Mass. State Auto. Dealers Ass'n, Inc. v. Tesla Motors Ma, Inc.

• Decision Date: 15 September 2014
• Docket Number: SJC–11545.
• Parties: MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION, INC., & others v. TESLA MOTORS MA, INC., & another.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

469 Mass. 675

15 N.E.3d 1152

MASSACHUSETTS STATE AUTOMOBILE DEALERS ASSOCIATION, INC., & others¹

v.TESLA MOTORS MA, INC., & another.²

SJC–11545.

Supreme Judicial Court of Massachusetts, Norfolk.

Submitted May 6, 2014.

Decided Sept. 15, 2014.

Thomas S. Vangel (James F. Radke with him), Boston, for Massachusetts State Automobile Dealers Association, Inc., & others.

Richard P. Campbell, Boston, for the defendants.

John E. Kwoka, Jr., pro se, amicus curiae, submitted a brief.

Present: SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

Opinion

BOTSFORD

, J.

In Beard Motors, Inc. v. Toyota Motor Distribs., Inc., 395 Mass. 428, 480 N.E.2d 303 (1985)

(Beard Motors ), this court held that a Massachusetts motor vehicle dealer did not have standing to maintain an action for an alleged violation of G.L. c. 93B, § 12A, against a motor vehicle distributor with which it was not affiliated. In the case before us, the principal question is whether amendments to the statute in 2002 broadened the scope of standing under c. 93B, such that Massachusetts motor vehicle dealers now have standing to maintain an action for an alleged violation of the statute against unaffiliated motor vehicle manufacturers or distributors. We hold that the 2002 amendments did not have this effect. Chapter 93B is aimed primarily at protecting motor vehicle dealers from injury caused by the unfair business practices of manufacturers and distributors with which they are associated, generally in a franchise relationship. We therefore affirm the judgment of the Superior Court dismissing the plaintiffs' action on the basis of lack of standing.

Procedural background. The plaintiff Massachusetts State Automobile Dealers Association, Inc. (MSADA), is a Statewide organization that represents the interests of new automobile and truck franchised dealerships in Massachusetts; two of the other plaintiffs, Connolly Buick Co., Inc., doing business as Herb Connolly Chevrolet, and Jake Kaplan's Inc., doing business as Fisker Norwood, are Massachusetts motor vehicle dealers. The plaintiffs commenced this action against Tesla Motors, Inc., an automobile manufacturer, and its Massachusetts subsidiary, Tesla Motors MA, Inc., alleging that the defendants were operating “an automobile dealership showroom in the Natick Mall without a license and in violation of law which prohibits a manufacturer from owning a dealership.”³ The plaintiffs claimed that the defendants were in violation of G.L. c. 93B, §§ 3 (a )⁴

and 4 (c ) (10),⁵ and were engaged in a civil conspiracy “to evade Massachusetts law and to

operate an automobile dealership without the required licenses.” They sought declaratory relief, a temporary restraining order, and preliminary and permanent injunctive relief that would, among other things, prevent the defendants from owning directly or indirectly any Tesla brand dealership in Massachusetts.

The defendants moved to dismiss the complaint both for lack of standing and for failure to state a claim on which relief could be granted. See Mass. R. Civ. P. 12(b)(1) and (6)

, 365 Mass. 754 (1974). They argued, among other things, that the plaintiffs lacked standing to claim a violation of G.L. c. 93B and conspiracy to violate c. 93B because they were not “affiliated dealers” of Tesla or Tesla MA. After a hearing, a judge in the Superior Court denied the plaintiffs' request for a temporary restraining order and preliminary injunction, ruling that the plaintiffs lacked standing to maintain the action. He subsequently denied the plaintiffs' motion for reconsideration and dismissed the complaint for lack of standing.⁶

, ⁷

The plaintiffs appeal.

Facts.⁸ Tesla is a manufacturer of electric motor vehicles. It was incorporated in Delaware in 2003. Tesla Motors MA is its wholly-owned subsidiary, incorporated in Massachusetts in 2012 “to lease and operate stores, galleries and service centers for the sale and service of Tesla vehicles in Massachusetts and to provide the public with information about electric vehicle ownership.” Neither of the defendants is affiliated in any way with the plaintiffs. The defendants are not members of MSADA, and neither of

the plaintiff individual dealers ever sold or distributed Tesla brand vehicles.

