hkpierce
05-24-2007, 04:06 PM
Below is the US Court of Appeals, 6th Circuit decision in FREIGHTLINER OF KNOXVILLE, INC.; CARROLL PROPERTIES, L.P.; and BUDDIE E. CARROLL, Plaintiffs-Appellants, v. DAIMLERCHRYSLER VANS, LLC, Defendant-Appellee, FREIGHTLINER, LLC, Defendant, decision issued April 26, 2007.
This decision is interesting as it backs up what I had heard in 2002 from both the Charlotte and Baltimore Freightliner dealers. See http://www.sprinter-source.com/forum/showthread.php?t=598&highlight=Shultz at Posting No. 3, Freightliner item.
As summarized by the Court:
FOK alleges that in February 2000, the president of FLLC presented it and a select group of Freightliner dealers with the opportunity to sell what was to be called the “Freightliner Sprinter,” a medium-size commercial van which could also be customized for passengers. Although it was to be marketed in the United States under the Freightliner brand, the Sprinter was virtually identical to a van that had been sold in Europe for many years, with tremendous success, under the Mercedes-Benz brand. FOK believed that if it became a Freightliner Sprinter franchisee, “it would be able to sell a great deal of product for a long time.”
The catch, according to FOK, was that a dealer would only be selected to sell the Sprinter if it were to upgrade its facility in a variety of ways, including (among other things): creation of a separate showroom for Sprinter vans, so as to “segregate potential Sprinter corporate customers from heavy-duty truck customers who frequent every Freightliner dealership for sales and service.” FOK took the bait and accordingly changed the design plans for its planned Knoxville facility by adding designated space for the Sprinter vans. FOK estimates that it paid $800,000 in “additional construction costs” in order to build the new space. FOK was rewarded for its efforts: sometime after May 2001 FLLC notified FOK that it had been approved for a Sprinter retail sales and service agreement. At the same time, FLLC told FOK that DC Vans, and not FLLC, would be the distributor of the Sprinter vans. This appears to have been a mere hiccup in the negotiations, however, as on September 26, 2001, FOK entered into a dealer agreement with DC Vans for the sale of Sprinters.
FOK alleges that regardless of who its distributor was (FLLC or DC Vans), it had always operated under the unwritten assumption that the Sprinter vans would be distributed exclusively to Freightliner dealers (such as FOK), and sold exclusively under the Freightliner brand. As FOK states in its amended complaint, “DC Vans stepped seamlessly into the shoes of FLLC. It parroted and confirmed the distinct impression of exclusivity fostered by FLLC’s representations.” This assumption proved mistaken, however: sometime in 2002, FOK was informed that the Sprinter van would also be sold through Dodge dealers under the Dodge brand, i.e., as a “Dodge Sprinter.”1 To add insult to injury, on July 19, 2002, FOK was informed that not only would the Sprinter be concomitantly sold as a Dodge product, but also that Freightliner dealers would only be permitted to sell Sprinter vans until 2005, at which point the vans would be sold exclusively as a Dodge product. DC Vans has since pulled back from this hard-line stance, and has in fact amended the record to note that it will not terminate its Sprinter agreements with Freightliner dealers, and that the Sprinter van will simply be “dual branded” for the foreseeable future. Indeed, despite the instant litigation, FOK and DC Vans continue to do business in Freightliner Sprinter vans pursuant to their dealer agreement, an agreement which has now been extended through the 2007 model of Freightliner Sprinter.
FOK makes 2 claims that survived through appeal:
(1) DC Vans promised exculsivity to Frieghtliner dealers in selling Sprinters. The Court finds that DC Van's contract reserved the right to DC Vans to sign up other dealers, including Dodge. In short, whatever DC Vans promised verbally was not what the Freightliner dealers contractually agreed to.
(2) DC Vans was offering incentives to Dodge dealers to sell Sprinters that DC Vans was not offering Frieghtliner dealers to sell Sprinters. The incentive FOK references is Dodge's Business Link, especially priority to repair bay-space for Business Link members. First, the Court notes the lack of record with regard to DC Vans really being the supplier of Dodge Sprinters. Further, the Court seems to make a distinction that Dodge dealers are really reselling a product, and not, in essence, a direct seller of product. Finally, the Court finds that there is a lack of record as to what the financial situation is between DC Vans and Dodge dealers to make a decision, and remands for further discovery.
