George Lussier Enterprises, Inc. v. Subaru of New England, Inc.

United States Court of Appeals
For the First Circuit

No. 03-2715

GEORGE LUSSIER ENTERPRISES, INC. D/B/A LUSSIER SUBARU;
SULLIVAN COUNTY MOTORS, INC. D/B/A SUBARU OF CLAREMONT;
CAMILLERI BROS., INC. D/B/A C&C SUBARU; BALD HILL REALTY, INC.
D/B/A BALD HILL SUBARU; KINNEY MOTORS, LTD.;
REYNOLDS GARAGE & MARINE,INC.,

Plaintiffs, Appellants,

v.

SUBARU OF NEW ENGLAND, INC.; ERNEST J. BOCH, JR. AND
JOSEPH APPELBE,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE

[Hon. Paul J. Barbadoro, U.S. District Judge]

Before

Torruella, Circuit Judge,
Rosenn,* Senior Circuit Judge,
and Howard, Circuit Judge.

Richard B. McNamara, with whom Gregory A. Holmes, Stephanie A.
Bray, Elizabeth M. Leonard and Wiggin & Nourie, P.A. were on brief,
for appellants.
Donald R. Frederico, with whom Steven W. Kasten and McDermott,
Will & Emery were on brief, for Ernest J. Boch and Subaru of New
England, Inc.
Howard Cooper, with whom Nicholas Carter and Todd & Weld LLP
were on brief, for Subaru of New England, Inc.

*
Of the Third Circuit, sitting by designation.
 Ronald L. Snow, with whom Lisa S. Wade and Orr & Reno P.A.
were on brief, for Joseph A. Appelbe.
Paul R. Norman, with whom Catherine L. Cetrangolo and
Boardman, Suhr, Curry & Field LLP were on brief, for amicus curiae
National Automobile Dealers Association.

December 16, 2004
 TORRUELLA, Circuit Judge. Various New England Subaru

dealers ("Dealers") appeal the summary judgment entered in favor of

their distributor, Subaru of New England, Inc. ("SNE"), its sole

shareholder and President, the late Ernest Boch, and its General

Manager, Joseph Appelbe, in a class action commenced on March 5,

1999. Dealers assert that SNE controlled the vehicle allocation

process to coerce them into purchasing unwanted accessories, and

stated claims under the Federal Automobile Dealers' Day in Court

Act ("ADDCA"), state dealer statutes, state contract law, the

Sherman and Clayton Antitrust Acts, and the Racketeer Influenced

Corrupt Organization Act ("RICO"). All claims were dismissed after

discovery, and after careful review, we affirm.

I. Background

SNE is the exclusive New England distributor of Subaru

products. Since 1971, it has contracted with Subaru of America,

Inc. ("SOA") to purchase a designated number of vehicles and to use

its best efforts to promote and sell Subaru vehicles and

accessories through sales representatives. SNE does not have the

contractual right to sell vehicles to the public; rather, its

distributorship agreement limits its activities to promoting the

sale of Subaru products through the solicitation of and contracting

with dealers.

SNE's contract with Subaru dealers incorporates SOA's

"Standard Provisions." It requires the "Dealer to order and

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purchase Cars, subject to availability, in adequate quantities and

on a regular periodic basis in order for Dealer to achieve adequate

sales performance." Although the agreement does not require SNE to

sell all of the cars to its dealers, it requires SNE to "allocate

all Subaru products equitably, using appropriate factors such as

the respective inventory levels and sales performance of

Distributor's dealers during a representative period of time

immediately prior to such allocation."

A. The Allocation System

From February 1, 1987 until early 2001, SNE implemented

the allocation provision under "Fair Share II."

Fair Share II established the number of regular

allocation cars that each dealer was entitled to receive under

fixed and variable components. The fixed component was based on

the higher of a dealership's planned sales volume or its average

actual sales three years prior to Fair Share II. The variable

component was based on a dealer's rate of sales over time.

Essentially, the more cars the dealers sold, the more cars they

would earn in future allocations. Regular allocation vehicles

comprised 88.5% of all vehicles sold to dealers during the class

period.

Not every car that SNE buys from SOA, however, is

distributed immediately to the dealers. SNE engages in the

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industry practice1 of retaining a certain percentage of cars for

discretionary purposes. Fair Share II authorized SNE to withhold

10% of each vehicle shipment as "discretionary vehicles," which was

later revised to 15% of Legacy models and 10% of all other models.

Fair Share II further states that SNE will use these discretionary

vehicles for demonstration, major auto shows, assistance to

dealers, and VIPs. Discretionary vehicles comprised 11.5% of all

vehicles sold to dealers during the class period.

Meanwhile, the regular allocation vehicles rejected by

dealers are referred to as "turndown vehicles." Fair Share II did

not specify how turndown vehicles should be reallocated; SNE sold

them to other dealers in their districts. Any turndown vehicle

that remained unsold at the end of the month became subject to the

next monthly allocation.

Finally, initial allocation and "package models" vehicles

comprised 1.5% of all cars distributed during the class period.

