American Honda Motor Co. v. Bernardi's, Inc.

• Decision Date: 04 May 2000
• Docket Number: SJC-08193
• Citation: 432 Mass. 425,735 N.E.2d 348
• Parties: (Mass.App.Ct. 2000) AMERICAN HONDA MOTOR CO., INC., vs. BERNARDI'S, INC (and a companion case <A HREF="#fr1-1" name="fn1-1">1 ). No.: Argued:
• Court: Appeals Court of Massachusetts

Page 348

735 N.E.2d 348 (Mass.App.Ct. 2000)

AMERICAN HONDA MOTOR CO., INC., vs. BERNARDI'S, INC (and a companion case¹).

No.: SJC-08193

Massachusetts Supreme Court, Suffolk

Argued: May 4, 2000.

Decided: September 1, 2000.

Richard B. McNamara for Bernardi's, Inc., & another.

Robert D. Cultice (Melissa A. Hoffer with him) for American Honda Motor Co., Inc.

John Whatley, of the District of Columbia, Charles H. Lockwood, II, of Virginia, & Daniel L. Goldberg, William N. Berkowitz, & Alicia L. Downey, for Alliance of Automobile Manufacturers & another, amici curiae, submitted a brief.

Present: Marshall, C.J., Abrams, Greaney, Ireland, Spina, & Cowin, JJ.

IRELAND, J.

In two separate actions commenced, and later consolidated, in the United States District Court for the District of Massachusetts, American Honda Motor Co., Inc. (Honda), a distributor of Honda motor vehicles, sought a declaration that Bernardi's, Inc. (Bernardi's), and Richard Lundgren Incorporated (Lundgren), both dealers authorized to sell and service Honda motor vehicles (dealers), lacked standing to protest the proposed establishment of a new Honda dealership² in Westborough because the new dealership's location was not within either dealer's "relevant market area" as defined in G. L. c. 93B, § 4 (3) (l), fifth par.³ The dealers counterclaimed, alleging in count I of their counterclaims that the proposed new dealership fell within their respective market areas, and was, thus, an arbitrary, unfair and deceptive act or practice in violation of G. L. c. 93B, § 4 (3) (l), which should be enjoined. They also alleged, in count II of their counterclaims, that Honda's proposal to establish the Westborough dealership was an act of retaliation, in violation of G. L. c. 93B, § 4, against them for their involvement in other litigation against Honda.

A Federal District Court judge concluded that under G. L. c. 93B, § 4 (3) (l), fifth par., the "relevant market area" of a motor vehicle dealer "is a circle, with the dealer at the center, circumscribing the geographical area comprising either two-thirds of the dealer's new vehicle sales or two-thirds of its service sales, whichever is smaller." Based on this conclusion, the dealers stipulated that they lacked standing to protest the proposed new dealership, and the judge entered judgment in favor of Honda on its petitions for declaratory judgment, and entered judgment against the dealers on count I of their counterclaims. The judge also dismissed count II of the dealers' counterclaims with prejudice, having concluded that § 4 (3) (l) "is the sole provision within c. 93B under which an aggrieved dealer may seek relief from an alleged arbitrary prospective dealership placement." The dealers appealed from the judgment.

The United States Court of Appeals for the First Circuit, after determining that there was no controlling Massachusetts precedent pertinent to the issues of this case, certified, pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981), the following two questions to this court:

"1. How should the relevant market area of a motor vehicle dealer be defined under Mass. Gen. Laws Ann. ch. 93B, § 4(3)(l)?

"2. Is Mass. Gen. Laws Ann. ch. 93B, § 4(3)(l) the sole provision within chapter 93B under which a motor vehicle dealer may seek relief from a prospective additional dealership which will sell the same motor vehicles as sold by the established motor vehicle dealer?"

In its certification order, the Court of Appeals welcomed our "discussion of any relevant Massachusetts law." We conclude that a dealer's "relevant market area," as defined under G. L. c. 93B, § 4 (3) (l), fifth par., although not a perfect circle, is a geographic area circular in shape,⁴ and contiguous to the existing dealer's location; and that § 4 (3) (l), is the sole provision within c. 93B under which a motor vehicle dealer may seek relief from a prospective additional dealership that will sell the same motor vehicles as sold by the existing motor vehicle dealer.

