United States Court of Appeals
For the First Circuit
No. 08-1456
WAGNER AND WAGNER AUTO SALES, INC.,
Plaintiff, Appellant,
v.
LAND ROVER NORTH AMERICA, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. F. Dennis Saylor IV, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Lipez, Circuit Judges.
Stephen Gordon with whom Stephen Gordon & Associates was on
brief for appellant.
John J. Sullivan with whom Carl J. Chiappa, Hogan & Hartson
LLP, Jeffrey S. King, Gregory R. Youman, and Kirkpatrick & Lockhart
Preston Gates Ellis LLP were on brief for appellee.
November 7, 2008
LYNCH, Chief Judge. Plaintiff Wagner and Wagner Auto
Sales, Inc. appeals from the district court's entry of summary
judgment rejecting its claims against defendant Land Rover North
America, Inc. under the Automobile Dealer's Day in Court Act, 15
U.S.C. § 1222 ("ADDCA"), and Mass. Gen. Laws ch. 93B, the
Massachusetts "Dealer's Bill of Rights." See generally Coady Corp.
v. Toyota Motor Distribs., Inc., 361 F.3d 50, 54 (1st Cir. 2004).
LRNA terminated a 2004 temporary dealership arrangement with
Wagner, which led to this lawsuit. The district court wrote a
thoughtful and meticulous opinion, Wagner & Wagner Auto Sales, Inc.
v. Land Rover N. Am., Inc., 539 F. Supp. 2d 631 (D. Mass. 2008),
which we affirm.
I.
We describe the undisputed material facts on which entry
of summary judgment was based.
Wagner owned two luxury car dealerships in Massachusetts,
which sold automobiles from manufacturers such as Mercedes-Benz,
BMW, Audi, and Jaguar. In 1999, Wagner wanted to expand to include
Land Rovers and reached an agreement with LRNA to that effect.
Three years later, on October 21, 2002, LRNA and Wagner entered
into a Letter of Intent ("2002 LOI") that annulled and replaced the
1999 agreement. Under the 2002 LOI, Wagner would construct a
combined Land Rover/Jaguar dealership in Boylston, Massachusetts to
be opened by March 31, 2004. In November 2003, however, Wagner
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requested to change the location of the proposed site for the
dealership to Shrewsbury. LRNA approved this request because it
believed Shrewsbury was the superior site.
The parties amended the 2002 LOI on June 14, 2004 and
entered into a second Letter of Intent ("2004 LOI"), which stated
that it incorporated any prior agreements and that its terms
controlled in cases of conflict. The 2004 LOI is the contract at
dispute in this case. Under the 2004 LOI, if Wagner met certain
benchmarks it would receive a "Temporary Land Rover Dealer
Agreement" ("TDA"), which would terminate if Wagner did not timely
construct a new facility in Shrewsbury meeting particular
requirements. If Wagner met the first deadline on August 31, 2004,
Wagner would receive the TDA. Wagner did so and received the TDA,
thus becoming a temporary Land Rover dealer at the Boylston
location.
The 2004 LOI also established that the deadline for
completion of construction of the permanent facility was February
28, 2006. It set interim deadlines for submission of plans,
obtaining necessary regulatory approvals, and construction of the
facility in Shrewsbury. The 2004 LOI also established a "planning
volume" of 250 Land Rovers and 150 Jaguars. Paragraph 6 of the
2004 LOI stated: "Time is of the essence with respect to this
schedule." The 2004 LOI provided a termination clause: that if
Wagner failed "to meet any of the foregoing deadlines . . . this
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Agreement and LOI shall, at Land Rover's option, expire and become
null and void . . . . Any such failure shall also constitute a
substantial and material breach [of the TDA] warranting the
termination of [the TDA]."
Sometime after opening this temporary dealership in
Boylston in September 2004, Wagner concluded that the proposed
permanent dealership in Shrewsbury would not be financially viable
under the specifications of the 2004 LOI. This was, in part,
because LRNA had pulled one particular model -- the Freelander --
from the market. Moreover, Jaguar sales across the country had
fallen precipitously since 2002, with new vehicle sales falling
from 61,204 in 2002 to 20,683 in 2006.
