Bronx Auto Mall, Inc. v. American Honda Motor Co., Inc.

American Honda Motor Company, Inc. (AHMC) (defendant), the American distributor of popularly priced Honda automobiles, introduced its luxury line of Acura automobiles in 1986. One of the franchisees was Harold Schlanger, whose Bronx Auto Mall, Inc. (plaintiff) sold Hondas and other car brands in the Bronx, New York. Before franchising Schlanger to sell Acuras, AHMC officials were well aware of Schlanger’s outdated facilities, the Bronx’s downscale reputation, and Schlanger’s strategy of taking business away from upscale suburban dealers by undercutting their prices. Acura sales fell in the early 1990s. AHMC decided to eliminate some of the Acura franchises, like Schlanger’s, that were losing money due to poor sales. In 1995, AHMC notified Schlanger that it would let his franchise expire. AHMC’s stated rationale was Schlanger’s unresponsiveness to AHMC’s demands for substantial upgrades to his Acura facilities. AHMC knew those demands were unreasonable, because Schlanger’s declining Acura sales did not warrant spending money on his Acura facilities, and because the upgrades would eat into space dedicated to Schlanger’s other brands. AHMC’s notice covered up its real motive, which was to cut its ties to a low-prestige neighborhood and to a dealer who stole business from dealerships in the prestigious suburbs that better complemented Acura’s luxury image. Schlanger sued AHMC and asked the federal district court to issue an injunction prohibiting AHMC from terminating his franchise.