Buono Sales, Inc. v. Chrysler Motors Corp.

FORMAN, Circuit Judge

(dissenting).

This appeal encompasses two distinct problems. The first issue raised is whether Chrysler’s Direct Dealer Agreement permitted the termination of De-Soto automobile production and, if so, whether such production was terminated in accordance with the provisions of that Agreement. In determining that the Direct Dealer Agreement did not authorize Chrysler’s termination of DeSoto production in the manner in which it acted, the majority places much emphasis on the absence of an explicit termination provision as indicating that Chrysler, the drafter of the Agreement, and Buono Sales, did not intend a discontinuance of DeSoto production. The majority further concludes that the notice of termination embodied in the telegram and form letter of November 18, 1960 sent to all DeSoto direct dealers was insufficient to constitute such a modification under Paragraph 5.

The second issue raised is whether the representation of the Dodge Division of Chrysler in a brochure circulated to De Soto owners that it was “best qualified to give [the discontinued DeSoto automobile] the genuine factory-approved service it deserves” was a tortious interference with the business relationships and prospective economic advantage of Buono Sales. The majority finds that such representation constituted a commercial tort.

We are constrained to dissent from these conclusions and the reversal of the judgment of the District Court.

—I—

Certain preliminary observations are in order. It is self-evident that the presence of a provision in the Direct Dealer Agreement authorizing, in so many words, the termination of all De Soto production would have greatly simplified the problem of contract interpretation here. The absence of such a provision, however, is given undue emphasis. In our view a significant amount of fairly plain language in the Agreement has thereby been given a strained construction to support the position taken by Buono Sales.

The observation, that the Direct Dealer Agreement “is completely a self-serving Chrysler product” which “takes elaborate precaution to protect Chrysler in the event of any contemplated exigency” and that, therefore, the absence of an explicit termination provision is persuasive of no intent to eliminate DeSoto production, in the future, does not present a balanced view of the Agreement in the light of the mutuality of obligation inherent in the explicit authority given the direct dealers themselves to withdraw totally from the Agreement on 30 days written notice apparently for whatever reason.1 Furthermore, under Paragraph 7, the direct dealers’ minimum purchase requirements from Chrysler were directly geared to market conditions in the dealers’ localities.2 The intimation *51drawn from the characterization of the Agreement, as a self-serving document, that it must necessarily be construed against its drafter, is unwarranted. Invocation of such a rule of construction is furthermore not appropriate here, for it would not be reasonable considering both the existence of much plain language in support of Chrysler’s petition and the background history of the industry.

We recognize that this court’s primary duty is to determine the meaning of the language of the contract but, in so doing, the commercial context in which both litigants conduct their respective business operations must be squared with the construction placed on the language of the Agreement. The record reflects the volatile nature of the automobile industry due to changes in consumer tastes and effects of competition. Buono Sales, itself, which had been franchised to deal in DeSoto automobiles since 1935, and had been and is now so. franchised to deal in Plymouth automobiles had, prior to that time, experienced the discontinuance of the production of a number of automobiles in which it dealt. In the period 1955-60 DeSoto sales suffered an extremely serious decline3 due to the shift in consumer tastes from the middle-priced automobile field, which included DeSoto, to the lower-priced and foreign car field. Significantly, in 1959, just prior to the discontinuance of DeSoto production, Buono Sales and other direct dealers became franchised by Chrysler to sell and maintain the compact automobile Valiant, then newly produced. Of course, in the absence of a contract which has language reasonably susceptible to construction consistent with the commercial history of the parties, such commercial background cannot be employed as persuasive on the issue of contract interpretation. But here, given the presence of what will be shown to be substantial expressions in the Direct Dealer Agreement authorizing the termination of DeSoto production without notice we cannot accept the majority’s view of the meaning of the Agreement for it is alien to the business experience of both litigants as disclosed by the record.

—II—

The central consideration is the determination of the meaning of certain language in the Direct Dealer Agreement. The District Court found Paragraph 20 to be determinative of the case. Paragraph 20 provides:

“DE SOTO-PLYMOUTH at any time may discontinue any models, lines or body styles and may revise, change or modify their construction or classification. * * * DE SOTO-PLYMOUTH at any time may declare obsolete or discontinue any or all parts, accessories, and other merchandise. DE SOTO-PLYMOUTH may act under this Paragraph 20 without notice and, except as set forth in Paragraph 13 of this agreement, without any obligation to DIRECT DEALER by reason of DIRECT DEALER’S previous purchases.”

