A. The New Jersey Franchise Practices Act
1. Statutory Language
The New Jersey Franchise Practices Act provides that:
[i]f any motor vehicle franchise shall require or permit
motor vehicle franchisees to . . . provide parts in
8
satisfaction of a warranty issued by the motor vehicle
franchisor . . . [t]he motor vehicle franchisor shall
reimburse each motor vehicle franchisee . . . for such
parts as are supplied, in an amount equal to the
prevailing retail price charged by such motor vehicle
franchisee for such . . . parts in circumstances where
. . . such parts [are] supplied other than pursuant to
the warranty; provided that such motor vehicle
franchisee's prevailing retail price is not unreasonable
when compared with that of [other franchisees] from
the same motor vehicle franchisor for identical
merchandise . . . in the geographic area in which the
motor vehicle franchisee is engaged in business . . . .
N.J. Stat. Ann. S 56:10-15(a). We must decide whether the
district court erred in entering summary judgment in favor
of Liberty on the grounds that Ford's "surcharge regime
violates the clear language of the NJFPA." Slip op. at 11.
We review both the district court's interpretation of the
NJFPA and its entry of summary judgment de novo,
construing the NJFPA as we believe that the New Jersey
Supreme Court would construe it and viewing the record in
the light most favorable to Ford. See Pittston Co. Ultramar
Am. Ltd. v. Allianz Ins. Co., 124 F.3d 508, 516 (3d Cir.
1997).
While the New Jersey courts have not interpreted the
relevant statutory language dictating that a "franchisor
shall reimburse" its franchisee for warranty parts at "the
prevailing retail price," under New Jersey law"[i]t is a
cardinal rule of statutory construction that the language of
the statute should be given its ordinary meaning and
construed in a common sense manner to accomplish the
legislative purpose." N.E.R.I. Corp. v. New Jersey Highway
Auth., 686 A.2d 328, 335 (N.J. 1996) (citations and internal
quotations omitted). Applying an ordinary and common
sense definition of the relevant statutory language requiring
Ford to reimburse Liberty at retail rates, we conclude that
Ford's assessment of the DPS, which automatically reduced
the reimbursements Liberty received to below retail levels,
violated the plain language of the NJFPA.
According to Ford, because the NJFPA regulates "a
narrow aspect of the franchisor-franchisee relationship,"
9
dictating only the rate of reimbursement for warranty parts,
and "is silent regarding wholesale prices," the DPS which
Ford added to Liberty's wholesale vehicle prices falls
outside the purview of the NJFPA. Br. at 14-15. Ford
contends that the district court, in finding that the DPS
violated the NJFPA, "read into the statutory scheme a
remarkably intrusive and completely unstated requirement
that Ford silently bear the full cost of compliance,"
depriving Ford of "the freedom to control its wholesale
pricing structure without . . . support in the language of
the statute." Id. at 20.
We disagree. The district court did not forbid Ford from
adopting policies to recover the costs of complying with the
NJFPA; nor did it forbid methods of cost recovery involving
wholesale prices. The court simply held that while some
"methods of cost-recovery are permissible . . . .[Ford's]
method certainly is not." Slip op. at 9. Even though the
court, in reaching this conclusion, did not delineate the
distinctions between the DPS and permissible cost-recovery
systems, those distinctions are apparent from the record
before us.
As Ford explained to Liberty in setting forth its method
for calculating the DPS, "incremental [warranty
reimbursement] costs incurred [by Ford] during each period
. . . will be divided by the total number of vehicles invoiced
. . . that month." App. at 321. Accordingly, the DPS bore no
economic relationship to Liberty's wholesale vehicle
purchases, but rather was exacted as an automatic result
of, and in direct proportion to, Liberty's incremental
warranty reimbursement claims. Although Ford described
the DPS as a vehicle price surcharge and attributed a
portion of it to each vehicle on Liberty's invoice, the total
amount of the surcharge neither would increase if Liberty
purchased more vehicles nor would decrease if Liberty
purchased fewer. See id. at 308, 321. Thus, looking to the
practical operation of the DPS rather than to the
nomenclature Ford used to describe it, we conclude that
the DPS, the amount of which depended solely and directly
on Liberty's warranty reimbursement claims, functioned not
as a wholesale vehicle price term carried out through
unregulated vehicle sales transactions, but rather as a
10
warranty reimbursement policy that automatically
eliminated any reimbursement beyond Ford's standard rate
resulting, as Liberty argues, in "no payment at retail." Br.
at 23.
