Ricky Smith Pontiac, Inc. v. Subaru of New England, Inc.

• Decision Date: 27 October 1982
• Citation: 440 N.E.2d 29,14 Mass.App.Ct. 396
• Parties: RICKY SMITH PONTIAC, INC. v. SUBARU OF NEW ENGLAND, INC. et al. 1
• Court: Appeals Court of Massachusetts

Page 29

440 N.E.2d 29

14 Mass.App.Ct. 396

RICKY SMITH PONTIAC, INC. v. SUBARU OF NEW ENGLAND, INC. et al. ¹

Appeals Court of Massachusetts,

Norfolk.

Argued May 14, 1982.

Decided Sept. 14, 1982.

Further Appellate Review Denied Oct. 27, 1982.

Robert W. Mahoney, Boston (William K. Dodds, Boston, with him), for defendants.

Allan R. Rosenberg, Boston (Alexander Whiteside, Boston, with him), for plaintiff.

Before ARMSTRONG, ROSE and GREANEY, JJ.

GREANEY, Justice.

Named for a constellation, ² the Subaru is a Japanese manufactured automobile which arrived on the American scene in the early 1970's. This case arises out of a dispute between members of Subaru's New England distribution chain which was precipitated by Subaru of New England's (SNE) grant, on February 1, 1978, of a motor vehicle franchise to the defendant Masabny. The plaintiff (Ricky Smith) challenged the grant as an impermissible intrusion on its "relevant market area", alleging that SNE had violated the plaintiff's franchise agreement and had committed unfair and deceptive practices in violation of G.L. c. 93B, §§ 3 and 4. SNE counterclaimed, alleging (1) that Ricky Smith had violated the franchise agreement by failing to promote Subaru's products aggressively in its immediate geographic area; and (2) that Ricky Smith had illegally conspired with other dealers in restraint of trade to prevent SNE from making new dealer appointments. After a lengthy trial without jury, a judge of the Superior Court made findings of fact and rulings of law which were, on the whole, favorable to Ricky Smith's position on the issues. The trial judge then reported the propriety of his decision on the liability questions to this court. ³ See G.L. c. 231 § 111, as appearing in St. 1973, c. 1114, § 199; Mass. R. Civ. P. 64, 365 Mass. 831 (1974); McStowe v. Bornstein, 377 Mass. 804, 805 n. 2, 388 N.E.2d 674 (1979).

1. Background facts found by the trial judge. SNE, a Massachusetts corporation, is the sole distributor of Subaru automobiles for the six New England states, having been appointed by Subaru's exclusive importer to the United States, Subaru of America, Inc. ⁴ Ricky Smith, one of nearly eighty Subaru retail dealers in New England, was granted a franchise by SNE in 1970. The agreement between Ricky Smith and SNE was renewed periodically, and had been most recently extended through October of 1979. ⁵ Ricky Smith's total investment in expanding and improving its facility for Subaru sales and service has exceeded $500,000. Prior to 1975, Midway Auto Sales, Inc. (Midway), located in Abington, Massachusetts, some 7.4 miles south of Ricky Smith, was granted a Subaru franchise by SNE. Approximately ten other Subaru franchises, awarded in the area within fifteen miles of Ricky Smith's dealership, went out of business between 1970 and 1977. By 1978, Midway was Ricky Smith's only competing Subaru dealer in the geographic area known as the "South Shore."

In 1976, Masabny wrote to SNE expressing interest in obtaining a Subaru franchise in the area of the towns of Hanover, Marshfield, or Pembroke (all located in Plymouth County). Masabny made formal application for a franchise on July 6, 1977. SNE, which was considering establishing a dealership in the Plymouth county area, informed Masabny that such a dealership would have to be located on Route 53 and would have to be a separate, not a dual dealership, facility. By December of 1977, SNE and Masabny had agreed on a site on Route 53 in Hanover, close to several small shopping centers and other automobile dealerships. Masabny in turn had satisfied SNE that he possessed or had access to sufficient capital and financing. A franchise agreement was executed on February 1, 1978, ⁶ and was amended on April 10, 1978, to relocate the dealership on Route 53 about one-quarter mile away in the town of Pembroke. ⁷ The Pembroke site, from which Masabny began conducting business on November 14, 1978, as South Shore Subaru, Inc. (South Shore), was situated approximately 10.5 miles southeast of Ricky Smith's and 7.8 miles east of Midway's dealerships. ⁸

