A federal appeals court has overturned a $29 million jury verdict against Ford Motor Co. in a class-action suit over its withdrawal from the heavy-truck market in 1997.
The U.S. Court of Appeals for the Third Circuit held Monday that the company did not breach sales contracts with dealers when it ceased production of the trucks because it continued to manufacture and distribute "company products" as required.
The term "company products" as used in the contract "includes not only heavy trucks, but also Ford parts and accessories," the judges said in Bayshore Ford Truck Sales Inc. v. Ford Motor Co.
The 11 dealers who sued claimed the discontinuance of Ford's heavy-truck manufacturing operation, which years earlier had become unprofitable, constituted a breach of contract. Heavy trucks include semitrailers used to haul freight.
In 2005, U.S. District Judge Jose Linares in Newark granted the dealers summary judgment on liability, finding the contract allowed Ford to change or discontinue product lines but, without properly terminating the contracts, the company "did not have the right to stop supplying heavy trucks altogether."
The $29 million award came after a bellwether damages trial in May and June 2012. Ford appealed both.
U.S. Circuit Judges Jane Roth, Marjorie Rendell and D. Brooks Smith called "unpersuasive" the plaintiffs' claim that the contract required Ford to provide parts and vehicles, not just parts.
Ford's "obligation to provide one product … is severable from its obligation to provide other products," Roth wrote for the panel.
The litigation began in 1999, two years after Ford sold its heavy-truck manufacturing operation to Portland, Ore.-based Freightliner for $300 million and agreed to stay out of that line for at least 10 years. In 1996 alone, Ford lost $131 million on its heavy-truck business.
However, Ford continued distributing parts and accessories, which the dealers continued to sell and to use in performing lucrative warranty work on Ford vehicles.
After a series of procedural delays, the class was certified as to liability and damages, but later decertified as to damages, which Linares said could not be calculated on a class-wide basis.
In a separate win for Ford on Monday, the same three-judge panel affirmed Linares' 2006 grant of Ford's summary judgment motion that dismissed claims by 25 other truck dealers.
When Ford ceased heavy-truck production in 1997, those dealers received contractual termination benefits and later executed releases waiving claims against the company.
The plaintiffs argued that the release letters sent in 1997 were superseded by the sales contract, but the Third Circuit dispensed with that argument. The contract "unequivocally states that when a dealer resigns its franchise, demands termination benefits, or accepts those … benefits, Ford is fully released from any liability," Roth wrote.
Christopher Handman of Hogan Lovells in Washington, D.C., who handled both appeals for Ford, deferred comment to the company.
Emails to Ford spokesmen were not answered Tuesday.
James Ulwick of Kramon & Graham in Baltimore, who argued for the plaintiffs on appeal, did not return a call.