United States Court of Appeals
For the First Circuit
No. 04-1450
THE CADILLAC/OLDSMOBILE/NISSAN CENTER, INC., DOING BUSINESS AS
JOHN SANTILLI'S CENTER FOR AUTOMOBILES,
Plaintiff, Appellant,
v.
GENERAL MOTORS CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
Before
Selya, Circuit Judge,
Campbell and Leval,* Senior Circuit Judges.
Richard N. Sox, Jr., with whom Daniel E. Myers, Benjamin B.
Bush, Myers & Fuller, P.A., Michael P. Connolly, and Murtha,
Cullina were on brief, for appellant.
James C. McGrath, with whom Daniel L. Goldberg, Serena D.
Madar, Bingham McCutchen LLP, and Lawrence S. Buonomo were on
brief, for appellee.
December 8, 2004
__________
*Of the Second Circuit, sitting by designation.
SELYA, Circuit Judge. Like most states, Massachusetts
regulates the relationship between motor vehicle manufacturers and
motor vehicle dealers in considerable detail. See Mass. Gen. Laws
ch. 93B, §§ 1-15.1 Relying on these rules, a multi-brand dealer
doing business as John Santilli's Center for Automobiles (Santilli)
brought suit against a manufacturer, General Motors Corporation
(GM), alleging that the manufacturer had engaged in a number of
unfair practices. GM denied the material allegations of the
complaint. Without resolving whether the manufacturer had violated
the statute, the district court entered summary judgment in its
favor on the ground that Santilli had not shown any actionable harm
flowing from the challenged conduct. Discerning no error in the
district court's thoughtful disposition, we affirm.
I. THE STATUTORY SCHEME
We begin by limning the purpose, text, and structure of
the statute. Chapter 93B, familiarly known as the "Dealers' Bill
of Rights," has two central purposes. One is to curb "the
potentially oppressive power of automobile manufacturers and
distributors in relation to their affiliated dealers." Beard
Motors, Inc. v. Toyota Motor Distribs., Inc., 480 N.E.2d 303, 306
(Mass. 1985). The other is to regulate competition in the retail
1
The legislature amended chapter 93B in 2002. See 2002 Mass.
Legis. Serv. ch. 222 (West). The relevant events in this case
occurred before the effective date of the amendment, so the pre-
amendment version of the statute controls. Throughout this
opinion, we cite to that version.
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automobile industry for the benefit of the public at large. Am.
Honda Motor Co. v. Bernardi's, Inc., 735 N.E.2d 348, 354 (Mass.
2000).
To effectuate these dual objectives, the statute places
off limits certain "[u]nfair methods of competition and unfair or
deceptive acts or practices." Mass. Gen. Laws ch. 93B, § 3. These
methods, acts, and practices are delineated in section 4. That
section generally proscribes conduct that is "arbitrary, in bad
faith, or unconscionable." Id. § 4(1). It then describes, and
specifically prohibits, twenty-one discrete acts and practices.
Id. § 4(2)-(4).
The statutory scheme maps two remedial avenues. One
involves public enforcement: the Attorney General may enforce the
law. Id. § 12. The other involves private enforcement: the
statute creates private rights of action for injunctive relief and
damages. Id. § 12A.
This case turns on the meaning and operation of section
12A. In pertinent part, that section authorizes "[a]ny franchisee
or motor vehicle dealer who suffers any loss of money or property
. . . as a result of [a violation of the statute by a
manufacturer]" to bring a civil action for equitable relief or
damages. A dealer who has not suffered a loss of money or property
as a result of an unfair act or practice may still bring an action
for equitable relief — but not for damages — if "it can be shown
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that the . . . unfair act or practice may have the effect of
causing such [a] loss of money or property" in the future. Id.
II. THE FACTS
Consistent with the summary judgment standard, we
rehearse the facts in the light most favorable to Santilli. See
Houlton Citizens' Coalition v. Town of Houlton, 175 F.3d 178, 184
(1st Cir. 1999).
