United States Court of Appeals
For the First Circuit
No. 02-1249
AMERICAN HONDA MOTOR COMPANY, INC.,
Plaintiff, Appellee,
v.
RICHARD LUNDGREN, INC.,
d/b/a LUNDGREN HONDA,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Boudin, Chief Judge,
Bownes, Senior Circuit Judge,
and Lynch, Circuit Judge.
Richard B. McNamara with whom Gregory A. Holmes, Stephanie A.
Bray, Elizabeth A. Leonard and Wiggin & Nourie, P.A. were on brief
for appellant.
Robert D. Cultice with whom Michael R. Heyison, Peter A.
Spaeth and Hale and Dorr LLP were on brief for appellee.
December 20, 2002
BOUDIN, Chief Judge. This diversity case concerns a
prolonged effort by appellee American Honda Motor Co., Inc.
("Honda") to franchise a new automobile dealership in Westborough,
Massachusetts. This effort has been opposed under a Massachusetts
dealer protection statute by appellant Richard Lundgren, Inc.
("Lundgren"), which operates an existing local Honda dealership in
Auburn, Massachusetts, about eleven miles west of the proposed new
dealership. The district court put an end to this multi-act drama,
granting summary judgment to Honda. We affirm.
Massachusetts, like a number of states, protects
franchised car dealers against the "potentially oppressive power"
of their respective manufacturers. Am. Honda Motor Co., Inc. v.
Bernardi's, Inc., 735 N.E.2d 348, 354 (Mass. 2000) ("Honda IV")
Under the statute, the dealer has a legal right to prevent an
"arbitrary" decision by the manufacturer to create a competing
dealership nearby. Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000)
(amended 2002). But the dealer can invoke the statute's protection
only if the new dealership would be located within the "relevant
market area" ("RMA") of the protesting dealer. Honda IV, 735
N.E.2d at 351.
"Relevant market area" might sound like an antitrust
concept. Cf. Tober Foreign Motors, Inc. v. Reiter Oldsmobile,
Inc., 381 N.E.2d 908, 918 (Mass. 1978). In fact it is defined
rather mechanically by the applicable Massachusetts statute in a
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thus-far frustrated effort by the legislature to avoid protracted
litigation over this initial "standing" requirement. Of course,
the statute does not concern standing in the Article III sense;
rather, the legislature has simply enacted a threshold requirement
(albeit a somewhat complicated one) based on the proposed dealer's
proximity before the "arbitrariness" test can be invoked.
The definition was more open-ended in the original
version of the statute; there, the RMA was to be defined by the
courts according to equitable principles. See generally Honda IV,
735 N.E.2d at 352 n.8 (discussing statutory history). But, in
1977, the Massachusetts legislature adopted a new "bright line"
formula which governs this case. A further amendment in 2002
sought to repair the 1977 version in the wake of judicial
interpretation, 2002 Mass. Legis. Serv. ch. 222, § 3 (to be
codified at Mass. Gen. Laws ch. 93B) ("2002 Amendment"); but by
virtue of a savings clause, the 2002 version does not apply to the
present dispute, id. § 5.
The governing 1977 definition, trimmed of portions not
here pertinent, reads as follows:
[T]he relevant market area of a motor vehicle
dealer . . . is the . . . geographical area
immediately surrounding its existing dealer
location within which it obtained, during [a
defined period] . . . at least two-thirds of .
. . its retail service sales . . . .1
1
Omitted from the quotation, among other language, is an
alternative test, based on sales of new cars. The statute directs
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Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002).
Unfortunately, the 1977 statute left open a number of
questions: for example, whether a dealership location should be
regarded as a point or an area; whether the surrounding RMA should
be defined as a perfect circle or may be some other shape; whether
customer locations should be identified by air miles or some other
variable (e.g., drive time); and whether the two-thirds figure
should be based on transactions, customers or revenues. All of
these issues, and others, were litigated in this case.