Because the DPS was assessed as an inevitable
consequence of incremental reimbursement claims and not
through separate, unregulated transactions, Ford's reliance
on Acadia Motors, Inc. v. Ford Motor Co., 44 F.3d 1050 (1st
Cir. 1995), is misplaced. Acadia held that a Maine retail
reimbursement statute similar to the NJFPA did not
preclude Ford from imposing a wholesale vehicle price
surcharge to recover the costs of reimbursing Maine dealers
at retail rates rather than at Ford's standard rate. 3 The
Acadia court found that "[n]othing in the[statutory]
language . . . prohibits a manufacturer from increasing
vehicle prices in order to recover its increased compliance
costs. The statute says nothing about wholesale or retail
prices, and apparently leaves the manufacturer free to
increase wholesale prices." Id. at 1056. Thus, the Acadia
court concluded, a restriction against wholesale price
increases would improperly establish "a rule unsupported
by state statute." Id. at 1057.4
We agree with Acadia's holding that the statutes at issue
do not preclude cost-recovery systems effected through
wholesale vehicle price increases, but reject Ford's
_________________________________________________________________
3. The Maine statute at issue in Acadia provides that:
[i]f a motor vehicle franchisor requires or permits a motor vehicle
franchisee to . . . provide parts in satisfaction of a warranty
created
by the franchisor, the franchisor . . . shall reimburse the
franchisee
for any parts so provided at the retail rate customarily charged by
that franchisee for the same parts when not provided in
satisfaction
of a warranty.
10 Me. Rev. Stat. Ann. tit. 10, S 1176 (West 1994).
4. In holding that the district court had fashioned a rule unsupported by
the statutory language, Acadia admonished that "federal courts must
take great caution when blazing new state-law trails." 44 F.3d at 1057
(citations and internal quotations omitted). This principle, which we
recognize as well, see Leo v. Kerr-McKee Chem. Corp., 37 F.3d 96, 101
(3d Cir. 1994), is not implicated in this case where the district court
properly applied the plain statutory language.
11
contention that the DPS constitutes such a system. 5 In
Acadia, Ford reimbursed all Maine dealers at retail rates
and assessed a "warranty parity surcharge" ("WPS") that
added $160 to the price of every vehicle sold to Maine
dealers "to recover [the] increase in its costs of doing
business in Maine." 44 F.3d at 1052. The total amount of
the surcharge imposed on each dealer was "based on the
number of cars sold, without regard to whether the dealer
actually performed warranty work in that month." Id. at
1053.
Thus, in contrast to the DPS, Ford did not impose
the WPS as a consequence of a dealer's warranty
reimbursement claims, but instead assessed it as a result
of a separate vehicle purchase transaction. Because the
total amount of charges a dealer would incur under the
WPS scheme depended on the "number of cars sold" and
not on the dealer's reimbursement amounts, the WPS
operated as a bona fide wholesale price term that resulted
from and accrued in proportion to unregulated vehicle sales
transactions rather than regulated warranty reimbursement
transactions.
Contrary to Ford's assertion that "this factual difference
. . . is completely irrelevant," reply br. at 11, we find the
distinction to be critical. When a dealer incursfinancial
burdens upon making a retail-rate warranty reimbursement
claim, the dealer, in effect, is compensated for the warranty
transaction at a below-retail rate, which the NJFPA forbids.
When, however, the dealer incurs financial burdens as a
result of other transactions, those burdens may reduce the
return the dealer receives on those transactions, but the
terms of those transactions are unregulated. Therefore the
decreased compensation associated with those transactions
_________________________________________________________________
5. Where, as here, a New Jersey court has not construed the relevant
statutory language, New Jersey courts seek guidance from cases
construing similar statutes in other jurisdictions. See Neptune T.V. &
Appliances Serv., Inc. v. Litton Microwave Cooking Prods. Div., 462 A.2d
595, 599 (N.J. Super. Ct. App. Div. 1983). Acadia, 44 F.3d 1050, is the
only such case of which we are aware.