Initial allocation vehicles are distributed in the first monthly

1
The Massachusetts legislature, for example, recently endorsed
this practice by amending its state dealer statute to allow
manufacturers and distributors to withhold up to fifteen percent of
cars and distribute them "for any business purpose that the
manufacturer or distributor considers appropriate." Mass. Gen.
Laws ch. 93B, § 4(c)(1)(i-ii)(2002). See also Coady Corp. v.
Toyota Motor Distrib., Inc., 361 F.3d 50, 56 (1st Cir. 2004)(10% of
cars and 15% of trucks retained from regular allocation); Cabriolet
Porsche Audi, Inc. v. Am. Honda Motor Co., Inc., 773 F.2d 1193
(11th Cir. 1985)(15% of cars retained in discretionary pool);
Colonial Dodge, Inc. v. Chrysler Corp., 11 F. Supp. 2d 737 (D. Md.
1996)(10% of cars retained in discretionary pool).

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allocation of each new model year and are preaccessorized for

dealers to display in the showroom. Special package models are

cars that SNE accessorized to create new models; they are sometimes

built from the discretionary pool.

B. Conditioning and Concealment of Accessories

Dealers allege that during the class period -- from

January 1995 to August 2001 -- SNE "hit upon a scheme to maximize

its profits" by pre-installing accessories before vehicle

distribution. SNE installed more than $53 million worth of

accessories during the class period, resulting in an average charge

of $427 per vehicle. To encourage such sales, SNE paid its

district managers commissions on the sale of these accessories,

which amounted to between 40% to 60% of the managers' total

compensation. SNE did not pay these commissions unless the

district managers' average gross profit on such sales met a

prescribed target of $140, requiring about $475 in accessory sales

per vehicle. SNE further encouraged the sale of overstocked

accessories by providing district managers with "focus letters"

identifying such accessories.

Dealers assert that SNE conditioned access to

discretionary and turndown cars by coercing dealers to purchase

accessories in regular allocation cars. As evidence, dealers

present an expert analysis establishing "a strong and statistically

significant relationship between the volume of accessories

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purchased by Dealers and the number of discretionary and turndown

cars they subsequently purchased." Dealers also present anecdotal

evidence from dealers and former SNE employees alleging that SNE

(1) conditioned access to discretionary and turndown cars on a

dealer's assent to purchase accessories for regular allocations

cars, and (2) used techniques such as tampering with the computer-

based allocations, altering the color and model mix of cars

assigned to particular dealers, and refusing to fill "sold orders"

from dealers who did not purchase enough accessories.

Dealers also assert that SNE fraudulently concealed its

conditioning practice. As evidence, dealers offer letters sent by

Appelbe and another SNE employee stating that "accessories are

strictly optional! You do not have to purchase any accessories on

any Subaru you purchase from SNE." Moreover, SNE told dealers at

an advisory meeting on October 23, 1996 that "no vehicles will be

pre-accessorized in the future with the exception of Safari and

Rally [models]." An SNE representative also stated in a letter to

a dealer that "you are always entitled to purchase vehicles with or

without port installed accessories."

Dealers filed suit under the ADDCA, state dealer acts,

RICO, the Sherman and Clayton antitrust acts, and state contract

law, arguing that SNE coerced them into purchasing unwanted

accessories and fraudulently concealed this practice. Both dealers

and SNE submitted dueling summary judgment motions. On

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September 26, 2003, the district court denied dealers' summary

judgment motion and granted SNE's summary judgment motion on the

ADDCA, state dealer statutes, antitrust acts, RICO, and state

contract law claims.2 Specifically, the court held, inter alia,

that "SNE's conditioning practices do not violate the ADDCA or the

state dealer acts and will not support a RICO extortion claim

because they are not coercive; they do not violate the antitrust

laws because SNE lacks market power in the relevant tying product

market; and they do not breach SNE's dealer agreements because they

are not unlawful, unethical, or inequitable." George Lussier, 286

F. Supp. 2d at 93. Dealers appeal the ADDCA, state dealer law,

state contract law, and RICO3 claims.

We now review each issue de novo, see, e.g., Stop & Shop

Supermarket Co. v. Blue Cross & Blue Shield of R.I., 373 F.3d 57,

60 (1st Cir. 2004)(summary judgment motions reviewed de novo),

"reviewing the entire record in the light most hospitable to the

party opposing summary judgment" -- the Dealers. Euromotion, Inc.

2
The court, however, denied without prejudice SNE's summary
judgment motion on dealer's claim that SNE used other coercive
means to induce dealers to purchase accessories. The court
reasoned that these claims are subsidiary to the conditioning
claim, and "may not warrant class action treatment because common
questions do not predominate and a class action would not be
superior to other forms of adjudication." George Lussier Enters.,
Inc. v. Subaru of New England, Inc., 286 F. Supp. 2d 86, 93 (D.N.H.
2003).
3
The RICO claim includes coercion, mail and wire fraud, and
substitution of defendants.

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v. BMW of North America, Inc., 136 F.3d 866, 869 (1st Cir.

1998)(citations omitted).

II. Analysis

A. The ADDCA

The ADDCA provides automobile dealers with a federal

cause of action against automobile manufacturers who fail "to act

in good faith in performing or complying with any of the terms or

provisions of the franchise, or in terminating, canceling, or not

renewing the franchise with said dealer . . . ." 15 U.S.C. § 1222

(1998)(emphasis added). The Act defines "good faith" as

the duty . . . to act in a fair and equitable
manner toward each other so as to guarantee
the one party freedom from coercion,
intimidation, or threats of coercion or
intimidation from the other party: Provided,
That recommendation, endorsement, exposition,
persuasion, urging or argument shall not be
deemed to constitute a lack of good faith.

