SAN DIEGO-Four California tire dealers have filed a classaction lawsuit against Goodyear, alleging the tire maker has unfairly diminished the ability of its franchise and contract dealers to operate profitable businesses. The lawsuit, filed July 6 in U.S. District Court in San Diego, also alleges Goodyear has used unfair business practices, violated California franchise laws and breached its contractual agreements with California dealers to their detriment since 1990.
Filing the suit on behalf of all similar Goodyear dealerships in California were: San Diego-based Taylor Tire Co., which also operates a location in Imperial Beach; L&M Tire Inc., which operates 12 Goodyear locations in San Diego and Riverside counties; DeVore Tire Inc., with one location in Santee and two in El Cajon; and D&D Tire & Automotive Inc. in Mountain View.
At least 60 of Goodyear's 143 dealerships in California are expected to become a part of the suit, if it is approved as a class action, although the exact number of dealers allegedly affected in that state is unknown at this point, according to Scott Metzger, an attorney for the plaintiffs.
``This kind of lawsuit, where you have a number of franchise members as discontented as (my clients) are...is something you are going to see more and more of'' as manufacturers increasingly distribute through mass merchandisers, Mr. Metzger said.
A Goodyear spokeswoman said the company's legal counsel currently is reviewing the lawsuit, which seeks an unspecified amount in damages and to allow dealers party to the suit the right to rescind their contract and franchise agreements.
``It is our firm conviction that Goodyear operates within the law,'' the spokeswoman said, adding the company would defend itself ``vigorously.''
The suit alleges Goodyear:
Failed to fairly disclose to dealers its negotiations to begin distributing tires through discount stores and mass merchandisers-actions that later led to distribution arrangements with Sears, Roebuck & Co. and Discount Tire., thereby depriving franchisees and potential franchisees of information essential to making correct business decisions, Mr. Metzger said;
Concealed prices offered to discount stores and mass merchandisers from franchise dealers;
Provided discount stores and mass merchandisers with price advantages on replacement tires that allegedly were promised but not available to franchise and contract dealers;
Unfairly pressured dealers to participate in ineffective cooperative advertising programs that could not compete with advertising from other Goodyear distribution channels;
Established company-owned outlets, including Just Tires locations, to compete with franchise and contract dealers; and
Breached its fiduciary duty by making rent fees in dealership leases and subleases contingent upon sales quotas as part of the Goodyear Productivity Program.
According to the suit, Goodyear began inducing its franchisees to enter a new contract program called G-110 dealerships in January 1992. G-110 dealerships, the suit alleges, were ``substantially less favorable franchise agreements'' that avoided a planned $12,500 increase in franchise fees at that time but:
Did not offer dealers the same price protection as franchise agreements;
Shortened the terms of the agreements from 10 years to two or five years; and
Gave Goodyear the ability to terminate a dealer for no cause on 30 days notice.
A Goodyear spokesman said 116 of the company's 143 dealerships in California fall under G-110 contracts. The remaining 27 are franchise operations.
The suit, however, alleges G-110 contracts are, in fact, franchise arrangements and, as such, must obey California franchise laws.
``While assuring plaintiffs that it would not distribute its products through mass merchandisers and discount stores, Goodyear has brought economic and other pressures on many of the plaintiff franchisees to enter into modified and substantially less favorable franchise agreements (G-110 dealer contracts), imposed new conditions on subleases which accompany the G-110 dealer contracts, and sold franchises to class members without providing the disclosures required by California law and without providing the legal protections required by California law,'' the suit states.
The dealers allege Goodyear is attempting to profit on the reputation it built through the ``dedication and hard work of its franchisees and dealers'' by now selling through large discount stores and mass merchandisers.
``As a consequence, (dealers) are unable to sell Goodyear tires to consumers at prices which are competitive with large discount stores and mass merchandisers. Their profits have been diminished or destroyed, and the value of their businesses have substantially declined,'' the suit alleges.
In denying Goodyear has committed any wrongdoing, the Goodyear spokeswoman said the company is ``quite disappointed that the dealers felt the need to take this action against one of their suppliers.''
But Dale Azevedo, owner of D&D Tire, said he and other dealers in the Goodyear Independent Tire Dealers Association-the organization that voted overwhelmingly in April to proceed with the lawsuit-see the legal action as their best opportunity to let their supplier know how unhappy they are with its decision to distribute through mass merchandisers.
``They take this; they take that; and then they turn around and cut your throat,'' Mr. Azevedo said of Goodyear. ``I'm just plain sick and tired of it.''
Mr. Azevedo said he doesn't care whether he remains a Goodyear dealer any longer but would like to continue to have a profitable tire business.
``I don't trust them anymore...,'' he said. ``There will be a day when it will be impossible for me to sell a tire, or I'll be selling them (at prices) so low that it won't be worth my while. If that happens, it's time to go do something else.''
The owners of Taylor Tire, L&M Tire and DeVore Tire either did not return telephone calls or declined comment on the case.
Mr. Metzger said attorneys have started the initial stages of discovery and expect U.S. District Judge Judith Keep to make a ruling on whether the California Goodyear dealers actually constitute a class by the end of the year.
``We would hope to have the case tried within 18 months,'' he said.