For many years, Santilli has operated an independent
automobile dealership in Brockton, Massachusetts. It is, inter
alia, licensed to sell the Cadillac line of vehicles (Cadillac is
a GM brand and all licensed Cadillac dealers are, therefore, GM
franchisees). During the same time frame, Norwood Cadillac has
operated a Cadillac dealership in Norwood, Massachusetts. By 1998,
the two dealerships had been in competition for several years. For
purposes of this appeal, we assume — but do not decide — that
Norwood Cadillac is within Santilli's relevant market area (RMA),
as that term is defined in Mass. Gen. Laws ch. 93B, § 4(3)(k).2
In the late 1990s, GM inaugurated the multi-site project
(MSP), a program designed to increase GM's presence in certain
geographic markets. Under the aegis of the MSP, GM aspired to
2
GM argues that Santilli failed to produce competent evidence
that Norwood is in Santilli's RMA and urges us to affirm the entry
of summary judgment on this alternative ground. See, e.g., Houlton
Citizens' Coalition, 175 F.3d at 184 (explaining that the court of
appeals may affirm an order for summary judgment "on any ground
revealed by the record"). Given the view that we take of the case,
see text infra, we need not resolve this issue.
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create joint ventures with successful independent dealers so that
the latter could own multiple dealerships (thus achieving economies
of scale and, not coincidentally, improving sales of GM vehicles in
the targeted markets).
In November of 1998, the MSP came to the greater Boston
area when a wholly-owned subsidiary of GM partnered with Joseph
Laham, the owner of Norwood Cadillac, to form Mass Bay Automotive,
LLC (MassBay). The original plan contemplated that MassBay, under
Laham's hegemony, would own and operate both Norwood Cadillac and
North Shore Buick-Pontiac-GMC Truck (a dealership that GM
previously had acquired). GM contributed approximately $13,000,000
in working capital and the assets of the North Shore dealership to
MassBay in exchange for a 90% ownership interest. Laham
contributed the fixed assets and leasehold improvements of Norwood
Cadillac, valued in excess of $1,400,000, in exchange for a 10%
ownership interest. He then sold the Norwood dealership, including
its goodwill and inventories of used cars and parts, to MassBay for
approximately $6,300,000.
MassBay proved to be a flop, and Laham sold his ownership
interest to GM in January of 2000. At that point, GM was, in
effect, the sole owner of Norwood Cadillac. It then began seeking
a purchaser for the dealership, hoping to find a buyer who would
operate Norwood as part of another MSP arrangement. When this
gambit failed, GM began pursuing a more traditional sale. To this
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end, it solicited bids for the dealership in mid-2001. Santilli
was among the bidders, but GM accepted a better offer from a third
party. The sale closed, and GM's de facto ownership of Norwood
Cadillac ceased, on October 30, 2001.
III. THE LAWSUIT
Invoking diversity jurisdiction, 28 U.S.C. § 1332(a),
Santilli sued GM in the United States District Court for the
District of Massachusetts. Its complaint contained four statements
of claim. We describe them briefly.
Count 1 emanates from a provision of the Dealers' Bill of
Rights that renders it unlawful for an automobile manufacturer
to own and operate . . . a motor vehicle
dealership within the relevant market area of
a motor vehicle dealer of the same line make;
provided, however, that a manufacturer . . .
shall not be deemed to be in violation of this
paragraph when operating a dealership either
temporarily for a reasonable period in any
case not to exceed one year or in a bona fide
relationship [with] an independent person . .
. .
Mass. Gen. Laws ch. 93B, § 4(3)(k). Santilli alleges that GM
violated this prohibition from and after November of 1999 (one year
after MassBay had assumed ownership of Norwood Cadillac). In its
view, Laham's relatively small equity interest in MassBay, combined
with the restrictive provisions of the MassBay operating agreement,
precluded MassBay from coming within the statutory safe harbor for
"bona fide relationship[s]" between manufacturers and independent
persons. See id. As a fallback, Santilli alleges that GM violated
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the statutory prohibition from and after January of 2001 (one year
after it had assumed full ownership of MassBay and, by extension,
of Norwood Cadillac).
Santilli premised count 2 on the catchall provision of
the Dealers' Bill of Rights. That provision proscribes actions
that are "arbitrary, in bad faith, or unconscionable." Id. § 4(1).
In support of this claim, Santilli alleged that GM's ownership and
operation of Norwood Cadillac after the one-year statutory grace
period and its favorable treatment of Norwood Cadillac during the
ensuing period3 constituted arbitrary and unconscionable conduct.
Count 3 alleges that GM acted arbitrarily in its
allocation of new vehicles, thus unfairly benefitting Norwood
Cadillac. Inasmuch as Santilli quickly abandoned this claim, we
eschew any further comment on it.
Count 4 alleges that GM violated a statutory provision
that generally prohibits "[u]nfair methods of competition and
unfair or deceptive acts or practices." Id. 3(a). This count
essentially replicates the substantive claims set out in the
previous three counts.
