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JUNIKKI IMPORTS, INC. v. TOYOTA MOTOR CO.

November 12, 1971

JUNIKKI IMPORTS, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
TOYOTA MOTOR CO., LTD., A CORPORATION ET AL., DEFENDANTS.



The opinion of the court was delivered by: Marovitz, District Judge.

MEMORANDUM OPINION

Motion For Partial Summary Judgment

This is an action by an automobile dealer against a manufacturer and distributor for violation of the Automobile Dealers' Day in Court Act 15 U.S.C. § 1221, 1222 (Count I), Fraud and Deceit (Count II) and Breach of Contract (Count III). The case is presently before us on defendant's Mid-Southern Toyota Distributors, Inc. (MST) and Amco Industries, Inc. (AMCO) Motion For Partial Summary Judgment.

Plaintiff alleges that he was induced to establish a dealership of Toyota automobiles by oral promises on the part of defendants' representatives that he would be supplied with a) a minimum of 20 cars per month, the number of cars necessary to finance the dealership; b) all necessary parts and equipment for servicing and repair of Toyota automobiles; and c) substantial sums of money for advertising and that subsequently defendants decided to open a factory-owned dealership in the same area and thereupon entered upon a course of conduct designed to compel the cancellation of plaintiff's franchise. The acts of misconduct and bad faith alleged are the purposeful refusal of defendants to supply an adequate or minimum number of automobiles; the refusal to provide parts and equipment essential for repair and servicing of Toyota vehicles; further acts of coercion aimed at forcing the relinquishment of the Toyota Franchise; the compelling of plaintiff to join an advertising cooperative; the defendants' refusal to approve sale of the operation to a prospective purchaser though he was a party provided by defendants; and demand by defendants' that plaintiff sell to them stock and equipment below their value once plaintiff had ceased operations.

I.

Plaintiff claims that the foregoing acts constitute a violation of 15 U.S.C. § 1221, 1222. Under § 1222 an automobile dealer may sue an automobile manufacturer for the failure to act in good faith in performing or complying with any of the terms or provisions of the franchise or in terminating, cancelling or not renewing the franchise. * * * Defendants seek summary judgment arguing that the oral representations made prior to the signing of the franchise are irrelevant in determining good faith since all prior inducements or representations were negated by the subsequent written agreement. We will address ourselves at greater length to the question of what evidentiary value to place on the oral promises in discussing the breach of contract claims. For the purposes of this Count, however, it is sufficient to say that we have decided that the oral representations are a part of the contract and therefore defendants' violation thereof does constitute bad faith under the Act. Irrespective of these oral promises we believe that plaintiff has stated a sufficient cause of action under the Act. Plaintiff is simply alleging that defendants embarked on a concerted effort to put him out of business by purposely failing to provide an adequate number of cars needed to finance his dealership and by refusing to deliver parts for his service facilities. The fact that defendants did or did not promise a specific number of vehicles is totally irrelevant if they did in fact, by whatever method, intend to disenfranchise the plaintiff. The sum total of defendants' acts must be considered and prior negotiations and inducements even if negated by the written agreement are nevertheless of value in proving defendants' knowledge of plaintiff's minimal needs and its subsequent effort to undersupply those needs. With this knowledge defendants could easily further their alleged disenfranchisement scheme by consistently withholding the stock necessary to cover plaintiff's overhead. As we have indicated, infra, a distributor cannot claim that it can in bad faith refuse to supply autos or parts based on the absence of any specific obligations or numbers in the written contract. He particularly cannot do so under the Automobile Dealers Day in Court Act which was enacted for the very purpose of preventing distributors and manufacturers from relying on their adhesion contracts and using bad faith in coercing dealers out of their franchises. It was to somewhat equalize the gross inequity in bargaining power that existed between dealers and manufacturers and to provide some safeguards from the disenfranchisement powers of distributors that the Act was legislated.

We therefore hold that the conduct alleged by plaintiff in Count I falls well within 15 U.S.C. § 1222 and that a cause of action having been sufficiently stated, defendants' motion as to this Count must be denied.

II.

Plaintiff's Second Count realleges the oral promises of 20 cars a month, parts and tools, and advertising costs, and the breach of those promises. The basis for this Count is fraud and deceit. Defendants argue that summary judgment ought to be granted given the unquestionable fact that Illinois adheres to the minority rule which does not permit an action for fraud where the misrepresentations involved relate to an executory or future performance rather than to a past or existent fact even where the promise was never intended to be fulfilled. There is a multitude of both Federal and State cases that support this proposition. Keithly v. Mutual Life Ins. Co., 271 Ill. 584, 111 N.E. 503 (1916); Brodsky v. Frank, 342 Ill. 110, 173 N.E. 775 (1930); Classic Bowl Inc. v. AMF Pinspotters, Inc., 403 F.2d 463 (7th Cir. 1968); Repsold v. New York Life Insurance Co., 216 F.2d 479 (7th Cir. 1954).

Plaintiff does not dispute the Illinois rule but rather claims that where the false promises of future conduct are claimed to be the scheme used to accomplish the fraud there is an exception to the rule. See Howard v. Howe, 61 F.2d 577 (7th Cir. 1932); Carroll v. First National Bank of Lincolnwood, 413 F.2d 353 (7th Cir. 1969); Roda v. Berko, 401 Ill. 335, 81 N.E.2d 912 (1948); Willis v. Atkins, 412 Ill. 245, 106 N.E.2d 370 (1952). The court in Howard v. Howe said:

    "Nor can it be successfully maintained that fraud
  may not under any circumstances be based upon the
  nonperformance of promises. If such promises are made
  to induce the fraud, if they induce one to change his
  status to his damage, he may seek the relief of one
  defrauded. It is only essential that the evidence
  disclose that they were fraudulent in their
  inception, were made in bad faith, with the intention
  to deceive and were the inducing cause of the
  detrimental change in his condition made by the
  complaining party in reliance thereon." 61 F.2d at
  579.

Likewise the court in Carroll said:

    "The general rule in Illinois denies recovery for
  fraud based on a false representation of intention or
  future conduct, but there is a well recognized
  exception, where, as here, the false promise or
  representation of future conduct is claimed to be the
  scheme used to accomplish the fraud." 413 F.2d at
  358-359.

Assuming the allegations to be true for the purposes of this Motion it is not sufficiently evident that plaintiff will not be able to prove that the promises were themselves a part of the scheme used to accomplish the fraud and we therefore are not prepared ...


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