The Franchise Memorandum

The United States Court of Appeals for the Third Circuit has reversed a New Jersey district court’s certification of a class of approximately 4,000 dealers in an action against Ford Motor Company alleging violations of the Robinson-Patman Act, the federal Automobile Dealer’s Day in Court Act, and numerous state franchise laws, as well as breach of contract and the covenant of good faith and fair dealing. Danvers Motor Co., Inc. v. Ford Motor Company, No. 07-2287, WL 418728 (3rd Cir. Sept. 12, 2008).

Ford had instituted a voluntary dealer certification program called The Blue Oval Program (“BOP”), which was available to all Ford dealers. The BOP provided cash bonus payments and other benefits to Ford dealers who improved customer satisfaction according to certain criteria. The plaintiffs contended that the BOP violated the Robinson-Patman Act by applying different standards and processes to different dealers and that the BOP was “an illegal means of constructive termination or attempted termination” in violation of the federal and state dealer-protection statutes.

The Third Circuit reversal found that the class failed to meet the requirement of Fed. R. Civ. P. 23(a)(2) that there exist “questions of law or fact common to the class.” Specifically, the Third Circuit found that the class plaintiffs’ action involved “many non-common issues,” including whether the dealer was certified, whether the dealers in the same market were treated differently under the BOP, and whether Ford’s conduct vis-à-vis a particular dealer violated the dealer’s state’s franchise laws.