United States Court of Appeals
For the First Circuit
No. 03-1586
COADY CORP., d/b/a 495 TOYOTA,
Plaintiff, Appellant,
v.
TOYOTA MOTOR DISTRIBUTORS, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Nathaniel M. Gorton, U.S. District Judge]
Before
Boudin, Chief Judge,
Lourie* and Lynch, Circuit Judges.
Evan T. Lawson with whom J. Mark Dickison, Robert J.
Roughsedge, Michael Williams, Nicole L. Johnson and Lawson &
Weitzen, LLP were on brief for appellant.
Daniel L. Goldberg with whom David Yamin, Justin M. O'Sullivan
and Bingham McCutchen LLP were on brief for appellee.
March 18, 2004
*
Of the Federal Circuit, sitting by designation.
BOUDIN, Chief Judge. This is an appeal from the judgment
of the district court rejecting claims by Coady Corporation
("Coady") against Toyota Motor Distributors, Inc. ("Toyota").
Toyota is the regional arm of Toyota Motor Sales USA, Inc., a
national distributor of Toyota Motor Vehicles; Coady, doing
business as 495 Toyota and owned by Kevin Coady, is a Toyota dealer
based in Milford, Massachusetts. Much of the dispute revolves
around Coady's access to new vehicles from Toyota.
Toyota, like other major distributors, supplies a large
number of dealers; in its "Boston region," which includes most of
New England, there are about 71 dealerships, each with its own
primary market area. However, other dealers are free to compete
with Coady, and Coady with them. Coady's nearest competitor is
Bernardi Toyota, which is based closer to the Boston metropolitan
area. Boch Toyota is another competitor, and its primary market
area adjoins Coady's.
Coady has been a Toyota dealer since 1977 and, for most
of the period, operated under the standard Toyota dealer agreement.
Among other things, the agreement obligates Toyota to explain its
vehicle distribution methods to dealers, to use its best efforts so
dealers can meet their own obligations under the agreement, and to
allocate vehicles in a fair and equitable manner as determined by
Toyota. Statutes impose additional and more detailed obligations
on Toyota, as we discuss below.
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Until February 1999, Coady mostly operated under six-year
agreements, and, for part of its tenure was not apparently a
successful dealer, which Coady says resulted from his unfair
treatment by Toyota. When the last of these six-year agreements
expired in 1999, Toyota--unhappy with Coady's performance and
acting against a background of quarrels between Coady and local
Toyota managers-–offered Coady only a two-year extension. The
proposed new agreement contained a non-standard provision requiring
Coady to maintain 100 percent or better "retail sales efficiency"--
a measurement used by Toyota for which 100 percent is supposed to
represent average dealer sales performance in the region.
When the 1999 agreement expired in 2001, Toyota again
offered a new two-year agreement, even though Coady's efficiency
rating had fallen to under 40 percent. The proposed new agreement
retained the unenforced 100 percent sales efficiency requirement.
It also proposed new requirements that Coady maintain a debt to
equity ratio of no more than 1:1 and renovate the interior of its
dealership. Coady declined to sign the new agreement and has
instead operated under month-to-month extensions of its franchise.
In the meantime, Coady filed the present lawsuit in
November 1997, against Toyota asserting a host of claims under
federal and state law, including federal antitrust claims, 15
U.S.C. § 1 (2000), claims under the federal Automobile Dealers' Day
in Court Act, 15 U.S.C. §§ 1221-1225 (2000), and claims under the
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so-called Massachusetts "Dealer's Bill of Rights", Mass. Gen. Laws
ch. 93B ("chapter 93B").
In due course, the district court dismissed certain of
the claims, allowed Coady to expand its complaint and then denied
cross-motions for summary judgment. Beginning on January 13, 2003,
the district court held a jury-waived trial, comprising eight days
of testimony. On April 14, 2003, the district court filed a
detailed decision over 50 pages rejecting on the merits all of the
Coady claims, and Coady now appeals.
