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

          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


                                     -2-
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

                                       -3-
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.

                                -4-
           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




                                  -5-
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.

                                          -6-
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


                                    -7-
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.


                                  -8-
          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,


                                -9-
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


                                  -10-
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.


                                     -11-
             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.

                                     -12-
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


                                            -13-
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.


                                       -14-
             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-




                                            -15-
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.

                                      -16-