United States Court of Appeals
For the First Circuit
No. 02-2570
GALLO MOTOR CENTER, INC. d/b/a GALLO MAZDA,
Plaintiff, Appellant,
v.
MAZDA MOTOR OF AMERICA, INC.,
d/b/a MAZDA NORTH AMERICAN OPERATIONS,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Lipez, Circuit Judge,
Porfilio,* Senior Circuit Judge,
and Howard, Circuit Judge.
Stephanie A. Bray, with whom Richard B. McNamara, Gregory A.
Holmes, Elizabeth M. Leonard and Wiggin & Nourie was on brief, for
appellant.
John R. Skelton, William F. Benson and Bingham McCutchen LLP
was on brief, for appellee.
October 16, 2003
* Of the Tenth Circuit, sitting by designation.
HOWARD, Circuit Judge. An automobile manufacturer upset
one of its existing franchisees when it decided to open a new
dealership near the existing franchise. The franchisee brought a
diversity action, alleging that the manufacturer's actions violated
state law. Following a bench trial, the district court entered
judgment for the manufacturer. The franchisee now appeals. We
consider whether the district court erred in either its evidentiary
admissions or factual findings and, discerning no error, affirm the
court's judgment.
I.
Plaintiff-appellant Gallo Motor Corporation ("Gallo")
became a dealer for defendant-appellee Mazda Motor of America, Inc.
("Mazda") in 1994, when Gallo acquired an existing Mazda dealership
on Shrewsbury Street in Worcester, Massachusetts. Gallo management
decided to purchase the franchise despite its awareness of other
Mazda dealers in the area.
Like all new Mazda franchisees, Gallo was assigned a
specific geographic area called a Statistical Observation Area
("SOA"). Mazda uses the SOA to monitor its dealers' performances.
By comparing new vehicle registrations in each SOA with industry-
wide benchmarks (such as Mazda's national and regional market
shares), Mazda is able to determine whether sales in a particular
SOA are above or below average. Gallo's assigned SOA encompassed
all of Worcester and neighboring Shrewsbury, Massachusetts.
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At the time Gallo purchased the franchise, Mazda's sales
in the Worcester-Shrewsbury SOA were below the national and
regional averages. Because Mazda believed that the poor location
of the Shrewsbury Street dealership (in Worcester) was at least
partially to blame for the substandard sales, it conditioned its
approval of the Gallo franchise on Gallo's agreement to relocate
the dealership from Shrewsbury Street to Gold Star Boulevard (also
in Worcester). Gallo agreed to an eventual relocation.
In 1997, approximately three years after Gallo began
operating the Shrewsbury Street dealership but prior to its
relocation, Mazda commissioned market studies to evaluate more than
80 of its metropolitan market areas throughout the country. These
studies were part of a "dealer revitalization program," which was
designed both to eliminate dealers with poor performance records
and to maximize the efficiencies of the remaining dealerships.
Based on market data from 1994 through 1997, the studies
revealed that the greater Worcester area, which encompasses Gallo's
Worcester-Shrewsbury SOA as well as the neighboring Westborough
SOA, was not performing at an optimal level. At the time of the
studies, this area contained three dealerships: Gallo, North End,
and Roy Rioux. A report accompanying the studies cautioned that,
while three dealerships were sufficient for the area, all three
dealerships needed to achieve superior sales and service records if
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Mazda was to achieve its expected market share in the greater
Worcester area.
In 1998, the number of Mazda dealerships in the greater
Worcester area decreased from three to two when Roy Rioux closed
its doors. Located on Route 9 in Westborough, Massachusetts, the
former Rioux dealership was approximately 7.6 miles away from
Gallo's Shrewsbury Street facility in Worcester. Unable to find an
acceptable buyer for the Rioux facility, Mazda quickly began
searching for a new dealership to service the Westborough area.
After considering a number of factors, including the 1997
greater Worcester area market study, Mazda's management determined
that a new dealership on Route 9 would lead to greater market
penetration in the Westborough SOA. Accordingly, in late 1998,
Mazda entered into an agreement with Ford Motor Company to
establish a joint Lincoln-Mercury/Mazda dealership ("MetroWest") on
Route 9 in Shrewsbury, just over the Westborough town line.
