Richard Lundgren, Inc. v. American Honda Motor Co., Inc.

• Decision Date: 02 September 1998
• Docket Number: No. 97-P-589,97-P-589
• Citation: 45 Mass.App.Ct. 410,699 N.E.2d 11
• Parties: RICHARD LUNDGREN, INCORPORATED 1 v. AMERICAN HONDA MOTOR CO., INC.
• Court: Appeals Court of Massachusetts

Page 11

699 N.E.2d 11

45 Mass.App.Ct. 410

RICHARD LUNDGREN, INCORPORATED ¹ v. AMERICAN HONDA MOTOR CO., INC.

No. 97-P-589.

Appeals Court of Massachusetts,

Worcester.

Argued March 3, 1998.

Decided Sept. 2, 1998.

Marielise Kelly, Charlestown, for defendant.

Allan R. Curhan, Boston, for plaintiff.

Before KASS, JACOBS and PORADA, JJ.

KASS, Justice.

After trial of an action brought under G.L. c. 93B, ² a judge of the Superior Court determined that a proposal by American Honda Motor Co. (American Honda) to award a new dealership franchise in Westborough would impinge on the territory of the plaintiff's existing Honda dealership and was, therefore, "arbitrary" in the statutory sense. See G.L. c. 93B, § 4(3)(l ). The judge further concluded that American Honda had violated chapter 93B and assessed against American Honda the plaintiff's attorneys' fees and costs in the amount of $431,738.16. See G.L. c. 93B, § 12A.

American Honda does not contest so much of the judge's decision as determined that the proposed dealership invaded the plaintiff's market area but appeals from the imposition of legal expenses. We decide that American Honda's inchoate proposal did not constitute a violation of c. 93B and that, therefore, the plaintiff was not entitled to recover legal fees and costs under G.L. c. 93B, § 12A.

1. Purpose and design of G.L. c. 93B, § 4(3)(l). General Laws c. 93B was enacted to protect existing car dealerships in Massachusetts from "destructive intrabrand competition and the unequal economic power of manufacturers." Heritage Jeep-Eagle, Inc. v. Chrysler Corp., 39 Mass.App.Ct. 254, 259, 655 N.E.2d 140 (1995) (citations omitted). See, for a discussion of the history of c. 93B, Ricky Smith Pontiac, Inc. v. Subaru of New England, Inc., 14 Mass.App.Ct. 396, 402-404, 440 N.E.2d 29 (1982). Most of the provisions of §§ 3 through 11 of that chapter are dedicated to proscribing, as violations of the statute, activities determined to be unfair methods of competition or unfair and deceptive acts or practices.

The first two paragraphs of § 4(3)(l ) are no exception. In relevant part, as amended by St.1977, c. 717, § 3, they pronounce it a violation of chapter 93B for a motor vehicle distributor: ³

"arbitrarily and without notice to existing franchisees as hereinafter provided, to grant or enter into 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 ⁴ of an existing franchisee or franchisees representing the same line make...."

The third and fourth paragraphs of § 4(3)(l ) go on to create a system by which a distributor contemplating the establishment of a new franchise and the existing dealers in that market area can resolve their dispute over the proposed dealership before it is actually established. A motor vehicle distributor must notify all existing dealers within a twenty-mile radius of a proposed dealership at least sixty days prior to granting a franchise or entering into a franchise agreement for that dealership. Any dealer whose "relevant market area" includes the location of the new dealership may, at any time prior to the date set for the establishment of the new franchise, petition the Superior Court to determine whether the proposed dealership would be "arbitrary," after first notifying the distributor of its intent to do so within thirty days of receiving notice of the proposed franchise.

As commonly used, "arbitrary" signifies whimsical or idiosyncratic action. W. Oliver Tripp Co. v. American Hoechst Corp., 34 Mass.App.Ct. 744, 748-749, 616 N.E.2d 118 (1993). See Cotter v. Chelsea, 329 Mass. 314, 318, 108 N.E.2d 47 (1952); Federman v. Board of Appeals of Marblehead, 35 Mass.App.Ct. 727, 730-731, 626 N.E.2d 8 (1994). In its c. 93B sense, however, "arbitrary" is a term of art that connotes that a new dealership will impinge economically on an existing dealership. Indeed, G.L. c. 93B, § 4(3)(l )(i) through (viii), sets out a nonexhaustive list of factors the court may consider in determining whether the proposed action is "arbitrary."

While the statute is silent as to the consequence of a determination that a proposed franchise is arbitrary, the procedure set out in the statute resembles a request for a declaratory judgment. See G.L. c. 231A, § 1. The resemblance is that G.L. c. 93B, § 4(3)(l ), allows all parties interested in the creation of the proposed dealership to eliminate uncertainty about their respective rights and obligations, so that they may "deal intelligently with the situation before them, ... agree between themselves as far as possible, and ... reduce as much as possible the area of future litigation." Oxford v. Oxford Water Co., 391 Mass. 581, 585, 463 N.E.2d 330 (1984). See Nelson v. Commissioner of Correction, 390 Mass. 379, 456 N.E.2d 1100 (1983).