15 U.S.C. § 1221(e).

In interpreting ADDCA's good faith provision, "[t]his

court has read the requirements of the ADDCA very narrowly to

require 'actual or threatened coercion or intimidation.'" General

GMC, Inc. v. Volvo White Truck Corp., et al., 918 F.2d 306, 308

(1st Cir. 1990)(quoting H.D. Corp. of Puerto Rico v. Ford Motor

Co., 791 F.2d 987, 990 (1st Cir. 1986))(emphasis added). Lack of

"good faith" does not simply mean malicious conduct or unfairness;

"it must be found in the context of actual or threatened coercion

or intimidation." H.D. Corp., 791 F.2d at 990. Coercion "must be

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actual; the mere fact that a dealer may have felt it had been

coerced or intimidated is not sufficient." Id. For example, a

manufacturer "condition[ing] continuation of a franchise upon

certain conduct, even if characterizable as a threat, cannot

constitute forbidden coercion per se. It must appear that the

condition was unfair or inequitable." Volkswagen Interamericana,

S.A. v. Rohlsen, 360 F.2d 437, 442 (1st Cir. 1966).

This Court has held, and we again emphasize, that

"coercion or intimidation [under the ADDCA] must include a wrongful

demand that would result in penalties or sanctions if not complied

with." Wallace Motor Sales, Inc. v. Am. Motors Sales Corp., 780

F.2d 1049, 1059 (1st Cir. 1985)(agreeing with several other

circuits that "coercion or intimidation must include a wrongful

demand which will result in sanctions if met."). That is, to state

a cause of action under the ADDCA, the aggrieved dealer must

produce evidence that the manufacturer or distributor4 (1) made a

wrongful demand, coupled with (2) sanctions, or threat thereof.

Id. at 1056. Otherwise, summary judgment is warranted if the

dealer "has produced no evidence showing that it was subjected to

coercion or intimidation" by the manufacturer or distributor.

General GMC, 918 F.2d at 308.

4
"It is entirely consistent with both the purpose and language of
the act to hold that 'automobile manufacturer' means, inter alia,
'automobile distributor,' when the distributor is subject to the
manufacturer's control." Rohlsen, 360 F.2d at 441.

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 In the instant case, appellants argue that SNE's pre-

accessorization practice amounts to coercion and thus violates

ADDCA's good-faith requirement because it solely benefits SNE at

the expense of dealers. Appellants present three key pieces of

evidence to show coercion: (1) expert testimony establishing a

"strong and statistically significant relationship between the

volume of accessories purchased by Dealers and the number of

discretionary and turndown cars they subsequently purchased"; (2)

anecdotal evidence from dealers and former SNE employees alleging

that SNE conditioned access to turndown and discretionary cars

based on dealers' assent to purchase accessories for regular

allocation cars; and (3) data indicating the disparity in price of

average accessories between turndown, discretionary, and initial

and special model vehicles ($490, $742, $1,360, respectively)

versus regular allocation vehicles ($338). This proffered evidence

ostensibly demonstrates that SNE "coerced" appellant dealers to buy

accessories in regular allocation cars to gain access to

discretionary and turndown cars, and that SNE installed leftover

and "unwanted" accessories in turndown and discretionary cars.

SNE's "coercive" practice, appellants argue, confers sole benefit

to SNE to the sole detriment of the dealers, who allegedly are

unable to pass the cost increases to consumers and must wait longer

to sell these highly accessorized cars.

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 Viewing the evidence in the light most favorable to

appellants, we find that SNE's conduct does not amount to coercion

within the meaning of ADDCA. We simply fail to see how SNE's

practice of conditioning access to, or accessorizing, discretionary

and turndown cars -- cars which dealers concede they had no

contractual right to receive -- constitutes coercion.

Several courts have found no coercion for various

conditions imposed by distributors for dealers' access to vehicles

which they were not entitled to receive. In Cabriolet Porsche

Audi, Inc. v. Am. Honda Motor Co., Inc., 773 F.2d 1193, 1209-11

(11th Cir. 1985), for example, the Eleventh Circuit held that a

distributor's offer of extra cars beyond the regular allocation

process, in return for establishing an exclusive facility, does not

amount to coercion in violation of ADDCA. 773 F.2d at 1209-11.

The court stated that "[w]e have little doubt that had [the

distributor] threatened to deny [the dealer] all cars, or any cars

to which it was entitled, unless [the dealer] provided an exclusive

facility, this would be evidence of coercion." Id. at 1210

(emphasis added). The distributor did not make a wrongful demand

because it "did not threaten to take away, and did not take away,

cars to which [the dealer] was entitled under the allocation

system." Id. A manufacturer's or distributor's suggestions of

ways to obtain extra cars -- more cars than a dealer is entitled to

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receive under the regular allocation system -- does not amount to

coercion in violation of ADDCA. Id.

Similarly, in Colonial Dodge, Inc. v. Chrysler Corp., 11

F. Supp. 2d 737, 744-46 (D. Md. 1996), aff'd, 121 F.3d 697 (4th

Cir. 1997), a district court granted summary judgment for the

manufacturer because its requirement that dealers accept hard-to-

sell automobiles as a precondition to receiving excess, fast-

selling automobiles did not amount to coercion under the ADDCA. As

evidence, the dealers offered affidavits indicating that the

manufacturer refused to supply high-end vehicles beyond what was

allocated under the "turn and earn" method unless the dealers

agreed to order additional low-demand models. Id. at 746. The

court held that since dealers offered no evidence that the

manufacturer was required under any existing agreement to provide

these extra vehicles, or that the manufacturer threatened to cut

back on their supply of other vehicles if dealers did not order

additional vehicles beyond the "turn and earn" system, dealers

"cannot demonstrate coercion within the meaning of the statute."