On this appeal, Coady's main claims are directed at a set
of practices or occurrences that, in Coady's view, represent
violations of chapter 93B as it stood prior to recent amendments.1
Coady also presses claims for breach of contract. Our review of
the district court's decision is for clear error as to its findings
of fact and de novo as to questions of law, Fed. R. Civ. P. 52;
Liberty Mut. Ins. Co. v. Nippon Sanso K.K., 331 F.3d 153, 158 (1st
Cir. 2003); as to questions of characterization, the standard is
more complex. See note 3 below.
As its primary method of allocating vehicles--the so-
called "balanced day's supply method"--Toyota allocates vehicles to
dealers once every two weeks (usually at the beginning and middle
of the month); the method uses a formula that assigns available
1
Chapter 93B was amended in 2002, see 2002 Mass. Legis. Serv.
222 (West), but both sides agreed that the pre-amendment version
controls and our citations throughout are to that version.
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vehicles in the region based upon each dealer's inventory and
recent sales volume. The method does not simply replace vehicles
sold on a one-to-one basis but rewards past sales performance, so
that successful dealers do better than unsuccessful ones.
In the first instance, the system relies upon self
reporting. For each sale, the dealer inputs the sale information--
including the vehicle identification number and the name and
address of the customer--into a computer network that informs
Toyota of the sale. When supplies are tight and stock can be
easily sold, as was true for much of the 1990s, there is some
incentive for dealers to misreport in the hope of increasing new
inventory.
Coady did offer evidence that its competitors had
misreported sales and Toyota was aware of the problem although the
precise effect on Coady is uncertain. How many inaccurate reports
are required to affect the allocation and how much of an effect
inaccurate reports produce is hard to summarize. Some evidence at
trial suggested that for Coady to be deprived of a single Toyota
Camry it would take 100 inaccurately reported Camry sales by other
dealers in the region during a two-week period.
Toyota monitors the accuracy of the reporting by
comparing the sales reports it receives from dealers with the
registration data provided by the R.L. Polk Company--apparently a
widely used automotive information and statistical reporting
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service. When the two reports do not match for a feature such as
the customer's name or address Toyota labels this a "no-match".
No-matches can reflect either innocent reporting errors or
intentional false reporting by the dealer. All dealers, including
Coady, incur no-matches from time to time. Coady's position at
trial was that deliberately false reporting was widespread and
known to Toyota.
At trial, Coady claimed that Toyota's tolerance of false
reporting by its competitors violated chapter 93B. The statute
makes unlawful "[u]nfair methods of competition and unfair or
deceptive acts or practices," Mass. Gen. Laws. ch. 93B, §
3(a)(2001), and then lists specific forbidden practices. See Tober
Foreign Motors, Inc. v. Reiter Oldsmobile, Inc., 381 N.E.2d 908,
911-12 (Mass. 1978). Pertinently, section 4(3)(a) makes it a
violation for a distributor
to adopt, change, establish or implement a
plan or system for the allocation and
distribution of new motor vehicles to motor
vehicle dealers which is arbitrary or unfair
or to modify an existing plan so as to cause
the same to be arbitrary or unfair.
Mass. Gen. Laws. ch. 93B, § 4(3)(a) (2001) (emphasis added).
Relying on dictionary definitions and case law relating
to a New Hampshire statute similar to chapter 93B, see N.H. Auto.
Dealers Ass'n, Inc. v. Gen. Motors Corp., 620 F. Supp. 1150, 1157
n.20 (D.N.H. 1985), aff'd in part, vacated in part, 801 F.2d 528
(1st Cir. 1986), the district court held that in this context
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"arbitrary" meant a regime that is "not based in reason and is
implemented in bad faith because of a dishonest purpose." As for
"unfair," the court relied again on the dictionary and a
Massachusetts case, Levings v. Forbes & Wallace, Inc., 396 N.E.2d
149, 153 (Mass. App. Ct. 1979)(addressing Mass. Gen. Laws ch. 93A,
§ 11 (1978)), to limit the term to an allocation plan "based on
inequity, dishonesty and fraud".