2. Procedure followed in this case. Here, American Honda followed the notification procedure of the third paragraph of G.L. c. 93B, § 4(3)(l ), and the plaintiff availed itself of the response mechanism provided for in the fourth paragraph of § 4(3)(l ). ⁵ Specifically, American Honda, a motor vehicle distributor, gave written notice on February 12, 1992, to the plaintiff, a motor vehicle dealer, of its intention to enter into a franchise agreement on May 1, 1992, with Roger Groux to open a new Honda dealership in Westborough. On March 5, 1992, the plaintiff, then in the process of relocating--with American Honda's permission--its Honda dealership from Worcester to Auburn, notified American Honda of its objection to the proposed Westborough franchise and its intent to bring suit. The plaintiff filed its action on April 10, 1992, seeking to have the proposed franchise declared "arbitrary" under G.L. c. 93B, § 4(3)(l ).

After a bench trial, the judge found that the proposed franchise was within the plaintiff's relevant market area ⁶ and was "arbitrary" because it "was not based on any careful consideration of relevant market data." See Heritage Jeep-Eagle, Inc. v. Chrysler Corp., 39 Mass.App.Ct. at 256-257, 655 N.E.2d 140. The judge thought that American Honda's decision to open a dealership in Westborough was colored by American Honda's displeasure with the plaintiff and a personal friendship between Groux (the prospective franchisee) and James Moynihan, a national market representative of American Honda.

3. When legal fees are recoverable. Having decided that location of a Westborough dealership would be arbitrary within the meaning of G.L. c. 93B, the judge moved in separate hearings to the questions of whether Honda had committed a "violation" of § 4(3)(l ) of that statute, and whether the plaintiff was entitled to recover legal fees and costs under G.L. c. 93, § 12A.

Section 12A, so far as immediately material, provides that

"Any ... motor vehicle dealer who suffers any loss of money or property ... as a result of the use or employment by a ... distributor ... of an unfair method of competition or an unfair or deceptive act or practice declared unlawful under [§§ 3 through 11], inclusive ... may bring an action in the [S]uperior [C]ourt for damages and equitable relief, including injunctive relief. A motor vehicle dealer, if it has not suffered any loss of money or property, may obtain final equitable relief if it can be shown that the ... unfair act or practice may have the effect of causing such loss of money or property.

"If the court finds for the ... motor vehicle dealer in any action commenced hereunder, that there has been a violation of [§§ 3 to 11], inclusive ... such ... motor vehicle dealer shall, in addition to any other relief provided for by this section ... be awarded reasonable attorneys' fees and costs ..." (emphasis supplied).

Section 12A, thus, provides a dealer a right of action for damages in Superior Court for violation of G.L. c. 93B, §§ 3 through 11, and, ancillary to that right of action, if the dealer is successful, the right to recover legal fees.

The right to recover legal fees was added to § 12A by St.1985, c. 689, § 2, and refers specifically to "any action commenced hereunder," that is to say under § 12A. Section 1 of the 1985 act added a similar provision for recovery of legal expenses to G.L. c. 93B, § 5C, having to do with indemnification of a manufacturer for the negligence of a dealer or franchisee. It follows that St.1985, c. 689, confers a right to recover legal expenses only in certain kinds of cases arising under c. 93B, not an across-the-board right to recover legal expenses. We also assume a purpose to the Legislature having established in G.L. c. 93B, § 4(3)(l ), par. 3 & 4, the procedure for an anticipatory ruling on whether a grant or establishment of a new franchise (or, in the lingo of the industry, a new "point") impinges on an existing dealer and having established in § 12A a right of action for redress of injuries arising out of a violation of the statute. We construe the statute to avoid any part of the legislation being meaningless or duplicative. International Org. of Masters, Mates, & Pilots v. Woods Hole, Martha's Vineyard & Nantucket S.S. Authy., 392 Mass. 811, 813, 467 N.E.2d 1331 (1984). Guardianship of Smith, 43 Mass.App.Ct. 493, 498, 684 N.E.2d 613 (1997). We do not think that the provision, added in 1985 to § 12A, conferring the right to recover legal expenses may be imported to § 4(3)(l ).

Apart from the absence of statutory language suggesting such an importation, there is a convincing reason why the Legislature would have provided a right to recover legal fees in § 12A actions and not in actions begun under § 4(3)(l ). The function of the latter, as we have observed, is to give manufacturers and dealers an opportunity to test, before capital is expended or damage done, the question whether a proposed new dealership unfairly poaches on an existing dealer's...