Id. Thus, the court granted summary judgment for the manufacturer

because dealers failed to establish any genuine dispute of material

fact under the ADDCA. Id.

We find these cases persuasive, and thus hold that a

manufacturer's conditioning of access to vehicles beyond the

regular allocation process, without more, does not amount to a

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"wrongful demand" that would constitute coercion under ADDCA's

good-faith requirement. Since dealers are not contractually

entitled to these extra vehicles, a manufacturer's decision to

impose reasonable conditions for dealer access is neither

"wrongful" nor even a "demand." These conditions are not wrongful

because they are part of a bargained-for exchange (e.g.,

accessories for extra cars, taking less-desirable cars to access

discretionary highly desirable cars); neither do these conditions

constitute a "demand" because dealers need not take these extra

cars. Rather, these conditions constitute reasonable business

judgments in a free market economy, and "[a] distributor acting

honestly is entitled to latitude in making commercial judgments."

Coady Corp. v. Toyota Motor Distrib., Inc., 361 F.3d 50, 56 (1st

Cir. 2004). Summary judgment is therefore proper if a plaintiff

dealer fails to offer evidence showing a wrongful demand and

sanctions, and thus coercion, under the ADDCA's good-faith

requirement.

Here, since dealers concede that they had no contractual

right to receive either turndown or discretionary vehicles,5 this

ends our inquiry. Dealers' proffered evidence, even if taken to be

true, merely establishes that (1) SNE conditioned access to

turndown and discretionary cars based on dealers' assent to

5
In response to SNE's Motion to Dismiss, dealers state that they
"do not allege or in any way presume that they are contractually
entitled to a certain percentage of discretionary cars."

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purchase accessories for regular allocation cars, and (2) SNE

installed unwanted leftover accessories on the turndown and

discretionary cars. However, since dealers offer no evidence

indicating that SNE made wrongful demands to access vehicles that

dealers were contractually entitled to receive, the district court

properly granted summary judgment for SNE.

Appellants nonetheless urge us to follow language from

our decision in Volkswagen Interamericana, S.A. v. Rohlsen, 360

F.2d 437, 442 (1st Cir. 1966) to define "good faith" under ADDCA.

In Rohlsen, we held that the distributor's termination of a

dealer's franchise related to the conduct of a dealer's agency, or

the dealer's rejection of the distributor as partner on

unreasonable terms, was a jury question. Id. at 444. Rohlsen

states, in relevant part, that "we think there is an important

difference between two kinds of improper conditions that a

manufacturer might impose and back up by threats." Id. at 442.

"Particularly suspect under the act are conditions which benefit

only, or primarily, the manufacturer . . . as distinguished from

requirements that would tend to work to the mutual advantage of

both parties." Id. Appellants allege that under this test, SNE's

pre-accessorization practice only benefits SNE, and thus violates

SNE's good-faith requirement.

We reject appellants' reading on two grounds. First,

appellants' proffered "test" is mere dicta; we merely explored two

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possible scenarios for a condition to constitute coercion under

ADDCA's good-faith requirement. We never announced a test for

coercion, and thus good faith, in Rohlsen. See Wallace, 780 F.2d

at 1056 ("This is the first time the meaning of this provision

['good faith' in 15 U.S.C. § 1221(e)] has come up for review in

this circuit."). Rather, we have now clarified that good faith

under ADDCA requires a showing of (1) wrongful conduct coupled with

(2) sanctions, or threat thereof. See also id. at 1059. And as we

have explained, appellants fail to state a claim under this test.

Second, even under the alleged "Rohlsen test," appellants fail to

show that SNE's pre-accessorization practice lacks mutual benefit.

Appellant dealers gained the additional benefit of cars that they

were not otherwise entitled to receive and the additional profits

that could be gained therefrom.

Finally, although we agree with appellants and amicus

that the district court erred in instituting a "'brand new'

viability test," summary judgment is nonetheless warranted under

the coercion test. Contrary to the district court's analysis,

plaintiff dealers need not offer evidence that the contested

"practices threatened any dealer's ability to conduct successful

business operations" to state a claim under ADDCA. Such

requirement is too narrow. It is enough that dealers offer

evidence that the manufacturer or distributor made a wrongful

demand coupled with threats of sanctions, such as withholding

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vehicles that dealers are legally entitled to receive. The

district court's error, however, does not change the propriety of

summary judgment in the instant case. See, e.g., Torres v. E.I.

Dupont De Nemours & Co., 219 F.3d 13, 17 (1st Cir. 2000)(citations

omitted) ("We may . . . uphold the district court's order granting

summary judgment regardless of whether we reject or adopt its

rationale, so long as an 'independently sufficient ground' is made

manifest by the record.").

Thus, we affirm the district court's judgment on the

ADDCA claim.

B. State Dealer Acts

In addition to the ADDCA claim, appellants allege that

the state statutory counterparts to the ADDCA prohibit SNE's

conduct. Appellants argue that contrary to the district court's

holding, these state dealer statutes define coercion more broadly

than the ADDCA and, consequently, cover the type of conduct engaged

in by SNE. We disagree.