Applying this definition to allocation systems, the
district court held that:
In the absence of any claim that Toyota itself
"cut off" Coady's supply of vehicles, in order
to show that Toyota has implemented an "unfair
or arbitrary" allocation system for the
distribution of motor vehicles to Coady
through periodic allocations, Coady must
prove, based on "all pertinent circumstances,"
that Toyota affirmatively facilitated or
encouraged fraudulent sales reporting by
dealers other than Coady. It is insufficient
for Coady to prove that dealers other than
Coady inaccurately reported sales because, to
be "arbitrary or unfair," such inaccurate
sales reporting must be shown to be fraudulent
or dishonest. Nor is it sufficient to prove
that Toyota knew about fraudulent sales
reporting by its dealers but failed to prevent
it.
We think that the district court has made the legal
standard too demanding. Based on ordinary usage, conduct can be
"arbitrary" and perhaps even "unfair" without subjective bad
faith;2 agency action taken without any whiff of dishonesty or
2
Dictionary definitions of "arbitrary" do sometimes include
language referring to "bad faith" or "dishonest purpose", usually
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fraud is commonly so characterized, and overturned, under an
arbitrariness standard.3 True, as the district court said, chapter
93B finds its roots in a concern about "oppressive power" of makers
and distributors, Beard Motors, Inc. v. Toyota Motor Distribs.,
Inc., 480 N.E.2d 303, 306 (Mass. 1985); but such power can be
carelessly as well as wilfully deployed.
Admittedly, the district court's reading of the
arbitrariness standard is supported by a statement of a sister
federal court in New Hampshire construing the same term
("arbitrary") in that state's automobile-dealer statute. Relying
on Black's Law Dictionary, that case held that "arbitrary" was
synonymous with "bad faith or failure to exercise honest judgment."
N.H. Auto. Dealers Ass'n, Inc., 620 F. Supp. at 1157 n.20. But
this 20-year old definition was too narrow even then and was pure
dictum because the district court found that the challenged conduct
accompanying alternative definitions that omit the subjective
element and refer to actions performed in an "unreasonable manner",
"capriciously" or without support. Black's Law Dictionary 104 (6th
ed. 1990); Random House Webster's College Dictionary 70 (1991).
3
See 5 U.S.C. § 706(2)(A) (2000); Motor Vehicle Mfrs. Ass'n of
U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983)(Agency action is arbitrary under the Administrative
Procedure Act "if the agency has relied on factors which Congress
has not intended it to consider, entirely failed to consider an
important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or is
so implausible that it could not be ascribed to a difference in
view or the product of agency expertise.").
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in that case was based on "reasonable business practices"--the same
test that we now endorse. Id. at 1157.
Nevertheless, chapter 93B (as we read it) does not demand
perfection in allocation or warrant a substitution of judicial for
business judgment. A distributor acting honestly is entitled to
latitude in making commercial judgments; and chapter 93B was not
meant to insulate dealers from the ordinary flux of pressure and
striving that is part of a free economy. Am. Honda Motor Co., Inc.
v. Bernardi's, Inc., 735 N.E.2d 348, 354 (Mass. 2000). In this
context, it is only the egregious decision that should be labeled
"arbitrary" or "unfair." Cf. Schott Motorcycle Supply, Inc. v. Am.
Honda Motor Co., Inc., 976 F.2d 58, 63 (1st Cir. 1992).
To us, this means that "[a]n allocation system is not
unreasonable simply because it is possible to subvert it, as long
as reasonable steps are taken to prevent and detect such
subversion." Cabriolet Porsche Audi, Inc. v. Am. Honda Motor Co.,
Inc., 773 F.2d 1193, 1206 (11th Cir. 1985), cert. denied, 475 U.S.
1122 (1986). And "reasonable" does not mean foolproof; there are
costs to every business endeavor, including enforcement, which are
ultimately borne by those who purchase the product.
Here, the district court found as fact that Toyota had
sought to combat dishonest reporting: in addition to making false
reporting a ground for termination and offering periodic education
on proper reporting, Toyota conducted ground stock audits to
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reverse reported sales of vehicles found on lots; adopted a policy
to decrease allocations to dealers found to have "no match" rates
over a fixed percentage; and began to decrease district manager
bonuses for excessive no-match rates in their districts (although
Coady says that this was delayed for two years because of computer
problems).