Neither Ricky Smith nor Midway was notified, when Masabny's July 6, 1977, application was accepted, that SNE considered the Hanover-Pembroke area an "open point," i.e., an area deemed to have sufficient present potential for an additional or new dealership. In late December, 1977, however, before their agreement was reduced to writing, SNE informed Masabny that both Ricky Smith and Midway would have to be given a chance to say "no" to opening in the Hanover-Pembroke area. On January 26, 1978, at a meeting between Ricky Smith's president (Ricky Smith, Sr.) and SNE's chief executive officer (Ernest Boch), Smith was informed that SNE had decided that a new dealer was needed on Route 53 in the Hanover area. Smith was told that he could have the Route 53 dealership if he would move his Subaru franchise there and build a new and separate facility. If Smith agreed, his allocation, or "travel rate", would be fifty Subarus per month. In context, this meant an initial monthly allocation of fifty new automobiles. ⁹ If Smith refused to move, Boch intended to put a new franchise in the area of Quincy, a large community immediately northwest of Weymouth. Moreover, absent a move, Smith's dealership would not be upgraded to the fifty automobiles per month allocation unless it built an entirely new and separate Subaru facility at its current location. In the meantime, the franchise on Route 53 would be awarded to someone else. ¹⁰ Smith was given five days, until January 31, to make a decision. Smith contacted Boch on February 16, when he was formally advised that a new dealer had been appointed for the northern Plymouth (Route 53) area. The present action followed.

2. The statutes. General Laws c. 93B, inserted by St. 1970, c. 814, § 1, regulates transactions among automobile manufacturers, distributors and dealers. ¹¹ Like G.L. c. 93A, the consumer protection statute which preceded it by three years, c. 93B, § 3(a), proscribes "[u]nfair methods of competition and unfair or deceptive acts or practices." Unlike c. 93A, however, c. 93B, § 4, specifies with some particularity those practices that shall be "deemed" unfair or deceptive under § 3(a). Among other means of enforcement, the statute affords injured dealers a private damages remedy which, prior to the statute's amendment by St. 1977, c. 717, permitted a claim of up to treble damages under the provisions of G.L. c. 93A, §§ 9 and 10. See Reiter Oldsmobile, Inc. v. General Motors Corp., 378 Mass. 707, 708-709, 393 N.E.2d 376 (1979). One of the acts or practices proscribed under § 4(3)(l ), prior to its amendment and the impetus behind the present action, is the improper granting of a competitive motor vehicle franchise in "the relevant market area previously granted to another franchisee." That statute also provided that such market area "be determined exclusively by equitable principles"; with the proviso that if a "manufacturer" wished to grant such a competitive franchise, then it must give notice to the existing dealer or dealers in the area and, unless there was agreement, the matter should be submitted to "final and binding arbitration under the principles herein prescribed, for a determination of the relevant market area, the adequacy of the servicing of the area by the existing dealer or dealers and the propriety of granting of such additional dealership." ¹² By St. 1977, c. 717, enacted on November 7, 1977, and effective ninety days thereafter, sundry provisions of G.L. c. 93B were revised. Included among the revisions were amendments to § 4(3)(l ) which (i) made it an illegal act under § 3(a) for a manufacturer or distributor "arbitrarily and without notice to existing franchisees" to grant a franchise to an additional franchisee who would conduct his dealership "from a place of business situated within the relevant market area of an existing franchisee or franchisees"; (ii) substituted a formula definition of "relevant market area" for the "equitable principles" determination; (iii) required, prior to such a grant, sixty days' notice to franchisees within a twenty-mile radius of the proposed new location; (iv) eliminated arbitration in favor of Superior Court review of the question whether placement of the additional franchise is arbitrary; and (v) directed the court, in determining the issue of arbitrariness, to consider "all pertinent circumstances" which may include eight stated factors. In Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313, 381 N.E.2d 908 (1978) (Tober decision), the Supreme Judicial Court upheld the validity of § 4(3)(l ) in the 1970 version of the statute against attack on several constitutional grounds. However, no adjudication on the merits of an alleged violation of § 4(3)(l ) in either version of the statute has yet come under appellate review. ¹³

3. The effect of the trial judge's findings. The judge filed a sixty-page memorandum of decision which included exhaustive findings of fact and rulings of law on virtually all the governing legal questions. On several of the issues under review, the defendants contend that the trial judge erred by failing to adopt or deny their requests for findings of fact and to act upon their requests for rulings of law. Since the argument is a persistent theme on the appeal, it would be useful to clear it up at the outset.

The requirement of findings under Mass. R. Civ. P. 52(a), 365 Mass. 816-817 (1974), "serves to (1) insure the quality of a judge's decision making process by requiring simultaneous articulation of the judge's underlying reasoning; (2) assure the parties that their claims have been fully and fairly considered and (3) inform an appellate court of the basis on which a decision has been reached." Cormier v. Carty, 381 Mass. 234, ---, Mass.Adv.Sh. (1980) 1783, 1785, 408 N.E.2d 860. As to requests for rulings of law, "a trial judge...