Each of the six states where SNE operates have enacted

statutory counterparts to the ADCCA. Massachusetts6 makes it

6
The Massachusetts state dealer act makes it unlawful for a
manufacturer or distributor to "coerce" a dealer to "accept or buy
any . . . accessory . . . which has not been ordered or requested
by the motor vehicle dealer." Mass. Gen. Laws Ann. ch. 93B, § 4(2)
(b) (1997 & Supp. 2003).

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unlawful to "coerce," Rhode Island,7 Maine,8 and New Hampshire9 make

it unlawful to "coerce or attempt to coerce," Vermont10 makes it

unlawful to "require or coerce," and Connecticut11 makes it unlawful

to "require," dealers to buy, order, or accept accessories that

they have not voluntarily ordered. Of these, only the New

Hampshire statute defines "coercion," which adopts language

analogous to the ADDCA.12

7
The Rhode Island state dealer act makes it unlawful for a
manufacturer to "coerce, or attempt to coerce," a dealer "to order
or accept . . . accessories . . . which the motor vehicle dealer
has not voluntarily ordered." R.I. Gen. Laws § 31-5.1-4(b) (2002).
8
The Maine state dealer statute makes it unlawful for a
manufacturer or distributor to "coerce or attempt to coerce" a
dealer to "order or accept delivery of . . . accessories . . .
which such motor vehicle dealer has not voluntarily ordered." Me.
Rev. Stat. Ann. tit. 10, § 1174(2) (1997 & Supp. 2002).
9
The New Hampshire state dealer statute makes it unlawful for a
manufacturer "to coerce or attempt to coerce" a dealer to "[o]rder
or accept delivery of . . . accessories . . . which such motor
vehicle dealer has not voluntarily ordered." N.H. Rev. Stat. Ann.
§ 357-C:3 (1995 & Supp. 2002).
10
The Vermont state dealer statute makes it unlawful for a
manufacturer to "require or to coerce" a dealer to "order or accept
delivery of any . . . accessory . . . which shall not have been
voluntarily ordered" by the dealer. Vt. Stat. Ann. tit. 9, § 4096
(2002).
11
The Connecticut state dealer statute makes it unlawful for a
manufacturer or distributor to "require" a dealer to "[o]rder or
accept delivery of any . . . accessory . . . not . . . voluntarily
ordered by the dealer." Conn. Gen. Stat. Ann. § 42-133bb (2003).
12
New Hampshire defines "coerc[ion]" as the "the failure to act
in a fair and equitable manner in performing or complying with any
terms or provisions of a franchise or agreement; provided, however,
that recommendation, persuasion, urging or argument shall not be
synonymous with 'coerce' or lack of 'good faith'." N.H. Rev. Stat.

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 Appellants argue that the state dealer statutes'

prohibitions against coercing dealers into purchasing unordered

accessories extend beyond "coercion" as understood under the ADDCA.

Appellants cite a First Circuit decision where we stated that in

construing the Massachusetts dealer act, "[b]ad faith may encompass

broader conduct under Chapter 93B than mere coercion or

intimidation." General GMC, 918 F.2d at 309 (citing Tober Motors,

Inc. v. Reiter Oldsmobile, Inc., 376 Mass. 313, 319-20, 381 N.E.2d

908 (1978)). This precedent, along with the statutes' legislative

history, ostensibly demonstrate a legislative intent to eliminate

the dealer's burden of showing wrongful conduct and threat of

sanctions to state a claim under the state dealer acts.

Although more compelling than the ADDCA claim, we find

appellants' argument unpersuasive. First, appellants' reliance on

General GMC is misplaced. In General GMC, we held that although

summary judgment was proper as to the ADDCA claim because the

dealer produced no evidence of coercion, summary judgment was

improper as to the state dealer claim because genuine issues of

material fact existed as to whether the manufacturer acted in bad

faith in terminating the dealer's franchise. 918 F.2d at 308-09.

We reasoned that because Chapter 93B -- the Massachusetts

counterpart to the ADDCA -- does not define "bad faith" or "good

cause," a court is not bound by the same restrictions that exist

Ann. § 357-C:3 (1995 & Supp. 2002).

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under ADDCA: "[b]ad faith may encompass broader conduct than mere

coercion or intimidation." Id. at 308. Our holding, however,

interpreted Section 4(1) of 93B, which prohibits manufacturers from

acting in "bad faith," and Section 4(3)(e), which prohibits

manufacturers from cancelling or terminating a franchise "without

good cause." The issue here pertains to a different section --

Section 4(2) -- which prohibits "coercion," specifically, the

manufacturer's coercion of dealers into purchasing accessories.

Therefore, we do not read General GMC to mean that "coercion" under

the state dealer statutes automatically encompasses conduct beyond

its meaning under ADDCA.

To the contrary, courts have consistently held that

"coercion" under state dealer statutes holds the same meaning as

under the ADDCA. See, e.g., Hubbard Chevrolet Co. v. Gen. Motors

Corp., 873 F.2d 873, 876 (5th Cir. 1989)(declining to read a

broader definition of "coercion" under Mississippi dealer's act

because there is "no evidence indicating that the Mississippi

statute's further definition of 'coerce' represents an effort to

broaden the scope of 'good faith.'"); Gage v. Gen. Motors Corp.,

796 F.2d 345, 350-51 (10th Cir. 1986)(assuming that federal case

law interpreting "coercion" under the ADDCA also governed the

similar language in the Colorado statute); Subaru Distrib. Corp. v.

