# United Stat es Court of Appeals For the First C ircuit

No. 02-1249 AMERICAN HONDA MOTOR COMPANY, INC., Plaintiff, Appellee,

v. RICHARD LUNDGREN, INC., d/b/a LUNDGREN HONDA, Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Nathaniel M. Gorton, U.S. District Judge ]

Before Boudin, Chief Judge , Bownes, Senior Circuit Judge , and Lynch, Circuit Judge .

RichardB. McNamara with whom Gregory A. Holmes , Stephanie A. Bray , Elizabeth A. Leonardand Wiggin & Nourie, P.A. were on brief for appellant. Robert D. Cultice with whom M ichael R. Heyison , Peter A. Spaeth and Hale and Dorr LLP were on brief for appellee.

December 20, 2002-2- BOUDIN, Chief Judge . This diversity cas e concerns a prolongedeffort by appellee American Honda Motor Co., Inc. ("Honda") to franchise a new automobile dealership in Westborough, Massachusetts. This effort has been opposed under a Massachusetts dealer protecti on statute by appellant Richard Lundgren, Inc. ("Lundgren"), which operates an existing local Honda dealership in Auburn, Massachusetts, about eleven miles west of the proposed new dealership. The district court put an end to this multi-act drama, granting summary judgment to Honda. We affirm.

Massachusetts, lik e a number of states, protects franchised car dealers against the "potentially oppressive power" of their respective manufacturers. Am. Honda Motor Co., Inc. v. Bernardi's, Inc. , 7 35 N.E.2d 348, 354 (Mass. 2000) (" Honda IV ") Under the statute, the dealer has a legal right to prevent an "arbitrary" deci sion by the manufacturer to create a competing dealership nearby. Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended2002). But the dealer can invoke the statute's protection onlyif the new dealership would be located within the "relevant market area" ("RMA") of the protesting dealer. Honda IV , 735 N.E.2d at 351.

"Relevant marke t area" might sound like an antitrust concept. Cf. Tober Foreign Motors, Inc. v. Reiter Oldsmobile, Inc. , 381 N.E.2d 908, 918 (Mass. 1978). In fact it is defined rather m echa nically by the applicable Massachusetts statute in a1 Omittedfrom the quotation, among other language, is an

alternative test, basedon sales of new cars. The statute directs -3- thus-far frustrated effort by the legislature to avoid protracted litigation over this i niti al "standing" requirement. Of course, the statute does not concern standing in the Article III sense; rather, the legislature has simply enacted a threshold requirement (albeit a somewhat complicatedone) based on the proposed dealer's proximity before the "arbitrariness" test can be invoked.

The definition was m ore open-ended in the original version of the statute; there, the RMA was to be defined by the courts according to equitable principles. See generally Honda IV , 735 N.E.2d at 352 n.8 (discussing statutory history). But, in 1977, the Massachusetts legislature adopted a new "bright line" formula which governs this case. A further amendment in 2002 sought to repair the 1977 version in the wake of judicial interpretation, 2002 Mass. Legis. Serv. ch. 222, § 3 (to be codifiedat Mass. Gen. Laws ch. 93B) ("2002 Amendment"); but by virtue of a savings clause, the 2002 version does not apply to the present dispute, id. § 5.

The gove rning 1977 definition, trimmed of portions not here pertinent, reads as follows:

[T]he relevant market area of a motor vehicle dealer . . . is the . . . geo graphical area immediatelysurrounding its existing dealer location within which it obtained, during [a definedperiod] . . . at least two-thirds of . . . its retail service sales . . . . 1that, as between new car sales and service sales, courts should

select the metric that results in the "more narrowly defined and circum scribe dgeographical area." Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002). The parties are in agreement that-- in this instance--the service ( i.e. , repairs) sales rather than new car sales are the proper test. -4- Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002).

Unfortunately, the 1977 statute left open a number of questions: for example, whether a dealership location should be regardedas a point or an area; whether the surrounding RMA should be defined as a perfect circle or may be some other shape; whether customer locations should be identified by air miles or some other variable ( e.g. , drive time ); and whether the two-thirds figure shouldbe based on transactions, customers or revenues. All of these issues, and others, were litigated in this case.

