Subaru Distributor Attempts to Enjoin “Re-Badging Plan”

What is the difference between a Saab 9-2 and a Subaru ImprezaWRX Wagon?  Soon, the answer might be thatthe only real difference is the badge (and, perhaps, the price).  Notsurprisingly, this peeved a Subaru distributor with exlcusive rights todistribute Subaru cars in New York and New Jersey.

Here’s what seems to be the shortest possible version of the story: Fuji manufactures Subarucars. Fuji granted Subaru of America the exclusive right to distribute certain Subaruproducts in the United States. In 1975, Subaru of America entered into a distribution agreement withSubaru Distributors, granting Subaru Distributors the exclusive right todistribute Subaru vehicles, parts and accessories in New York and northern New Jersey. Since1975, various car company acquisitions have changed things:

the relationship between these threeparties has grown complicated and vexed as Fuji acquired part, then all, of thestock of Subaru of America; a rival manufacturer, General Motors, acquiredapproximately 20% of Fuji’s stock; and GM acquired 100% of the stock of Saab,the Swedish vehicle manufacturer.

After GM acquired its stake in Fuji,GM and Fujiannounced that they had entered a “technical alliance.” In 2003, GM and Saab announced what the complaint called a “Re-Badging Plan,” under which Fuji would manufacture vehicles to be sold asthe Saab 9-2.

Subaru Distributors is not happy with the “Re-Badging Plan”:under the plan the new Saab 9-2 is to be based on the same design as the SubaruImpreza WRX Wagon and Sport Wagon, which Fuji manufactures in the same plant as the Saab 9-2. According to the complaint, under the “Rebadging Plan,” the Saab 9-2s are goingto be sold through the existing Saab distribution network in Subaru Distributors’geographic territory.

On various contract theories, Subaru Distributors sought toenjoin the re-bading plan and sought compensatory and punitive damages. The District Court dismissed the complaintfor failure to state a claim, and the Second Circuit affirmed. Subaru Distributors’ breach of contract claimagainst Subaru of America alleged that Subaru of America acquiesced to Fuji’s “Re-Badging Plan.” The Second Circuit held thatnothing in the Distribution Agreement between the parties imposed upon Subaruof America a duty to prevent Fuji from acting. Additionally, the SecondCircuit held that Subaru Distributors was not a third-party beneficiary of thecontract between Fujiand Subaru of America.

Subaru Distributors, Corp. v. Subaru of America, et al., No. 04-3598-cv (2d Cir. Sept. 21, 2005).

[Meredith R. Miller]