Subaru of Am., 47 F. Supp. 2d 451, 465, n.9 (S.D.N.Y. 1999)(noting

that "coercion" has been interpreted to have the same meaning under

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both the New York Dealer Act and the ADDCA); Colonial Dodge, 11 F.

Supp. 2d at 744 (holding that "[w]hile there are slight differences

between the state and federal statutes, 'coercion' under both the

State Act and the ADDCA embodies the same concept, and accordingly

the same analysis applies.").

We find these cases instructive, and agree with the

district court that "coercion" holds the same meaning under both

the state dealer acts and the ADDCA.13 The Rhode Island Supreme

Court has already defined its own state dealer statute as such: "we

define coercion as 'a wrongful demand which will result in

sanctions if not complied with.'" Dunne Leases Cars & Trucks, Inc.

v. Kenworth Truck Co., 466 A.2d 1153, 1160 (R.I. 1983)(quoting

Marquis v. Chrysler Corp., 577 F.2d 624, 633 (9th Cir. 1978)

(quoting Fray Chevrolet Sales, Inc. v. General Motors Corp., 536

F.2d 683, 685 (6th Cir. 1976)). As for Massachusetts, Maine, and

Vermont,14 the fact that their state legislatures have not defined

"coercion" suggest that they did not intend to give the word a

different meaning than it has in the ADDCA. While we are not bound

by the same restrictions under ADDCA because the state legislatures

13
Moreover, the argument that "coercion" holds different meanings
under different state dealer statutes negates the presence of
"common questions of law" necessary for class certification. See
Fed. R. Civ. P. 25(a).
14
Vermont makes it unlawful to "require or to coerce" dealers into
purchasing unordered accessories. Vt. Stat. Ann. tit. 9, § 4096.
For analysis of the "require" component, see next paragraph.

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did not define "coercion," cf. General GMC, 918 F.2d at 309

(reasoning that because the state counterpart to the ADDCA does not

define "bad faith" or "good cause," a court is not bound by the

same restrictions as under the ADDCA in determining "bad faith"),

we see no reason to depart from its federal meaning in this case.

As for New Hampshire, the fact that its definition of "coercion"

mirrors the ADDCA language suggests that it holds the same meaning

of wrongful conduct and threat of sanctions as the ADDCA.

Finally, the fact that Connecticut does not mention

"coercion," but merely makes it unlawful to "require" dealers to

purchase unordered accessories, does not warrant reversal on the

state dealer statute issue. We simply fail to see how SNE is

"requiring" dealers to purchase accessories in the discretionary

and turndown cars when dealers need not purchase these cars in the

first place; individual dealers have no contractual obligation to

receive or purchase any cars beyond the regular allocation process.

Since dealers are not "required" to purchase these accessories, no

genuine issue of material fact exists under the Connecticut

statute.

For the foregoing reasons, we affirm the district court's

summary judgment on the state dealer statute claims.

C. State Contract Claims

Appellants also allege that SNE breached its contractual

obligation to allocate cars "fairly and equitably" by concealing

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the true terms for allocating discretionary and turndown cars: the

purchase of accessories. We are not convinced.

SNE's franchise agreement with each dealer obligates SNE

to "perform[ ] its obligations under the Agreement in a lawful and

ethical manner," including "allocat[ing] all affected Subaru

products equitably, using appropriate factors." Fair Share II

similarly expressed SNE's desire to allocate vehicles "in a manner

that, in SNE's opinion, will maximize the business opportunity for

both SNE and its dealers consistent with SNE's desire to allocate

vehicles fairly and equitably." (emphasis added). Fair Share II

is silent on turndown vehicles, but describes discretionary cars as

"[v]ehicles to be used as demonstrators by [SNE]; vehicles used for

major auto shows; vehicles set aside to assist dealers who, at the

sole discretion of [SNE], need assistance and vehicles delivered to

VIPs." (emphasis in original). Fair Share II also refers to

discretionary cars as potentially used for "market action," an

undefined term.

Appellants argue that SNE breached these contractual

obligations and deceived dealers (1) by not stating that it

intended to sell discretionary cars only with accessories, (2) by

not stating anything about turndown cars, and (3) by using

discretionary cars to encourage the purchase of accessories in

regular allocation cars. Viewing the evidence in the light most

favorable to appellants, and reviewing the district court's holding

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de novo,15 we nonetheless find that SNE did not breach its contract

with the dealers.

First, we reject appellants' argument that SNE breached

its contractual obligation to distribute all Subaru products

"fairly and equitably" by failing to state its intent to sell

discretionary cars only with accessories. "Every system has pluses

and minuses, and a fair allocation system does not mean one without

wrinkles." Coady, 361 F.3d at 58. For example, we recently noted

that a distributor's failure to have a "written policy" on a

particular method of allocation is "not itself arbitrary or

unfair," especially when the "allocation system depends, to some

extent, upon each district manager's discretion in offering

vehicles to dealers." Id. at 58. We have also upheld a district

court finding that a manufacturer did not breach its contract to

distribute cars "fair[ly] and equitab[ly]" during a time of

increased shortage, as long as the dealer received all that it was

entitled to receive under the contract. Narragansett Motors, Inc.

v. Packard Motor Car Co., 193 F.2d 545, 546 (1st Cir. 1951).