Buono Sales’s argument before the District Court and before us is that Paragraph 20, in effect, authorized discontinuance of any DeSoto automobiles short of discontinuance of all DeSoto automobiles. This position is founded on Buono Sales’s definition of the term “lines” which it contends refers to a series of DeSoto automobiles, i. e., the Adventurer series or the Fireflite series. This being so, argues Buono, only a *52series, e. g., Adventurer, if more than one series is produced, could be discontinued, but the total production of De-Soto automobiles could not be discontinued. The District Court went to the record where there was evidence to prove that the contracting parties understood “line” to be synonymous with DeSoto, as well as with a series of DeSoto, such as Adventurer. The majority rejects the use of this extrinsic evidence on the grounds that the context of the contract without more demonstrates that “line” was not meant to be synonymous with the DeSoto automobile. Assuming the impropriety of weighing the extrinsic evidence as to the meaning of “line”, and that the majority properly reads the contract language as to the meaning of “line”, this term was used in the plural in Paragraph 20. Thus, even if “line” meant something less than all DeSoto automobiles, “any * * * lines”, as stated in Paragraph 20, could be discontinued. There is no indication in the Agreement that the term “any” limited Chrysler from terminating production of all DeSoto “lines.” The plain language should govern.

The majority reads “any” to mean something less than all, however. Such a construction does not comport with the dictionary definition of “any”.4 “Any” is clearly defined as specifying a choice of a limited or unlimited number of alternatives presented by the noun which it modifies. Thus, the provision for the discontinuance of “any * * * lines * * * without notice” is the authority for the discontinuance of one, some, or all lines without notice.

With further reference to Paragraph 20, there appears to be agreement that the term “model” refers to automobiles sold under the name DeSoto or Plymouth for a particular year, e. g., a 1961 De-Soto. The word “models” as with “lines” is employed in Paragraph 20 in the plural. The action of Chrysler consisted in the discontinuance of the 1961 model and future yearly models of the DeSoto and thus would have been expressly authorized by the right to discontinue “any models * * * without notice” even if the word “lines” was not included at all. This further evidences that Paragraph 20 authorized Chrysler’s discontinuance of the production of the DeSoto automobile.

Given Buono Sales’s concession that Paragraph 20 authorizes the discontinuance of any lines or any models, it appears imperative to read the plain language as authorizing the total discontinuance of the DeSoto production. A rapid curtailment of production just short of total discontinuance could as significantly affect a dealer’s DeSoto business as total discontinuance. Furthermore, Paragraph 20 authorizes Chrysler to “discontinue any or all parts.” 5 Without parts the direct dealers’ sales of the DeSoto automobiles would create an impossible business situation. In sum then, the contracting parties would not have intended to authorize such an anomaly, permitting partial but not total discontinuance of DeSoto production, although the effect of either would more than likely be similar.

Buono Sales and the other eight dealers whose suits now depend on the disposition of this appeal all had arrangements to deal in both the DeSoto and Plymouth automobiles. They now have agreements to deal in both the Plymouth and Valiant automobiles. Paragraph 20 cannot be meaningfully construed without considering the continued existence of other Chrysler automobiles in the hands of the direct dealers. Paragraph *5320 is entitled: “Change of Models, Parts and Accessories Declared Obsolete or Discontinued.” That language indicates that Paragraph 20 grants to Chrysler the right to make adjustments in the continuing business relationship it has with its direct dealers. Paragraph 20 does not appear to authorize Chrysler’s justifying a permanent elimination of all automobile supply from all of Chrysler’s divisions to the direct dealers, in the absence of a formal Paragraph 5 Agreement modification. The plain language of Paragraph 20, however, in our view authorizes the discontinuance of those automobiles which will at least assist Chrysler in its adjustment to changed market conditions, without terminating the sale to the direct dealers of all automobiles from its divisions with which the direct dealers are under contract. Introduction of Valiant and termination of the DeSoto “models” and “lines” was such an adjustment. This construction is reasonable and squares with the commercial history of the automobile industry. The explicit language of Paragraph 20 would seem to authorize the discontinuance of DeSoto automobiles. The intent of the parties was to allow Chrysler to gauge its production by the contingencies of the market.

Other paragraphs of the Direct Dealer Agreement support such a reading of Paragraph 20. Paragraphs 7, 10, 13 and 28 of the Agreement recognize circumstances in which Chrysler may not be able to perform in full its obligations and is, therefore, relieved of liability therefrom. Paragraph 7 provides:

******
“To the extent that DE SOTO-PLYMOUTH for any reason other than DIRECT DEALER’S failure to submit orders or arrange payment, delivers to DIRECT DEALER less than the number of new De Soto or Plymouth passenger cars that represents DIRECT DEALER’S Minimum Sales Responsibility as defined above, DIRECT DEALER’S Minimum Sales Responsibility will be proportionately reduced.”

