American Honda Motor Co., Inc. v. Bernardi's Inc., s. CIV. A. 98-10690-NMG, CIV. A. 98-40061-NMG.
| Decision Date | 08 February 2002 |
| Docket Number | Nos. CIV. A. 98-10690-NMG, CIV. A. 98-40061-NMG.,s. CIV. A. 98-10690-NMG, CIV. A. 98-40061-NMG. |
| Parties | AMERICAN HONDA MOTOR CO., INC., Plaintiff, v. BERNARDI'S, INC. d/b/a Bernardi Honda, Defendant. American Honda Motor Co., Inc., Plaintiff, v. Richard Lundgren, Inc. d/b/a Lundgren Honda, Defendant. |
| Court | U.S. District Court — District of Massachusetts |
Richard A. Gargiulo, Marielise Kelly, Gargiulo, Rudnick & Gargiulo, Boston, for American Honda Motor Co., Inc., Plaintiffs.
Stephanie A. Bray, Gregory A. Holmes, Wiggin & Nourie, Franklin & Market Streets, Richard B. McNamara, Wiggin & Nourie, P.A., Jean M. Long, Wiggin & Nourie, P.A., Manchester, NH, for Richard Lundgren Incorporated, Defendants.
Pending before this Court is the motion by plaintiff, American Honda Motor Co., Inc. ("Honda"), for summary judgment against the defendant, Richard Lundgren, Inc. ("Lundgren"), a Honda dealership (Docket No. 72). On December 7, 2001, this Court entered an Order allowing Honda's motion for summary judgment against Lundgren with respect to Count II of Lundgren's counterclaims alleging retaliation under M.G.L. c. 93B § 4(1) (Docket No. 96). The Court took under advisement the remainder of the plaintiff's motion for summary judgment in order to hear expert testimony (which it did at a hearing on December 18, 2001) regarding how a dealership's relevant market area should be measured under M.G.L. c. 93B § 4(3)(1). The only remaining issue for the Court is, therefore, whether Honda's proposed new dealership in Westborough, Massachusetts ("the add point") is located within Lundgren's relevant market area thereby giving Lundgren standing to protest the establishment of the new dealership.1
Honda seeks to establish a new Honda dealership in Westborough, approximately 11 miles east of Lundgren's dealership in Auburn, Massachusetts. In March of 1998, Honda notified Lundgren of its intent to award the new dealership to Mark P. Ragsdale, George M. Ragsdale and Robert J. Avolizi. Lundgren duly notified Honda of its intent to protest the award of the new dealership pursuant to M.G.L. c. 93B § 4(3)(1).
On April 21, 1998, Honda filed the instant suit seeking a declaratory judgment that Lundgren does not have standing to protest the appointment of the new dealership or, in the alternative, that the proposed establishment of a new dealership is lawful and proper. Lundgren counterclaimed alleging retaliation and violation of M.G.L. c. 93B § 4(3)(1) and seeking a permanent injunction against the opening of the new dealership.
Until this point in the litigation, the parties have disputed whether Lundgren has standing to protest Honda's establishment of a new dealership at the add point. Initially, the dispute about standing concerned the shape of the relevant market area as that term is defined in the statute more fully discussed in the "Analysis" section of this Memorandum and Order below. Honda argued that the controlling statute requires a dealership's relevant market area to be defined as a circle with the existing dealership at the center while Lundgren responded that the statute allows for an irregular, polygonal shape to define the relevant market area. For the first two years of the litigation, there was little dispute regarding the methodology to be employed in computing and platting the relevant market area. Such is no longer the case.
The First Circuit Court of Appeals certified the issue of the shape of the relevant market area to the Supreme Judicial Court of Massachusetts ("SJC") which ultimately declared that, under Chapter 93B § 4(3)(1), a relevant market area is "a geographic area circular in shape, although not a perfect circle, and contiguous to the existing dealer's location." American Honda Motor Co., Inc. v. Bernardi's Inc., et al., 432 Mass. 425, 427, 735 N.E.2d 348 (2000). The Court went on to explain that:
A "circular" shape may differ from the shape of a perfect "circle." A "circle" is a "closed plane curve every point of which is equidistant from a fixed point within the curve", ... [whereas] a "circular" shape has "the exact or approximate form or outline of a circle: ROUND."
