Not long ago (February 2018, p. 62), “Legal Files” reported about the Ford Motor Company lawsuit against celebrity wrestler John Cena for flipping his new Ford GT. Ford’s position is that Cena agreed to hold the GT for at least 24 months, and that his quick sale was undermining Ford’s marketing efforts. Cena’s GT popped up again for resale, and Ford jumped on it with both feet. Ford filed emergency litigation against New Autos Inc., a Chico, CA, car dealership. Ford claims that New Autos interfered with its contractual relationship with Cena, and that the agreement with Cena creates a common-law […]
Not long ago (February 2018, p. 62), “Legal Files” reported about the Ford Motor Company lawsuit against celebrity wrestler John Cena for flipping his new Ford GT.
Ford’s position is that Cena agreed to hold the GT for at least 24 months, and that his quick sale was undermining Ford’s marketing efforts.
Cena’s GT popped up again for resale, and Ford jumped on it with both feet. Ford filed emergency litigation against New Autos Inc., a Chico, CA, car dealership. Ford claims that New Autos interfered with its contractual relationship with Cena, and that the agreement with Cena creates a common-law lien against the GT, preventing it from being sold.
How did we get here?
As Ford tells the story, it learned that the GT was on display at the New Autos showroom. A Ford representative visited the showroom, photographed it and learned that it was going to be moved that night or the next day. Ford also claims that New Autos specializes in exporting cars overseas, including to China, triggering fear that the car would go to China. The next day, Ford filed suit, hoping to prevent the sale of the GT.
New Autos’ version of the story is markedly different. Its owner, Bernard Knaus, received a call from a potential customer asking if he could locate a Ford GT. New Autos’ business model is to source new cars for customers and negotiate with dealers to get the customer the best price. New Autos takes a fee from the selling dealer, and the customer comes away with a better deal than could be gained alone.
Sourcing a Ford GT was quite a challenging request. Knaus wondered how he could ever find one. Thousands of prospective buyers applied to the Ford GT Application Program, and fewer than 90 cars had been delivered.
Thinking he was on a wild goose chase, Knaus made some calls and surprisingly found a Florida dealer who said he “had one coming.” Knaus made the deal, and the GT soon arrived in the New Autos dealership. It was resold to the New Autos client before it ever arrived.
After the sale, Knaus made arrangements with the new owner to show the GT at an upcoming car show in Chico. A local TV station caught wind of this and filmed a segment at the New Autos showroom and surrounding streets, complete with Knaus driving the GT and being interviewed about it.
That resulted in a lot of local publicity about the car show, and Knaus believes that a Ford representative visited the car show and saw the GT. Within hours, Ford filed the lawsuit.
Not my car
Knaus says he has no idea where the imminent sale and possible export to China story came from. His position is that Ford came way too late to the party: The GT had already been sold to the customer when Ford first showed up, the GT was never going to leave the country, and there was no way for Ford to prevent him from doing something he had already done.
Ford claims that Knaus should have known about the GT program resale restrictions, but the company doesn’t explain how he should have gained that knowledge. Ford alleges that such resale restrictions are “common for limited-edition vehicles,” but we all know that is not really the case.
Knaus argues there was no way he could possibly have known what Cena agreed to without having been the one signing the documents. That’s a pretty strong point.
Claims of contract interference
Ford claims that New Autos wrongfully interfered with its contractual arrangements with Cena. That’s going to be really tough to win.
Interference with contract arises when a person (New Autos) uses improper means or an improper motive to cause another person (Cena) to breach his contract with a third party (Ford). Fat chance on this one.
Ford’s lawsuit against Cena blames him for flipping the GT, hardly a situation where someone else made him do it. Further, New Autos didn’t buy the GT from Cena, but from a Florida dealer, and didn’t even know it was Cena’s car. Cena had already breached his contract with Ford.
Ford also claims that the GT was the subject of an “equitable servitude,” meaning that New Autos holds the GT in trust for Ford and must return it.
There are two major problems with this claim.
