Ocean City Express Co. v. Atlas Van Lines, Inc.

194 F.Supp.3d 314

OCEAN CITY EXPRESS CO., INC., Plaintiff,

v.ATLAS VAN LINES, INC., Defendant.

Civil Action No. 13-1467 (JBS/KMW)

United States District Court, D. New Jersey.

Signed July 11, 2016

Filed July 12, 2016

Jeffrey H. Sutherland, Esq., Jeffrey H. Sutherland, PC , Linwood Commons, 2106 New Road, Suite E-5, Linwood, NJ 08221, Attorney for Plaintiff.

Gary Francis Seitz, Esq., Gellert Scali Busenkell & Brown LLC , Curtis Center, 601 Walnut Street, Suite 280 South, Philadelphia, PA 19106, Attorney for Defendant.

OPINION

SIMANDLE, Chief Judge:

Contents

I. INTRODUCTION...316

II. BACKGROUND...318

III. STANDARD OF REVIEW...321

A. Summary Judgment Standard, Generally...321

IV. DISCUSSION...321

A. New Jersey Franchise Practices Act...321

1. 20% Requirement...322

2. Status as an "Innocent Franchisee"...324

B. Evidence of Damages caused by Atlas' alleged violation of the NJFPA...325

1. Loss of Earnings/Revenues...325

a. Mr. Portock's Opinion is Admissible...325

b. Mr. Webers' Testimony has some Relevance...327

2. Costs of De-branding...328

V. CONCLUSION...329

I. INTRODUCTION

In this action, Plaintiff Ocean City Express Co., Inc. (hereinafter, "Plaintiff" or "Ocean City Express" or "Ocean City") alleges that Defendant Atlas Van Lines, Inc. (hereinafter, "Defendant" or "Atlas Van Lines" or "Atlas") violated the New Jersey Franchise Practices Act, N.J.S.A. §§ 56:10–1, –15 (hereinafter, the "NJFPA" or the "Act") when it terminated the parties' March 31, 2006 Agency Agreement without "good cause."

In enacting the NJFPA, the New Jersey Legislature aimed "to equalize the disparity of bargaining power in franchisor-franchisee relations," Liberty Lincoln – Mercury v. Ford Motor Co., 134 F.3d 557, 566 (3d Cir.1998) (citations omitted), by prohibiting a franchisor from terminating, cancelling, or failing to renew a franchise without sufficient " 'good cause.' " Cooper Distrib. Co. v. Amana Refrigeration, Inc., 63 F.3d 262, 268 (3d Cir.1995) (quoting N.J.S.A. § 56:10–5 ); see also N.J.S.A. § 56:10–2 (listing the legislative findings underpinning the NJFPA). The NJFPA, however, applies only (1) where the franchisee maintains a place of business within the State of New Jersey, (2) where gross sales between the franchisor and franchisee exceeded $35,000 for the 12 months that preceded the suit, and (3) where the franchisee derived or intended to derive more than 20% of its overall gross sales from the franchise arrangement. See N.J.S.A. § 56:10–4.

Against that statutory backdrop and following multiple rounds of dismissal motion practice,¹ Defendant moves for summary judgment, on the grounds that the undisputed factual record demonstrates that the NJFPA has no application to the parties' Agency Agreement. (See generally Def.'s Br.; Def.'s Reply.) More specifically, Defendant takes the view that the arrangement cannot qualify as a "franchise" for purposes of the NJFPA, (1) because the unrebutted testimony reflects that Plaintiff derived less than 20% of its gross sales from the Agency Agreement, and (2) because its "noncompliance" with the Agency Agreement precludes it, in any event, from relying upon the " 'innocent franchisee' " protections of the NJFPA. (Def.'s Br. at 3-7, 14-19; Def.'s Reply at 12-14.) Moving beyond the coverage requirements of the NJFPA, Defendant then claims that Plaintiff's NJFPA claim necessarily fails on the merits for lack of evidence on the issues of damages (whether in the form of lost earnings, costs to de-brand, or otherwise).² (See Def.'s Br. at 7-14; Def.'s Reply at 3-8.)

Plaintiff, in opposition, largely admits that its actual gross sales dropped below the 20% threshold of the NJFPA, and concedes its own "technical" noncompliance with the Agency Agreement. (Pl.'s Opp'n at 2, 5-8; see also Terne Cert.; Terne Dep.) Nevertheless, Plaintiff attributes its "forced" violation and depressed sales to the " 'unreasonable' " requirements of a "scheme"³ developed by Defendant which blocked Plaintiff from bidding on projects offered by its largest customer, Cartus Corporation (hereinafter, "Cartus").⁴ (Id.) Plaintiff similarly concedes, as detailed above, its violations of the Agency Agreement, but again attributes its noncompliance to the " 'unreasonable' " requirements of Defendant's "no bidding scheme." (Id.) Based upon these allegations, Plaintiff advances the view that the essential fabric of this litigation—the ruinous effects of a " 'no bidding scheme' " imposed by the franchisor—falls well within the protective and remedial purposes of the NJFPA. (Id. at 11–14.) Turning then to the question of damages, Plaintiff argues that the record contains "clear evidence" that Defendant's termination of the Agency Agreement caused a loss of revenue and expenses related to de-branding, even though it lacks specific written documentation of these damages. (Id. at 8–11.)

