American Honda Motor Co. v. Richard Lundgren

• Citation: 314 F.3d 17
• Decision Date: 20 December 2002
• Docket Number: No. 02-1249.,02-1249.
• Parties: AMERICAN HONDA MOTOR COMPANY, INC., Plaintiff, Appellee, v. RICHARD LUNDGREN, INC., d/b/a Lundgren Honda, Defendant, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 17

314 F.3d 17

AMERICAN HONDA MOTOR COMPANY, INC., Plaintiff, Appellee, v. RICHARD LUNDGREN, INC., d/b/a Lundgren Honda, Defendant, Appellant.

No. 02-1249.

United States Court of Appeals, First Circuit.

Heard September 4, 2002.

Decided December 20, 2002.

Richard B. McNamara with whom Gregory A. Holmes, Stephanie A. Bray, Elizabeth A. Leonard and Wiggin & Nourie, P.A. were on brief for appellant.

Robert D. Cultice with whom Michael R. Heyison, Peter A. Spaeth and Hale and Dorr LLP were on brief for appellee.

Before BOUDIN, Chief Judge, BOWNES, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Chief Judge.

This diversity case concerns a prolonged effort by appellee American Honda Motor Co., Inc. ("Honda") to franchise a new automobile dealership in Westborough, Massachusetts. This effort has been opposed under a Massachusetts dealer protection statute by appellant Richard Lundgren, Inc. ("Lundgren"), which operates an existing local Honda dealership in Auburn, Massachusetts, about eleven miles west of the proposed new dealership. The district court put an end to this multi-act drama, granting summary judgment to Honda. We affirm.

Massachusetts, like a number of states, protects franchised car dealers against the "potentially oppressive power" of their respective manufacturers. Am. Honda Motor Co., Inc. v. Bernardi's, Inc., 432 Mass. 425, 735 N.E.2d 348, 354 (2000) ("Honda IV"). Under the statute, the dealer has a legal right to prevent an "arbitrary" decision by the manufacturer to create a competing dealership nearby. Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002). But the dealer can invoke the statute's protection only if the new dealership would be located within the "relevant market area" ("RMA") of the protesting dealer. Honda IV, 735 N.E.2d at 351.

"Relevant market area" might sound like an antitrust concept. Cf. Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313, 381 N.E.2d 908, 918 (1978). In fact it is defined rather mechanically by the applicable Massachusetts statute in a thus-far frustrated effort by the legislature to avoid protracted litigation over this initial "standing" requirement. Of course, the statute does not concern standing in the Article III sense; rather, the legislature has simply enacted a threshold requirement (albeit a somewhat complicated one) based on the proposed dealer's proximity before the "arbitrariness" test can be invoked.

The definition was more open-ended in the original version of the statute; there, the RMA was to be defined by the courts according to equitable principles. See generally Honda IV, 735 N.E.2d at 352 n. 8 (discussing statutory history). But, in 1977, the Massachusetts legislature adopted a new "bright line" formula which governs this case. A further amendment in 2002 sought to repair the 1977 version in the wake of judicial interpretation, 2002 Mass. Legis. Serv. ch. 222, § 3 (to be codified at Mass. Gen. Laws ch. 93B) ("2002 Amendment"); but by virtue of a savings clause, the 2002 version does not apply to the present dispute, id. § 5.

The governing 1977 definition, trimmed of portions not here pertinent, reads as follows:

[T]he relevant market area of a motor vehicle dealer ... is the ... geographical area immediately surrounding its existing dealer location within which it obtained, during [a defined period] ... at least two-thirds of ... its retail service sales....¹

Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002).

Unfortunately, the 1977 statute left open a number of questions: for example, whether a dealership location should be regarded as a point or an area; whether the surrounding RMA should be defined as a perfect circle or may be some other shape; whether customer locations should be identified by air miles or some other variable (e.g., drive time); and whether the two-thirds figure should be based on transactions, customers or revenues. All of these issues, and others, were litigated in this case.

The present litigation began in April 1998, when Honda filed an action in the federal district court seeking a declaratory judgment. Honda planned to franchise a new dealer in Westborough, Massachusetts, about eleven miles east of the existing Lundgren dealership in Auburn. Anticipating a challenge (Lundgren had earlier contested a different proposal by Honda, Richard Lundgren, Inc. v. Am. Honda Motor Co., 45 Mass.App.Ct. 410, 699 N.E.2d 11 (1998)), Honda sought a ruling that Lundgren had no standing (under the 1977 definition) to contest this new dealership as an "arbitrary" decision by Honda.