At the close of discovery, Santilli moved for partial
summary judgment on the three counts then remaining, namely, counts
3
Santilli alleged, for example, that GM allowed Norwood
Cadillac and North Shore to share administrative personnel (a
practice that GM normally forbids) and that Norwood Cadillac
received financing rates from General Motors Acceptance Corporation
that were unavailable to independent dealers.
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1, 2, and 4. GM cross-moved for summary judgment. It advanced two
grounds: (i) that Santilli had failed to introduce competent
evidence that Norwood Cadillac is in Santilli's RMA, see supra note
2; and (ii) that even if GM had violated the statute, Santilli
nonetheless had failed to adduce any evidence that the violation(s)
had caused it a loss of money or property as required by section
12A as a precondition of a suit for damages.
Santilli's proof concentrated heavily on GM's overlong
ownership and operation of Norwood Cadillac. In an effort to
satisfy the injury requirement with respect to that violation,
Santilli proffered expert evidence estimating the additional sales
that it would have garnered but for the continued presence of the
Norwood dealership during the wrongful interval. Santilli argued
that the statute forbade GM from owning and operating Norwood
Cadillac during that interval and, therefore, that GM should have
closed the doors once the one-year statutory grace period had
expired. Based on this premise, Santilli claimed that it was
entitled to damages equivalent to the profits it would have
realized through increased sales had Norwood Cadillac ceased
operations.
The district court rejected this theory of damages and
granted GM's summary judgment motion on the ground that Santilli
had failed to demonstrate that it had sustained any loss of money
or property as a result of this putative violation. Citing section
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12A of chapter 93B, the court reasoned that a plaintiff must show
that the violation itself caused the plaintiff harm. Applying that
principle, the proper measure of damages under section 4(3)(k) is
the increase in profits that the aggrieved dealer would have
realized had it been competing, during the wrongful interval,
against an independently owned dealership instead of a
manufacturer-owned dealership. Since Santilli failed to introduce
any evidence that would support a finding of injury on this basis,
the court rebuffed count 1 of its complaint.
The court simultaneously granted summary judgment in GM's
favor on counts 2 and 4. As to each of those counts, the court
noted that Santilli's proof sufficed only to show overlong
ownership. It concluded that Santilli could not recover in a
chapter 93B suit under a generic proscription when a more specific
provision, in this case section 4(3)(k), applies directly to the
challenged conduct. This timely appeal followed.
IV. ANALYSIS
Our review of an order granting summary judgment is
plenary. Houlton Citizens' Coalition, 175 F.3d at 184. The
primary question presented in this appeal is whether the district
court correctly apprehended the measure of damages under section
4(3)(k). To frame that question, we assume, for argument's sake,
that GM was in violation of section 4(3)(k), at least from January
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3, 2001 forward (i.e., one year after it acquired full ownership of
Norwood Cadillac).
In our view, the language of section 12A makes pellucid
that a plaintiff seeking damages under chapter 93B must show more
than that a defendant violated some substantive provision of the
statute. Rather, the plaintiff must show both that a violation
occurred and that the violation harmed the plaintiff. Martha's
Vineyard Auto Vill., Inc. v. Newman, 569 N.E.2d 401, 405 (Mass.
App. Ct. 1991). A necessary corollary of this injury requirement
is that a non-injurious violation may occur and, if that is the
case, the plaintiff will not be able to recover damages. See Coady
Corp. v. Toyota Motor Distribs., Inc., 361 F.3d 50, 59 (1st Cir.
2004) (upholding the district court's denial of relief under
chapter 93B when the evidence may have established a statutory
breach but the plaintiff failed to demonstrate any injury flowing
therefrom).
This brings us to the task of defining the injury needed
to justify recovery of damages under section 4(3)(k). We must make
this determination with reference to the purposes of the statute.
See Am. Honda, 735 N.E.2d at 354 (interpreting chapter 93B with
reference to statutory purpose). The main object of section
4(3)(k) is to forfend against unfair competition, that is, to
protect independent dealers from having to compete on unequal terms
with dealerships owned and operated by manufacturers. The statute
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does not attempt to safeguard dealers from competition with other
dealers on a level playing field. See id. (noting that chapter 93B
strives to strike a balance by controlling unfair trade practices
without "shielding dealers from all competition"). Accordingly, a
section 4(3)(k) plaintiff must show that it has suffered harm by
being forced into unfair competition with a manufacturer-owned
dealership.
