Seacoast Motors of Salisbury, Inc. v. Daimlerchrysler Motors Corp.

United States Court of Appeals
For the First Circuit

No. 01-1262

SEACOAST MOTORS OF SALISBURY, INC.,

Plaintiff, Appellant,

v.

DAIMLERCHRYSLER MOTORS CORPORATION,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nancy Gertner, U.S. District Judge]

Before

Boudin, Chief Judge,

Coffin, Senior Circuit Judge,

and Lynch, Circuit Judge.

Nicholas J. Decoulos and Decoulos & Decoulos on brief for
appellant.
George W. Mykulak, Susan B. Hanmer and Hale and Dorr LLP on
brief for appellee.

November 8, 2001
 BOUDIN, Chief Judge. This case has its origin in a law

suit against the auto manufacturer DaimlerChrysler Motors

Corporation ("DaimlerChrysler") by Seacoast Motors of Salisbury

("Seacoast"), one of its dealers. Seacoast claims that

DaimlerChrysler's decision to authorize a new competing dealer

near Salisbury was an arbitrary and unfair trade practice under

Mass. Gen. Laws. ch. 93B, § 4(3)(l) (West 1997). The district

court dismissed Seacoast's suit and ordered arbitration pursuant

to a clause in Seacoast's dealership agreement that, both sides

concede, covered the claim. Seacoast Motors of Salisbury, Inc.

v. Chrysler Corp., 959 F. Supp. 52, 56 (D. Mass. 1997).

Seacoast appealed to this court, arguing that its

chapter 93B claim sounded in antitrust and was thus not

arbitrable under the so-called American Safety doctrine. See

Am. Safety Equip. Corp. v. J.P. Maguire & Co., 391 F.2d 821,

827-28 (2d Cir. 1968). This court, on a ground later rejected

by the Supreme Court in another case, Green Tree Fin. Corp. v.

Randolph, 531 U.S. 79, 88-89 (2000), held that it lacked

jurisdiction over Seacoast's appeal because the arbitrability

decision was "embedded" in the underlying substantive dispute

and thus interlocutory. Seacoast, 143 F.3d 626, 628-29 (1st

Cir.), cert. denied, 525 U.S. 965 (1998).

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 Thereafter, Seacoast's claim was submitted to

arbitration and DaimlerChrysler prevailed. Seacoast then

repeated its objection to arbitrability in a new federal suit,

brought in the same district court that had ordered arbitration,

seeking to enjoin enforcement of the arbitration award. The

district court once again dismissed, this time without a written

opinion, and Seacoast now appeals. We review the issue de novo.

Rosa v. Park West Bank & Trust Co., 214 F.3d 213, 215 (1st Cir.

2000).

At the threshold, there is uncertainty whether Seacoast

has a timely cause of action in this case. DaimlerChrysler

argues that Seacoast's challenge to the arbitration award is a

suit to vacate the arbitration award under section 10 of the

Federal Arbitration Act ("FAA"), 9 U.S.C. § 10 (1994). If so,

Seacoast's claim is time-barred, because it failed to serve

notice of the action on DaimlerChrysler within three months of

the filing of the award (its service came six days late). 9

U.S.C. § 12. Seacoast's reply is that this is not a motion to

vacate under section 10 but an independent equitable action to

enjoin the award not subject to section 12's time limit.

Section 10 sets forth a restricted list of grounds on

which a court may entertain a motion to vacate an award; those

grounds are directed primarily to fundamental errors within the

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arbitration process itself (e.g., fraud, misconduct) and, read

literally, they may not include the anterior claim that the

arbitration contract is itself invalid. Although section 12's

three-month statute of limitations is not formally limited to

motions to vacate "under section 10," such motions were surely

what the drafters of the FAA had principally in mind.

Of course, the existence of a valid arbitration

contract embracing the dispute is the predicate for everything

else. Section 10 omits any reference to disagreements on this

issue as a ground for attacking an award; but this is probably

because the drafters assumed that any party who resisted

arbitration would do so at the outset. If so, the issue would

be presented to the trial court on a motion to compel

arbitration, either by a de novo motion (9 U.S.C. § 4) or in

resisting a civil suit by an adversary (9 U.S.C. § 3), and

resolved prior to arbitration.