The present litigation began in April 1998, when Honda
filed an action in the federal district court seeking a declaratory
judgment. Honda planned to franchise a new dealer in Westborough,
Massachusetts, about eleven miles east of the existing Lundgren
dealership in Auburn. Anticipating a challenge (Lundgren had
earlier contested a different proposal by Honda, Richard Lundgren,
Inc. v. Am. Honda Motor Co., 699 N.E.2d 11 (Mass. App. Ct. 1998)),
Honda sought a ruling that Lundgren had no standing (under the 1977
definition) to contest this new dealership as an "arbitrary"
decision by Honda.
that, as between new car sales and service sales, courts should
select the metric that results in the "more narrowly defined and
circumscribed geographical area." Mass. Gen. Laws ch. 93B, §
4(3)(l) (2000) (amended 2002). The parties are in agreement that--
in this instance--the service (i.e., repairs) sales rather than new
car sales are the proper test.
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Lundgren, as this litigation shows, is anxious to mount
such a contest. Both sides engaged experts on the RMA issue. At
the end of this case's first journey through the district court,
Lundgren stipulated that it could not prevail if the RMA had to be
a perfect circle. Am. Honda Motor Co. v. Bernardi's, Inc., 113 F.
Supp. 2d 54, 57 (D. Mass. 1999) ("Honda I"); Am. Honda Motor Co. v.
Bernardi's, Inc., 113 F. Supp. 2d 58, 59 (D. Mass. 1999) ("Honda
II"). On that premise, the district court ruled in Honda's favor.
Honda I, 113 F. Supp. 2d at 57; Honda II, 113 F. Supp. 2d at 59.
On appeal, this court certified the legal question to the
Massachusetts Supreme Judicial Court ("SJC"). Am. Honda Motor Co.
v. Bernardi's, Inc., 198 F.3d 293, 296-97 (1st Cir. 1999) (Honda
III). That court, over a dissent supporting the district court's
ruling, held that the RMA had to be circular or like a circle but
did not have to be a perfect circle. Honda IV, 735 N.E.2d at 350.
This court then vacated the district court judgment and remanded
for further proceedings. Am. Honda Motor Co. v. Bernardi's, Inc.,
235 F.3d 1 (1st Cir. 2000) ("Honda V").
The case was then transferred to a different district
judge. Honda filed a new motion for summary judgment, and Lundgren
offered two alternative RMA calculations purporting to establish
standing under the statute. On February 8, 2002, the district
court granted summary judgment, again in favor of Honda. Am. Honda
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Motor Co. v. Lundgren, 188 F. Supp. 2d 27, 33 (D. Mass. 2002)
("Honda VI").
Two of the district court's rulings, favorable to
Lundgren on the present facts, are not disputed by Honda on this
appeal. One is that the two-thirds requirement could be measured
by the dollar volume of sales or the number of transactions but not
by the number of customers. Honda VI, 188 F. Supp. 2d at 30-31.
The other is that the location of customers, critical to
determining the boundary within which two-thirds of those customers
reside, can be determined by "geocoding." Id. at 32. Geocoding,
championed by Lundgren's expert, is a somewhat more precise way of
locating individual customers than is the zip code distribution
method urged by Honda.2
On these premises, Lundgren's expert proceeded as
follows. First, customers (each assigned the dollar value of his
or her repairs in the relevant period) were sequenced in order of
increasing distance from the Lundgren dealership. Then the expert
measured the air mile distance ("last order distance") from the
2
Geocoding employs a computer program that can pinpoint the
longitude and latitude of a customer's location. Under the zip
code distribution method, the dealership's sales are sorted
according to the customer's zip code, and then the sales within
each zip code are distributed randomly. Lundgren's expert used
geocoding for ninety percent or so of the data. For the ten
percent of the data that could not be geocoded, the sales were
attributed to the zip code's centroid (the centroid is the
geometric center of an irregular shape). Honda VI, 188 F. Supp. 2d
at 31-32.
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Lundgren dealership to the last customer ("last order location")
necessary to encompass two-thirds of the total repair dollars.
Thus, a circle drawn around the dealership with a radius equal to
the last order distance would necessarily include two-thirds of the
repair service revenue. Honda VI, 188 F. Supp. 2d at 32.