An equitable servitude is a concept applicable to real estate. An example is where property owners agree to various restrictions about the use of the property — such as that it will always be used as a park. It’s extremely rare to have a court impose an equitable servitude on personal property such as a car. Second, New Autos couldn’t hold the GT in trust for Ford because New Autos didn’t own the car when the lawsuit was filed.
Cena lawsuit heats up
Meanwhile, Cena has filed a motion to dismiss the lawsuit against him. Just as “Legal Files” predicted in February, Cena claims that he never signed an agreement with Ford that restricted his sale of the GT because Ford’s documentation was crystal clear that all terms and conditions of the sale of the GT would be reflected in Cena’s contract with the selling dealer, including any resale restrictions. The selling dealer, of course, did not impose any resale restrictions under its sales agreement with Cena.
Cena’s motion has not been decided as we go to press. If Ford’s case against him is dismissed, that should resolve the claims against New Autos.
More GT litigation
While all of this was coming about, another Ford GT was sold at the Mecum Indianapolis auction for a $1.65 million hammer price after frenzied bidding. Ford went to court to prevent that sale when it caught wind of the auction offering. The judge ruled that the auction could proceed.
Prior to the sale of the GT, Dana Mecum, owner of Mecum Auctions, sought to comfort the bidders about the legality of the sale, stating, “The judge did rule in Mecum’s favor, that we could sell this car. And if Ford wanted it back, they were welcome to come here and bid on it. So this is a publicly legal sale of a Ford GT. We had some people worried there was going to be some repercussions; there’s no repercussions with this car. It’s all been contested in court. You bid on it, you buy it, it’s yours. It’s America — you can buy and sell what you want!”
Back to the drawing board
Ford does seem to have good motives. As explained in the February 2018 “Legal Files,” Ford knows it has a very special car, and the company can’t build very many of them. It was as selective as possible in selecting applicants to buy the GT, expecting that they would use the GT in a public manner and serve as Ford “brand ambassadors” who could help sell other cars in the Ford line.
Unfortunately, Ford’s execution has been weak, and throwing its litigation muscle around isn’t winning it many friends. Could Ford have done better? Of course. Here’s several better ways to have gone about it:
Ford could have required stronger contracts with its buyers. Leaving everything to the dealers insulates Ford from a variety of potential claims, but it leaves everything to the dealers’ follow-through. Obviously, that has been lacking.
Ford could have solved this by requiring its dealers to use prescribed contractual provisions in all GT sales. Or it could have imposed such requirements in clear fashion in the documentation where an applicant was accepted for the purchase.
For example, it could simply have provided in the application, “In return for being selected, I agree not to resell the GT for 24 months,” etc., and then confirmed that in the notice of acceptance, with perhaps another confirmation from the buyer.
Ford could have offered the GT for lease only, as Ferrari did with its F50. Sure, Ferrari got a lot of buyers mad about that one and dropped it, but Ford could have controlled the GTs better in that manner if control was really that important. The leases could have been non-transferable for 24 months, subject to cancellation and loss of the GT if breached.
Ford could have imposed a right-of-first-refusal arrangement whereby Ford would have the right to buy the GT back at MSRP if the owner chose to sell it, with that buy-back right secured with a lien on the title.
There are probably a lot of other ways this could have been handled, but I only had five minutes to think about it.
Discretion the better part of valor
With all due respect to Ford, maybe it should declare victory and walk away from the Cena lawsuit.
As it has turned out, Cena was never going to be the “brand ambassador” Ford expected him to be. Meanwhile, the current owner is exactly the sort of brand ambassador Ford has dreamed of — he is the quintessential Ford guy. The GT is one of an approximately 60-car Ford collection. He owned a 2006 Ford GT that he drove regularly until it was wrecked. Most important, he drives the Ford GT on a daily basis.
The current owner applied for the GT program but was rejected. Perhaps Ford should do some soul searching about why they rejected this guy and selected Cena.♦
JOHN DRANEAS is an attorney in Oregon. His comments are general in nature and are not intended to substitute for consultation with an attorney. He can be reached through www.draneaslaw.com.