The Franchise Memorandum

An appeals court in Ohio has set aside for now a large class action damages award that had been entered against an automobile manufacturer. In Westgate Ford Truck Sales, Inc. vs. Ford Motor Company, 2012 Ohio App. LEXIS 1707 (Ohio App. 8th Cir. May 3, 2012), the court reviewed the terms of a discount program provided by Ford Motor Company to the Plaintiff-Appellee, Westgate Ford Truck Sales, and other dealers. Ford’s Competitive Price Assistance Program (CPA) allowed dealers to petition Ford for discounts from the wholesale price of trucks in order to maintain a competitive edge in the market. The “Sales Advantage” CPA was available to all truck dealers whereas the “Appeal Level” CPA allowed for additional, need-based discounts on a case by case basis. Westgate claimed the contract required Ford to publish and provide any Appeal CPA discounts to all dealers. The trial court granted summary judgment in favor of Westgate on Ford’s liability and awarded the plaintiff $1.9 billion. Ford appealed.

Unlike the trial court, the court of appeals held that the contract was ambiguous “when viewed as a whole” (though some terms within the key section were unambiguous). The court noted that Westgate had participated in and benefited from the Appeal CPA program without prior notice of rates provided to other dealers. The court questioned whether holding Ford liable for breach through strict adherence to the written contract would be contrary to the parties’ past observance of the terms. The court quoted a prior Michigan case decision that a contract can be modified through course of dealing where there is “clear and convincing evidence of the parties’ mutual intent to modify the contract.” The court of appeals found that the trial court had abused its discretion in deciding that Westgate was entitled to summary judgment, and remanded the case for the fact finder to determine whether or not the contract was breached given the parties’ course of conduct.