A federal appeals court has refused to revive a breach-of-contract suit stemming from Ford Motor Co.'s failure to make final the sale of an Ohio dealership.
The 6th U.S. Circuit Court of Appeals in Cincinnati ruled that Wayne Allen's 1995 agreement to buy the stock of Western Ford-Mercury in Clyde could not be enforced because no Ford officer signed the offer as required.
In 1987, Western became an authorized dealership under Ford's dealer development program. Lloyd-Mullinax Inc. operated it with Phil Lloyd as president. In 1995, Western's board of directors removed Lloyd as president and terminated his employment, the appellate court said.
Lloyd protested to the Ohio Motor Vehicle Dealers Board, asserting he was the franchisee and was wrongfully terminated.
While the protest was pending, Allen negotiated to buy Ford's stock in the dealership, put down a $25,000 deposit and began to manage the dealership, according to the court. As part of the arrangement, Ford ordered an environmental assessment, determined the dealership's closing net worth and obtained insurance on Allen's behalf to protect him from claims against the former dealer.
'He was well financed and was welcomed by Ford as a franchisee,' said Allen's lawyer, Frederick Luper of Columbus. 'They were very happy with him.'
However, the transaction fell through because the dealer board ruled in Lloyd's favor, precluding Ford from issuing a new franchise agreement for that location, the court said. And without a franchise agreement, Allen couldn't obtain a license to sell new vehicles.
Ford continued to discuss options for the transfer of the dealership, but after the agreed-on deadline extension passed without a solution, Allen stopped negotiating and resigned as general manager, the court added.
Ford returned his $25,000 earnest money.
The dealer board's ruling in Lloyd's favor was overturned on appeal, lawyers said. However, Western was closed and never sold.
Allen sued Ford, alleging breach of contract, fraud and unjust enrichment. He sought monetary damages but not the franchise, lawyers for both sides said.
Ford denied liability. A lawyer for the company, Randy Rabe of Columbus, said, 'There were a lot of things we did to further the transaction. We couldn't close through no fault of our own.'
U.S. District Judge James Carr in Toledo sided with Ford and dismissed the case without trial.
A three-judge Court of Appeals panel unanimously affirmed that decision, finding no validity in Allen's claims.
There was no binding contract, it held. 'Both parties were aware of the clause in the offer which stated that Ford would not be bound by the contract - accept the offer - until an officer with authority signed the agreement,' appeals Judge Eugene Siler Jr. said. 'No officer of Ford ever signed the offer, and therefore no contract was formed.'
The court added that it would be unreasonable for Allen to believe Ford would follow through without the required signature.
The court also rejected Allen's claim that Ford was enriched unjustly when the value of the dealership increased under his management, adding, 'It is undisputed that Allen was compensated for his work as general manager.'
Finally, the court said the fraud claim was justifiably tossed out because Allen failed to offer any evidence either that Ford knew that the Lloyd litigation before the dealer board would become a problem or that Ford intentionally misled him.
Rabe, Ford's lawyer, said, 'The important thing was that Ford was trying to be fair to Mr. Allen. It was Mr. Allen who chose to walk away.'
As the lesson of the case, Luper said he would advise potential Ford franchisees that they don't have a deal until the closing is over: 'According to this decision, there's never a binding agreement until a Ford officer signs off.'
He said he doesn't know whether Allen will take the case any further.