12
does not violate the statute as does as a below-retail rate of
compensation for installing warranty parts.6
In light of these differences between the WPS at issue in
Acadia and the DPS at issue in this case, Acadia's approval
of the "chosen mechanism for cost recovery" in that case,
44 F.3d at 1058, has little bearing on our examination of
the decidedly different cost-recovery mechanism in this
case. Because the DPS, unlike the WPS, did not function as
a wholesale price increase effected through vehicle sales
transactions beyond the regulatory reach of the NJFPA, we
find Acadia inapposite and reject Ford's contention that
Acadia compels us to find the cost-recovery method before
us permissible under the NJFPA. Based upon the
uncontroverted facts regarding the structure and operation
of the DPS, we find that Ford's assessment of the DPS, by
automatically reducing Liberty's reimbursements to below-
retail rates, violates the NJFPA's clear mandate that the
franchisor "shall reimburse" the franchisee for warranty
_________________________________________________________________
6. The distinction holds practical as well as statutory significance.
Since
a dealer, under the standard franchise agreement, must perform all
warranty repairs brought to its dealership and cannot charge customers
for those repairs but instead must accept the franchisor's standard
reimbursement, the dealer cannot control the volume, timing or
profitability of those repairs. Thus dealers cannot mitigate losses they
may incur in performing warranty repairs by controlling the terms of
those transactions as they can in their other operations. Because losses
incurred in the context of warranty transactions impose these unique
hardships on dealers, so do cost-recovery systems that assess charges as
a result of and in proportion to those transactions.
While Ford attempts to obscure this reality by arguing that a dealer
can redistribute warranty transaction losses through its other
operations, see reply br. at 11 & n.2, this argument ignores the fact that
a dealer neither can predict nor can control the proportion of its
operations it will be required to devote to performing mandatory
warranty repairs, and thus could recover fluctuating warranty losses
only by constantly readjusting retail prices, which would be economically
infeasible. Thus, a rule protecting dealers fromfinancial burdens
incurred through warranty transactions but not through other
transactions not only comports with the statutory scheme dictating the
terms only of the former, but also recognizes the unique hardships
associated with warranty losses due to the dealer's lack of control over
the terms of warranty transactions.
13
parts "in an amount equal to the prevailing retail price."
N.J. Stat. Ann. S 56:10-15(a).7
In arguing that its DPS scheme comports with the
NJFPA, Ford essentially argues that to achieve compliance
with the retail reimbursement mandate, a franchisor only
need record a nominal retail-rate credit to the dealer, even
if an offsetting debit ensures that the dealer never receives
any reimbursement at the retail rate. Ford's definition of
statutory compliance would require us to view its initial
retail-rate reimbursement in isolation from the surcharge
that inevitably offsets that reimbursement, contrary to the
undisputed evidence that the offset followed ineluctably
from the incremental reimbursement and relegated Liberty
to the same position as if it initially had received only the
standard reimbursement.8
Ford's strained construction of the NJFPA, which the
district court properly rejected as "formalistic, in the
extreme," slip op. at 9, would ascribe paramount
importance to illusory transactions recorded on a dealer's
invoice while ignoring the reality of whether the franchisor
actually reimbursed its franchisee "in an amount equal to
the prevailing retail price" as the statute requires. Because
a statute permitting illusory transactions with no economic
effect would serve no legislative purpose, we find no
indication that the New Jersey Supreme Court would adopt
Ford's construction of the NJFPA contrary to that court's
pronouncement that statutes be construed in "a common
_________________________________________________________________
7. Because the surcharge in this case resulted automatically from
Liberty's incremental reimbursement claims and because the total
amount of the surcharge depended directly on the amount of those
claims, we need not decide the legality under the NJFPA of cost-recovery
methods that depend on a dealer's reimbursement transactions in some
less direct manner.
8. Indeed, in maintaining that the surcharge achieved "parity" between
Liberty and competitors who received only standard reimbursements,
Ford effectively recognizes that the DPS consigned Liberty to the same
position as dealers who were reimbursed at Ford's rates which were
statutorily deficient as to Liberty. See app. at 321 ("[P]arity between
dealers . . . is essential. . . . To maintain that parity . . . and to
recover
our increased costs . . . the Costs will be recovered [through] a dealer
parity surcharge.").
14
sense manner to accomplish the legislative purpose."
N.E.R.I Corp., 686 A.2d at 335. In fact, we are quite
confident that that court would reject Ford's NJFPA
argument.