Here, Seacoast brought a civil suit and did contest

arbitrability; but when the district court held the matter

subject to arbitration, it dismissed the case instead of staying

the civil action. As already described, we in turn dismissed an

immediate appeal on the ground that the judgment was not final

and the Supreme Court then denied certiorari (even though it

later held that such judgments are final). The question, then,

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is what vehicle is available for Seacoast to get appellate

review now of its original claim that the dispute was not

arbitrable.

One way is to read section 10, stretching its language,

to include any adequately preserved ground ( e.g., public policy)

on which an arbitration award might be challenged--over and

above those specifically listed in section 10. Alternatively,

one might imagine some form of independent equitable action.

There is limited precedent for both courses, and both have

difficulties.1 But even if an independent action were permitted,

section 12 might still be read as a three-month time limit on

attacks on arbitration awards subject to the FAA, however

framed.

These puzzles need not be resolved here and should be

left for cases where they have to be decided. The procedural

gap in the FAA that ensnared Seacoast has been closed by Green

Tree: in the future, the party in Seacoast's position will be

able to appeal the order of dismissal it suffered as a "final"

order (and will at least risk a claim of waiver or law of the

case if it does not). And where the district court finds that

1See Advest, Inc. v. McCarthy, 914 F.2d 6, 8-9 (1st Cir.
1990); Societe Generale de Surveillance, S.A. v. Raytheon Eur.
Mgmt. & Sys. Co., 643 F.2d 863, 867-68 (1st Cir. 1981); see also
4 MacNeil, Speidel & Stipanowich, Federal Arbitration Law § 40.5
(1999); 2 id. § 23.5.

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arbitration is required and enters a stay of the action before

it, the arbitrability issue it decided will be adequately

preserved for appellate review when the stay is ended and the

district court later proceeds with enforcement.

We turn then to the merits, assuming arguendo that

Seacoast has brought a timely challenge to the arbitrability

ruling. There is no "jurisdictional" bar to our approach: the

parties are diverse and there is clearly a constitutional case

or controversy. See Steel Co. v. Citizens for a Better Env't,

523 U.S. 83, 93-95 (1998). We conclude that even assuming that

Seacoast's claim is properly before the court and not out of

time, Seacoast still loses.

Seacoast argues that its claim under chapter 93B sounds

in antitrust and is therefore nonarbitrable under American

Safety. The provision of chapter 93B that gives rise to the

suit is typical of so-called auto dealer protection statutes

passed by many states since the 1960s. See generally ABA

Antitrust Section, Monograph No. 17, Franchise Protection: Laws

Against Termination and the Establishment of Additional

Franchises (1990). Massachusetts' version prohibits inter alia

auto manufacturers from "arbitrarily" granting a franchise to a

dealer who intends to sell the same line of cars in the same

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retail market area as an existing franchisee. Mass. Gen. Laws.

ch. 93B, § 4(3)(l).

To describe such a chapter 93B claim as "antitrust" is

a very dubious use of language. The central aim of the

antitrust laws is to protect consumers against certain abusive

business practices--especially price-fixing and monopoly. See

1 Areeda & Hovenkamp, Antitrust Law ¶ 100a (2000). By contrast,

dealer protection statutes, so far as they allow existing

dealers to block new ones, are commonly aimed at restricting

intrabrand competition (i.e., among dealers selling the same

product). See Heritage Jeep-Eagle, Inc. v. Chrysler Corp., 655

N.E.2d 140, 143-44 (Mass. App. Ct. 1995). Such restrictions are

not normally pro-consumer, and, where imposed by dealers

themselves as a naked restraint, can readily violate the

antitrust laws. United States v. Topco Assocs., 405 U.S. 596,

608 (1972).2

Insofar as such statutes protect against arbitrary

ousters of existing dealers (e.g., by a refusal to renew a

franchise), Mass. Gen. Laws. ch. 93B, § 4(3)(e), they may in

2
In some situations, a supplier like DaimlerChrysler may
lawfully impose such restrictions (e.g., granting exclusive
territories) to protect dealer services against "free riding" or
to promote dealer investment, Continental T.V., Inc. v. GTE
Sylvania, Inc., 433 U.S. 36, 54-55 (1977); but here
DaimlerChrysler seeks to expand dealer competition.