The present litigati on b egan in April 1998, when Honda filedan action in the federal district court seeking a declaratory judgment. Honda planned to franchise a new dealer in Westborough, Massachusetts, about eleven miles east of the existing Lundgren dealership in Auburn. Anticipating a challenge (Lundgren had earlier contested a different proposal by Honda, Richard Lundgren, Inc. v. Am. Honda Motor Co. , 699 N.E.2d 11 (Mass. App. Ct. 1998)), Honda sought a ruling that Lundgren hadno standing (under the 1977 def inition) to contest this new dealership as an "arbitrar y " decision by Honda.-5- Lundgren, as this litigation shows, is anxious to mount such a contest. Both sides engaged experts on the RMA issue. At the end of this case's first journey through the district court, Lundgren stipulated that it could not prevail if the RMA had to be

a perfect circle. Am. Honda Motor Co. v. Bernardi's, Inc. , 113 F. Supp. 2d 54, 57 (D. Mass. 1999) (" Honda I "); Am. Honda Motor Co. v. Bern ardi' s, Inc. , 113 F. Supp. 2d 58, 59 (D. Mass. 1999) (" Honda II ") . On that premise, the district court ruled in Honda's favor . Honda I , 113 F. Supp. 2d at 57; Honda II , 113 F. Supp. 2d at 59.

On appeal, this court certified the legal question to the Massachusetts Supreme Judicial Court ("SJC"). Am. Honda Motor Co.

v. Bernardi's, Inc. , 198 F.3d 293, 296-97 (1st Cir. 1999) ( Honda III ). That court, over a dissent supporting the district court's ruling, held that the RMA had to be circular or like a circle but didnot have to be a perfect circle. Honda IV , 735 N.E.2d at 350. This court then vacated the district court judgment and remanded for further proceedings. Am. Honda Motor Co. v. Bernardi's, Inc. , 235 F.3d 1 (1st Cir. 2000) (" Honda V ").

The case was then transferred to a different district judge. Honda filed a new motion for summary judgment, andLundgren offeredtwo alternative RMA calculations purporting to e stab lish standing under the statute. On February 8, 2002, the district court granted summary judgment, again in favor of Honda. Am. Honda2 Geocoding employs a computer prog ram that can pinpoint the

longitude and latitude of a customer's location. Under the zip code distrib uti on method, the dealership's sales are sorted according to the customer's zip code, and then the sales within each zip code are distributed rando mly . Lundgren's expert used geocoding for ninety percent or so of the data. For the ten percent of the data that could not be geocoded, the sales were attr ibutedto the zip code's centroid (the centroid is the geometric center of an irregular shape). Honda VI , 188 F. Supp. 2d at 31-32. -6- Motor Co. v. Lundgren , 188 F. Supp. 2d 27, 33 (D. Mass. 2002) (" Honda VI ").

Two of the district court's rulings, favor abl e to Lu ndgre n on the present facts, are not disputed by Honda on this appeal. One is that the two-thirds requirement could be measured bythe dollar volume of sales or the number of transactions but not byt he numbe r of customers. Honda VI , 188 F. Supp. 2d at 30-31. The other is that the location of customers, critical to determining the boundary within which two-thirds of those customers reside, can be determined by "geocoding." Id. at 32. Geocoding, championedby Lundgren's expert, is a somewhat more precise way of locating individual customers than is the zip code distribution method urged by Honda. 2

On these premises, Lundgren's expert proceeded as follows. First, customers (each assigned the dollar value of his or her repairs in the relevant period) were sequenced in order of increasing distance from the Lundgren dealership. Then the expert

meas ure dthe air mile distance ("last order distance") from the-7-

Lund gren dealership to the last customer ("last order location")

necess ary to encompass two-thirds of the total repair dollars. Thus, a circle drawn around the dealership with a radius equal to the last order distance would necessarily include two-thirds of the repair service revenue. Honda VI , 188 F. Supp. 2d at 32.