Santilli's evidence, taken in the light most favorable to
it, establishes only that the continued existence of Norwood
Cadillac hampered its sales. However, Santilli presented no
evidence that GM's unlawful ownership and operation of Norwood
Cadillac made Norwood a more formidable competitor, thereby causing
Santilli to lose sales or profits. This is a fatal deficiency
because section 4(3)(k) did not require GM to close Norwood
Cadillac at the expiration of the one-year statutory grace period.
GM had other lawful alternatives to a complete shut-down of Norwood
Cadillac, most notably, selling the dealership to an independent
operator.
Placed in perspective, Santilli's proposed measure of
damages does not flow from GM's violation of the statute, but from
GM's failure to take one possible route to statutory compliance.
In effect, then, Santilli urges us to hold that it is entitled to
damages because it was denied a windfall that it would have enjoyed
had GM shuttered the Norwood dealership while seeking a buyer. The
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only thing illegal about the existence of the Norwood dealership
was that it was owned and operated by GM. If Santilli cannot show
that he suffered any loss of money or property as a result of that
illegal ownership and operation, it is not authorized by section
12A to bring suit for damages. Santilli's approach ignores the
injury requirement limned in section 12A and, in the bargain,
converts section 4(3)(k), by judicial fiat, into a strict liability
statute. Nor is this unfortunate result accompanied by any
corresponding gain; Santilli's approach would not further the
statute's purpose and, indeed, would run counter to the statutory
goal of benefitting consumers.
Santilli loudly protests that we will eviscerate section
4(3)(k) if we require plaintiffs to demonstrate that they have
suffered special injury from compelled competition with
manufacturer-owned dealerships. Santilli complains that, as a
practical matter, it will be impossible to prove that such a
disadvantage caused harm and, therefore, that the statutory remedy
— an action for damages — will prove to be fool's gold. This
animadversion is misplaced for two reasons.
First, we see nothing insurmountable (or even
particularly difficult) in the requirement that a section 4(3)(k)
plaintiff show injury flowing from a manufacturer's unlawful
ownership and operation of a competing dealership. The
Massachusetts cases are clear that damages under unfair competition
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statutes need not be proved with mathematical certainty. See,
e.g., Datacomm Interface, Inc. v. Computerworld, Inc., 489 N.E.2d
185, 196 (Mass. 1986); Nat'l Merch. Corp. v. Leyden, 348 N.E.2d
771, 774 (Mass. 1976); Ricky Smith Pontiac, Inc. v. Subaru of New
Engl., Inc., 440 N.E.2d 29, 48 (Mass. App. Ct. 1982); cf. Veranda
Beach Club Ltd. P'ship v. W. Sur. Co., 936 F.2d 1364, 1385 (1st
Cir. 1991) (noting that "translating legal damage into money
damages is, virtually by definition, an imprecise affair"). Should
unfair acts or practices occur in, say, the allocation of vehicles
or the setting of credit terms, there is no earthly reason why the
effect of such favoritism cannot be satisfactorily quantified. The
case law under the counterpart federal statute, the Automobile
Dealers' Day in Court Act, 15 U.S.C. §§ 1221-1225, attests to the
validity of this conclusion. See, e.g., Bob Willow Motors, Inc. v.
Gen. Motors Corp., 872 F.2d 788, 798-99 (7th Cir. 1989) (approving
estimation of damages resulting from discriminatory vehicle
allocation); Randy's Studebaker Sales, Inc. v. Nissan Motor Corp.,
533 F.2d 510, 517-18 (10th Cir. 1976) (endorsing damages
approximation based on sales at other area dealers unaffected by
the manufacturer's discriminatory practices).
Second, Santilli's argument totally overlooks the
availability of injunctive relief. Under the statute as written,
a dealer who fears unfair competition from a manufacturer's
overlong ownership and operation of a competing dealership can seek
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injunctive relief without having to show actual damages (or even
threatened irreparable harm, as is normally required for an
injunction). See Mass. Gen. Laws ch. 93B, § 12A. Rather, the
plaintiff may obtain relief upon a showing that the defendant's
violation may cause the plaintiff injury.4 Id. We are unable to
think of any sound reason why, in a situation such as this, the
legislature would not have considered that an adequate remedy — and
one that was preferable to providing a means for opportunistic
dealers to make windfall gains without any showing that they were
actually disadvantaged by a section 4(3)(k) transgression.
