Semmes Motors, Inc. v. Ford Motor Company

429 F.2d 1197 (2d Cir. 1970)

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Nature of the Case

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Facts

D instituted a new warranty and repair method. When a purchaser of a D car finds a defect which he claims to be within the warranty, he returns the car to the dealer who repairs it and submits a Warranty Refund Claim to D. D then reimburses the dealer for replacement parts at cost plus a profit and labor. D was concerned over the submission of inflated and even wholly false refund claims. Audits were announced and conducted. P's dealership was inspected, and the report found that 253 claims submitted to P for refund, with a price tag of $10,440, were defective. The most serious were 86 claims, aggregating $4,691, where the auditors found that work for which reimbursement had been obtained had not been performed at all. The auditors' insistence on contacting customers led the Alliance (Ps) and Semmes (P) to file a complaint in a New Jersey state court, later removed by D to the District Court for New Jersey, seeking an injunction against such contacts. However, no application for interlocutory relief was then made. D began to consider making a counterclaim for false and fraudulent refund claims and also terminating P's' dealership. D actually conducted direct customer interviews. D made allegations that repairs alleged to have been done were not performed. Ps then told D of their intent to file in the Southern District of New York an action on behalf of P and Ps substantially identical to the New Jersey action and to seek a temporary restraining order similar to that which had been refused in New Jersey. D moved to dismiss the New Jersey action. Judge Ryan, in the Southern District of New York, declined to issue a temporary restraining order against customer contacts pending a hearing on a temporary injunction on October 14. D then issued a termination notice to P. Judge Ryan issued an opinion in which he denied the motion for a stay of the New York action, limited D's contacts with P's customers although not to the extent sought by P, and temporarily enjoined termination of the dealership. D moved to vacate the injunction and again to stay proceedings during the pendency of the New Jersey suit.