The expert then compared the last order distance to the distance between the Lundgren dealership andth e site of the proposed new dealership in Westborough ("inter-dealer distance"). In determining the inter-dealer distance, the expert did not

measure the distance between the respective centroids (the geometric centers) of the two dealerships but between the eastern border of the Lundgren dealership and the western border of the proposed new dealership. Because the last order distance and the inter-dealer distance were found to be equal, Lundgren's expert concludedthat the proposed new dealership is within th e c ircle representing Lundgren's RMA. Honda VI , 188 F. Supp. 2d at 32.

Lundgren's e xpert also made a second, alternativ e calculation of the RMA. This time he sequenced custom ers n ot by air mile distance from Lundgren's dealership ( e.g. , New York City is 200 miles from Boston), but by the time needed to drive the distance ( e.g. , New York City is four hours from Boston) . Us ingthis metric to derive the last order necessary to constitute twothirds of repair sales, the expert found the drive time from Lundgren to the new dealer to be 17 minutes and the drive time to-8-

the last order location to be 17.6 minutes. According to Lundgren, using such an RMA based on drive time means that at least a small portion of the proposed new dealership would fall inside the RMA.

In its decision, the district court rejected the main air mile distance calculation on several separate grounds: (1) that Lundgren had earlier stipulated that it would lose if a perfect circle were used to construct the RMA; (2) that the RMA should be spannedfrom the centroid of the Lundgren property and not from its boundaries; (3) that the expert had admittedly rounded off air mile distances to the nea rest ten th of a mile; and (4) that even disregarding the first three problems the expert's RMA merely touchedrather than overlapped with the property o f the proposed

new dealer. The cou rt rej ected the alternative drive time calculation on the further gro und that the Massachusetts statute didnot allow it . Hon da VI , 188 F. Supp. 2d at 32. Summary judgment for Honda was entered and Lundgren now appeals.

On app eal from summary judgment, this court ordinarily reviews issues de novo , construing the record in the light most favorable to the non-moving party, here Lundgren. Euromotion, Inc.

v. BMW of N. Am., Inc. , 136 F.3d 866, 869 (1st Cir. 1998). At this stage, we assume th at the computations of Lundgren's expert are accurate; whether they are foreclosed by the prior stipulation and, if not, whether they satisfy the requirements of the Massachusetts statute are legal issues.-9- The d is trict court's reliance on the stipulation is unders tand able. The stipulation was unqualified and, if given effect, might appear to resolve the case cleanly in Honda's favor. Lundgren stipulated in the earlier go-aroundin the district court that if the RMA were computed as a perfect circle, it would not reach the location of the proposed new dealership. Honda I , 113 F. Supp. 2dat 57. On this go-around, Lundgren's main computation is basedupon a perfect circle RMA. Honda VI , 188 F. Supp. 2d at 32. In litigation that has already lasted several ye ars an d occupied three different courts, Lundgren's about-face certainly needed explaining.

Stipulations between parties are not "absolute," T I Fed. Credit Union v. DelBonis , 72 F.3d 921, 928 (1st Cir. 1995), and a partymay be relieved of a stipulation for good cause--which means, in a nutshell, that good reason must exist and that relief must not unfairly prejudice the opposing party or the interests of justice. See, e.g. , New Hampshire v. Maine , 532 U.S. 742, 750-51 (2001); FDIC v. Kooyomjian , 2 20 F.3d 10, 14 (1st Cir. 2000). Here, Lundgren argues that its earlier co ncession was not based on geocoding or drive time calculations and that the intervening SJC decision in Honda IVoffered room for its expert's more recent calculations.

In principle, an intervening change of law might count as goodc ause . See Arizona v. Shamrock Foods Co. , 729 F.2d 1208,-10-

1215- 16 (9th Cir. 1984), cert. denied , 469 U.S. 1197 (1985). In general terms, Honda I Vis p ermissive toward new and alternative methods of making the RMA calculation. Honda IV , 735 N.E.2d at 355. Further, geocoding has greater accuracy in its favor, Honda VI , 188 F. Supp. 2d at 32, and language in Honda IV --discussed more fully below--at least leaves open the possibility of calculations basedon drive time. But the change of law argument is not persuasive on these facts.