These findings in turn led the district court to conclude
that "Toyota took reasonable steps at all relevant times to ensure
that sales were reported accurately and to reverse those sales that
were not . . . [and so] ensured that . . . periodic allocations [to
the Boston region] were neither arbitrary nor unfair." This
determination amounts, in substance, to an alternative ruling by
the district court that even if reasonable efforts by Toyota to
check fraudulent reporting were required, Toyota made those
efforts. And, this alternative view--being based on a proper
standard--justifies affirmance, assuming that the finding of
reasonableness is sound.
In substance, Coady's claim is that Toyota long knew of
the problem of false reporting, acted too casually to bring it
under control, and even now does not have anything like a foolproof
system. Coady's evidence describes flaws; Toyota responds by
pointing to its own efforts to monitor and control the problem.
Except by describing each incident and measure in the very
extensive record, there is no way to summarize the ebb and flow.
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In the absence of some sharper standard, the district court had to
make an assessment as to whether Toyota had acted unreasonably.
Applying abstract labels to settled facts is, strictly
speaking, a prescriptive and therefore a legal judgment; but where
the outcome is debatable, some (and often much) deference is
normally afforded to the factfinder's evaluation, because the one
who heard the evidence is closer to the scene and better steeped in
the nuances.4 Affording such deference to the district court's
ultimate conclusion and considering the latitude the statute
permits to business managers, we cannot say that the district judge
was wrong.
A second set of chapter 93B claims by Coady, relating to
allocation, concerns "turndowns." Dealers including Coady do not
accept every vehicle earned in a periodic allocation, and each
region has its own method of reallocating such rejected vehicles.
In the Boston region, turndowns are first offered to dealers within
the same district where they were originally assigned, and if
4
In re Spadoni, 316 F.3d 56, 58 n.1 (1st Cir. 2003); Jackson
v. United States, 156 F.3d 230, 232 (1st Cir. 1998); In re
Extradition of Howard, 996 F.2d 1320, 1328 (1st Cir. 1993)
(degree-of-deference continuum). There are exceptions to the
affording of deference--none here relevant--based on history (e.g.,
contract interpretation, see Principal Mut. Life Ins. Co. v.
Racal-Datacom, Inc., 233 F.3d 1, 3 (1st Cir. 2000)) and policy
(e.g., Fourth Amendment, see Ornelas v. United States, 517 U.S.
690, 697-98 (1996)).
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unclaimed they are offered to all dealers in the region as "port
stock" (a subject to which we will return).
Coady's first claim regarding the turndowns was that this
system of allocation is "arbitrary or unfair" because Coady's two
main competitors, Bernardi and Boch, are part of a contiguous but
separate district with more turndowns, so they have access to
turndowns that Coady does not. The district court rejected this
contention, finding that the current method of allocating turndowns
is employed because it allows for rapid, low-
cost distribution of turndowns based on an
individualized assessment of each dealer's
needs. It is deemed more efficient to
distribute turndowns in this manner rather
than to group all Region-wide turndowns
together and distribute them through a second
[balanced day's supply method] allocation as
was done between 1989 and 1991.
The choice not to allocate turndowns region-wide had a
plausible business rationale; indeed, Toyota had experimented with
region-wide allocation of turndowns between 1989 and 1991 before
changing to the current system. Every system has pluses and
minuses, and a fair allocation system does not mean one without
wrinkles. Nothing in Coady's showing on this issue causes us to
second guess the district court's assessment.
Coady's second turndown complaint stems from the failure
of Toyota to have a written policy on turndowns. This is not
itself arbitrary or unfair but, as the district court noted, "the
turndown allocation system depends, to some extent, upon each
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district manager's discretion in offering vehicles to the dealers,"
and the court found that this discretion had been abused on at
least one occasion when then district manager Andrew Brody reduced
Coady's access to desirable turndowns due to some bad blood between
Brody and Coady. However, an occasional abuse does not
automatically require a more formal or rigid policy. As to the
incident itself, the district court found that Coady had not
offered evidence of specific damages arising from the incident.5
The vehicles rejected in the turndown process fall into
what is known as "port stock"--vehicles available to all dealers in
the region. Toyota informs dealers about the vehicles it has in
port stock by fax and dealers may claim those vehicles on a "first
come, first served" basis. Coady says that Toyota was arbitrary
because it sent such notices by fax and not e-mail, listing Coady
last on the fax list. Coady does not quantify the effect and, at
least in these circumstances, chapter 93B does not require this
kind of micro-management by courts.
