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Semmes Motors, Inc. v. Ford Motor Company

United States Court of Appeals for the Second Circuit
429 F.2d 1197 (1970)


Facts

Semmes Motors, Inc. (Semmes) (plaintiff) was a longtime dealer of Ford Motor Company (Ford) (defendant) vehicles in Scarsdale, New York. Semmes’s president, Williams Semmes, was an active participant in the Ford Dealers Alliance, Inc. (Alliance) (plaintiff), a New Jersey corporation dedicated to protecting Ford franchisees from abuse by the manufacturer. Concerned about fraud in the reporting of warranty repairs, Ford informed Semmes that it intended to audit the dealership’s warranty claims and records, inspect repaired vehicles, and potentially contact customers for whom warranty work was performed. William Semmes believed that the audit was retaliation for his involvement in the Alliance. Semmes and the Alliance filed an action against Ford in a New Jersey state court, seeking to enjoin the contacting of customers. Ford removed the matter to federal court, where the plaintiffs’ petition for a temporary restraining order was denied. Meanwhile, Ford proceeded with its audit, finding that 70 percent of the vehicles inspected had not been repaired as reported. The plaintiffs then filed a substantially identical action against Ford in the United States District Court for the Southern District of New York, again seeking a temporary restraining order. The next day, Ford: (1) counterclaimed against Semmes in the New Jersey action to recover false warranty refunds and (2) terminated Semmes’s dealership. The plaintiffs then amended their complaint in the Southern District to include a claim for wrongful termination of Semmes’s dealership under the Federal Dealer Act, 15 U.S.C. §§ 1221–25. A month later, the Southern District granted a temporary restraining order against Ford and denied Ford’s motion to stay the Southern District action while the New Jersey suit proceeded. The plaintiffs agreed to discontinue the New Jersey action with Ford’s consent. Ford appealed.

Rule of Law

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Holding and Reasoning (Friendly, J.)

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