Honda IVdid not undo a previous bar to geocoding and drive time calculations; from the outset, Lundgren could have employedsuch calculations on an alternative basis and argued that theywere permissible. Instead, it placed its chips on the argument that the RMA did not have to be a perfect circle, stipulating that it would lose if a perfect circle were employed. Having won the perfect circle debate, Lundgren now ignores its victoryand seeks to change other parts of its original computation in ways that it could easily have urged several years ago.

However, Honda's stipulation argument appears flawed for

a different reason not argued by Lundgren. Suppose that instead of drawing a perfect circle Lundgren's expert had drawn a sl ightly imperfect one encompassing the same customers--say, caving slightly inward where no customer now exists. Nominally, this would avoid violating the stipulation--the circle would no longer be perfect--yet the cavity would be trivial and the resulting shape-11-

wouldarguably be su ffic iently "circular" to comply with the dictates of Honda IV . In short, Lundgren's change in position is not aimed at altering the shape of the circle; what improves Lundgren's position is simply the use of geocoding and drive time data. Lundgren apparently did not stipulate that it would limit itself to zip code-based platting methods an d a ir mile distance data. Perhaps this about face as to methodology could be barred on

some other ground or even claimed to be implicitly at odds with the stipulation; it is certainly bad timing since the legal validity of geocoding and drive time calculations could have been certified on the prior go-around. In sum, we would readily upholdthe district court's refusal to allow a departure from the stipulation, whatever the standard of review; but we are not persuaded that Lundgren's new formula is at odds with the substance of the stipulation.

Turning to the merits, we begin with the air mile distance calculation made by Lundgren's exp ert , placing the boundary of Lundgren's RMA on the boundary of the proposed new dealership. The district court rejected this proposed showing on

se veral different grounds. Honda VI , 188 F. Supp. 2d at 32-33 . The district court ruled that measuring distance fromthe boundary

was unsound and that some central point within the dealership ( e.g. , the centroid) should be used, id. at 33; Lundgren's counsel conceded at oral argument that this would cause it to lose.3 The 20 02 revision of the statute says directly that the

boundary can be used. Compare Mass. Gen. Laws ch. 93B, § 4(3)(l) (2000) (amended 2002) with 2002 Amendment, § 3 (definition of RMA in the new ch. 93B, § 1). The latter language is not determinative--it could be a change rather than a clarification-- but it does give one pause. -12-

Use of some interior central point might seem the better choice; otherwise the RMA could easily depend on whether the dealer chancedto have a large or small lot. Yet the 1977 statute refers simp lyto the area immediately surrounding the existing dealer "location"--hardly a clear-cut preference for the centroid over the boundary. 3 Policy argu ments are not of great force either way. Without resolving this state law issue--which may not arise again given the change in the statute--we think it is not the strongest ground for affirmance.

Rather, so far as th e air mile distance calculation is concerned, we prefer the district court's alternative ruling that

an RMA merely touching on the boundary of the proposed new dealership does not create standing. Honda VI , 188 F. Supp. 2d at 33. The statute's operative language, as distinct from the RMA definition itself, provides that a manufacturer may not arbitrarily franchise a new dealer "within" the RMA of an existing franchisee. Mass. Gen. Laws. ch. 93B, § 4(3)(l) (2000) (amended 2002). In our view, a new dealer whose property merely touches the outer boundary of the RMA does not create standing in the existing dealer. The statute provides that the car maker may not arbitrarily franchise-13-

a new dealer "within" the RMA of an existing franchise. A new dealer who is merely adjacent or tangent to the RMA is not fairly within the statutory language or within its evident purpose of preventing the new dealer from operating inside this perimeter.