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principle serve to protect a small business from being

mistreated by a large one. But even there, the aim is often one

of fairness, not promotion of competition. See Beard Motors,

Inc. v. Toyota Motor Distribs., Inc., 480 N.E.2d 303, 306 (Mass.

1985). Antitrust law protects competition, not competitors.

Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962). In

all events, nothing in Seacoast's complaint has to do with a

threatened dealer cut-off; Seacoast simply does not want to face

a new competitor.

Even if we assumed arguendo that Seacoast's claim could

be classified as an antitrust claim, it remains arbitrable.

Seacoast argues that the Massachusetts legislature made chapter

93B claims nonarbitrable in 1977 when it deleted a provision

that automatically required arbitration absent clear agreement

to the contrary. The inference that the 1977 change meant to

preclude arbitration is doubtful and, in any event, is

irrelevant. Because of the FAA's preemptive effect, the

question is solely whether federal law or policy exempts

antitrust claims from the pro-arbitration presumption of the

FAA. Southland Corp. v. Keating, 465 U.S. 1, 10-11 (1984).

To this, Seacoast urges a positive answer based on

American Safety, in which the Second Circuit held that antitrust

claims are not arbitrable because of "the pervasive public

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interest in enforcement of the antitrust laws." 391 F.2d at

827-28. This circuit once adopted American Safety, but the

Supreme Court reversed, at least in the context of antitrust

claims arising from international transactions. Mitsubishi

Motors Corp. v. Soler Chrysler-Plymouth, 723 F.2d 155, 169 (1st

Cir. 1983), rev'd, 473 U.S. 614, 629 (1985).

Since then, several circuits have abandoned the

American Safety doctrine in its entirety. See, e.g., Kotam

Elecs., Inc. v. JBL Consumer Prods., Inc., 93 F.3d 724, 725-28

(11th Cir. 1996), cert. denied, 519 U.S. 1110 (1997); Nghiem v.

NEC Elec., Inc., 25 F.3d 1437, 1442 (9th Cir.), cert. denied,

513 U.S. 1044 (1994). Others have expressed doubt whether it

remains good law. See, e.g., Sanjuan v. Am. Bd. of Psychiatry

& Neurology, Inc., 40 F.3d 247, 250 (7th Cir. 1994), cert.

denied 516 U.S. 1159 (1996); Swensen's Ice Cream Co. v. Corsair

Corp., 942 F.2d 1307, 1310 (8th Cir. 1991). It is time to lay

it to rest.

American Safety rested on the basic premise that the

public interest in antitrust enforcement, the complexity of the

antitrust laws, and the inadequacy of arbitral tribunals make

arbitration of private antitrust claims inappropriate. This

premise has since been rejected by the Supreme Court with

respect to a variety of other statutory claims no less important

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or complex. See Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20 (1991) (Age Discrimination in Employment Act); Rodriguez

de Quijas v. Shearson/American Express, Inc., 490 U.S. 477

(1989) (1933 Securities Act); Shearson/American Express Inc. v.

McMahon, 482 U.S. 220 (1987) (1934 Securities Act and civil

RICO).3

There is no question here of an advance waiver of

antitrust claims; arbitration clauses do not eliminate

substantive rights but submit them for resolution in an

arbitral, rather than a judicial forum. Mitsubishi, 473 U.S. at

628. And while some antitrust cases do involve large issues in

which the public has an interest, others are essentially

business quarrels peculiar to the parties. For those in the

former category, government agencies remain free to pursue the

defendant regardless of private actions, whether before courts

or arbitrators. We think time has passed by the American Safety

doctrine and so hold.

Affirmed.

3
In Page v. Moseley, Hallgarten, Estabrook & Weeden, Inc.,
806 F.2d 291 (1st Cir. 1986), this court stated that the Supreme
Court’s decision in Mitsubishi did not overrule the American
Safety doctrine where the context was domestic rather than
international, and on this basis, Page held that civil RICO
claims were not arbitrable. Id. at 299. But Page's holding was
itself abrogated by the Supreme Court in Shearson/American
Express, 482 U.S. at 225.

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