The expert then compared the last order distance to the
distance between the Lundgren dealership and the site of the
proposed new dealership in Westborough ("inter-dealer distance").
In determining the inter-dealer distance, the expert did not
measure the distance between the respective centroids (the
geometric centers) of the two dealerships but between the eastern
border of the Lundgren dealership and the western border of the
proposed new dealership. Because the last order distance and the
inter-dealer distance were found to be equal, Lundgren's expert
concluded that the proposed new dealership is within the circle
representing Lundgren's RMA. Honda VI, 188 F. Supp. 2d at 32.
Lundgren's expert also made a second, alternative
calculation of the RMA. This time he sequenced customers not by
air mile distance from Lundgren's dealership (e.g., New York City
is 200 miles from Boston), but by the time needed to drive the
distance (e.g., New York City is four hours from Boston). Using
this metric to derive the last order necessary to constitute two-
thirds of repair sales, the expert found the drive time from
Lundgren to the new dealer to be 17 minutes and the drive time to
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the last order location to be 17.6 minutes. According to Lundgren,
using such an RMA based on drive time means that at least a small
portion of the proposed new dealership would fall inside the RMA.
In its decision, the district court rejected the main air
mile distance calculation on several separate grounds: (1) that
Lundgren had earlier stipulated that it would lose if a perfect
circle were used to construct the RMA; (2) that the RMA should be
spanned from the centroid of the Lundgren property and not from its
boundaries; (3) that the expert had admittedly rounded off air mile
distances to the nearest tenth of a mile; and (4) that even
disregarding the first three problems the expert's RMA merely
touched rather than overlapped with the property of the proposed
new dealer. The court rejected the alternative drive time
calculation on the further ground that the Massachusetts statute
did not allow it. Honda VI, 188 F. Supp. 2d at 32. Summary
judgment for Honda was entered and Lundgren now appeals.
On appeal from summary judgment, this court ordinarily
reviews issues de novo, construing the record in the light most
favorable to the non-moving party, here Lundgren. Euromotion, Inc.
v. BMW of N. Am., Inc., 136 F.3d 866, 869 (1st Cir. 1998). At this
stage, we assume that the computations of Lundgren's expert are
accurate; whether they are foreclosed by the prior stipulation and,
if not, whether they satisfy the requirements of the Massachusetts
statute are legal issues.
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The district court's reliance on the stipulation is
understandable. The stipulation was unqualified and, if given
effect, might appear to resolve the case cleanly in Honda's favor.
Lundgren stipulated in the earlier go-around in the district court
that if the RMA were computed as a perfect circle, it would not
reach the location of the proposed new dealership. Honda I, 113 F.
Supp. 2d at 57. On this go-around, Lundgren's main computation is
based upon a perfect circle RMA. Honda VI, 188 F. Supp. 2d at 32.
In litigation that has already lasted several years and occupied
three different courts, Lundgren's about-face certainly needed
explaining.
Stipulations between parties are not "absolute," T I Fed.
Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir. 1995), and a
party may be relieved of a stipulation for good cause--which means,
in a nutshell, that good reason must exist and that relief must not
unfairly prejudice the opposing party or the interests of justice.
See, e.g., New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001);
FDIC v. Kooyomjian, 220 F.3d 10, 14 (1st Cir. 2000). Here,
Lundgren argues that its earlier concession was not based on
geocoding or drive time calculations and that the intervening SJC
decision in Honda IV offered room for its expert's more recent
calculations.
In principle, an intervening change of law might count as
good cause. See Arizona v. Shamrock Foods Co., 729 F.2d 1208,
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1215-16 (9th Cir. 1984), cert. denied, 469 U.S. 1197 (1985). In
general terms, Honda IV is permissive toward new and alternative
methods of making the RMA calculation. Honda IV, 735 N.E.2d at
355. Further, geocoding has greater accuracy in its favor, Honda
VI, 188 F. Supp. 2d at 32, and language in Honda IV--discussed more
fully below--at least leaves open the possibility of calculations
based on drive time. But the change of law argument is not
persuasive on these facts.