Id. at 427, 735 N.E.2d 348 (quoting Webster's New Int'l Dictionary 408 (1993)).
Although the parties now must agree on the shape of the relevant market area, they now disagree with respect to the definition of "service sales" as that term is used in the controlling statute and the methodology to be employed in determining the relevant market area.
Massachusetts General Laws Chapter 93B was enacted to prevent unfair methods of competition and unfair or deceptive acts among motor vehicle manufacturers, distributors and dealers. American Honda Motor Co., Inc., 432 Mass. at 427, 735 N.E.2d 348. Specifically, it prohibits, inter alia, the improper granting of
a franchise or selling agreement to or with an additional franchisee 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.
M.G.L. c. 93B § 4(3)(1)(1977).
An existing dealer has standing to contest the establishment of a new dealership if the add point is within the existing dealer's relevant market area. American Honda Motor Co., Inc., 432 Mass. at 428, 735 N.E.2d 348. Prior to the 1977 amendments to Chapter 93B, the statute required courts to determine a motor vehicle dealer's relevant market area using equitable principles. Ricky Smith Pontiac, Inc. v. Subaru of New England, Inc., et al., 14 Mass.App.Ct. 396, 403, 440 N.E.2d 29 (1982). Equitable principles included such factors as demographics, access to public transportation and brand popularity. Id. at 410-11, 440 N.E.2d 29.
In 1977, the Legislature amended the statute and substituted a formula definition of "relevant market area" for the equitable principles. The goal of the Legislature was to construct a bright-line test for determining a motor vehicle dealer's relevant market area. Id. at 414, 440 N.E.2d 29. The amended 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 date of 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...
M.G.L. c. 93B § 4(3)(1) as amended.
To determine whether a dealer has standing to protest the establishment of a new dealership, the court analyzes hard statistical data regarding dealership sales and after the relevant market area is platted using that data, simply decides whether the add point falls within or without the existing dealer's relevant market area. Ricky Smith, 14 Mass.App.Ct. at 415, 440 N.E.2d 29. Although the Legislature intended to provide courts with an easily-applied bright line test, courts have fundamentally disagreed with respect to the shape of the relevant market area, the definition of sales and the expert methodologies.
The SJC has now determined and defined the shape of the relevant market area but, in this Court's humble opinion, has left more confusion than enlightenment. That is because its definition of relevant market area is inconsistent with the bright-line test enunciated by the Legislature and impracticable to apply. By defining the relevant market area as a circular shape, as opposed to an exact circle, there is no way to determine the relevant market area on the basis of anything other than subjective or equitable principles. If the trial court is to substitute an "approximate circle" for an "exact circle" on what basis is it to so approximate? If the area is not a circle then for what reason is an alternative shape to be chosen? Faced with this conundrum, we nevertheless labor on to apply the law as announced.
In this case, the plaintiff and defendant utilize different data and methodologies to arrive at two diametrically opposed conclusions. Not surprisingly, Honda's expert concludes that the add point falls just outside Lundgren's relevant market area, while Lundgren's expert finds that it falls on the line forming the outer boundary of Lundgren's relevant market area.
The parties agree that "retail service sales" form the more narrowly defined geographical area immediately surrounding the Lundgren dealership but they disagree with respect to the definition of "service sales." Lundgren contends that the total number of service customers, the total number of repair orders and the total dollar value of repairs are all valid indicia of service sales. It further asserts that if either the total number of customers or the total number of service dollars is used to determine service sales, the add point falls within Lundgren's relevant market area using a method called "geocoding."
Honda, on the other hand, argues that the number of service customers and the dollar volume of sales are not reasonable definitions of "service sales" and that geocoding is not a reliable method for computing and platting the data.2 It is undisputed that if service sales is defined by the number of repair orders (as opposed to the dollar volume or number of customers), the add point falls outside of Lundgren's relevant market area.
The statute is silent both with respect to how the term "service sales" should be defined or measured and what methodologies are acceptable. Nor did the SJC opine on those subjects. The expert reports and testimony in this case, however support a finding that both dollar volume and number of repair orders are acceptable definitions of service sales. ...
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