In a last-ditch effort to blunt the force of this
reasoning, Santilli points us to the decision of the Massachusetts
Appeals Court in Ricky Smith Pontiac. That case concerned a
provision of chapter 93B that prohibits a manufacturer from
"arbitrarily . . . grant[ing] . . . a franchise . . . to . . . an
additional franchisee who intends . . . to conduct its dealership
operations from a place of business situated within the relevant
market area of an existing franchisee." Mass. Gen. Laws ch. 93B,
§ 4(3)(l). The defendant had granted a franchise in violation of
this provision, and the court determined that the plaintiff's
damages should be measured by calculating the profits lost due to
the unlawful location of the competing franchise within its market
4
This remedial avenue was open to Santilli, but Santilli chose
not to explore it.
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area. 440 N.E.2d at 47. Santilli attempts to draw a parallel,
asseverating that just as Ricky Smith Pontiac was damaged by the
unlawful insertion of competition into its market area, so Santilli
has been damaged by the unlawful operation of Norwood Cadillac.
The parallel is inexact and, ultimately, unconvincing.
The crucial distinction involves the divergence in the purposes of
the two statutory provisions. Section 4(3)(l) is aimed at
geographic protection, shielding dealers from the arbitrary
interposition of any additional same-brand competition within their
market areas. Am. Honda, 735 N.E.2d at 354. Had that statute not
been breached, the offending dealership in Ricky Smith Pontiac
would not have existed at all. Thus, the Ricky Smith measure of
damages was appropriate because it put the plaintiff in as good a
position as the plaintiff would have occupied had the transgression
not occurred.
By contrast, section 4(3)(k) is aimed only at protecting
dealers from unfair competition, specifically, the kind of unfair
competition that vertical integration can bring about when
manufacturers own and operate dealerships. Applying the Ricky
Smith measure of damages to claims brought under section 4(3)(k)
would mix apples with oranges, and result in granting plaintiffs
more protection than the legislature prescribed. At least in this
instance, this patchwork would put the complaining dealer in a
better position that it would have occupied had the manufacturer
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eschewed any involvement with the competing dealer. Ricky Smith
Pontiac is, therefore, inapposite.
To sum up, we hold that a plaintiff seeking to recover
damages for a violation of section 4(3)(k) must show not only a
violation of the statute but also harm resulting from that
violation. The latter showing requires competent proof that the
plaintiff sustained a loss of money or property attributable to the
manufacturer's unlawful ownership and operation of the competing
dealership. That measure of harm is consistent with the statute's
purpose to shield dealers from the "overweening economic power
wielded by manufacturers." Tober Foreign Motors, Inc. v. Reiter
Olds., Inc., 381 N.E.2d 908, 912 (Mass. 1978).
Santilli's claims against GM under sections 3 and 4(1) of
chapter 93B (counts 2 and 4) need not detain us. As said, the
lower court granted GM summary judgment on these counts, reasoning
that when a specific provision of chapter 93B applies, a plaintiff
may not also bring claims under the statute's generic provisions
based on the same facts.
As to the section 3 claim, that reasoning is flawless.
The statute makes it transparently clear that section 3 is only
actionable insofar as there has been a violation of some subsection
of section 4. See Mass. Gen. Laws ch. 93B, § 3(a) (prohibiting
unfair methods of competition as defined in section 4).
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Unlike the section 3 claim, the section 4(1) claim is not
obviously vulnerable. Here, however, there is no need for us to
test the district court's rationale. See Houlton Citizens'
Coalition, 175 F.3d at 184 (explaining that the court of appeals
may affirm an order for summary judgment "on any ground revealed by
the record"). Even if Santilli could state an undisplaced claim
for damages under section 4(1), any such claim would be subject, on
these facts, to the injury requirement of section 12A.
Accordingly, it would be doomed by the same lack of evidence of
violation-induced harm that condemned count 1 (the claim under
section 4(3)(k)) to an early demise.
V. CONCLUSION
We need go no further. Insofar as money damages are
concerned, the Massachusetts legislature has incorporated into the
Dealers' Bill of Rights a principle of "no harm, no foul." It thus
became Santilli's burden to demonstrate actual harm flowing from
GM's ostensible violation of the statute. The district court
correctly concluded that Santilli failed to carry this burden. It
follows inexorably, as night follows day, that GM was entitled to
summary judgment on counts 1, 2, and 4 of the complaint.
Affirmed.
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