Construing the statutory terms according to their plain
and ordinary meaning as is required under New Jersey law,
see Service Armament Co. v. Hyland, 362 A.2d 13, 16 (N.J.
1976); Cutler v. Borough of Westwood, 685 A.2d 44, 47
(N.J. Super. Ct. App. Div. 1996), certif. denied, 693 A.2d
112 (N.J. 1997), we conclude that the term "reimburse,"
which is defined as "[t]o pay back, to make restoration, to
repay that expended; to indemnify, or make whole," BLACK'S
LAW DICTIONARY 1287 (6th ed. 1990), is not satisfied by
transactions that fail to result in actual payment or
restoration of the requisite sums. Accordingly we, like the
district court, hold that in reducing Liberty to"the same
position as if it were reimbursed the standard thirty to forty
percent above cost," slip op. at 10, the DPS scheme violated
"the clear language of the NJFPA" by denying Liberty
reimbursement at its prevailing retail rate. Id. at 11.
2. Legislative Purpose
Because the district court properly construed the NJFPA
"as it is written [and] . . . not according to some
unexpressed intention," Unsatisfied Claim & Judgment
Fund Bd. v. New Jersey Mfrs. Ins. Co., 637 A.2d 191, 193
(N.J. Super. Ct. App. Div.), aff'd, 649 A.2d 1243 (N.J.
1994), we find no merit in Ford's contention that the
district court erred by relying on legislative history to
expand the NJFPA beyond the scope of its plain statutory
language. See br. at 16. The legislative history, however,
clearly does support a statutory interpretation that
prohibits spurious transactions which ultimately fail to
result in reimbursement at the dealer's retail rate.
The New Jersey courts have held that the NJFPA is a
remedial statute intended to equalize the disparity of
bargaining power in franchisor-franchisee relations. See
Kubis & Perszyk Assocs., Inc. v. Sun Microsystems, Inc., 680
A.2d 618, 626 (N.J. 1996) (recognizing NJFPA's "basic
legislative objectives of protecting franchisees from the
15
superior bargaining power of franschisors"); Tynan v.
General Motors Corp., 604 A.2d 99, 100 (N.J. 1992)
(adopting reasoning of dissent below stating that"[t]he
Franchise Practices Act is remedial in purpose [and]
focuses on the need to protect franchisees from inequitable
treatment by economically more powerful franchisors")
(citing Tynan v. General Motors Corp., 591 A.2d 1024, 1035
(N.J. Super. Ct. App. Div. 1991) (Cohen, J., dissenting in
part)); Westfield Ctr. Serv., Inc. v. Cities Serv. Oil Co., 432
A.2d 48, 52-54 (N.J. 1981) (discussing "disparity in . . .
bargaining power" addressed in NJFPA).9 Under New Jersey
law, remedial statutes must be construed broadly to give
effect to their legislative purpose. See Lemelledo v.
Beneficial Management Corp., 674 A.2d 582, 585 (N.J.
Super. Ct. App. Div. 1996), aff'd, 696 A.2d 546 (N.J. 1997);
Sabella v. Lacey Township, 497 A.2d 896, 898 (N.J. Super.
Ct. App. Div. 1985).
The motor vehicle franchise provisions at issue, which
the legislature added to the NJFPA in 1977, were "designed
to remove the franchisor's present opportunity to isolate
himself from the warranty he issues." Legislative Statement,
L. 1977, c. 84, S 3, Assembly No. 1956 (May 24, 1976)
("Legis. Statement"). In enacting the retail reimbursement
requirement, the New Jersey legislature expressed its intent
to "offer[ ] protection to the competent retailer against
arbitrary actions by manufacturers who too often hold a
life-and-death power over his business and his ability to
serve his customers." Id. In light of these statements
indicating an intent to shift responsibility toward
franchisors who issue warranties and to protect dealers in
their transactions with franchisors, we agree with the
district court that a construction of the NJFPA permitting
machinations which ultimately fail to afford the dealer
reimbursement for warranty parts at its retail rate would
"fly in the face of the intent of the New Jersey legislature
_________________________________________________________________
9. In a 1989 amendment to the NJFPA adopted after the 1977 provision
at issue, the New Jersey legislature explicitly codified its concern over
the "inequality of bargaining power . . . between motor vehicle
franchisors and motor vehicle franchisees." See N.J. Stat. Ann. S 56:10-
7.2(b).
16
. . . and would undermine the purpose of the Act." Slip op.
at 11.