At the time the complaint was filed, the defendants were not licensed to sell motor vehicles in Massachusetts. However, Tesla MA had filed with the board of selectmen of Natick (board) an application for a class 1 license pursuant to G.L. c. 140, §§ 58

and 59.⁹ Tesla MA was also operating a “gallery” in the Natick Mall at which interested individuals could view a Tesla display vehicle and learn about Tesla products and electric motor vehicles in general. The plaintiffs alleged in their complaint that the gallery was the functional equivalent of a dealership showroom, intended to generate sales of Tesla vehicles. The defendants have denied that any sales of vehicles have been made or facilitated at the gallery. In any event, between the time of the motion judge's ruling on the plaintiffs' request for a preliminary injunction and his ruling on the defendants' motion to dismiss, the board approved Tesla MA's license application and issued a class 1 license to Tesla MA, permitting it to operate a sales office located on West Central Street in Natick (town).¹⁰

Statutory framework. Chapter 93B was added to the General Laws in 1970 (see St. 1970, c. 814, § 1). It was, and continues to be, “a comprehensive statute covering an array of business practices in the automobile industry.” Beard Motors, 395 Mass. at 430, 480 N.E.2d 303

. It “was enacted in recognition of the potentially oppressive power of automobile manufacturers and distributors in relation to their affiliated dealers.” Id. at 432, 480 N.E.2d 303. “The statute aims at eliminating industry practices which may be reasonably thought to operate unfairly or coercively. It is designed to protect franchisees from having to succumb to dictation by manufacturers pressing their own interests in disregard of the health of other elements in the trade and perhaps ultimately of the welfare of the public.” Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313, 322, 381 N.E.2d 908 (1978) (Tober ). See Brown, A Bill of Rights for Auto Dealers, 12 B.C. Indus. & Commercial L.Rev. 757 (1971) (Brown).

General Laws c. 93B, as enacted in 1970, remained in effect and in the same general form through 2002. Before the 2002 amendments, c. 93B, § 3 (a )

, declared unlawful the use of “unfair methods of competition and unfair or deceptive acts or practices, as defined in [c. 93B, § ] 4.” See G.L. c. 93B, § 3 (a ), inserted by St. 1970, c. 814, § 1. Section 4(3), in turn, itemized “a considerable array of oppressive practices,” Tober, 376 Mass. at 320, 381 N.E.2d 908, by manufacturers and distributors that were deemed to be violations of § 3 (a ). See G.L. c. 93B, § 4(3) (a )-(m ), inserted by St. 1970, c. 814, § 1, and as amended through St. 1977, c. 717, § 3. When originally enacted, this itemized list was described by one author as the “The Dealers' ‘Bill of Rights' Provision,” and was intended to protect franchised dealerships from specific types of abuses by their manufacturers. Brown, supra at 799–806. Chapter 93B also had a section authorizing the Attorney General, at the request of a dealer, manufacturer, or distributor, to enforce compliance with the chapter in accordance with G.L. c. 93A, §§ 4

–8, inclusive, see c. 93B, § 12, as amended by St. 1977, c. 717, § 5, as well as a provision conferring a private right of action on motor vehicle dealers damaged by one or more of the proscribed acts or practices. See G.L. c. 93B, § 12A, as amended by St. 1985, c. 689, § 2.

The 2002 statutes repealed in its entirety the then-existing c. 93B and replaced it with a new c. 93B. See St. 2002, c. 222, § 3

. However, many of the core provisions and the general structure of the previous statute have remained essentially the same. Specifically,

§ 3 (a ) of the new c. 93B¹¹ continues to declare unlawful the use of “[u]nfair methods of competition and unfair or deceptive acts and practices, as defined in [§ ] 4,” and § 4 (c )

, like the former § 4(3), consists of an itemized list of specific acts that are deemed to be violative of § 3 (a ). Although the section number has changed, c. 93B continues to give the Attorney General the power to enforce compliance with the statute on request of any dealer, manufacturer, or distributor, see c. 93B, § 14, inserted by St. 2002, c. 222, § 3.

Of particular concern in this case are new § 4 (c ) (10)

and new § 15 (a ). Under § 4 (c ) (10), it is unlawful for a manufacturer, distributor, or franchisor representative “to own or operate, either directly or indirectly through any subsidiary, parent company or firm, a motor vehicle dealership located in the commonwealth of the same line make as any of the vehicles manufactured, assembled or distributed by the manufacturer or distributor.” G.L. c. 93B, § 4 (c ) (10), inserted by St. 2002, c. 222, § 3. Under the cognate provision of the version of the statute that existed just before its 2002 amendments, it was unlawful for a manufacturer, distributor, or wholesaler “to own and operate, either directly or indirectly through any subsidiary, parent or affiliated company or firm, a motor vehicle dealership within the relevant market area of a motor vehicle dealer of the same line make.” See G.L. c. 93B, § 4(3) (k ), as amended through St. 1977, c. 717, § 3. Section 15 (a ) creates a private right of action for dealers injured by statutory violations—a right that formerly was set out in c. 93B, § 12A —and adds a private right of action for manufacturers and distributors who may suffer injury on account of statutory violations by dealers.¹²

Discussion. The plaintiffs urge us to read literally the language of G.L. c. 93B, §§ 4 (c ) (10)

and 15 (a ), and to conclude that they have standing. In particular, they argue that the plain language of § 15 (a ) permits...