Meanwhile, in March 1999, Gallo relocated from Shrewsbury Street to
Gold Star Boulevard in Worcester pursuant to its franchising
agreement with Mazda.
On August 16, 1999, three months after Gallo's move,
Mazda notified Gallo by certified mail of its intention to
establish a new dealership "at the Southwest corner of Route 9 and
Walnut Street in Westborough, Massachusetts" (emphasis added).
Although the letter's description provided an accurate street
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address, it incorrectly identified the new dealership's site as
Westborough instead of Shrewsbury. Based on this defective letter,
Gallo management assumed that the new dealership was effectively
replacing the former Rioux dealership in Westborough. Accordingly,
it neither objected nor inquired further.
With no pending protests, Mazda and Ford proceeded with
their plans to establish the MetroWest dealership. At completion,
the $3.8 million facility –- located approximately 6.5 miles away
from Gallo's Gold Star Boulevard dealership in Worcester –- was
entirely Ford-owned.
In March 2001, just a few months prior to MetroWest's
grand opening, Gallo management discovered that the joint
dealership was located in Shrewsbury -– not Westborough.
Management immediately contacted Mazda's Regional General Manager
to express concern. On June 21, 2001, Gallo's counsel sent Mazda
a letter complaining about both the establishment of the MetroWest
dealership and Mazda's failure to provide Gallo with the notice
required by Massachusetts law. On July 13, 2001, Mazda's counsel
responded with a corrected notice letter, which confirmed Mazda's
intention to proceed with the MetroWest dealership.
Gallo thereafter filed a diversity action in federal
district court, alleging violations of Massachusetts' so-called
"Dealer's Bill of Rights." See Mass. Gen. Laws ch. 93(B) (amended
2002). Specifically, Gallo claimed that Mazda's MetroWest decision
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was arbitrary and that Mazda had failed to provide adequate notice
of its decision. The pertinent text of the statute, as it existed
at the time of trial, is reproduced below.
[It is a violation for a manufacturer]
arbitrarily and without notice to existing
franchisees . . . 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 selling agreement
to conduct its dealership operations from a
place of business situated within the relevant
market area of an existing franchisee . . . .
...
Any manufacturer . . . which intends to grant
or enter into an additional franchise or
selling agreement, shall, at least sixty days
prior to granting such franchise or entering
into such agreement, give written notice of
its intention to do so to each motor vehicle
dealer with a franchise or selling agreement
covering the same line make within a twenty
mile radius of the location where the business
of the proposed franchise will be located.
Such notice shall state the date on or after
which such proposed franchise shall be granted
or entered into.
...
In determining whether such proposed
appointment is arbitrary, the court shall
consider all pertinent circumstances. These
may include but are not limited to: [a list of
eight lengthy statutory factors].1
1
As summarized by the district court, these factors include
"(i) the economic justification for the new franchise; (ii) the
record of the objecting dealer, and other dealers in the area, in
exploiting the relevant market; (iii) the investment in their
franchises of the objecting dealer and other dealers in the
relevant market area; (iv) the permanency of the investment of such
dealers in the relevant market area; (v) whether the proposed
dealership serves the public interest; (vi) whether such dealers
provide adequate competition and convenient customer care; (vii)
whether such dealers offer satisfactory facilities, equipment,
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Mass. Gen. Laws ch. 93(B), § 4(3)(l) (amended 2002).
During the five-day bench trial, Gallo sought to prove
the arbitrariness of Mazda's decision by arguing, inter alia, the
presence/absence of the statutory factors. Gallo also asserted
that Mazda's decision was influenced more by Ford's participation
in the MetroWest facility –- in particular, Ford's financing -–
than by any rational weighing of the pros and cons.
Unconvinced, the district court entered judgment for
Mazda. See Gallo Motor Ctr. Corp., 204 F. Supp. 2d at 150, 156.
