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Acdia Motors, Inc. et al. v. Ford Motor Company
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MAINE SUPREME JUDICIAL COURT					                                             Reporter of Decisions
Decision:	2002 ME 102 
Docket:	Pen-01-662
Argued:		March 6, 2002
Decided:	June 25, 2002

Panel:		CLIFFORD, and RUDMAN, ALEXANDER, and CALKINS, JJ.

										 

ACADIA MOTORS, INC. et al.{1}

v.

FORD MOTOR COMPANY

CLIFFORD, J., 
	[¶1]  The plaintiffs, Maine automobile dealers (Dealers) who sell motor vehicles manufactured by the 
Ford Motor Company, appeal from a summary judgment entered in the Superior Court (Penobscot County, Marsano, J.)
 in favor of Ford on the Dealers' claim that Ford's "warranty parity surcharge" violates 10 M.R.S.A. § 1176
 (1997 & Supp. 2001).  The Dealers contend that the court erred by finding, as a matter of law, that the surcharge does
 not violate section 1176.  We affirm the summary judgment. 

	[¶2]  The facts presented in the parties' statements of material fact and the
procedural history of the present dispute may be summarized as follows: Under
the sales and service agreements that govern the relationship between Ford and the
Dealers, the Dealers are required to repair Ford vehicles under warranty from
Ford at no cost to the customer.  Ford's customary and nationwide practice is to
reimburse the Dealers for these repairs at the rate of cost plus a thirty to forty
percent markup.  This amount is lower than Ford's suggested retail price for
repair work of sixty three percent, and it is lower than the customary retail price
that the Dealers charge to nonwarranty customers.  These reimbursements are
credited to the Dealers on their monthly Parts Statement.

	[¶3]  Since 1980, 10 M.R.S.A. § 1176 has required that a motor vehicle
franchisor who "requires or permits a motor vehicle franchisee to perform labor
or provide parts in satisfaction of a warranty created by the franchisor"
compensate the franchisee for parts and labor on the warranty service "at the retail
rate customarily charged by that franchisee" for parts and labor provided to
customers not covered by a warranty.  Id. § 1176.  Prior to 1980, section 1176
required only that franchisors "adequately and fairly compensate" franchisees for
parts and labor provided in a warranty service.  10 M.R.S.A. § 1176 (Supp.
1978-1979) repealed by P.L. 1979, ch. 698, § 1 (effective July 3, 1980).  The
Legislature made these amendments to alleviate the need for dealers to artificially
inflate the labor rate they charge non-warranty customers to subsidize
manufacturers who are "unwilling to pay the fair and full price for repairs made
necessary when their automobiles fail[ ] to meet warranty standards."  L.D. 1878,
Statement of Fact (109th Legis. 1980). 
    
	[¶4]  Ford did nothing to change how it reimbursed dealers until after
several small claims were filed against it in Maine District Court for
reimbursement by Darling's Bangor Ford.{2}  Acadia Motors, Inc. v. Ford Motor
Co., 44 F.3d 1050, 1052 (1st Cir. 1995).{3}  In 1993, Ford did increase its
reimbursement and announced that it would be imposing a warranty parity
surcharge on all Ford dealers in Maine to recover the costs of reimbursing the
Dealers at a higher markup on warranty repairs.  Id.  The 1993 surcharge was
$160.00, and it was imposed on all cars and light trucks under 10,000 pounds
"reported sold."{4}  The surcharge was charged on the Dealers' monthly parts
statement.

	[¶5]  In 1993, the Dealers sued Ford in the United States District Court
claiming that the surcharge was unlawful under section 1176.  Id. at 1053.  The
United States District Court found that Ford was entitled to recover its "increased
costs of doing business in Maine as a result of th[e] legislation" but that it could
only do so by increasing the wholesale sticker price of the vehicles it sold, not by
imposing a surcharge on the Dealers' monthly parts statements.  Acadia Motors,
Inc. v. Ford Motor Co., 844 F. Supp. 819, 829-30 (D. Me. 1994).  The  United
States Court of Appeals for the First Circuit affirmed that portion of the District
Court's opinion finding that section 1176 does not prohibit Ford from recovering
its costs of compliance, but it vacated that portion of the opinion requiring Ford to
do so only by raising the wholesale sticker price of the vehicles it sells to Maine
dealers.  Acadia Motors, Inc, 44 F.3d at 1056-57.  It concluded that nothing in the
language of the statute or in the legislative history indicated any legislative intent
to "prevent or condition manufacturers' cost recovery."  Id. at 1056.  Ford did not
immediately reimpose the 1993 surcharge following the First Circuit Court's
decision.