1. Defining the relevant market area. General Laws c. 93B, § 3 (a), declares unlawful specific "[u]nfair methods of competition and unfair or deceptive acts or practices" which occur in the automotive industry primarily among motor vehicle manufacturers, distributors, and dealers,⁵ and which ultimately affect consumers. See id. at § 4; Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313 319 (1978). Among the acts or practices proscribed, as far as relevant here, is the improper granting of "a franchise⁶ or selling agreement to or with an additional franchisee⁷ who intends or would be required by such franchise or selling agreement to conduct its dealership operations from a place of business situated within the relevant market area of an existing franchisee or franchisees representing the same line make." G. L. c. 93B, § 4 (3) (l). Pursuant to the procedures set forth in § 4 (3) (l), an existing dealer may protest the addition of a new dealership as improper, but may only do so if the proposed new dealership is within its "relevant market area." The statute defines "relevant market area" as "the more narrowly defined and circumscribed geographical area immediately surrounding its existing dealer location within which it obtained, during the period of time the dealership business has been operated from said location or the three-year period immediately preceding the dateof said notice of intent to grant or enter into an additional franchise or selling agreement, whichever is the lesser, at least two-thirds of (i) its retail sales of new motor vehicles of said line make or (ii) its retail service sales, regardless of whether its franchise or selling agreement delineates or establishes a specific area of responsibility or whether, by custom or usage, a specific area of responsibility has been established or another motor vehicle dealer with a franchise or selling agreement covering the same line makes has a place of business in such market area."

The wording of the 1977 revision of § 4 (3) (l), has been said to "perplex even the most percipient logician." Ricky Smith Pontiac, Inc. v. Subaru of New England, Inc., 14 Mass. App. Ct. 396, 412 (1982). There the court examined, in particular, the definition of "relevant market area" as that term appeared in the 1977 statute, noting that its revised definition established a "bright line test" for determining a dealer's relevant market area. Id. at 414.⁸ Under this test, "a judge analyzes hard statistical data [comprising two-thirds of the dealer's new vehicle sales and two-thirds of its service sales] to draw two geographic areas and, after the areas are platted, he simply chooses the smaller of the two." Id. at 415. The statistical data are compiled from the lesser of the two following time periods: "during the period of time the dealership business has been operated from said location or the three-year period immediately preceding the date of said notice of intent to grant or enter into an additional franchise or selling agreement." G. L. c. 93B, § 4 (3) (l), fifth par. We generally agree with this approach, and note that the dealers' contentions with the District Court judge's conclusion do not concern the application of this test, but rather concern the confines, or shape, of the resulting smaller geographic area derived from the statistical data (the relevant market area), and the methodology used to establish the two geographic areas (and resulting relevant market area). As noted by the Court of Appeals, we have not yet had occasion to address these issues.

The statute defines the shape of a dealer's relevant market area as "the more narrowly defined and circumscribed geographical area immediately surrounding its existing dealer location." The dealers suggest that the plain meaning of this language requires a court to plat two irregular shaped areas, or polygons,⁹ consisting of the dealer's new vehicle sales and service sales, and thereafter, choose the polygon which has the smaller circumscribed shape as a dealer's relevant market area. Pursuant to this approach, the shape of a dealer's relevant market area could be depicted as an oval, and would better reflect a dealer's actual market. The dealers assert that none of the definitions of the term "circumscribe," requires the circumscribed area to be in the shape of a perfect circle, and that the phrase "immediately surrounding" also does not require a perfect circle.

When interpreting a statute, we are to construe the words therein "according to their natural import in common and approved usage." Commonwealth v. Welosky, 276 Mass. 398, 401 (1931), cert. denied, 284 U.S. 684 (1932). "While courts should look to dictionary definitions and accepted meanings in other legal contexts, . . . their interpretations must remain faithful to the purpose and construction of the statute as a whole" (citations omitted). Heritage Jeep-Eagle, Inc. v. Chrysler Corp., 39 Mass. App. Ct. 254, 258 (1995). Consistent with these principles of statutory construction, we conclude that the Legislature intended the shape of a dealer's "relevant market area" to be a geographic area generally circular in shape, although not a perfect circle, and contiguous to the existing dealer's location.

We agree with the dealers that the term "circumscribe" does not necessarily require the drawing of a circle. The word "circumscribe" means "to be drawn around (as a geometrical figure) so as to touch at as many points as possible . . . a curve circumscribing a polygon . . . to draw (as a line) around something [such as] a circle around a triangle." Webster's Third New Int'l Dictionary 410 (1993). Depending on the object, geographic area, or geometric figure circumscribed, the shape of the circumscription may or may not constitute a circle. Accordingly, the word "circumscribed" as it appears in the statute cannot be read in isolation; it must be construed in the context of...