Wagner did not meet the 2004 LOI's October 31, 2004
interim deadline for applying for all necessary regulatory
approvals. Wagner also failed to meet the March 31, 2005 interim
deadline for furnishing detailed construction drawings to LRNA or
identifying a general contractor for the project.
On May 11, 2005, LRNA sent Wagner a letter advising that
it had not met the March 31 deadline. Wagner requested an
extension. On August 18, 2005, LRNA offered a twelve-month
extension of the 2004 LOI deadlines "subject to [Wagner] signing
amended agreements." On August 29, Wagner responded and requested
an extension of up to three years and suggested that it was the
Ford takeover of LRNA in 2000 that caused delays in construction of
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the Land Rover/Jaguar dealership. The letter also mentioned the
national decline in Jaguar sales.
In response, on September 19, LRNA reiterated its prior
offer of a one-year extension and stated that it would reconsider
the size of the planning volume. Wagner failed to respond in
writing. LRNA sent a final letter on February 22, 2006 saying that
Wagner needed to contact Virginia Slocum, LRNA's liaison to the
dealership, by February 28, 2006, or the agreement would be
terminated effective May 1, 2006.
When the parties could not come to agreement regarding an
extension of the contract, LRNA sent a Notice of Termination to
Wagner on March 21, 2006, stating that the TDA would expire in
ninety days. The letter stated that the grounds for termination
included Wagner's failure to comply with the agreed upon deadlines
under the 2004 LOI.
Wagner brought suit in the district court contesting the
validity of LRNA's termination under both Mass. Gen. Laws ch. 93B,
§ 3 and the ADDCA, seeking damages, injunctive relief, and costs.1
After the district court granted summary judgment in favor of LRNA,
Wagner timely appealed.
II.
We review the district court's grant of summary judgment
1
On appeal, Wagner does not challenge the district court's
decision with respect to the ADDCA.
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de novo, drawing all reasonable inferences in favor of Wagner.
Mellen v. Trs. of Boston Univ., 504 F.3d 21, 24 (1st Cir. 2007).
Chapter 93B of the Massachusetts General Laws regulates
business practices among motor vehicle manufacturers, distributors,
and dealers in Massachusetts. Most recently amended in 2002, the
chapter has two primary purposes. The first "is to curb 'the
potentially oppressive power of automobile manufacturers and
distributors in relation to their affiliated dealers.'"
Cadillac/Oldsmobile/Nissan Ctr., Inc. v. Gen. Motors Corp., 391
F.3d 304, 306 (1st Cir. 2004) (quoting Beard Motors, Inc. v. Toyota
Motor Distribs., Inc., 480 N.E. 2d 303, 306 (Mass. 1985)). The
second "is to regulate competition in the retail automobile
industry for the benefit of the public at large." Id. (citing Am.
Honda Motor Co. v. Bernardi's, Inc., 735 N.E.2d 348, 354 (Mass.
2000)).
Wagner claims that LRNA violated section 3 of the chapter
in three ways. First, Wagner argues that LRNA violated the
chapter's requirement that terminations of dealerships be for good
cause, largely because Wagner alleges that LRNA also breached the
2004 LOI. Second, Wagner argues that LRNA violated section 3 by
acting in bad faith in terminating the agreement. Third, Wagner
argues that LRNA failed to demonstrate good cause because it did
not give Wagner an opportunity to cure.
Section 3 of chapter 93B makes "[u]nfair methods of
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competition and unfair or deceptive acts or practices" unlawful.
Mass. Gen. Laws ch. 93B, § 3. Among the enumerated "unfair methods"
and "unfair or deceptive acts or practices," section 5 makes the
termination of a motor vehicle franchise agreement unlawful under
certain conditions. Id. § 5. Under section 5, "[i]t shall be a
violation of subsection (a) of section 3 for a manufacturer,
distributor or franchisor representative without good cause, in bad
faith or in an arbitrary or unconscionable manner . . . to terminate
the franchise agreement of a motor vehicle dealer . . . ."
