SAN DIEGO-A federal judge ruled June 24 that Goodyear did not violate its contracts with dealers in California by distributing tires through mass merchandisers and discount chains. Goodyear dealers and franchisees in California filed July 6, 1994, a state-wide, class-action lawsuit against the tire maker claiming it breached contractual agreements and lessened the value of their businesses when it signed customers like Sears, Roebuck and Co. and Discount Tire Co.
In addition, the lawsuit alleged Goodyear provided mass merchandisers with price advantages not available to dealerships and established company-owned outlets to compete with independent dealers.
For the most part, U.S. District Judge Marilyn L. Huff ruled that Goodyear reserved the right to act as it did in both its franchise agreement and a slightly different document it holds with independent dealerships known as a G-110 contract.
``Each class of plaintiffs executed contracts with Goodyear that plainly gave Goodyear the authority to act as Goodyear allegedly did,'' the judge wrote in her decision.
Some Goodyear dealers across the country felt betrayed when the tire maker decided to expand its distribution network from independent tire dealers and began selling Goodyear tires to mass merchandisers and discount stores in 1992.
But the court said Goodyear's contracts with its dealers had clear ``non-exclusivity'' clauses that enabled the tire maker to expand its distribution as it saw fit.
``Plaintiffs (i.e. the dealers) in essence ask the court to rewrite the terms of their agreements to coincide with individual plaintiff sentiments about loyalty,'' the judge wrote.
Dealers party to the suit also contended Goodyear did not disclose to them that it intended to begin selling tires through mass merchandisers either when they were buying dealerships or changing their contracts. That information, they said, was necessary to make informed business decisions.
In addition, they argued, California Franchise Law mandated that Goodyear disclose those plans.
But the judge said Goodyear upheld its disclosure qualifications because G-110 dealerships do not qualify as franchises and, therefore, do not fall under franchise disclosure laws. Furthermore, dealers who had franchise agreements showed during the trial that they were in fact aware of the possibility Goodyear might begin distributing through mass merchandisers.
The plaintiffs also contended Goodyear violated the California Unfair Practices Act by establishing company-owned ``Just Tires'' outlets within the markets of some existing franchise and independent dealerships.
The court, however, denied that claim on several bases, including that: the act does not apply to ``vertical'' competition between a supplier and a dealer; none of the case representatives had Just Tires stores in their trade areas; and ``the apparent effect of plaintiffs' action would be to limit, rather than expand competition by establishing a monolithic pricing scheme.''
Still, the Akron-based tire maker is in the process of distributing an undisclosed settlement to all of the dealers party to the suit because Goodyear violated California Franchise Law by not filing a notice of exemption with the California Commissioner of Corporations ``in a timely fashion.''
Goodyear since has filed the necessary paper work for 1996, the court noted.
A Goodyear spokeswoman said that because a settlement is involved in the case, the dealers likely won't appeal the decision.
Overall, the judge's decisions represent a significant victory for Goodyear, the company said. ``Goodyear is pleased the court recognized its right to control the distribution of its products and to respond to customer demand by making Goodyear tires available where its customers wish to buy them,'' company attorney Michael H. Riney said in a prepared statement.
Taylor Tire Co., L*&*M Tire Inc., Devore Tire Inc. and D*&*D Tire & Automotive Inc. originally filed the class-action lawsuit in U.S. District Court in San Diego on behalf of all similar Goodyear franchise or contract dealerships operating in California.
Neither the dealerships nor their attorney, Scott Metzger, responded to requests for comment before press time, July 3.
The lawsuit sought an unspecified amount in damages and the right to allow dealers party to the suit to rescind their contracts and franchise agreements.
A similar lawsuit has been filed on behalf of 17 dealers in Texas. A trial date has yet to be set in that case, according to D. Craig Brinker, an attorney for the Texas dealers.
Mr. Brinker said the California ruling has little bearing on the Texas case because of differences in the two states' franchise laws and the overall approaches to the two cases. ``We still feel there are certain aspects of the contracts that (Goodyear) didn't adhere to,'' he said.