After considering "all pertinent circumstances," see id. at 151
(quoting Mass. Gen. Laws ch. 93(B), § 4(3)(l) (amended 2002)),
including several of the eight statutory factors, the court found
that "Gallo has not sustained its burden of demonstrating [by a
preponderance of the evidence] that Mazda's establishment of the
MetroWest dealership is arbitrary[;] [t]o the contrary, Mazda's new
dealership promotes competition which, in turn, benefits the public
interest." Id. at 156. Regarding Gallo's claim that Mazda
provided inadequate notice of its MetroWest decision, the court
found that "[although] the notice given by Mazda on August 16, 1999
was defective and inadequate[,] [i]ts subsequent letter of July 13,
vehicle parts and qualified personnel; and (viii) whether the
establishment of an additional franchise would increase competition
and therefore be in the public interest." Gallo Motor Ctr.
Corp. v. Mazda Motor of Am., Inc., 204 F. Supp. 2d 144, 151 (D.
Mass. 2002) (citing Mass. Gen Laws ch. 93(B), § 4(3)(l) (amended
2002)).
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2001 was . . . effective statutory notice pursuant to Chapter 93B."
Id. at 150.
This appeal followed.
II.
Essentially, we are presented with two broad questions:
(1) whether the district court improperly admitted and considered
certain evidence; and (2) whether, as a result of improperly
weighing the evidence, the district court erred in its factual
findings.
Given these separate questions, two standards of review
apply.2 First, we review a district court's decision to admit
evidence for abuse of discretion. See Larch v. Mansfield Mun.
Elec. Dept., 272 F.3d 63, 72 (1st Cir. 2001); see also United
States v. Davis, 261 F.3d 1, 42 (1st Cir. 2001) ("A trial court
enjoys considerable discretion in connection with the admission or
exclusion of evidence."). Second, we review findings of fact for
clear error. See Fed. R. Civ. P. 52(a); Persson v. Scotia Prince
Cruises, Ltd., 330 F.3d 28, 31 (1st Cir. 2003). Under the clear-
error standard, "we will give . . . [factual] findings effect
unless, after carefully reading the record and according due
deference to the trial court, we form a strong, unyielding belief
2
To the extent that answering these questions first requires
an interpretation of the relevant statute, we shall provide a de
novo reading. See Blockel v. J.C. Penney Co., Inc., 337 F.3d 17,
29 (1st Cir. 2003).
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that a mistake has been made." Windsor Mount Joy Mut. Ins. Co. v.
Giragosian, 57 F.3d 50, 53 (1st Cir. 1995) (citation and internal
quotation marks omitted).
A. Evidentiary Admissions
Gallo contends that the district court improperly
admitted and considered (1) Mazda's 1997 market study, (2) a report
authored in 2002 by a Mazda expert, and (3) evidence of Gallo
management's state of mind. We find no abuse of discretion.
(1) The 1997 Market Study
According to Gallo, "[t]he plain language of [Mass. Gen.
Laws ch.] 93(B), § 4(3)(l) renders Mazda's 1997 . . . market study
obsolete and unworthy of consideration." For support, Gallo looks
to one of the eight non-exhaustive statutory factors that a court
may consider when determining arbitrariness:
the retail sales and service business
transacted by the . . . dealers with a place
of business in the market area to be served by
the additional franchisee during the three
year period immediately preceding [the notice
required by this statute].
Mass. Gen. Laws ch. 93(B), § 4(3)(l)(ii) (emphasis added). Because
the 1997 study was based on data that existed outside this three-
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year window,3 Gallo argues that it should have been excluded as
irrelevant.
Gallo's argument misses the mark. As the district court
correctly noted, the eight statutory factors are neither exhaustive
nor definitive. We need not even resort to case law for support;
the statute is unambiguous. "In determining whether [the
establishment of the new dealership] is arbitrary, the court shall
consider all pertinent circumstances. These may include but are
not limited to [the eight factors]." Id. § 4(3)(l) (emphases
added). So while we agree with Gallo that the statutory language
is "plain," we disagree with Gallo's interpretation of it.