In Coady Corporation, we held that "arbitrariness" under
chapter 93B cannot be shown if the defendant's actions were based
on "reasonable business practices." 361 F.3d at 56. It is only the
egregious decision which can be labeled "arbitrary or unfair." The
chapter was not intended to protect dealers from the normal risks
of a free economy. Id.
A. Good Cause Under Chapter 93B
The district court analyzed good cause under two different
subsections of section 5. Section 5(h) provides:
For purposes of this section, good cause may
be found if the motor vehicle dealer failed to
comply with or observe a provision of the
franchise agreement that is material to the
franchise relationship, including without
limitation . . . facility requirements, which
were communicated in writing to the motor
vehicle dealer within a reasonable period
before the effective date of the termination
or nonrenewal, such that a reasonable
opportunity to cure was afforded.
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Mass. Gen. Laws ch. 93B, § 5(h). This section allows the court to
make the good cause determination on the basis of a material breach
concerning facility requirements alone. The district court assigned
"heavy weight" to the breaches under section 5(h). Wagner & Wagner,
539 F. Supp. 2d at 470.
The district court also held that, alternatively, there
was good cause for termination in considering the enumerated factors
under section 5(j), which provides:
In determining whether good cause has been
established for terminating, refusing to extend
or renew or changing or modifying the
obligations of the motor vehicle dealer as a
condition to offering a renewal, replacement or
succeeding franchise agreement, the court shall
consider all pertinent circumstances, that may
include, but shall not be limited to: . . . the
existence and materiality of any breaches,
defaults or violations by the affected motor
vehicle dealer of the terms or provisions of
the existing franchise agreement or of
applicable law.
Mass. Gen. Laws ch. 93B, § 5(j).2
2
The section lists six other factors: (1) the amount of
business transacted by the affected motor vehicle dealer during the
three-year period immediately preceding such notice as compared to
the business available to it; (2) the investment necessarily made
and obligations incurred by the affected motor vehicle dealer to
perform its obligations under the existing franchise agreement; (3)
the permanency of the investment of the affected motor vehicle
dealer; (4) whether it is injurious or beneficial to the public
welfare for the franchise agreement of the affected motor vehicle
dealer to expire, to be modified, or to be terminated, or for the
affected motor vehicle dealer to be replaced; (5) whether the
affected motor vehicle dealer has adequate motor vehicle sales and
service facilities, equipment, vehicle parts and qualified
personnel to reasonably provide for the needs of the consumers for
motor vehicles handled by the affected motor vehicle dealer; (6)
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Under the terms of the chapter, the burden is on LRNA to
establish good cause to terminate the franchise. Id. § 5(m). The
district court correctly held that Wagner's "failure to meet the
interim construction deadlines and the final facility completion
deadlines" violated the terms of the 2004 LOI, and that Wagner's
breach was material. Wagner & Wagner, 539 F. Supp. 2d at 470. On
the undisputed facts, we agree that LRNA established good cause
under both section 5(h) and section 5(j). The court's finding is
well-supported in the record. The terms of the 2004 LOI and the TDA
made it clear that completion of the Shrewsbury site dealership was
a condition precedent to LRNA ultimately granting Wagner a non-
temporary Land Rover Dealer Agreement. Id.
Wagner never met any of the deadlines in the 2004 LOI
after obtaining the TDA. Ron Wagner, the owner of Wagner, conceded
that the plaintiff never applied for any of the permits or
regulatory approvals necessary to comply with the October 31, 2004
deadline. He also conceded that Wagner failed to supply the
required detailed construction drawings in compliance with the 2004
LOI's March 31, 2005 deadline. He admitted that a general
contractor was never identified or hired, and conceded that no site
work ever even started. That site work was required to be completed
by September 30, 2005. Wagner thus failed to meet the September 30,
whether the affected motor vehicle dealer has been and is rendering
adequate services to the public. Mass. Gen. Laws ch. 93B, § 5(j).
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2005 interim deadline and never opened the permanent facility by
February 28, 2006, the completion date stated in the 2004 LOI.