Argu ably, one could read the "within" requirement as contemplating that the new dealer be either entirely or largely within the RMA but we will assume arguendo that it is enough if

some appreciable portion of the new dealer's property falls inside the RMA of the existing dealer. Even so, if the only arguable "overlap" is a single tangent point, then for all practical

commer cial purposes the new dealer is operating outside--not within--the existing dealer's RMA. No new sales c an be made, or repairs accomplished, at this one-dimensional tangent point. Nor does Lundgren himself wish to treat either dealer as a point: it is onlyby looking to the full property in each case, a nd me asuring fromone near border to the other, that he even achieves a tangent point. This makes it unne ces sary to consider whether the district court was correct in rejecting the expert's rounding off of his distances. Honda VI , 188 F. Supp. 2d at 33. The district court was perhaps suspicious that the unexplained rounding by Lundgren's expert unduly favored Lundgren. But virtually all measurements involve some rounding off; in this case we do not know the full scope of the rounding off adjustments, the impact, or the-14-

explanation. It is enough here that, having made his calculations, the expert could do no more than show the RMAas tangent to the proposed new dealership. This, as we and the district court both read the statute, is not sufficient.

It remains to ad d ress the expert's alternative, drive time calculation. Lundgren relies on Honda IV as endorsing the use of drive time based on a brief reference in the opinion. Explaining that even a perfect circle would not eliminate factual disputes, the SJC said that experts might dispute in ter alia "wheth er the radius follows existing topography." Honda IV , 735 N.E.2dat 353. True, drive time accounts better for topographical oddities than air mile distance, but we agree fully with the distr ict court that the SJC comment can hardly be taken to have approveddrive time calculations.

But lack of endorsement is not the same as rejection, and Honda IVitself u nde rcut ease of administration by holding that

some unknown set of circular shapes, rather than a perfect circle,

can be the basis of the RMA. Honda IV , 735 N. E.2d at 350. Further, a n air mile distance calculation--although easier to compute--might occasionally depart from economic reality. Imagine, for example, that the new dealership fell within a perfect circle surrounding an existing dealership but that the new location was on the other side of an unbridged river. The new dealer would hardly be an effective competitor for repairs.-15- Admittedly, using drive time computations could present manyproblems, further undercutting the apparent intent of the 1977 amendments to create an easily administered test of standing. Honda VI , 188 F. Supp. 2d at 32. U nlike air mile distance, the best driving route, and even more so the driving time, ma y var y with weather, season and commuter patterns; and each customer becomes a separate, debatable calculation. Simplifying assumptions can be made (at the price of accuracy), but the opportunities for expense and delay in litigating such a case are apparent. Even so,

we are unwilling (without more precedent) to hold that a Massachusetts cour t would in every circumstance deem topography irrelevant in computing an RMA.

The potential relevance of topography, however, does not automatically validate Lundgren's th eo ry based on drive time. Drive time calculations are in tension with the statutory requirement, as i nterpretedby Honda IV , that the RMA must be a "circular" area--circular being described as a figure having at least the "approximate form or outline of a circle." 735 N.E.2d at 350 & n.4. This is the reading that the SJC, employing dictionary definitions, gave to the statutory t erm s "circumscribe" and "surround". Id. at 352. In reaching this con clusion, the SJC rejected an alternative approach urged by Lundgren--involving the platting of zip code areas--that would have satisfied the two-4 Of course, one could draw the circle with an air mile radius

equal to that of the last order customer in the drive time-ordered sequence; but it would be only h app enstance if the customers loc atedwithin this geographic circle satisfied the two-thi rd s requirement. -16- thirds requirement but produced a relatively irregular shape. Id. at 354-55. Atension exists because the sam e drive time may translate to different geographic distances, depending on topog raphy. Therefore, a shape with a radius equal to th e las t order drive time is not ordinarily going to be, except by accident, either a geographic circle or a circular shape; yet a geographic circular shape is what is required under the terms of the statute

as construed in Honda IV , 735 N.E.2d at 352. As with the zip code plattedboundary rejected in Honda IV , a shape drawn by plotting a fixeddrive time in all directions could be anything from an arc to a star to the boundary of a Picasso scribble. 4

In this case, there is nothing in the recordto show that

an RMA based on this drive tim e radius p roduces anything like a circular shape. Honda raised this objection in the district court andrenews it in this court, yet Lundgren has made no effort to show that its alternative calculation meets this objection. Under these circumstances, the drive time theory is not in t his c ase a barrier to the grant of summary judgment in Honda's favor.

Affirmed .