[Of course I am not a lawyer, so take my review with a grain of salt, plus my interest in not so much the law as history of the Freightliner<>DC Vans<>Dodge relationship.]
This decision is interesting as it backs up what I had heard in 2002 from both the Charlotte and Baltimore Freightliner dealers. See http://www.sprinter-source.com/forum/showthread.php?t=598&highlight=Shultz at Posting No. 3, Freightliner item.
As summarized by the Court:
FOK alleges that in February 2000, the president of FLLC presented it and a select group of Freightliner dealers with the opportunity to sell what was to be called the “Freightliner Sprinter,” a medium-size commercial van which could also be customized for passengers. Although it was to be marketed in the United States under the Freightliner brand, the Sprinter was virtually identical to a van that had been sold in Europe for many years, with tremendous success, under the Mercedes-Benz brand. FOK believed that if it became a Freightliner Sprinter franchisee, “it would be able to sell a great deal of product for a long time.”
The catch, according to FOK, was that a dealer would only be selected to sell the Sprinter if it were to upgrade its facility in a variety of ways, including (among other things): creation of a separate showroom for Sprinter vans, so as to “segregate potential Sprinter corporate customers from heavy-duty truck customers who frequent every Freightliner dealership for sales and service.” FOK took the bait and accordingly changed the design plans for its planned Knoxville facility by adding designated space for the Sprinter vans. FOK estimates that it paid $800,000 in “additional construction costs” in order to build the new space. FOK was rewarded for its efforts: sometime after May 2001 FLLC notified FOK that it had been approved for a Sprinter retail sales and service agreement. At the same time, FLLC told FOK that DC Vans, and not FLLC, would be the distributor of the Sprinter vans. This appears to have been a mere hiccup in the negotiations, however, as on September 26, 2001, FOK entered into a dealer agreement with DC Vans for the sale of Sprinters.
FOK alleges that regardless of who its distributor was (FLLC or DC Vans), it had always operated under the unwritten assumption that the Sprinter vans would be distributed exclusively to Freightliner dealers (such as FOK), and sold exclusively under the Freightliner brand. As FOK states in its amended complaint, “DC Vans stepped seamlessly into the shoes of FLLC. It parroted and confirmed the distinct impression of exclusivity fostered by FLLC’s representations.” This assumption proved mistaken, however: sometime in 2002, FOK was informed that the Sprinter van would also be sold through Dodge dealers under the Dodge brand, i.e., as a “Dodge Sprinter.”1 To add insult to injury, on July 19, 2002, FOK was informed that not only would the Sprinter be concomitantly sold as a Dodge product, but also that Freightliner dealers would only be permitted to sell Sprinter vans until 2005, at which point the vans would be sold exclusively as a Dodge product. DC Vans has since pulled back from this hard-line stance, and has in fact amended the record to note that it will not terminate its Sprinter agreements with Freightliner dealers, and that the Sprinter van will simply be “dual branded” for the foreseeable future. Indeed, despite the instant litigation, FOK and DC Vans continue to do business in Freightliner Sprinter vans pursuant to their dealer agreement, an agreement which has now been extended through the 2007 model of Freightliner Sprinter.
FOK makes 2 claims that survived through appeal:
(1) DC Vans promised exculsivity to Frieghtliner dealers in selling Sprinters. The Court finds that DC Van's contract reserved the right to DC Vans to sign up other dealers, including Dodge. In short, whatever DC Vans promised verbally was not what the Freightliner dealers contractually agreed to.
(2) DC Vans was offering incentives to Dodge dealers to sell Sprinters that DC Vans was not offering Frieghtliner dealers to sell Sprinters. The incentive FOK references is Dodge's Business Link, especially priority to repair bay-space for Business Link members. First, the Court notes the lack of record with regard to DC Vans really being the supplier of Dodge Sprinters. Further, the Court seems to make a distinction that Dodge dealers are really reselling a product, and not, in essence, a direct seller of product. Finally, the Court finds that there is a lack of record as to what the financial situation is between DC Vans and Dodge dealers to make a decision, and remands for further discovery.
[Of course I am not a lawyer, so take my review with a grain of salt, plus my interest in not so much the law as history of the Freightliner<>DC Vans<>Dodge relationship.]