15
"Contract interpretation is often said to be 'a question of
law' for the trial judge and, accordingly, subject to de novo
review by the appellate court." Principal Mut. Life Ins. Co. v.
Racal-Datacom, Inc., 233 F.3d 1, 3 (1st Cir. 2000) (citing
Commercial Union Ins. Co. v. Gilbane Bldg. Co., 992 F.2d 386, 388
(1st Cir. 1993)). For "disputes of fact relating to the
construction of contract terms," however, "those findings are
subject to deference on review." Id. (citing United States Liab.
Ins. Co. v. Selman, 70 F.3d 684, 687 (1st Cir. 1995)).

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 Here, although we would have preferred that SNE

explicitly stated its conditioning practice in the contracts, we

nonetheless conclude that SNE did not breach its contractual

obligation to distribute all Subaru products "fairly and

equitably." SNE's failure to state its conditioning practice in

the contracts, standing alone, is insufficient to find a breach of

its contractual duty of fair and equitable allocation. See Coady,

361 F.3d at 58. Discretionary vehicles, by their very nature in

the contracts,16 are distributed at the "discretion" of SNE, subject

only to a "fair and equitable" allocation. The fact that dealers

have received all that they were entitled to receive under the

contract -- through regular allocation vehicles comprising 88% of

all cars distributed during the class period -- supports a finding

of "fair and equitable" allocation. See Narragansett Motors, 193

F.2d at 546. Moreover, the fact that all dealers had to purchase

accessorized discretionary cars if they wanted access to such cars

supports a finding of "equitable" allocation. Thus, along with the

fact that neither the Dealership Agreements nor Fair Share II

forbids SNE's accessorization of discretionary cars, we find that

SNE did not breach its contract to "fairly and equitably"

distribute discretionary cars.

16
Fair Share II specifies that discretionary vehicles will be set
aside, inter alia, "to assist dealers who, at the sole discretion
of Subaru of New England, need assistance." (Emphasis added).

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 Under the same analysis, we likewise reject appellant's

argument regarding turndown cars. SNE's failure to have a written

policy on turndown cars, without more, does not render its

allocation system unfair or inequitable. See Coady, 361 F.3d at

58. Since dealers received all that they were entitled to receive

under the regular allocation process, and since turndown cars have

already passed through this agreed-upon regular allocation process,

we do not find that SNE breached its contract. See Narragansett

Motors, 193 F.2d at 546.

Finally, we reject appellants' argument that SNE breached

it contracts by using discretionary cars to encourage the purchase

of accessories in regular allocation cars. We defer to the

district court's factual finding that "more than 88% of all

vehicles were initially allocated under Fair Share II using a

formula that did not take into account whether a dealer had agreed

to purchase accessories." George Lussier, 286 F. Supp. 2d at 101.

Therefore, since appellants "provide[s] no reason to

suppose that allocation system claims that have failed under the

statute should prevail under the contract, . . . no more need be

said about this contract-claim perspective." Coady, 361 F.3d at

59. We uphold the district court's grant of summary judgment on

these claims.

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D. RICO Claims

Appellants further allege claims under RICO,17 arguing

that "[t]he same conduct that constituted a wrongful demand and

threatened sanction, and which violated these pre-existing rights

guaranteed by State [dealer] and Federal [ADDCA] statutes, is

extortion under the Hobbs Act." This argument also fails.

The Hobbs Act defines extortion as "the obtaining of

property from another, with his consent, induced by wrongful use of

actual or threatened force, violence, or fear, or under color of

official right." 18 U.S.C. § 1951 (2000)(emphasis added).

Although "fear" may include economic fear, see United States v.

Hathaway, 534 F.2d 386, 395-96 (1st Cir. 1976), "there is nothing

inherently wrongful about the use of economic fear to obtain

property," United States v. Sturm, 870 F.2d 769, 773 (1st Cir.

1989). Indeed, "the fear of economic loss is a driving force of

our economy that plays an important role in many legitimate

business transactions." Brokerage Concepts, Inc. v. U.S.

Healthcare, Inc., 140 F.3d 494, 523 (1st Cir. 1998). Rather,

economic fear is wrongful under the Hobbs Act if the plaintiff had

a pre-existing statutory right to be free from the defendant's

demand. See id. at 525-26 (holding that plaintiff failed to state

17
RICO, 18 U.S.C. §§ 1961-1968 (2000), primarily designed as a
criminal statute, see Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479,
498 (1985), also provides civil remedies -- including treble
damages and attorney's fees -- to persons injured in their business
or property by a prohibited act. 18 U.S.C § 1964(c).

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an extortionate predicate act because plaintiff had no pre-existing

right to be an approved provider, and thus free of economic fear);

Viacom Int'l Inc. v. Icahn, 747 F. Supp. 205, 213 (S.D.N.Y. 1990),

aff'd on other grounds, 946 F.2d 998 (2d Cir. 1991)(distinguishing

between "hard bargaining" and extortion based on the plaintiff's

"pre-existing entitlement to pursue his business interests free of

the [economic] fear he is quelling").

Here, appellants argue that since SNE's conditioning

practice constitutes coercion under the state dealer statutes and

the ADDCA, the practice also constitutes extortion under the Hobbs

Act. We have now clarified, however, that such practice does not

violate the ADDCA or state dealer statutes because conditioning

access to cars beyond the dealer's rightful entitlement does not

amount to a "wrongful demand" to constitute a component for

coercion. Thus, assuming arguendo that we have adopted appellants'

rationale, since SNE's conditioning practice is not coercive under

the ADDCA, neither is it extortionate under the Hobbs Act. SNE's

conditioning of access to cars to which dealers had no pre-existing

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entitlement18 represents lawful hard-bargaining, not unlawful

extortion.