The statutory language is sufficiently broad to permit
the admission of the 1997 market study. "All pertinent
circumstances" means all pertinent circumstances. That a
particular piece of evidence does not fall within the purview of a
particular factor in a non-exhaustive statutory list is not a sound
basis for objecting to its admissibility. Although Gallo did not
receive its formal statutory notice until 2001, Mazda had made its
MetroWest decision two years earlier, as evidenced by the defective
notice letter dated August 16, 1999. Mazda's decision was
partially based on the 1997 study –- a major market study
3
As discussed above, the district court held that, while
Mazda's initial notice on August 16, 1999, was defective,
effective notice was given on July 13, 2001. Therefore, for
purposes of Gallo's argument, the critical dates are July 13, 1998
through July 13, 2001.
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commissioned for the purpose of evaluating Mazda's businesses and
business opportunities. The results of this study are not only
"pertinent" to an arbitrariness inquiry, they are important.
Accordingly, the court did not abuse its broad discretion in
determining that the 1997 study was relevant to an arbitrariness
inquiry. See United States v. Brandon, 17 F.3d 409, 444 (1st Cir.
1994) (noting that the district court has broad discretion in
making relevancy determinations).
(2) The 2002 expert report
Next, Gallo asserts that Mazda's 2002 expert report was
an "after-the-fact justification" for the MetroWest facility that
should have been excluded.4 For support, Gallo cites two cases,
each of which involves a lawsuit that closely parallels this one.
See Ricky Smith Pontiac, Inc. v. Subaru of New England, Inc., 440
N.E.2d 29 (Mass. App. Ct. 1982); Richard Lundgren, Inc. v. Am.
Honda Motor Co., Inc., 1994 WL 879478 (Mass. Super. 1994).
Neither case controls. In both cases, the court found
arbitrariness despite the assembly of after-the-fact market data --
not because of it. In Ricky Smith, the court noted that the
factfinder "could . . . consider the absence of careful
consideration or relevant data at the time the [franchising]
appointment was made as evidence that the . . . franchise was
4
The report concluded, inter alia, that the addition of the
MetroWest dealership was justified.
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arbitrarily granted, despite [the manufacturer's] assembly, after
the fact, of information which tended to support its actions." 440
N.E.2d at 43 (emphases added). Similarly, in Richard Lundgren,
the court found that, while witnesses for the manufacturer "have
strived diligently to assemble after-the-fact market data in an
attempt to support its action, . . . the intended creation of a new
dealership . . . was not based on any careful consideration of
relevant market data at the time, and was hence arbitrary." 1994
WL 879478, at *5 (emphasis added). Neither case held that after-
the-fact data must be excluded or that a manufacturer must conduct
a contemporaneous market study.
Here, the district court considered several pieces of
evidence, most of which involved pre-MetroWest data.5 Mazda, of
course, could not have based its 1999 MetroWest decision on the
2002 expert report. Such a report, then, merely serves as
additional relevant evidence supporting Mazda's decision –- a
decision that was based on "careful consideration of relevant
market data at the time." See id. An after-the-fact study is not
per se irrelevant to the court's analysis of arbitrariness because,
as here, it can provide an account of the "pertinent circumstances"
that the court is statutorily required to consider. Accordingly,
5
Mazda based its decision on, inter alia, the 1997 market
study, the closure of the Rioux dealership, and the need to improve
its market share.
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the district court did not abuse its discretion in admitting this
expert report.
(3) The State-Of-Mind Evidence
In its final attack on the admissibility of evidence,
Gallo asserts that the district court improperly admitted evidence
of Gallo management's "state of mind." At issue is the following
statement by the court:
[Gallo] has consistently voiced no
objection to the introduction of a
dealership in Westborough, the Town in
which the Roy Rioux dealership was
located, because it is sufficiently
removed from [the Gallo] dealership [so
as] to pose little competitive threat.
. . . Notwithstanding the perceived
difference between Shrewsbury and
Westborough, [management's] lack of
concern about a Westborough competitor
seriously undercuts [its] claim that
Mazda's decision to establish MetroWest
was arbitrary.
Gallo, 204 F. Supp. 2d at 155.
According to Gallo, the "all pertinent circumstances"
language in the statute "does not extend to evidence which is
directly contrary to the statute's intent." Seeking de novo
review, Gallo argues that, because the eight statutory factors
emphasize public interest concerns and objective evidence, evidence
as to management's state of mind is irrelevant "to the objective
examination of the benefit or detriment that the new dealership
will pose to the consuming public."