Next, in a further attack on Toyota's fairness in
allocation, Coady complains about (again relying upon chapter 93B)
5
Coady did offer expert damage evidence based primarily on a
study of how the balanced day's supply regime would, if unflawed by
dishonest reporting, have given Coady more vehicles; but, at least
on appeal, Coady points to no evidence as to damages from
individual events such as dispute with Brody. The district court
did not credit Coady's main damage evidence but, as Coady itself
recognizes, the court's main holding on the fraudulent reporting
issue rested on lack of a violation.
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Toyota's "market representation vehicle support program." Under
this program, a dealer can earn extra vehicles by becoming an
exclusive Toyota dealership, by installing qualifying branding
signs or by making improvements in new or modernized facility
improvements. To qualify for the program, dealers must document
their expenditures.
Coady says that Toyota failed to provide thirty vehicles
under the program after Coady spent $200,000 on qualifying
improvements to its facility in 1994, even though Toyota awarded
more than 900 vehicles to Bernardi for qualified improvements. The
key difference was that Coady, unlike Bernardi, failed to provide
receipts to Toyota to verify its construction expenditures, which
was a prerequisite under the program. Coady says he was relieved
of this obligation by Toyota but the district court did not credit
this claim, and on appeal Coady is silent on this point. Mass.
Sch. of Law at Andover, Inc. v. Am. Bar Ass'n, 142 F.3d 26, 43 (1st
Cir. 1998).
Finally, under Toyota's allocation regime, its general
manager in the region can distribute up to 10% of the cars and 15%
of the trucks to dealers at his discretion in order to help dealers
meet specific inventory and customer needs. This group of vehicles
is not included in the pool subject to the semi-monthly formula
periodic allocations. Before 1998 but not after, the percentage
limitations on this general manager's pool included any vehicles
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distributed under the market representation vehicle support
program.
On appeal Coady argues (again relying upon chapter 93B)
that the change in 1998 undermined the semi-monthly formula
allocations because there is no limit to the number of vehicles
that can be assigned under the Support Program. In principle, a
very large number of assignments under the latter program might
leave few, if any, for distribution by formula. But the district
court found there was no evidence that any such distorting had
occurred. Coady offers no answer to this finding, which seems to
us preclusive on the principle of "no harm, no foul."
Coady argues that the same deficiencies in allocation
already discussed--in particular, Toyota's failure to prevent fraud
by other dealers--violated its standard agreement with Coady and so
gave rise to contract claims as well as claims under chapter 93B.
The standard agreement, in section XIII(B), does require Toyota to
use its "best efforts" to provide dealers vehicles required to
fulfill the dealer's obligations under the contract and to
"endeavor to allocate" vehicles "in a fair and equitable manner,
which it shall determine in its sole discretion."
This language is on its face less helpful to Coady than
the standard set forth in chapter 93B. "Best efforts" is
implicitly qualified by a reasonableness test--it cannot mean
everything possible under the sun, see Macksey v. Egan, 633 N.E.2d
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408, 413 & n.16 (Mass. App. Ct. 1994)--and the "own discretion"
proviso is clearly more qualified than chapter 93B. Coady provides
no reason to suppose that allocation system claims that have failed
under the statute should prevail under the contract, so no more
need be said about this contract-claim perspective.
This brings us to a claim by Coady arising under a
different provision of chapter 93B which makes it a violation of
section 3 for a distributor to refuse a written request by a dealer
to disclose the basis on which the distributor allocates vehicles
in Massachusetts and to the dealer in question. Mass. Gen. Laws.
ch. 93B, § 4(3)(b) (2001). At trial Coady said that Toyota had
failed adequately to respond to Coady's written request for
information about how the general manager's pool operated and the
number of vehicles.
The district court faulted Coady for not offering
evidence of written requests having focused instead on oral
requests, but we bypass this issue. This is because the district
court also found that even if Toyota had not responded adequately
to one written request, no damages had been proved, see note 4
above, and Coady had not requested "any other relief" on this
issue. On appeal, Coady complains that the evidence did show a
written request but offers no counter to the alternative ground.