Paragraph 10 tells us that:

“* * * DE SOTO-PLYMOUTH will not be liable for delay or nondelivery of products ordered nor will anything in this agreement obligate DE SOTO-PLYMOUTH to deliver to DIRECT DEALER any particular number of new De Soto or Plymouth passenger cars.”

Paragraph 13 lays out a program by which Chrysler must either help a dealer in difficulty, through sales promotion techniques or, failing to so act, must provide a dealer with an allowance per each left-over automobile on the day of the announcement to the public of the new yearly model. But, paragraph 13 provides that appellee does not have to so proceed if:

“ * * * fire, flood, strikes or other labor disputes, accident, war, riot, insurrection, acts of government, governmental regulation or other circumstances have not substantially affected the availability of De Soto or Plymouth passenger cars at the time of announcement to the public of new yearly models. * * * ”

Finally, Paragraph 28 provides:

“In addition to any other exemption from liability specifically provided for in this agreement, neither DIRECT DEALER nor DE SOTO-PLYMOUTH will be liable for failure to perform its part of this agreement when the failure is due to fire, flood, strikes or other labor disputes, accident, war, riot, insurrection, acts of government, government regulation or other circumstances beyond the control of the parties.”

A reading together of Paragraphs 7, 10, 13 and 28 demonstrates that the contracting parties were aware that circumstances could arise which would excuse Chrysler both from the production of at least some automobiles and certain collateral performance. It has been suggested that the phrase “other circumstances beyond the control of the parties” appearing in Paragraphs 13 and 28 is limited by the rule restricting the *54phrase to events of the same nature or class as the specifics preceding it. Such an argument provides little leverage for Buono Sales. Economic depression of the entire market or a part thereof certainly is as serious to the automobile industry as the effect of the specific arts articulated in Paragraphs 13 and 28. The history of the industry as set forth in the record reflects this seriousness. Thus, we feel that market conditions were problems to which Paragraphs 13 and 28, as well as Paragraphs 7 and 10, were addressed.

Chrysler suggests that Paragraph 10, without more, provides ample basis for discontinuing the DeSoto automobile, without liability for breach of contract flowing therefrom. Though we have applied that Paragraph solely as support for our reading of Paragraph 20, an application of the law of Michigan by which this contract specifies it is to be construed, as embodied in a decision of the Supreme Court of Michigan, F. H. McClintock Co. v. Truxell Sales & Service, Inc.,6 would appear to support Paragraph 10, even standing alone, as being dispositive of the problem adversely to Buono Sales.

In McClintock, plaintiff was a dealer, such as Buono, and defendant was a distributor of Chrysler. Agreements between plaintiff and defendant had been executed for the supply and sale of De-Soto and Plymouth automobiles. They provided, among other things, for defendant to give not less than 90 nor more than 95 days’ written notice for termination. The following provision also appeared :

“Direct dealer shall have the right to accept, in whole or in part, any or all orders received, and shall not be liable for any loss or damage resulting from its failure to ship or deliver goods ordered.”

Subsequently, defendant sent an “immediate effective” notice of termination to plaintiff and no longer supplied either DeSotos or Plymouths. Plaintiff brought suit claiming damages for loss of sales during the 90 day period until the notice became effective.

The Michigan Supreme Court ruled that the explicit language of the agreement stating that defendant could not be held “liable for any loss or damages resulting from its failure to ship and deliver goods ordered,” language identical in import to that in paragraph 10, insulated defendant from liability, as Chrysler here urges. Specifically the Court said:

“We are obliged to consider the agreement in its entirety, including the effect of the above-quoted clause as well as others. We cannot make a new agreement for the parties. Defendant never accepted the orders on which plaintiff’s claim for damages is based. By the explicit language of the agreement, it cannot be held ‘liable for any loss or damages resulting from its failure to ship and deliver goods ordered.’ * * * ” At p. 287, 297 N.W. at p. 494.

As a pronouncement of the highest court of Michigan the decision should be given its due weight in support of Chrysler’s position herein.

