United States Court of Appeals,
Eleventh Circuit.
No. 94-3372.
Gary J. PEARSON, Plaintiff-Counter-Defendant-Appellant,
v.
FORD MOTOR COMPANY, Ford Motor Credit Company, Ford Leasing
Development Company, Ford Corporations from "A" through "Z", Beal
Parkway Lincoln-Mercury Inc., Defendants-Appellees,
Ft. Walton Beach Lincoln-Mercury, Inc., Defendant-Counter-
Claimant-Appellee.
Nov. 15, 1995.
Appeal from the United States District Court of the Northern
District of Florida. (No. 93-30031-RV) Roger Vinson, Judge.
Before BIRCH and CARNES, Circuit Judges, and SIMONS*, Senior
District Judge.
PER CURIAM:
Plaintiff-appellant Gary J. Pearson brought this case alleging
a cause of action under the Automobile Dealers' Day in Court Act,
15 U.S.C. Sections 1221-1225, as well as nine additional state law
causes of action. The District Court subsequently granted
defendants' joint Motion for Summary Judgment on the ADDCA claim
and dismissed the state law claims without prejudice. Pearson v.
Ford Motor Company, 865 F.Supp. 1504 (N.D.Fla.1994). We affirm the
District Court on the fundamental ground that appellant lacks
standing.
Defendant Ford Motor Company operates a Dealer Development
Plan in which it assists individuals lacking sufficient investment
*
Honorable Charles E. Simons, Jr., Senior U.S. District
Judge for the District of South Carolina, sitting by designation.
capital to become owners of independent dealerships. Participants
may become owners after successfully operating dealerships largely
capitalized by Ford. The program was begun in the early 1950's and
has more recently been used for the additional purpose of
increasing opportunities for members of minorities to become owners
of dealerships. Appellant Pearson, who is of African-American
descent, was first employed by Ford in 1973. By 1975, Pearson had
become a zone manager, and in 1983, he was zone manager of the
territory which included Fort Walton Beach, Florida. Pearson was
interested in an existing dealership there, the owner of which had
determined to close or sell it.
Pearson did not have adequate funds to purchase the
dealership, and consequently the sale was made through the Dealer
Development Program. On July 12, 1983, Pearson signed a letter of
understanding with Ford which provided that Ford would furnish
startup capital of $320,000.00 for Fort Walton Beach Lincoln-
Mercury ("FWBLM"). Pearson would provide $80,000.00, to be held in
escrow for the first six months of operation, during which time
Ford would make the entire initial investment. The agreement
provided that if Pearson chose not to continue in the venture
during the initial period, the escrow funds would be returned to
him. If he chose to continue in the venture, the escrowed funds
would be used to purchase common stock in FWBLM.
On July 18, 1983, Ford entered into distinct sales and service
agreements with FWBLM. Pearson was not a party to these
agreements, which identified FWBLM as the "dealer" and which gave
FWBLM the right to acquire Ford vehicles and parts and to sell them
to the public. The sales and service agreements imposed all
obligations on FWBLM and not on Pearson, who was at this point only
the dealership's hired General Manager.
At the conclusion of the initial six month period, Pearson
chose to continue in the undertaking, and on February 1, 1984, he
entered into a Dealer Development Agreement with Ford and a
Management Agreement with FWBLM. Pursuant to the Dealer
Development Agreement, Ford received 1600 shares of convertible
preferred stock in FWBLM, and Pearson received 800 shares of common
stock. The common stock had no voting rights as long as any
preferred stock was outstanding.
The Dealer Development Agreement further provided that if the
dealership were profitable, a portion of Pearson's share of the
profits would be used to gradually purchase Ford's preferred stock
in FWBLM and convert it into common stock. Pearson could only
purchase Ford stock from the profits of FWBLM, not with any other
funds. Under this plan, only if the dealership were profitable
under his management, would Pearson eventually own it. Ford had no
obligation to provide any additional capitalization, but if it
chose to do so, Ford would receive additional preferred stock in
proportion to its contributions.
The Board of Directors of FWBLM was composed of Pearson and
three other Directors chosen by Ford. The Management Agreement
provided that Pearson was to serve as President and Operator of
FWBLM. Pearson was the on-site Manager and was responsible for the
day to day operations of the dealership. Both the Dealer
Development Agreement and the Management Agreement were terminable
at will by either party. Both Agreements also stated that
termination was likely if the dealership lost money to the point
that Pearson's equity interest had no value.
The dealership was profitable from 1984 to 1986. Because his
portion of the profits were used to purchase stock, Pearson owned
79% of the total FWBLM stock by the end of 1986. However, in 1987
and the first quarter of 1988, the dealership lost money and as a
result of these losses, offset by Ford's further capital
contributions of more than $1,000,000.00 during the last four years
of operation, Pearson's ownership interest had declined to 34% of
the total stock by the end of 1988. By the end of 1989, Pearson's
common stock had no value and this remained the case until he was
terminated in February of 1991 by the FWBLM Board of Directors.
Against this factual background, we project the following
statutory definition of "automobile dealer", as set out in 15
U.S.C. Section 1221(c):
The term "automobile dealer" shall mean any person,
partnership, corporation, association, or other form of
business enterprise resident in the United States or in any
territory thereof or in the District of Columbia operating
under the terms of a franchise and engaged in the sale or
distribution of passenger cars, trucks, or station wagons.
The District Court concluded that FWBLM, and not appellant
Pearson, was the "automobile dealer" under the statutory
definition. We agree.1
Pearson was himself never a party to FWBLM's Franchise
Agreements with Ford. These Agreements were entirely between Ford
1
The District Court chose not to follow the conclusion
reached in Kavanaugh v. Ford Motor Co., 353 F.2d 710 (7th
Cir.1965). We agree that, on these facts, the better view is the
one reflected herein.
and FWBLM. In support of his position, Pearson cites York
Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., 447 F.2d 786 (5th
Cir.1971), but we find that case to be distinguishable. That
decision relied heavily upon the fact that the Yorks, although not
signers of the franchise agreement, were "inextricably woven into
it." In essence, the court concluded that Chrysler had made the
Yorks essential to the operation of the dealership.
This was manifestly not the case with Pearson, who was in fact
ultimately terminated and replaced. Thus, there is no basis for
applying the rationale of York, which itself recognized that
"individuals would not come within the scope of the Act merely
because they were the sole stockholders, officers and directors of
the corporate franchise holder." 447 F.2d at 790.
Because of our finding with respect to Pearson's lack of
standing, it is not necessary to consider the alternative bases for
the District Court's opinion.
AFFIRMED.