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We are not convinced. As discussed above, the broad
language in the statute permits a court to consider a wide range of
factors –- public and private, objective and subjective, statutory
and non-statutory -– when making its determination of
arbitrariness. Cf. Ricky Smith, 440 N.E.2d at 43 (noting that,
given the language of Mass. Gen. Laws ch. 93(B), the lower court
"could have properly considered [the manufacturer's] conduct prior
to [the new dealership's] appointment as manifesting indifference
to the statute and to the impact that the new dealer would have on
existing franchisees").
In failing to object to the proposed Westborough site (as
erroneously noted in the 1999 notice letter), Gallo management
undermined its subsequent position that MetroWest's actual
Shrewsbury location was arbitrary. See Gallo, 204 F. Supp. 2d at
155. This evidence, itself a "pertinent circumstance," is further
supported by several other "pertinent circumstances": (1) the close
proximity of MetroWest to the Westborough border (less than one-
half mile), id.; (2) the fact that MetroWest's actual Shrewsbury
location is only one mile closer to Gallo's Gold Star dealership
than the former Rioux dealership was to Gallo's initial Shrewsbury
Street dealership, id.; and (3) the testimony of Gallo management
that, in its opinion, the greater Worcester market area was not
"overdealered" when it purchased the Shrewsbury Street franchise
(despite the presence of the Rioux dealership). Given all these
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"pertinent circumstances," the district court did not abuse its
discretion when it considered relevant evidence of Gallo
management's failure to object.
B. Factual Findings
Gallo next contends that the district court (1)
improperly focused on evidence of Mazda's market share to the
neglect of other statutory factors, (2) improperly assessed Gallo's
performance in the Westborough market instead of the Worcester
market, (3) improperly construed Gallo management's state of mind,
and (4) improperly weighed Ford's participation in the MetroWest
decision. We find no clear error.
(1) The Market-Share Evidence
Gallo claims that the district court clearly erred when
it "focus[ed] on Mazda's market share without [giving] sufficient
consideration to other [statutory] factors." Arguing that the
district court's findings were against the weight of the evidence,
Gallo asserts that the district court gave too little weight to the
"voluminous factual and expert evidence" regarding, inter alia, the
adequacy of its facilities and the substantial amount and permanent
nature of its investment.
We disagree. As the district court explained in its
thorough opinion,
[t]he factors constituting the calculus of
arbitrariness are neither exhaustive nor
definitive. The statute pointedly directs a
court to consider all pertinent circumstances.
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By implication, courts need not perform a
mechanical analysis of all the elements that
may have bearing upon whether the
establishment of a proposed dealership is
arbitrary. Common sense, experience and
expert opinion may properly serve as
guideposts in th[e] [c]ourt's arbitrariness
analysis.
Gallo, 204 F. Supp. 2d at 151 (internal citation omitted).
Further, as this Court has explained,
in a jury-waived case, appellate courts cannot
presume to decide factual issues anew. . . .
If the district court's account of the
evidence is plausible in light of the record
reviewed in its entirety, the court of appeals
may not reverse it even though convinced that
had it been sitting as trier of fact, it would
have weighed the evidence differently.
Cumpiano v. Banco Santander Puerto Rico, 902 F.2d 148, 152 (1st
Cir. 1990) (internal citation omitted). Here, because the market-
share statistics were reliable and telling indicators of Mazda's
below-average performance in the region, we are not at all
convinced that we even would have weighed the evidence differently.
Accordingly, we discern no clear error.
(2) The Assessment of Gallo's Performance
In its written opinion, the district court stated that
the "thorny question is . . . whether Mazda's existing dealership
network, without the MetroWest site, adequately serves the
Westborough area . . . ." Gallo, 204 F. Supp. 2d at 154 (emphasis
added). Gallo argues on appeal that, because the new MetroWest
facility was established to serve the Worcester market, the statute
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requires the court to evaluate the arbitrariness of the MetroWest
decision in terms of whether or not Gallo and other Mazda dealers
were adequately serving the Worcester market –- not the
"Westborough area." For support, Gallo notes that five of the
eight statutory factors refer to "the market area to be served by
the additional franchisee." See Mass. Gen. Laws ch. 93(B),
§ 4(3)(l)(ii)-(iv), (vi)-(vii). Further, Gallo seeks de novo
review of this particular question "since the interpretation of
[Chapter 93B] is an issue of law" and "the plain language of the
statute does not contemplate or sanction this [']thorny
question[']."