Paragraph 217 entitled “Termination” adds to the light shed on Paragraph 20 by Paragraphs 7, 10, 13 and 28. In it the instances in which Chrysler, automatically or on ninety days’ notice, may *55terminate any Direct Dealer Agreement, relate to either the conduct of a dealer or circumstances economic or otherwise to which a dealer may be subject. As noted above, many other paragraphs of the Agreement excuse Chrysler from the obligation of contract performance based on conditions directly affecting Chrysler, conditions which are unrelated to the conduct of a dealer or circumstances in which a dealer is placed. But, as to Paragraph 21, the termination provision covers ground not previously dealt with in other paragraphs, namely, that conduct of a dealer or a situation in which a dealer may be placed which will excuse the manufacturer from performance. A gap is thereby left, which can appropriately be closed by a reasonable interpretation of Paragraph 20 and the other provisions of the contract as have been discussed above.

—Ill—

Eveii if Paragraph 20 of the Direct Dealer Agreement and the other supporting paragraphs could not reasonably be construed to authorize the discontinuance of DeSoto automobile production, both the telegram and form letter of November 18, 1960 sent to all DeSoto direct dealers was sufficient to constitute a modification under Paragraph 5 of the Agreement, effective, however, after 35 days had elapsed. The absence of any reference to Paragraph 5 in the telegram and letter, and Chrysler’s attempt to take advantage of Paragraph 5 to effect an immediate change, do not turn the issue adversely to Chrysler. All features of the modification procedure but the 35 day notice aspect were adhered to. Buono Sales and the other direct dealers were given adequate substantive notice. A mere change in the technical language of Chrysler’s communications would not have improved the quality of the notice given them. The direct dealers could not have understood but that Chrysler was discontinuing production of the DeSoto automobile. But for the necessity of moving the effective date of the notice 35 days ahead from November 18, 1960 to December 22, 1960, it does not appear to us that there is any genuine difficulty with Chrysler’s having adequately invoked Paragraph 5 of the Agreement. Thus, at the very most, Paragraph 20 aside for the moment, Buono Sales and the other direct dealers would be entitled to offer no more than their proof of damages covering the 35 day period prior to the date the modification notice became effective.

—IV—

Buono Sales also sued for tortious interference with business relationships and a prospective economic advantage. Shortly after the discontinuance of De-Soto automobile production, the Dodge division of Chrysler circulated a nine *56panel brochure to certain DeSoto owners, in one panel of which it was stated that Dodge dealers were “best qualified to give your DeSoto the genuine factory-approved service it deserves.”8 Buono Sales contends that such action was creative of a commercial tort. The District Court found that the brochure was essentially a promotional effort to increase the sale of the 1961 Dodge. The record reflects that large automobile corporations are made up of a number of divisions, each division being in competition with the others and with divisions of other automobile corporations for the automobile market. Indeed, the Plymouth division of Chrysler’s enterprise, as well as divisions of other automobile corporations, could have vied for the business represented by the then current DeSoto owners in much the same manner as Dodge did. As we see it the cases cited by the majority are appropriate to our problem neither on their facts nor on the law for which they stand. They are authority for the basic proposition that there is a right to be free from malicious and wanton interference with a business relationship and prospective economic advantage, an act for which Buono Sales does not charge Chrysler. We thus agree with the District Court that the use of the term “best qualified” was merely puffing by the Dodge division, there being no suggestion by Buono Sales of fraud or misrepresentation in the brochure, or bad motive in its distribution. We find absent from the record evidence of any commercial tort.

For the reasons above discussed, we respectfully dissent from the majority view and would affirm the judgment of the Ünited States District Court for the District of New Jersey.

HASTIE and WILLIAM F. SMITH, JJ., concur in this dissent.

. Paragraph 21 of the Direct Dealer Agreement in part states:

“Direct Dealer may terminate this agreement on not less than thirty (30) days’ written notice.”

. *“Direct Dealer’s Minimum Sales Responsibility will be determined separately for DeSoto and Plymouth passenger oars as follows:

“From time to time, but at least once a year, De Soto-Plymoutii will compute the ratio of the number of new De Soto or Plymouth passenger cars, as the case may be, registered in the most recent 12-month period for which registration figures are. available in the De Soto-Plymoutii Sales Region in which Direct Dealer is located to the number of all new passenger cars so registered in that Region. The ratio thus obtained will be applied to the number of all new passenger cars registered during the same 12-month period in Direct Dealer’s Sales Locality. The resulting number (and the percentage share of market that such number represents for the Sales Locality) will be Direct Dealer’s Minimum Sales Responsibility for this same twelve (12) montli period, subject to such adjustment as is described below.

