First Priority Emergency Vehicles, Inc. v. REV Ambulance Grp. Orlando, Inc.

FIRST PRIORITY EMERGENCY VEHICLES, INC., Plaintiff, v. REV AMBULANCE GROUP ORLANDO, INC.,d/b/a MCCOY MILLER EMERGENCY VEHICLES,MARQUE EMERGENCY VEHICLES,and ROAD RESCUE EMERGENCY VEHICLES, Defendant.

Case No. 3:18-cv-9805-BRM-DEA

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

July 30, 2019

NOT FOR PUBLICATION

OPINION

MARTINOTTI, DISTRICT JUDGE

Before this Court is a Motion to Dismiss filed by Defendant REV Ambulance Group Orlando, Inc. d/b/a McCoy Miller Emergency Vehicles, Marque Emergency Vehicles, and Road Rescue Emergency Vehicles ("REV" or "Defendant") seeking to dismiss Plaintiff First Priority Emergency Vehicles, Inc.'s ("First Priority" or "Plaintiff") Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 18.) First Priority filed an Opposition to Defendants' Motion to Dismiss (ECF No. 24.) Also before this Court is First Priority's Cross-Motion for Leave to Amend its antitrust claims. (ECF No. 25.) REV filed an Opposition to First Priority's Cross-Motion for Leave to Amend. (ECF No. 30.) Having reviewed the submissions filed in connection with the motion and having declined to hold oral argument pursuant to Federal Rule of Civil Procedure 78(b), for the reasons set forth below and for good cause appearing, Defendant's Motion to Dismiss is GRANTED IN PART and DENIED IN PART and First Priority's Cross-Motion for Leave to Amend the Amended Complaint is GRANTED.

I. BACKGROUND

A. Factual Background

For the purposes of this Motion to Dismiss, the Court accepts the factual allegations in the Amended Complaint as true and draws all inferences in the light most favorable to the plaintiff. See Phillips v. Cty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). Furthermore, the Court also considers any "document integral to or explicitly relied upon in the complaint." In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (quoting Shaw v. Dig. Equip. Corp., 82 F.3d 1194, 1220 (1st Cir. 1996)).

First Priority is a New Jersey corporation with its principal place of business in Manchester, New Jersey. (ECF No. 17 ¶ 6.) REV is a Florida corporation with its principal place of business in Florida. (Id. ¶ 7.) REV does business under a variety of names, including McCoy Miller Emergency Vehicles ("McCoy Miller"), Marque Emergency Vehicles ("Marque"), Road Rescue Emergency Vehicles ("Road Rescue"), and Wheeled Coach Vehicles ("Wheeled Coach"), among others. (Id.)

First Priority "provides a range of expertise that encompasses design, manufacturing, uplifting, service, fleet management and infrastructure installment." (Id. ¶ 11.) For over twenty years, First Priority has also sold and serviced new and remounted ambulance vehicles, remounted ambulances, and parts for ambulances. (Id. ¶ 12.) There are three "major categories" of ambulance vehicles in the United States: Type I is based upon a heavy truck chassis and is used primarily for advanced life support and rescue work; Type II is a van-based ambulance with few modifications, except for a raised roof; and Type III is a van chassis that has a custom made rear compartment with the same use as Type I ambulances. (Id. ¶ 13.) REV owns seven of the twenty-one Type I, II, and III ambulance brands marketed in the United States and "controls more than 50% of the [United States] market for new ambulances." (Id. ¶ 14.)

On September 12, 2002, First Priority entered into a written agreement with Road Rescue, the Road Rescue Dealer Agreement ("RR Agreement"). (Id. ¶ 15.) The RR Agreement had a term of one year, expiring on October 1, 2003, and was renewable "for one year periods thereafter by written agreement of both parties at the time of annual review." (Id. ¶ 16.) The RR Agreement granted First Priority the right to sell Road Rescue-branded products throughout New Jersey, requiring First Priority to use its "best efforts" to meet or exceed certain sales goals. (Id. ¶¶ 16-17.) Specifically, the RR Agreement required First Priority to: aggressively promote, market, and sell the products; use its best efforts to manufacture and deliver Defendant's products; purchase a demonstrator vehicle; establish and maintain a place of business and a sales office in New Jersey; and maintain all applicable licenses and insurance, among other things. (Id. ¶ 17.) This relationship has continued "despite the fact the parties have never prepared a formal written renewal of the RR Agreement." (Id. ¶ 18.) Additionally, First Priority contends that, on multiple occasions, representatives from First Priority and Road Rescue "discussed their mutual understanding" that First Priority would remain a dealer of Defendant's products so long as it performed adequately and Defendant "would provide [First Priority] a reasonable time to cure the claimed deficiency before terminating the relationship." (Id. ¶ 19.)