Appellants further allege that SNE engaged in mail and

wire fraud under RICO. Specifically, SNE allegedly (1) withheld

computer-allocated cars from a dealer's folder and then told the

dealers that they were hand-allocated cars which could only be

obtained with accessories, (2) shuffled load sheets from one dealer

folder to another to ensure that dealers who bought more

accessories received more desirable cars, and (3) repeated false

assurances such as "accessories are strictly optional" whenever the

dealers became restless or threatened a lawsuit. Dealers argue

that since these false statements were made through mails and wires

and were sufficiently numerous to comprise a RICO "pattern," they

have stated a civil RICO claim. Since dealers fail to establish

causation, however, this claim also fails.

To have standing in a civil RICO claim, plaintiffs must

show "some direct relation between the injury asserted and the

injurious conduct alleged." Holmes v. Securities Investor Prot.

Corp., 503 U.S. 258, 268 (1992). Plaintiffs may not succeed by

18
We also reject dealers' argument, raised for the first time in
this appeal, that they had a "collective" right to receive all of
the vehicles delivered by SOA to SNE for distribution through that
system. Not only is this issue waived since dealers did not make
this argument in the district court, see Sammartano v. Palmas del
Mar Prop., Inc., 161 F.3d 96, 97 (1st Cir. 1998), but each dealer
had a separate contract with SNE and thus had no "collective"
entitlement.

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merely proving that the predicate acts were a "cause in fact" of

the plaintiffs' injuries; rather, Section 1964(c) requires that the

defendant's specified acts of racketeering were the proximate cause

of the plaintiffs' injuries. Id. at 268; Camelio v. Am. Fed'n, 137

F.3d 666, 669-70 (1st Cir. 1998)(dismissing plaintiff's RICO claim

and explaining proximate causation requirements under 18 U.S.C.

§ 1964(c)). Otherwise, plaintiffs may not recover in a civil RICO

claim if their injuries are so far removed from the defendant's

acts that they are indirect and derivative. Holmes, 503 U.S. at

268-69 (holding that plaintiff did not have standing because his

injuries were indirect as his losses were purely contingent on the

insolvency of third parties).

Here, dealers fail to establish a "direct relation

between the injury asserted and the injurious conduct alleged."

See id., 503 U.S. at 268. The "injurious conduct alleged"

involves the fraudulent concealment of SNE's option-packing scheme.

The "injury asserted" involves costs associated with the (1)

purchase of unwanted accessories, (2) payment of floor plan

interest for accessorized vehicles that took longer to sell, and

(3) reductions in the value of their dealerships. The injury

asserted, however, was directly caused by the option-packing

scheme, rather than the fraudulent scheme of concealment. Dealers

fail to offer any evidence that the alleged fraud directly caused

specific injuries, such as a dealer signing a dealer contract or

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making substantial investment in a dealership as a result of the

fraud. Although SNE's alleged fraudulent conduct may have

contributed to dealers' specific injuries -- i.e., buying unwanted

accessories, paying floor plan interests, reducing the value of

their dealerships -- such indirect and derivative injuries are

insufficient to have standing in a civil RICO claim. See Holmes,

503 U.S. at 268-69.

For the foregoing reasons, appellants' civil RICO claims

fail as well.19 Finally, since the only claim against the late

Ernest Boch individually is the failed civil RICO claim, we need

not decide appellants' last issue of whether the district court

erred in denying their motion to substitute defendants.

19
Since appellants lack standing to state a civil RICO claim, this
ends our inquiry. Nevertheless, we note that appellants' civil
RICO claim would also fail as a matter of law because they could
not establish that SNE used an "enterprise" as a vehicle for
racketeering, thus corrupting an otherwise lawful enterprise. See
Nat'l Org. for Women v. Scheidler, 510 U.S. 249, 259 (1994); United
States v. Turkette, 452 U.S. 576, 583 (1981). Appellants allege
that the New England Subaru Dealer Network, which presents dealer
concerns to SNE through its Advisory Board, constitutes a RICO
"enterprise." Far from a prototypical RICO enterprise, however,
there is no evidence that SNE "was able to commit the predicate
[racketeering] acts by means of, by consequence of, by reason of,
by the agency of, or by the instrumentality of its association with
the enterprise" -- the Dealer Network. United States v. Marino,
277 F.3d 11, 27 (1st Cir. 2002). See also Fitzgerald v. Chrysler
Corp., 116 F.3d 225, 227-28 (7th Cir. 1997)(describing a
prototypical RICO case as one where the "defendant gains additional
power to do evil by taking over a seemingly legitimate
enterprise"). Since SNE did not gain additional power to
"racketeer" and engage in mail and wire fraud by "taking over" the
Dealer Network, appellants' RICO claim fail as a matter of law.

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 In closing, we note that SNE "ought to reflect that it

has enjoyed a measure of good fortune in escaping unscathed in this

lawsuit." Cf. Coady, 361 F.3d at 62. Its allocation and

concealment practices were no model of perfection; individual

dealers could plausibly pursue claims that SNE used other coercive

means to induce dealers to purchase accessories. See George

Lussier, 286 F. Supp. 2d at 93. Nonetheless, with regard to the

class action claims and issues on this appeal, the judgment is

Affirmed.

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