Still another subsection of chapter 93B is in issue.
Coady claimed and the district court found that Toyota had in some
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cases offered desirable turndowns to dealers on condition that they
accept less desirable turndown vehicles as well--a practice that
antitrust lawyers would call "tying." Tying is not automatically
unlawful under the antitrust laws (new shoes contain laces), e.g.,
Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 11-12
(1984); Borschow Hosp. & Med. Supplies, Inc. v. Cesar Castillo
Inc., 96 F.3d 10, 17-18 (1st Cir. 1996); but chapter 93B--a
catalogue of practices disliked by dealers--includes a precise and
seemingly unconditional ban on such tying of vehicles provided to
dealers. Mass. Gen. Laws. ch. 93B, § 4(2)(a) (2001).
On this appeal, Coady does not identify any specific
damages linked to such violations but complains that the district
court ought to have granted an injunction against continuation of
the practice. The difficulty is that the district court found that
Toyota "has not engaged in that practice with Coady since at least
1998"--several years before the trial. Given the time gap and the
absence of any other indication that Toyota would repeat this
practice, the denial was within the district court's discretion.6
This brings us finally to a set of issues that relate
primarily to the renewal of Coady's contract with Toyota and to yet
6
Generally, review of the denial of the injunction is for
abuse of discretion. Aponte v. Calderón, 284 F.3d 184, 191 (1st
Cir.), cert. denied, 537 U.S. 886 (2002). "In shaping equity
decrees, the trial court is vested with broad discretionary power;
appellate review is correspondingly narrow." Lemon v. Kurtzman,
411 U.S. 192, 200 (1973); Griffin v. Burns, 570 F.2d 1065, 1079
(1st Cir. 1978).
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another provision of chapter 93B. Under section 4(3)(e), it is a
violation to cancel or refuse to extend a franchise upon expiration
"without good cause" or to offer, "arbitrarily and without good
cause," a renewal agreement whose terms "substantially change or
modify the sales and service obligations or capital requirements"
of the dealer. Mass. Gen. Laws. ch. 93B, § 4(3)(e) (2001).
Further, for any such proposed change, 90 days written notice is
required including "a detailed statement of the reasons for such
action." Mass. Gen. Laws. ch. 93B, § 4(3)(e)(2) (2001).
Coady argued in the district court that the 1999 renewal
of the 1993 six-year standard agreement was illegal because it
added a requirement of 100 percent retail sales efficiency and
reduced the duration to two years but gave written notice only 59
days before the old agreement expired. In 2001, Toyota offered
Coady a further two-year renewal, again allegedly on less than 90
days notice, containing the 100 percent retail sales efficiency
clause and adding requirements that Coady maintain a 1:1 debt to
equity ratio and renovate the interior of its facility.
When Coady complained about the deficient notice period
for the 1999 contract, Toyota said it would defer the date of the
new agreement (which Coady refused) and Coady never signed the 2001
agreement. Toyota has apparently withdrawn the 1:1 debt to equity
ratio and interior renovation demands and not enforced the 100
percent sales efficiency provision. Nevertheless, Coady requested
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an injunction pertaining to the renewal dispute and appeals from
the district court's failure to provide such relief.
The district court ruled that the shortening of the
proposed renewal period from six years to two did not violate the
statute because, although this altered the terms, it did not do so
in respect of sales and service obligations or capital
requirements. Coady may have some answer to this proposition--
perhaps unreasonable new terms amount to an arbitrary refusal to
renew--but it has not made it nor has it otherwise explained why it
is entitled to a longer renewal period.7 So we put this issue to
one side.
As for the inadequate notice period, Toyota corrected the
error for the 1999 agreement and ordinarily a district court is not
obligated to issue an injunction absent a threat of repetition.
This is not because the issue is necessarily moot--mootness may
often require more, Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 190 (2000)--but because
injunctions are normally a matter of equity and the court is not
required to waste resources where there is no ongoing harm and
7
Coady does cite a case that says that contract length is a
material term, Seaboard Lumber Co. v. United States, 48 Fed. Cl.
814, 832 (Fed. Cl. 2001), hardly a revelation, but nothing in the
statute says that every material alteration is covered by the
statute. While some material alterations may be unreasonable, the
statute makes actionable only those that "substantially change or
modify the sales and service obligations or capital requirements".