Ford attempts to diminish the significance of the
851damages, Liberty sought to recover not only the
incremental reimbursements it was denied as a result of
the surcharge, but also additional reimbursements for
warranty parts installed before December 12, 1991, the
effective date of Ford's agreement to credit Liberty at retail
rates subject to the surcharge. Citing Ford's warranty
manual, which permits dealers to submit reimbursement
claims for up to one year after a warranty part is installed,
Liberty argued that because it demanded retail-rate
reimbursements on December 12, 1991, it was entitled to
additional reimbursements to supplement the standard
reimbursements it had received for parts installed during
the year preceding December 12, 1991. See February 26,
1997 slip op. at 6.
The district court held that, "[t]his legal issue was never
addressed during the liability phase of this case because
Liberty explicitly waived all claims other than its claim for
illegal surcharge since December 12, 1991." Id. at 7. The
district court cited Liberty's brief regarding liability, in
which Liberty expressly stated that it "claim[ed] liability
only on the reimbursement amounts recovered by Ford by
illegal surcharge since December 1991." Thus, the court
concluded, "[b]ecause the court did not grant summary
judgment as to liability on this issue, it cannot now award
damages." Id.
Liberty's briefs to this court do not challenge the waiver
determination that the district court found dispositive, but
rather address only the merits of Liberty's entitlement to
additional reimbursements for parts installed before
December 12, 1991.22 The district court's order entering
_________________________________________________________________
22. Liberty addresses the waiver issue only by stating that "Ford's
liability for retail payment on claims submitted since December 12, 1991
was never waived. It is recognized in the Court's Orders and decisions,
with the exception of the final ruling on . . . damages." Reply br. at 12
(emphasis added). The district court's orders did not "recognize" any
liability as to warranty parts installed before December 12, 1991. In the
portion of Liberty's brief asserting that it preserved the issue in the
district court, Liberty states only that it raised the issue "as to
damages"
and does not cite any part of the record where it sought to establish
Ford's liability for the reimbursements at issue. See br. at xiv.
28
judgment as to Ford's liability under the NJFPA explicitly
stated, "[f]or the reasons stated herein, the court grants
[Liberty's] motion for summary judgment as to liability,
since December, 1991 only." Slip op. at 14. We therefore
conclude that the district court properly refused to award
damages on this claim which Liberty failed to raise at the
liability stage of the proceedings.
Even if Liberty had not waived the issue, undisputed
evidence demonstrates that Ford is not liable for any
additional reimbursements for parts installed before
December 1991. Liberty claims that it is entitled to
additional reimbursements for parts installed between
December 12, 1990, and December 12, 1991, because the
relevant warranty agreement permitted dealers to submit
reimbursement claims within one year from the date of
repair. See app. at 139 ("After 1 year from date of repair . . .
[w]arranty . . . claims will not be accepted."). Liberty
contends that, because Ford first agreed to reimburse
Liberty at retail as of December 12, 1991, Ford is obligated
to pay Liberty the incremental reimbursement for all
warranty parts Liberty installed after December 12, 1990,
to supplement the below-retail reimbursements Liberty
received for installing those parts. Br. at 40-41.
However, contrary to Liberty's assertion that it
"submitted incremental reimbursement claims" on
December 12, 1991, id., the letter of that date merely
requested an increase in Liberty's reimbursement rate and
did not submit any specific reimbursement claims or make
reference to any parts already installed and reimbursed at
a lower rate. See app. at 286 ("I hereby apply for an
increase in warranty parts markup . . . to my retail
markup."). Liberty first made specific retail-rate
reimbursement claims "for the period of December 12, 1991
to June 30, 1992," in a letter dated September 23, 1992,
again making no reference to parts installed before
December 12, 1991. App. at 316-17. It was not until
December 21, 1992, that Liberty first submitted a request
for retail-rate reimbursement for parts installed before
December 12, 1991. This request included parts installed
during "the years 1986 through 1991 inclusive." App. at
326.