In addressing these competing positions, the Court must address two largely interconnected issues. First, the Court must consider the scope of the NJFPA's 20% gross sales requirement, and must then decide whether the undisputed factual record creates a triable issue concerning whether the NJFPA governs the parties' Agency Agreement. Second, the Court must determine whether Plaintiff's evidence of damages meets its prima facie burden.

For the reasons that follow, Defendant's motion for summary judgment will be denied.

II. BACKGROUND⁵

A. Factual and Procedural Background⁶

Ocean City Express, a family-owned and operated moving company out of Pleasantville, New Jersey, provides mostly local and intrastate moving services throughout the Northeast. (See Terne Cert. at ¶¶ 2-3)⁷

Atlas Van Lines, by contrast, focuses primarily upon interstate and international transportation services for "household goods and general commodities" as a "motor carrier registered with the Department of Transportation." (Ex. A to Def.'s SMF.) In connection with these services, and in an effort to enhance its geographic reach, Atlas enlists "limited [local] agent[s]" to book, ship, and haul interstate shipments under its interstate transportation authority (from the Department of Transportation). (Id.)

Along those lines, on March 31, 2006, Ocean City Express executed the "ATLAS VAN LINES CO., INC. AGENCY AGREEMENT" (hereinafter, the "Agency Agreement"), which empowered Ocean City to solicit shipping contracts under Atlas' interstate carrier authority, and to haul interstate shipments under Atlas' name, signage, and branding, for a period of at least three years.⁸ (See id.; see also Def.'s SMF at ¶ 7; Pl.'s RSMF at ¶ 7.) In other words, the Agency Agreement, in practical terms, allowed Ocean City Express to benefit, commercially, from Atlas' established reputation, market recognition, and interstate authority, but required it to rebrand its existing fleet of moving trucks in accordance with Atlas' visual identity. (See generally Terne Cert. at ¶ 7.) Beyond that, the Agency Agreement required Ocean City to register all interstate shipments with Atlas, and precluded it from using Atlas-branded equipment or material assets for any other interstate (or, rival) carrier. (See Def.'s SMF at ¶¶ 11-12, 15; Pl.'s RSMF at ¶¶ 11-12, 15.) The Agreement then specified that Atlas could terminate the relationship on account of Ocean City's failure to, among other things, comply with "any term of th[e] Agreement," "book, haul or otherwise service a sufficient volume of business," and/or cooperate with any conditions "relative to the business of Atlas." (Ex. A to Def.'s SMF.)

Following execution of the Agency Agreement, the parties' commercial relationship appears to have unfolded in model fashion. (See generally Def.'s SMF; Pl.'s RSMF; Pl.'s Supp. SMF; Def.'s R. Supp. SMF.) Indeed, the Agency Agreement seems to have, at least initially, expanded the scope of Ocean City's business. (See generally Def.'s SMF at ¶¶ 3, 5; Pl.'s RSMF at ¶¶ 3, 5; Terne Cert. at ¶¶ 6, 13.) In early 2008, however, Ocean City's largest client, Cartus, instituted a competitive "bidding system" that essentially required moving companies—like, Atlas, Ocean City, and its competitors—to undercut or discount rival shipping rates in order to secure Cartus shipping contracts. (Weber Dep. at 13:15-14:14; see also Pl.'s Supp. SMF at ¶¶ 4, 11, 14; Def.'s R. Supp. SMF at ¶¶ 4, 11, 14.) Atlas, in turn, blocked its agents from submitting any bid lower than a 67% discount off of Atlas' standard rates in order to "preserve [its] rate structure." (See Weber Dep. at 14:15-15:13; see also Pl.'s Supp. SMF at ¶¶ 4-5, 16; Def.'s R. Supp. SMF at ¶¶ 4-5, 16.) Stated differently, Atlas imposed a strict baseline (or, floor) for any discounted bidding on Cartus shipping contracts, in an effort to discourage Cartus from maintaining its competitive bidding scheme. (See Weber Dep. at 14:15-15:13.)

Atlas' policy directive, in turn, had a purportedly deleterious effect on Ocean City's ability to compete for contracts with Cartus—a company which comprised approximately 90% of Ocean City's book of business. (Pl.'s Supp. SMF at ¶ 14; Def.'s R Supp. SMF at ¶ 14; Terne Cert. at ¶¶ 14, 20.) More specifically, Atlas' cap on rate discounts appears to have allowed competing companies to easily underbid Ocean City. (See generally Terne Dep.) As a result, in June 2008, Ocean City's principal, Thomas Terne, reactivated its interstate carrier authority, and formed a new company, Atlantic Express L.L.C. (hereinafter, "Atlantic Express"), in order "to bid at a lower [and unrestricted] rate on Cartus jobs." (Pl.'s Supp. SMF at ¶ 16; Def.'s R. Supp. SMF at ¶ 16; Def.'s SMF at ¶ 3; Pl.'s RSMF at ¶ 3; Terne Cert. at ¶¶ 20-21.) In other words, Ocean City's principal formed a "non-Atlas company" to sidestep the requirements of the Agency Agreement—and specifically Atlas' restriction on Cartus bidding—by diverting its Cartus business through Atlantic Express (a company free from the restrictions of the Agency Agreement and Atlas' rate policy). (Terne Cert. at ¶¶ 19-20; see also Terne Dep. at 23:11-15,...