On appeal, Wagner argues that its failure to perform is
excused by what it alleges was LRNA's failure to approve in writing
Wagner's preliminary construction plans and that it could not
provide final detailed construction drawings until the preliminary
drawings were approved by LRNA. LRNA's alleged failure to meet its
obligations in turn prevented Wagner from performing by complying
with the later deadlines of September 30, 2005 and February 28,
2006.
The argument fails. We bypass the question of whether
Wagner preserved this argument in the district court. We are
doubtful the issue was preserved because the facts offered by Wagner
as disputed went to a different defense -- that regardless of the
terms of the LOI there was a changed economic landscape of Land
Rover and Jaguar sales warranting Wagner's non-compliance. See
Boston Beer Co. v. Slesar Bros. Brewing Co., 9 F.3d 175, 180 (1st
Cir. 1993)); Wright & Miller, Federal Practice & Procedure §
2716, at 282-86 (3d ed. 1998).
Even taking the argument that LRNA failed to approve the
plans as preserved, there is no merit to it. The record shows that
whatever Ron Wagner's initial uncertainty at deposition as to
whether LRNA responded to Wagner's architectural drawings, Ron
Wagner admitted that the drawings "did finally come back, but I
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can't remember the dates." Upon further questioning, Ron Wagner
admitted that the reason Wagner did not move ahead with applications
for permits in compliance with the 2004 LOI was that he "lost
focus," rather than because of LRNA's failure to approve the
drawings. The record is clear that Wagner received the requisite
approval of preliminary plans from LRNA. George Delaney, the LRNA
representative who worked with Wagner, testified at his deposition,
"[w]e approved the preliminary drawings, the size that they
submitted." He further testified that after a meeting discussing
the preliminary drawings and approving them "subject to the Wagners'
architect making certain revisions," Delaney "advised the Wagners
that they had met the first milestone under the LOI."
Wagner's argument that LRNA was in breach of its
obligations depends on a misrepresentation of the record. Since
Wagner was undeniably in breach of its contractual obligations, LRNA
had good cause under sections 5(h) and 5(j).
B. Bad Faith
Under chapter 93B, the burden of showing bad faith is on
the dealer, Wagner. Mass. Gen. Laws ch. 93B, § 5(m). Plaintiff
argues generally that LRNA showed bad faith3 in terminating the
3
Wagner contends that the Massachusetts covenant of good
faith and fair dealing implied into contracts should define bad
faith under chapter 93B. Plaintiff argues that, in light of
Wagner's initial investment in the dealership, LRNA's alleged
failure to approve the plans, the need for a reduced facility due
to the decline in market conditions, and the evidence of ongoing
negotiations between the parties, there was a breach of the implied
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franchise agreement or that the question at least presents a triable
issue of fact.
There is no evidence of bad faith and so no need to test
whether there can ever be a finding of bad faith when good cause has
been established under section 5(h). This court has explained that
"[b]ad faith may encompass broader conduct under chapter 93B than
mere coercion or intimidation." General GMC, Inc. v. Volvo White
Truck Corp., 918 F.2d 306, 309 (1st Cir. 1990) (citing Tober Foreign
Motors, Inc. v. Reiter Oldsmobile, Inc., 381 N.E.2d 908 (Mass.
1978)) (interpreting Mass. Gen. Laws ch. 93B, § 4(1), which then
included language later amended and moved to § 5). Even so,
plaintiff failed to present any evidence whatsoever of bad faith on
the part of LRNA. LRNA simply enforced the terms of the 2004 LOI
for which the parties had bargained. Although Wagner may have
wished to change the terms of the 2004 LOI in light of changed
market conditions, "chapter 93B was not meant to insulate dealers
from the ordinary flux of pressure and striving that is part of a
free economy." Coady Corp., 361 F.3d at 56.
C. Opportunity to Cure
We turn to Wagner's argument that nonetheless it should
prevail because LRNA failed to provide an opportunity to cure
consistent with good cause as defined in chapter 93B. A court
covenant of good faith and fair dealing. The reference to a common
law doctrine, however, adds nothing to Wagner's statutory claim.