Irrespective of the standard of review that ought to
apply, we discern no basis for reversing because of this finding.
Given Gallo's previous position on the relevant market, which it
now abandons, our finding should come as no surprise. At trial,
Gallo's own expert testified that the area to be served by the
MetroWest dealership was the combined SOAs of Gallo and the "add-
point," which includes Westborough. Moreover, Gallo's expert not
only testified that the Worcester and Westborough markets were
linked historically, he also presented an analysis based on an
opinion that the two markets ought to be considered together.
While not dispositive, this evidence is telling because it
indicates that, at least at trial, Gallo believed an accurate
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assessment of its performance would require an inquiry into markets
other than just Worcester.
The district court was thorough in its analysis; in
determining arbitrariness, it considered Mazda's sales performance
in both the Westborough and Worcester markets. See Gallo, 204 F.
Supp. 2d at 152 ("Although experts continue to debate the proper
performance benchmark, it is clear that Mazda's sales performance
in the Worcester-Shrewsbury SOA was inadequate from 1998 to the
present. Moreover, Mazda was not performing at expected levels in
the [Westborough SOA]."). That the Westborough analysis was "the
thorny question" indicates only that, for lack of a better phrase,
one determination was "thorn[ier]" than the other.
(3) The interpretation of Gallo management's state of mind
Having anticipated that this Court might reject its
argument as to the inadmissibility of state-of-mind evidence, Gallo
invites us to accept its fallback position: "Even if [Gallo
management's state of mind was] relevant, the [d]istrict [c]ourt
misunderstood the testimony on this point." As indicated earlier,
Gallo takes issue with the following statement:
[Gallo] has consistently voiced no
objection to the introduction of a
dealership in Westborough, the Town in
which the Roy Rioux dealership was
located, because it is sufficiently
removed from [the Gallo] dealership [so
as] to pose little competitive threat.
. . . Notwithstanding the perceived
difference between Shrewsbury and
Westborough, [management's] lack of
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concern about a Westborough competitor
seriously undercuts [its] claim that
Mazda's decision to establish MetroWest
was arbitrary.
Gallo, 204 F. Supp. 2d at 155. Gallo posits that, contrary to the
findings of the district court, an objection was not made because
a new dealership in Westborough would have provided "enough space
to compete equally."
Gallo's argument fails for two reasons. First and
foremost, no discrepancy exists between the district court's
findings and the position advocated by Gallo on appeal. Second,
even if a discrepancy exists, there is no clear error. Given the
evidence and the deferential standard of review, Gallo cannot
establish reversible error in the court's refusal to accept that,
while a MetroWest dealership on Route 9 in Westborough would be
unobjectionable, a MetroWest dealership on Route 9 that is only
one-half mile away from the Westborough town line makes all the
difference in terms of competition.
(4) Ford's Participation
In a final attempt to establish clear error, Gallo
asserts that "the district court overlooked the participation of
Ford Motor Company in the new dealership." According to Gallo,
"[t]he absence from the [d]istrict [c]ourt's Memorandum of Decision
of Ford's silent but ominous presence in this case is [evidence of]
clear error in that it [shows that the district court] overlooked
certain important, and undisputed, facts."
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We reject Gallo's argument. Standing alone, the fact
that a judicial opinion neglects to mention a particular piece of
evidence is no proof that the court failed to consider it. "[I]t
is the very essence of the trial court's function to choose from
among the competing and conflicting inferences and conclusions that
which it deems most reasonable." Evans v. United States, 319 F.2d
751, 755 (1st Cir. 1963) (citation omitted). The district court's
careful opinion in this case gives us every reason to suppose that
the court carefully weighed all the evidence before coming to its
decision.
III.
For the reasons stated above, the judgment of the
district court is affirmed.
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