“Where appropriate, De Soto-Plym-outii will adjust Direct Dealer’s Mini*51mum Sales Responsibility to take into account the availability of passenger cars, local conditions, revisions in Direct Dealer’s Sales Locality description, the recent trend in Direct Dealer’s sales performance, and the other factors, if any, directly affecting sales opportunity.” * :¡s * * * *

. "* * * New car registrations of De-Sotos in the United States dropped from 118,062 in 1955 to 23,063 in 1960. Plaintiff’s own car sales of the DeSoto automobile, which in 1955 and 1956 had accounted for over 50% of its total new car sales, accounted for only 12 out of a total of 89 new cars sold by it in 1960. * * * ” Buono Sales, Inc. v. Chrysler Motors Corporation, 239 F.Supp. 839, 840 (D.N.J.1965).

. See the all encompassing definition in Webster, New International Dictionary (2 ed. 1961).

. At this point in the Paragraph the term “all” is introduced, and used conjunctively with “any.” Based upon the unambiguous dictionary definition of “any” as encompassing “all,” we are of the view that the mention of “all” at this point is merely redundant and surplusage to the term “any.” This use of “all” cannot reasonably reflect an intention that the previous usage of “any” alone is indicative that “any” was meant to denote something less than “all.”

. 297 Mich. 284, 297 N.W. 493 (1941).

. Paragraph 21 states in part:

“Direct Dealer may terminate this agreement on not less than thirty (30) (lays’ written notice.
“De Soto-Plymotjth may terminate this agreement on not less than ninety (90) days’ written notice on (1) the failure of Direct Dealer to perform fully any of Direct Dealer’s undertakings and obligations of Paragraphs 7 through 10 and Paragraph 14 of this agreement, or (2) the death of any person listed in Paragraph 2 of this agreement, other than the death of Direct Dealer if he is an individual, or. the failure of any such person so listed to continue his active and substantial participation in the management of Direct Dealer’s organization, or (3) a misrepresentation of or change in any of the ownership interests listed in *55Paragraph 3 of this agreement resulting in a transfer of majority control or interest in the capital stock or partnership interest of Direct Dealer, unless De Soto-Plymouth has given written approval to such change, or (4) a disagreement dispute or controversy between or among principals, partners, managers, officers or stockholders of Direct Dealer that, in the opinion of De Soto-Plym-outii may affect adversely the operation, management or business of Direct Dealer, or (5) the conviction of Direct Dealer, or a partner, principal stockholder, officer or manager of Direct Dealer of any crime that, in De Soto-Plymoutii’s opinion, may affect adversely the operation or business of Direct Dealer or the name, good will, or reputation of De Soto-Plymouth, De Soto or Plymouth products or Direct Dealer.”
* * * * * * *
“Notwithstanding the provisions above, this agreement will terminate automatically without notice from either party on: (1) the death of Direct Dealer if lie is an individual, or (2) an attempted assignment of this agreement by Direct Dealer without the written consent of De Soto-Plymouth, or (3) an assignment by Direct Dealer for the benefit of creditors, or (4) the admitted insolvency of Direct Dealer or of any partner of Direct Dealer if it is a partnership, or (5) the institution of voluntary or involuntary proceedings by or against Direct Dealer in bankruptcy or under insolvency laws or for corporate reorganization, arrangement, receivership or dissolution.”

. Of the nine panels, eight advertised the alleged virtues and advantages of Dodge automobiles, at times as related to products of competitors other than DeSoto-Plymouth. A ninth panel contained the following:

“Dear DeSoto Owner:
“Your DeSoto was one of the best engineered, best built cars in its day. I hope it has given you good service. When you bought it, your DeSoto was far and away the most advanced car in its price class. But at that time, there was no full-size Dodge Dart or compact Dodge Lancer for you to compare when buying a new car.
“Today, in 1961, Dodge offers you two distinct sizes of automobiles that incorporate many new engineering and quality features: the full-size Dodge Dart and compact Dodge Lancer. The Dodge Dart is priced model for model with Ford and Chevrolet. Lancer is priced right down the line with Comet, Falcon and Corvair. “Dodge engineering and convenience features are outlined on the following pages. We know you’ll find them interesting to read about, and to try personally, when you visit your nearby Dodge dealer.
“Whether or not you’ve decided about a new oar — your dependable Dodge dealer is a good man to know. He is best qualified to give your DeSoto the genuine factory-approved service it deserves. Your Dodge dealer has the trained, experienced mechanics and proper service facilities to handle all your service needs. The large, nationwide Dodge dealer organization stands ready with service when you travel, too.
“May I take this opportunity to personally invite you to visit your Dodge dealer. Meet his service manager, look over his showroom and service facilities. You may even wish to drive in a new 1961 Dodge. Remember, whether it’s a new automobile * * * or dependable service * * * you’ll get a great deal with Dodge.
Sincerely,
Byron J. Nichols
Vice President, Chrysler Corporation
General Manager, Dodge Division”