29
Thus, Liberty did not seek the additional reimbursements
at issue until December 21, 1992. As Ford accurately
contends, pursuant to the warranty manual Liberty's
claims "were time-barred on the date they were made" as
they pertained to repairs performed before December 21,
1991. Reply br. at 30.23 Because Liberty failed to seek the
reimbursements at issue within one year of the repair date,
it is immaterial that Liberty sought a higher reimbursement
rate on December 12, 1991, in a request that did not
present any specific reimbursement claims.24 Similarly, it is
immaterial that "[a]s of December 12, 1991, all of Liberty's
claims back one year from [the] date of repair were eligible
for the incremental warranty payment," reply br. at 13,
since Liberty failed to submit those claims before that
eligibility expired on December 12, 1992. Accordingly, even
if Liberty had not waived its claim to recover additional
reimbursements for parts installed before December 12,
1991, we would affirm the district court's rejection of that
claim.
E. Prejudgment Interest Rate
In its February 26, 1997 final order the district court,
applying the principles of state law that govern awards of
prejudgment interest in federal diversity actions, see
Zippertubing Co. v. Teleflex, Inc., 757 F.2d 1401, 1414 (3d
Cir. 1985); W.A. Wright, Inc. v. KDI Sylvan Pools, Inc., 746
F.2d 215, 219 (3d Cir. 1984), awarded Liberty prejudgment
interest on its NJFPA damages at the rates set forth in New
Jersey Court Rule 4:42-11. Slip op. at 8-9. Under New
Jersey law, a court may award prejudgment interest in its
discretion in accordance with equitable principles, and the
court's exercise of its discretion should not be disturbed on
_________________________________________________________________
23. Liberty did not distinguish the 1991 claims from the even more
untimely claims dating back to 1986.
24. While Liberty argues that "for the most part" the claims at issue were
"already submitted and approved" at Ford's standard rate, reply br. at
13, Liberty makes no argument to support its apparent suggestion that
claims for additional reimbursements are exempt from the one-year
limitation period that on its face applies to all warranty reimbursement
claims. See app. at 139.
30
appeal unless it represents "a manifest denial of justice." In
re Petition of County of Essex, 691 A.2d 846, 858 (N.J.
Super. Ct. App. Div.), certif. denied, 700 A.2d 876 (N.J.
1997); accord Coastal Group, Inc. v. Dryvit Sys., Inc., 643
A.2d 649, 654 (N.J. Super. Ct. App. Div. 1994).
The district court found that, "because Ford has had the
use, and Liberty has not, of the funds retained by Ford by
way of illegal surcharges," Liberty was entitled to interest
on the surcharges from December 1991 through March
1996. The court concluded that New Jersey Court Rule
4:42-11, which sets forth postjudgment interest rates and
prejudgment interest rates in tort suits, "reflect[ed] an
equitable rate of return" under the circumstances of the
case. See slip op. at 8-9 (citing Zippertubing Co., 757 F.2d
at 1414; W.A. Wright, Inc., 746 F.2d at 219). Liberty
contends that the district court abused its discretion in
applying the New Jersey Court Rules instead of adopting
the involuntary loan theory recognized in A-S Dev., Inc. v.
W.R. Grace Land Corp., 537 F. Supp. 549 (D.N.J. 1982),
aff'd, 707 F.2d 1388 (3d Cir. 1983) (table). Liberty argues
that under this theory, the district court should have
applied the interest rate Ford would have charged Liberty
for late payments or loans during the same period. See br.
at 41.
In arguing that the involuntary loan theory is
"particularly appropriate" since Liberty "partially
underwrote Ford's coverage of its manufacturing defects,"
id. at 41, 43, Liberty ignores the fact that A-S Development
applied the involuntary loan theory as an element of
damages and not as a measure of prejudgment interest. See
A-S Dev., 537 F. Supp. at 559 (holding that"plaintiff is
entitled to damages in an amount to be calculated on the
involuntary loan theory"). Liberty points to nothing
requiring the district court, in its discretionary weighing of
equitable considerations, to adopt this theory and nothing
indicating that the interest rates set forth in the New Jersey
Court Rules were inequitable under the circumstances of
the case.25
_________________________________________________________________
25. Liberty emphasizes that the award of prejudgment interest must be
determined by "equitable principles," reply br. at 14-15, but raises no
arguments and cites no authority indicating that the district court
misapplied these principles.
31
Liberty also challenges the district court's conclusion that
"[b]ecause Liberty has asserted its claim under N.J.S.A.
56:10-10 and 56:10-15, it is not entitled to prejudgment
interest at 12% under N.J.S.A. 56:10-13.5, which applies
only to claims under that section." Slip op. at 9 n.3. Liberty
argues that "this Court could properly apply" N.J. Stat.