Honda IV did not undo a previous bar to geocoding and
drive time calculations; from the outset, Lundgren could have
employed such calculations on an alternative basis and argued that
they were permissible. Instead, it placed its chips on the
argument that the RMA did not have to be a perfect circle,
stipulating that it would lose if a perfect circle were employed.
Having won the perfect circle debate, Lundgren now ignores its
victory and seeks to change other parts of its original computation
in ways that it could easily have urged several years ago.
However, Honda's stipulation argument appears flawed for
a different reason not argued by Lundgren. Suppose that instead of
drawing a perfect circle Lundgren's expert had drawn a slightly
imperfect one encompassing the same customers--say, caving
slightly inward where no customer now exists. Nominally, this
would avoid violating the stipulation--the circle would no longer
be perfect--yet the cavity would be trivial and the resulting shape
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would arguably be sufficiently "circular" to comply with the
dictates of Honda IV. In short, Lundgren's change in position is
not aimed at altering the shape of the circle; what improves
Lundgren's position is simply the use of geocoding and drive time
data.
Lundgren apparently did not stipulate that it would limit
itself to zip code-based platting methods and air mile distance
data. Perhaps this about face as to methodology could be barred on
some other ground or even claimed to be implicitly at odds with the
stipulation; it is certainly bad timing since the legal validity of
geocoding and drive time calculations could have been certified on
the prior go-around. In sum, we would readily uphold the district
court's refusal to allow a departure from the stipulation, whatever
the standard of review; but we are not persuaded that Lundgren's
new formula is at odds with the substance of the stipulation.
Turning to the merits, we begin with the air mile
distance calculation made by Lundgren's expert, placing the
boundary of Lundgren's RMA on the boundary of the proposed new
dealership. The district court rejected this proposed showing on
several different grounds. Honda VI, 188 F. Supp. 2d at 32-33.
The district court ruled that measuring distance from the boundary
was unsound and that some central point within the dealership
(e.g., the centroid) should be used, id. at 33; Lundgren's counsel
conceded at oral argument that this would cause it to lose.
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Use of some interior central point might seem the better
choice; otherwise the RMA could easily depend on whether the dealer
chanced to have a large or small lot. Yet the 1977 statute refers
simply to the area immediately surrounding the existing dealer
"location"--hardly a clear-cut preference for the centroid over the
boundary.3 Policy arguments are not of great force either way.
Without resolving this state law issue--which may not arise again
given the change in the statute--we think it is not the strongest
ground for affirmance.
Rather, so far as the air mile distance calculation is
concerned, we prefer the district court's alternative ruling that
an RMA merely touching on the boundary of the proposed new
dealership does not create standing. Honda VI, 188 F. Supp. 2d at
33. The statute's operative language, as distinct from the RMA
definition itself, provides that a manufacturer may not arbitrarily
franchise a new dealer "within" the RMA of an existing franchisee.
Mass. Gen. Laws. ch. 93B, § 4(3)(l) (2000) (amended 2002). In our
view, a new dealer whose property merely touches the outer boundary
of the RMA does not create standing in the existing dealer. The
statute provides that the car maker may not arbitrarily franchise
3
The 2002 revision of the statute says directly that the
boundary can be used. Compare Mass. Gen. Laws ch. 93B, § 4(3)(l)
(2000) (amended 2002) with 2002 Amendment, § 3 (definition of RMA
in the new ch. 93B, § 1). The latter language is not
determinative--it could be a change rather than a clarification--
but it does give one pause.
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a new dealer "within" the RMA of an existing franchise. A new
dealer who is merely adjacent or tangent to the RMA is not fairly
within the statutory language or within its evident purpose of
preventing the new dealer from operating inside this perimeter.
Arguably, one could read the "within" requirement as
contemplating that the new dealer be either entirely or largely
within the RMA but we will assume arguendo that it is enough if
some appreciable portion of the new dealer's property falls inside
the RMA of the existing dealer. Even so, if the only arguable
"overlap" is a single tangent point, then for all practical
commercial purposes the new dealer is operating outside--not
within--the existing dealer's RMA. No new sales can be made, or
repairs accomplished, at this one-dimensional tangent point. Nor
does Lundgren himself wish to treat either dealer as a point: it is
only by looking to the full property in each case, and measuring
from one near border to the other, that he even achieves a tangent
point.