Lundgren, as this litigation shows, is anxious to mount such a contest. Both sides engaged experts on the RMA issue. At the end of this case's first journey through the district court, Lundgren stipulated that it could not prevail if the RMA had to be a perfect circle. Am. Honda Motor Co. v. Bernardi's, Inc., 113 F.Supp.2d 54, 57 (D.Mass.1999) ("Honda I"); Am. Honda Motor Co. v. Bernardi's, Inc., 113 F.Supp.2d 58, 59 (D.Mass.1999) ("Honda II"). On that premise, the district court ruled in Honda's favor. Honda I, 113 F.Supp.2d at 57; Honda II, 113 F.Supp.2d at 59.

On appeal, this court certified the legal question to the Massachusetts Supreme Judicial Court ("SJC"). Am. Honda Motor Co. v. Bernardi's, Inc., 198 F.3d 293, 296-97 (1st Cir.1999) ("Honda III"). That court, over a dissent supporting the district court's ruling, held that the RMA had to be circular or like a circle but did not have to be a perfect circle. Honda IV, 735 N.E.2d at 350. This court then vacated the district court judgment and remanded for further proceedings. Am. Honda Motor Co. v. Bernardi's, Inc., 235 F.3d 1 (1st Cir.2000) ("Honda V").

The case was then transferred to a different district judge. Honda filed a new motion for summary judgment, and Lundgren offered two alternative RMA calculations purporting to establish standing under the statute. On February 8, 2002, the district court granted summary judgment, again in favor of Honda. Am. Honda Motor Co. v. Lundgren, 188 F.Supp.2d 27, 33 (D.Mass.2002) ("Honda VI").

Two of the district court's rulings, favorable to Lundgren on the present facts, are not disputed by Honda on this appeal. One is that the two-thirds requirement could be measured by the dollar volume of sales or the number of transactions but not by the number of customers. Honda VI, 188 F.Supp.2d at 30-31. The other is that the location of customers, critical to determining the boundary within which two-thirds of those customers reside, can be determined by "geocoding." Id. at 32. Geocoding, championed by Lundgren's expert, is a somewhat more precise way of locating individual customers than is the zip code distribution method urged by Honda.²

On these premises, Lundgren's expert proceeded as follows. First, customers (each assigned the dollar value of his or her repairs in the relevant period) were sequenced in order of increasing distance from the Lundgren dealership. Then the expert measured the air mile distance ("last order distance") from the Lundgren dealership to the last customer ("last order location") necessary to encompass two-thirds of the total repair dollars. Thus, a circle drawn around the dealership with a radius equal to the last order distance would necessarily include two-thirds of the repair service revenue. Honda VI, 188 F.Supp.2d at 32.

The expert then compared the last order distance to the distance between the Lundgren dealership and the site of the proposed new dealership in Westborough ("inter-dealer distance"). In determining the inter-dealer distance, the expert did not measure the distance between the respective centroids (the geometric centers) of the two dealerships but between the eastern border of the Lundgren dealership and the western border of the proposed new dealership. Because the last order distance and the inter-dealer distance were found to be equal, Lundgren's expert concluded that the proposed new dealership is within the circle representing Lundgren's RMA. Honda VI, 188 F.Supp.2d at 32.

Lundgren's expert also made a second, alternative calculation of the RMA. This time he sequenced customers not by air mile distance from Lundgren's dealership (e.g., New York City is 200 miles from Boston), but by the time needed to drive the distance (e.g., New York City is four hours from Boston). Using this metric to derive the last order necessary to constitute two-thirds of repair sales, the expert found the drive time from Lundgren to the new dealer to be 17 minutes and the drive time to the last order location to be 17.6 minutes. According to Lundgren, using such an RMA based on drive time means that at least a small portion of the proposed new dealership would fall inside the RMA.

In its decision, the district court rejected the main air mile distance calculation on several separate grounds: (1) that Lundgren had earlier stipulated that it would lose if a perfect circle were used to construct the RMA; (2) that the RMA should be spanned from the centroid of the Lundgren property and not from its boundaries; (3) that the expert had admittedly rounded off air mile distances to the nearest tenth of a mile; and (4) that even disregarding the first three problems the expert's RMA merely touched rather than overlapped with the property of the proposed new dealer. The court rejected the alternative drive time calculation on the further ground that the Massachusetts statute did not allow it. Honda VI, 188 F.Supp.2d at 32. Summary judgment for Honda was entered and Lundgren now appeals.

On appeal from summary judgment, this court ordinarily reviews issues de novo, construing the record in the light most favorable to the non-moving party, here Lundgren. Euromotion, Inc. v. BMW of N. Am., Inc., 136 F.3d 866, 869 (1st Cir. 1998). At this stage, we assume that the computations of Lundgren's expert are accurate; whether they are foreclosed by the prior stipulation and, if not,...