Ann. S 56:10-13.5, br. at 42, which provides that,
[i]f a motor vehicle franchisor fails to make any
payment required by this 1991 amendatory and
supplementary act within the time specified for
payment, interest shall be added to that payment at
the rate of 12% per annum from the date payment was
due.
This provision, by its terms, applies only to payments
required by the 1991 amendatory and supplementary act.
It does not apply to Liberty's claim to recover a payment
required by N.J. Stat. Ann. S 56:10-15(a), which was
codified in 1977 and is not part of the 1991 amendatory
and supplementary act. Although section 56:10-15 was
amended by the 1991 act, payments required by that
section are not payments required by the 1991 act, but are
payments required by the 1977 act.26 Liberty has not
identified, and this court cannot discern, any abuse of
discretion in the district court's determination that the
interest rates provided for in New Jersey Court Rule 4:42-
11 were equitable under the circumstances of this case.
Accordingly, we will affirm the district court's award of
prejudgment interest.
_________________________________________________________________
26. Liberty argues that the N.J. Stat. Ann. S 56:10-13.5 interest
provision
was "enacted at the same time the Legislature amended the warranty
reimbursement provision" and is found in the"same statute which
amended the NJFPA Warranty Reimbursement Act." Br. at 42; reply br.
at 16. However, the 1991 amendments to N.J. Stat. Ann. S 56:10-15 did
not affect section 56:10-15(a) but simply added section 56:10-15(c)
which is not implicated in this case. Liberty's arguments do not alter the
fact that Liberty sought payments required by a preexisting provision,
N.J. Stat. Ann. S 56:10-15(a), and not by the 1991 amendatory and
supplementary act.
32
F. Costs Associated With The Retail Rate Analysis
The district court awarded Liberty counsel fees and costs
associated with this litigation, but rejected Liberty's claim
for fees and costs associated with Liberty I because Liberty
was not a prevailing party in that case, which culminated
in a denial of class certification and a stipulation of
dismissal. See slip op. at 10-11. Liberty contends that the
district court erroneously excluded, as a cost associated
with Liberty I, the $26,185.15 in fees Liberty incurred in
compiling a part-by-part analysis of its retail rate over six
years. Liberty contends that, because it compiled the
analysis after the dismissal in Liberty I,"in contemplation
of and in preparation for" the instant case, and because its
counsel "reviewed the analysis as part of its litigation
strategy" and "briefed and argued" the results thereof in
this litigation, the district court should have included the
fees associated with the analysis in its fee award instead of
excluding them along with the fees arising from Liberty I.
Reply br. at 17-18; br. at 44.
While the district court did not articulate a separate
rationale for excluding the disputed fees along with the
Liberty I fees, it is readily apparent that the fees at issue
are not recoverable in this litigation. Liberty prevailed in
this litigation on the issue of whether Ford could assess the
dealer-parity surcharge to offset a retail-rate
reimbursement, an issue that did not require any
verification of Liberty's claimed retail rate. 27 Therefore the
fees incurred in compiling the retail rate analysis were not
"reasonably expended" in pursuit of the "result obtained" in
this litigation, and thus properly were excluded from the fee
award even if they were not incurred in connection with
Liberty I. Slip op. at 10-11 (citing Hensley v. Eckerhart, 461
U.S. 424, 433, 103 S.Ct. 1933, 1939 (1983)). We,
_________________________________________________________________
27. Liberty arguably raised the issue of its retail rate in its Motion to
Enforce the district court's March order. In that motion, however, Liberty
contended that Ford was not entitled to demand documentation of
Liberty's part-by-part retail rates over the past six months. Thus
Liberty's
motion in no way required a detailed analysis documenting those rates
over the past six years. In any event, because Liberty was not entitled to
the relief awarded in the September 19, 1996 order, Liberty has obtained
no relief on any claim implicating the validity of its retail rates.
33
accordingly, will affirm the district court's exclusion of fees
associated with Liberty's retail rate analysis from its fee
award.
IV. CONCLUSION
For the foregoing reasons, we will reverse the district
court's September 19, 1996 order and will vacate and
remand for reconsideration in light of this opinion the
award of attorneys' fees in the district court's February 26,
1997 final order. We, however, will affirm in all other
respects. The parties will bear their own costs on this
appeal.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
34