This makes it unnecessary to consider whether the
district court was correct in rejecting the expert's rounding off
of his distances. Honda VI, 188 F. Supp. 2d at 33. The district
court was perhaps suspicious that the unexplained rounding by
Lundgren's expert unduly favored Lundgren. But virtually all
measurements involve some rounding off; in this case we do not know
the full scope of the rounding off adjustments, the impact, or the
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explanation. It is enough here that, having made his calculations,
the expert could do no more than show the RMA as tangent to the
proposed new dealership. This, as we and the district court both
read the statute, is not sufficient.
It remains to address the expert's alternative, drive
time calculation. Lundgren relies on Honda IV as endorsing the use
of drive time based on a brief reference in the opinion.
Explaining that even a perfect circle would not eliminate factual
disputes, the SJC said that experts might dispute inter alia
"whether the radius follows existing topography." Honda IV, 735
N.E.2d at 353. True, drive time accounts better for topographical
oddities than air mile distance, but we agree fully with the
district court that the SJC comment can hardly be taken to have
approved drive time calculations.
But lack of endorsement is not the same as rejection, and
Honda IV itself undercut ease of administration by holding that
some unknown set of circular shapes, rather than a perfect circle,
can be the basis of the RMA. Honda IV, 735 N.E.2d at 350.
Further, an air mile distance calculation--although easier to
compute--might occasionally depart from economic reality. Imagine,
for example, that the new dealership fell within a perfect circle
surrounding an existing dealership but that the new location was on
the other side of an unbridged river. The new dealer would hardly
be an effective competitor for repairs.
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Admittedly, using drive time computations could present
many problems, further undercutting the apparent intent of the 1977
amendments to create an easily administered test of standing.
Honda VI, 188 F. Supp. 2d at 32. Unlike air mile distance, the
best driving route, and even more so the driving time, may vary
with weather, season and commuter patterns; and each customer
becomes a separate, debatable calculation. Simplifying assumptions
can be made (at the price of accuracy), but the opportunities for
expense and delay in litigating such a case are apparent. Even so,
we are unwilling (without more precedent) to hold that a
Massachusetts court would in every circumstance deem topography
irrelevant in computing an RMA.
The potential relevance of topography, however, does not
automatically validate Lundgren's theory based on drive time.
Drive time calculations are in tension with the statutory
requirement, as interpreted by Honda IV, that the RMA must be a
"circular" area--circular being described as a figure having at
least the "approximate form or outline of a circle." 735 N.E.2d at
350 & n.4. This is the reading that the SJC, employing dictionary
definitions, gave to the statutory terms "circumscribe" and
"surround". Id. at 352. In reaching this conclusion, the SJC
rejected an alternative approach urged by Lundgren--involving the
platting of zip code areas--that would have satisfied the two-
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thirds requirement but produced a relatively irregular shape. Id.
at 354-55.
A tension exists because the same drive time may
translate to different geographic distances, depending on
topography. Therefore, a shape with a radius equal to the last
order drive time is not ordinarily going to be, except by accident,
either a geographic circle or a circular shape; yet a geographic
circular shape is what is required under the terms of the statute
as construed in Honda IV, 735 N.E.2d at 352. As with the zip code
platted boundary rejected in Honda IV, a shape drawn by plotting a
fixed drive time in all directions could be anything from an arc to
a star to the boundary of a Picasso scribble.4
In this case, there is nothing in the record to show that
an RMA based on this drive time radius produces anything like a
circular shape. Honda raised this objection in the district court
and renews it in this court, yet Lundgren has made no effort to
show that its alternative calculation meets this objection. Under
these circumstances, the drive time theory is not in this case a
barrier to the grant of summary judgment in Honda's favor.
Affirmed.
4
Of course, one could draw the circle with an air mile radius
equal to that of the last order customer in the drive time-ordered
sequence; but it would be only happenstance if the customers
located within this geographic circle satisfied the two-thirds
requirement.
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