	[¶6]  In 1995, Darling's Bangor Ford filed a complaint in the Superior
Court claiming that Ford's reimbursement policies did not meet the requirements
of section 1176 because the policies did not provide reimbursement for parts and
labor utilized for warranty repairs at the same rate customarily charged by dealers
to nonwarranty retail customers.   See Darling's v. Ford Motor Co., 1998 ME
232, ¶ 3, 719 A.2d 111 (answering certified questions presented by United States
District Court).  The parties ultimately settled the dispute.  

	[¶7]  In 1999, Ford informed the Dealers that it would again impose a
warranty parity surcharge of $150 for each vehicle sold or leased to recover the
costs of compliance with section 1176 and the costs of the settlement it incurred in
the Darling lawsuit.  Ford expressly reserved the right to review and revise the
amount of the surcharge and is expected to increase the surcharge to $250 "[v]ery
shortly."{5} 

	[¶8]  On August 10, 1999, the Dealers filed the complaint in this case
seeking a declaratory judgment that the surcharge violates section 1176.  Ford
moved for a summary judgment, and, after a hearing, the Superior Court entered
a partial summary judgment concluding that the surcharge did not violate section
1176{6} but that there remained a genuine issue of material fact regarding whether
the Dealers had properly submitted their reimbursement claims.  The parties
subsequently stipulated to a dismissal of the latter issue, and the Dealers  filed this
appeal from the entry of the summary judgment.

	[¶9]  The Dealers contend that Ford's 1999 surcharge is an attempt to avoid
the costs of complying with section 1176 and that it is against "clear State policy." 
They maintain that the legislative history of section 1176 demonstrates that the
purpose of the statute is to protect the public from the warranty reimbursement
practices of motor vehicle manufacturers by protecting local dealers who, because
of their inferior bargaining position, are forced to accept sales and service
agreements that require them to provide parts and services for warranty work at a
rate that is lower than the rate they customarily charge.  The public is harmed,
they contend, because the dealers are pressured to artificially inflate the rates they
charge nonwarranty customers to compensate for the lower rates they receive for
the warranty work.  The Dealers contend that summary judgment should have
been entered in their favor.

We review a summary judgment for errors of law, viewing the
evidence in the light most favorable to the party against whom the
judgment was entered. A summary judgment is proper if, on the
evidence, there is no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law.

Coulombe v. Salvation Army, 2002 ME 25, ¶ 8, 790 A.2d 593 (quotations and
citations omitted).  

	[¶10]  Our main objective in construing statutes is to discern and give effect
to the Legislature's intent.  Great Northern Paper, Inc., v. Penobscot Nation,
2001 ME 68, ¶ 15, 770 A.2d 574.  "To give effect to the Legislature's intent, we
look first to the statute's plain meaning and, if there is ambiguity, we look beyond
that language to the legislative history to determine the intent of the Legislature." 
Id.  

	[¶11]  Section 1176 requires that a franchisor (manufacturer) 

reimburse the franchisee for any parts so provided at the retail rate
customarily charged by that franchisee for the same parts when not
provided in satisfaction of a warranty. Further, the franchisor shall
reimburse the franchisee for any labor so performed at the retail rate
customarily charged by that franchisee for the same labor when not
performed in satisfaction of a warranty . . . .

10 M.R.S.A. § 1176.  The statute is unambiguous, and it is silent with respect to
Ford's ability to impose a surcharge.  As the Court of Appeals for the First Circuit
concluded in upholding the legality of a similar surcharge in Acadia Motors, Inc.
v. Ford Motor Co., 44 F.3d at 1056, section 1176 contains no language restricting
or conditioning Ford's ability to recover its costs of compliance.

The statute says nothing about wholesale or retail prices, and
apparently leaves the manufacturer free to increase wholesale prices,
and the dealer to increase retail prices. The legislative history of the
amended statute also does not indicate that the Maine legislature
intended to set price controls or to force manufacturers to wholly
bear the costs of compliance.

Id.  We agree with the First Circuit that the language of section 1176 is clear and
that it does not prohibit the surcharge on its dealers imposed by Ford.

	The entry is:

			Judgment affirmed.
_____________________________________

Attorneys for the plaintiffs:

Bruce C. Gerrity, Esq. 	(orally)
Roy Pierce, Esq.
Preti, Flaherty, Beliveau & Pachios
One City Center
P.O. Box 9546 
Portland, Maine 04112
 
Attorneys for the defendant:

James T. Kilbreth, Esq.   (orally)
Daniel L. Rosenthal, Esq.
Verrill & Dana
One Portland Square
Portland, Maine 04112-0586