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examining whether there was good cause for termination may consider
a number of different criteria, including whether the distributor
gave the automobile dealer a reasonable opportunity to cure. The
cure provision states that courts may find "good cause [for
termination] . . . if the motor vehicle dealer failed to comply
with [requirements that] . . . were communicated in writing to the
motor vehicle dealer within a reasonable period before the effective
date of the termination or nonrenewal, such that a reasonable
opportunity to cure was afforded." Mass. Gen. Laws ch. 93B, § 5(h)
(emphasis added). The district court correctly found on the
undisputed facts that LRNA had repeatedly offered Wagner reasonable
opportunity to cure.
When Wagner failed to meet its initial obligations, LRNA's
Vice President of Franchise Operations sent a letter on May 16, 2005
asking Wagner why the March 31 deadline had not been met. LRNA's
letter emphasized that time was of the essence and that material
breaches would be enforced. Wagner responded, saying that the
changed business outlook for Land Rover and Jaguar sales meant that
it needed more time to adjust its business model, and Wagner's
response, on July 13, 2005, requested an extension for an
unspecified date. On August 18, 2005, LRNA responded to Wagner's
request by offering (i) a one-year extension of the completion date
and (ii) a reduction in the size of the facility subject to Wagner
signing amended agreements. Wagner rejected LRNA's proposal and
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instead sought an extension of up to three years. On those facts
alone, Wagner's claim of inadequacy of an opportunity to cure fails.
LRNA rejected Wagner's counterproposal for a three-year
extension on September 19, 2005 and restated its previous offer.
The final letters in 2006, which granted LRNA more than sixty days
notice until the effective termination date, put Wagner on notice
of its contractual breach and gave Wagner repeated opportunity to
cure by offering to amend the deadlines.
Indeed, the documents from the time show that Wagner never
complained of a lack of an opportunity to cure. Rather it
explained its failure to comply was due to adverse economic
conditions, including the decline in Jaguar sales and the removal
of the Freelander model from the market.
We note that Wagner was not an established Land Rover
dealer of many years faced with the loss of a dealership, a core
concern of the statute. See Autohaus, Inc. v. BMW of N. Am., Inc.,
No. CIV. A. 92-103403-MA, 1993 WL 1503945 (D. Mass. Dec. 23, 1993)
(manufacturer had good cause in terminating twenty-five-year-old
established dealership for failure to build facility as required in
franchise agreement). Rather, Wagner was at the other end -- it was
a temporary dealer. It was given a temporary initial dealership
pursuant to the TDA and there were certain conditions precedent it
had to meet to be given a more permanent dealership. It failed to
meet those conditions.
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D. Oral Modification to the 2004 LOI
As a last resort, Wagner argues that its written
contractual obligations were modified orally by agreement of the
parties. The district court correctly held there was no evidence
of oral modification. The plain language of the 2004 LOI forbids
amending the agreement "in any manner except by an executed
instrument in writing duly executed by an officer of the party to
be charged."
Still, it is true that Massachusetts law allows claims of
oral modification of written contracts contravening such contract
language. See Cambridgeport Savs. Bank v. Boersner, 597 N.E.2d
1017, 1022 (Mass. 1992) ("[A] provision that an agreement may not
be amended orally but only by a written instrument does not
necessarily bar oral modification of the contract."). State law,
however, imposes stringent proof requirements for such oral
modification. Massachusetts courts have made clear that "[t]he
evidence of a subsequent oral modification must be of sufficient
force to overcome the presumption that the integrated and complete
agreement, which requires written consent to modification, expresses
the intent of the parties." Id. at 1022, n.10; see also Beal Bank
S.S.B. v. Krock, No. 97-2241, 1998 WL 1085807, at *3 (1st Cir. 1998)
("Massachusetts . . . impose[s] a heavy burden on the party seeking
to modify an integrated written contract by subsequent oral
agreement.")
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There is no evidence of any oral modification sufficient
to overcome the presumption that the 2004 LOI expresses the intent
of the parties. The evidence in the record shows that Wagner merely
emphasized to the district court that negotiations were ongoing,
without establishing the substance of the alleged oral modification.
III.
Entry of summary judgment for LRNA is affirmed. Costs are
awarded to LRNA.
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