On October 10, 2010, Road Rescue assigned its rights and obligations under the RR Agreement to Wheeled Coach. (Id. ¶ 22.)¹ On March 30, 2011, First Priority and SJC Industries Corporation ("SJ Industries") entered into a Dealer Sales and Service Agreement (the "SJC Agreement") for an ambulance dealership franchise that included the right to sell ambulances in New Jersey. (Id. ¶ 24.)² On May 8, 2013, SJC Industries assigned its rights and obligations under the SJC Agreement to Wheeled Coach. (Id. ¶¶ 26.)³

First Priority alleges that REV provided it with "poor quality" vehicles. (Id. ¶¶ 28-41.) Specifically, First Priority alleges: in 2012, Brick Township purchased two Marque-branded ambulances from REV but refused delivery because the vehicles "did not meet specifications" thereby requiring Brick Township to purchase vehicles from a competing brand (id. ¶ 29); in 2013, a client, Fairview, claimed it was dissatisfied with the ambulance vehicles due to electrical issues (id. ¶ 30); in 2013, a client, Hopatcong, was forced to purchase a demonstrator vehicle because of excessive delays in production (id. ¶ 31); in 2013, a client experienced an electrical fire in the Road Rescue vehicle and has since refused to purchase REV products (id. ¶ 32); in 2013, a client, Beach Haven, "changed its entire fleet from [] Road Rescue to a different brand due to numerous quality issues" (id. ¶ 33); between 2012 and 2013, a client, University Hospital, grew dissatisfied due to delays in production and delivery and has since refused to do business with REV (id. ¶ 34); a client, Maplewood, refuses to purchase Road Rescue products due to their poor quality (id. ¶ 35); clients South Orange, Roxbury, and Lakewood EMS have each grown so dissatisfied with Road Rescue vehicles that they refuse to purchase any products from REV (id. ¶¶ 36-38); in 2015, REV refused to honor a warranty with a client, Hightstown, which is now unlikely to do any further business with REV (id. ¶ 39); and between 2016 and 2017, clients Ocean Township and Atlantic Ambulance purchased vehicles that "experienced quality issues" to the extent that each client now refuses to purchase REV products. (id. ¶¶ 40-41).

First Priority alleges it made these quality and service issues well known to REV, which subsequently "failed to follow through on correcting the deficiencies." (Id. ¶¶ 42-43.) Specifically, on December 21 and 22, 2016, First Priority's Vice President, Ken Clark ("Clark"), e-mailed REV representative Enrique Gimenez ("Gimenez") expressing First Priority's "frustration at REV's conduct in shipping incomplete ambulances of poor quality and its failure to support" First Priority. (Id. ¶ 43.) Thereafter, at REV's annual dealer summit in February 2017, REV's Vice President of Marketing and Sales, Scott Barnes ("Barnes"), told Clark that "REV wanted to get its Road Rescue brand in New Jersey back on track," yet provided "no such support." (Id. ¶ 44.)

On or about March 28, 2017, during a meeting between First Priority representative Zach Yeager ("Yeager") and REV representative Irina Hot ("Hot"), REV "revealed its plan to limit competition by restricting its dealers' ability to continue to sell ambulances from brands not affiliated" with it. (Id. ¶ 46.) Specifically, REV "indicated that it intended to convert all of its dealers of its ambulance brands toward being either 'factory owned' or REV only dealers." (Id.) Under this new policy, REV's ambulance dealers would be prohibited from offering products services to clients that were not manufactured by REV. (Id.) During this meeting, First Priority "expressed its reluctance to become a REV-exclusive dealer in light of the quality problems its customers had been experiencing." (Id. ¶ 47.)

Between April 2016 and November 2017, REV reduced the percentage of its multi-line dealers by 59% - from sixty-nine to thirty-six - whereas it increased the number of factory- owned and REV-exclusive dealers by twenty-five percent - from 197 to 222. (Id. ¶ 47.) By the end of 2017, 86% of REV dealers were either factory-owned or REV-exclusive dealers. (Id.)⁴

In a June 30, 2017 letter from Barnes to First Priority's Alex Cherepakhov ("Cherepakhov"), REV terminated its business relationship with First Priority, stating in pertinent part:

As you know, First Priority is a REV dealer for the McCoy Miller, Marque, and Road Rescue brand of emergency vehicles in the state of New Jersey pursuant to a Retail Sales and Service Agreement between the parties (the "Dealer Agreement and Dealer Relationship"). However, as a result of First Priority's failure to perform in accordance with the Dealer Agreement, this letter shall serve as REV's official notice of termination of the Dealer Agreement and Dealer Relationship effective sixty (60) days from First Priority's receipt.

Pursuant to the Dealer Agreement, First Priority obligated itself to meet its mutually agreed upon sales objectives and has failed to do so. For example, the sales objective for all three brands for fiscal year 2017 was 18 vehicles and First Priority has only sold 1 vehicle thus far. In fiscal year 2015 and 2016,

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