Mass. Gen. Laws. ch. 93B, § 4(3)(e)(2) (2001).
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reasonable threat of recurrence. Lemon v. Kurtzman, 411 U.S. 192,
200-01 (1973); El Dia, Inc. v. Hernandez Colon, 963 F.2d 488, 498
n.12 (1st Cir. 1992). Here there is no suggestion of ongoing harm
from the unduly short notice period given five years ago.
If Toyota gave inadequate notice again in 2001, the
threat of repetition is clearly greater. But just what occurred as
to timing in 2001 is not clear to us, and in any event the proposed
changes that would seemingly trigger the need for notice (the 1:1
debt to equity ratio and renovation requirements) were withdrawn by
Toyota. Under the circumstances, the threat of recurrence is not
so clear as to require the grant of equitable relief, although
Toyota is pressing its luck if it has now made the same short-
notice mistake twice.
The most serious renewal claim involves Toyota's apparent
continued insistence on the provision requiring 100 percent sales
efficiency. Admittedly, it has not enforced this provision by
termination or refusal to renew; and, as the district court found
and Coady does not dispute, this negates any obvious damages. But
this does not explain why, if the provision is improper, Coady does
not deserve an injunction. The district court treated the lack of
past harm as defeating the injunction as well but this is not
necessarily a complete answer.
Even if the provision were not enforced, its presence
could hamper Coady's operations and impair its ability to borrow,
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(although Coady has not expressly made those claims to us). There
is also remedy language in chapter 93B suggesting a lenient
standard for injunctions--the statute says the test is whether the
violation "may have the effect of causing" a "loss of money or
property", Mass. Gen. Laws. ch. 93B, § 12A (2001) (emphasis added)
--although we are not now inclined to read this provision as making
an injunction mandatory.8
Yet the threshold question remains whether the 100
percent sales efficiency provision is improper, and here Coady says
only that the notice period was inadequate. Yet there is little
risk, if Toyota has any sense at all, that its future demands for
such a clause will be pressed on less than 90 days notice. If
notice is adequate, then the question under the statute will be
whether Toyota has explained its reasons and has a non-arbitrary
basis for its request. On these points Coady is completely silent
on appeal. Thus, we are unwilling to remand for further
proceedings.
Coady is free to sue immediately if Toyota insists on the
sales efficiency requirement as a condition of renewal and fails to
8
The provision says that the dealer, even if it has not
suffered a loss of money or property, "may" obtain an injunction if
the practice "may" cause such a loss. Mass. Gen. Laws. ch. 93B, §
12A (2001). We read the first "may" as licencing an injunction,
perhaps even encouraging it, but not as compelling it regardless of
circumstances. Coady has not relied on the provision, so our
reading is subject to further enlightenment--by means of case law
or legislative history--in some future case.
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supply the statutory statement of reasons or lacks a non-arbitrary
basis for the request. Our affirmance is without prejudice to such
a suit--but also without foreclosing Toyota from showing that its
demand is consistent with the statute. At this point we know
nothing about the reasons for the proposed efficiency requirement
in a new contract and little about Coady's basis for deeming it
arbitrary.
Toyota ought to reflect that it has enjoyed a measure of
good fortune in escaping unscathed in this lawsuit. Its allocation
practices vis à vis Coady were no model of perfection and a
factfinder who condemned them might well have been upheld.
Further, Toyota has virtually admitted to other violations of
chapter 93B (tying, short notice) even if neither damages nor a
need for any injunction were proved as to these actions.
The package of new demands ascribed to Toyota (a perhaps
unrealistic efficiency condition, the two-year extension, the extra
interior-design spending demanded) may or may not be defensible;
but they seem less likely to mend a relationship than to foreshadow
more litigation under the renewal and termination provisions of
chapter 93B. Perhaps the relationship is now beyond repair, but in
the interests of heading off further litigation, both sides may
want to consider making a fresh start in negotiating and carrying
out a new agreement.
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The judgment of the district court is affirmed.
Reflecting the closeness of the case, each side will bear its own
costs on this appeal.
It is so ordered.
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