United States Court of Appeals

For the First Circuit

No. 09-2110

SACCUCCI AUTO GROUP, INC.,

f/k/a SACCUCCI LINCOLN MERCURY INC., d/b/a SACCUCCI HONDA,

Plaintiff, Appellant,

v.

AMERICAN HONDA MOTOR COMPANY, INC.;

AMERICAN HONDA FINANCE CORPORATION,

d/b/a HONDA FINANCIAL SERVICES,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Mary M. Lisi, U.S. District Judge]

Before

Torruella, Boudin and Howard,

Circuit Judges.

Geoffrey W. Millsom, with whom Adam M. Ramos and Adler Pollock

& Sheehan P.C., were on brief, for appellant.

Joshua Teverow and Joshua Teverow, Esquire, Ltd on brief for The

Rhode Island Automobile Dealers' Association, Amicus Curiae.

David A. Kluft, with whom Michael B. Keating, Catherine H.

Wicker, Foley Hoag LLP, Gordon P. Cleary and Vetter & White, were

on brief, for appellees.

August 4, 2010
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HOWARD, Circuit Judge. This is a diversity case

involving Rhode Island's "Dealer Act," R.I. Gen. Laws § 31-5.1-4,

which regulates the business relationship between car manufacturers

and dealers. The plaintiff-appellant is a dealer located in Rhode

Island, Saccucci Auto Group Inc. ("Saccucci"). The defendantsappellees, American Honda Motor Co. Inc. and American Honda Finance

Corp., are entities of Honda, a car manufacturer. We refer to the

defendants-appellees collectively as "Honda."

The central issue in this case is whether Honda's

decision to prohibit its dealers from selling Honda Vehicle

Servicing Contracts ("VSCs") over the Internet violates the Dealer

Act. VSCs are extended warranties, more or less. Honda had

allowed its dealers to sell Honda VSCs over the Internet for a

number of years but put an end to the practice in 2007. This

prompted Saccucci, a dealer which sold Honda VSCs over the

Internet, to sue Honda in federal court, claiming, inter alia, that

Honda's prohibition violated the Dealer Act.

The district court granted summary judgment to Honda. It

held (1) that Saccucci's claims were not cognizable under the

Dealer Act; and that (2) even if they were, no reasonable jury

could find in Saccucci's favor on the claims. We agree with the

second of these conclusions and affirm. 
-3-

I. Facts

A. Background

Concerned that car manufacturers had more bargaining

power than car dealers, Congress and a number of states enacted

"legislation to protect car dealers from perceived abusive and

oppressive acts by the manufacturers." New Motor Vehicle Bd. v.

Orrin W. Fox Co., 439 U.S. 96, 101 (1978). Rhode Island's Dealer

Act is an example of such legislation. Id. at 101 n.5.

Saccucci claims that Honda's decision to temporarily

prohibit its dealers from selling Honda VSCs over the Internet

violated three of the Dealer Act's provisions: one prohibiting

manufacturers from "coerc[ing]" a dealer to enter into an

agreement, R.I. Gen. Laws § 31-5.1-4(b)(4), one prohibiting

manufacturers from engaging in "arbitrary" action that causes

damage to a dealer, id. § 31-5.1-4(a), and one prohibiting

manufacturers from engaging in any "predatory practice" against a

dealer. Id. § 31-5.1-4(c)(26).

B. VSCs

A VSC is a vehicle protection package similar to an

extended warranty. Generally speaking, it covers the cost of

repairing certain mechanical breakdowns and provides other,

ancillary benefits such as roadside assistance. VSCs are sold by

a number of companies, including Honda. Honda's brand is known as

"Honda Care."
-4-

Honda does not sell its VSCs directly to customers.

Rather, it provides its dealers with Honda VSCs, and the dealers

make the ground-level sale. Although Honda dealers must pay Honda

a fee for every Honda VSC they sell (these fees range from

$360–$1,365 per VSC), dealers are free to charge their customers

whatever price they wish for a Honda VSC, retaining the difference

between price and fee as profit. Although the dealer is the one

making the sale to the customer, the Honda VSC contract is

ultimately between the customer and Honda, not between the customer

and the dealer. 

Honda dealers may promote and sell different brands of

VSCs (e.g., a Toyota or General Electric VSC). But if one of the

dealer's customers requests a Honda VSC, the dealer is

contractually obligated to make one available for purchase. And

Honda dealers have other reasons to offer Honda VSCs. Their

customers, Honda owners, generally prefer Honda VSCs over competing

brands because Honda VSCs guarantee that "all repairs will be made

by factory-trained Honda technicians at authorized Honda

dealerships using only Genuine Honda or American Honda authorized

parts." Also, Honda pays its dealers a "performance based

allowance" for each VSC sold. The amount of this allowance depends

on a quotient keyed to vehicle sales. For example, if a Honda

dealer's Honda VSC sales are 70% of his total car sales (i.e., the

dealer sells seven Honda VSCs for every ten cars he sells), that
-5-

dealer will receive more money than if its Honda VSC sales were 20%

of its total car sales. A dealer, then, has a financial incentive

to increase its Honda VSC sales percentage.

C. The Internet sale of Honda VSCs

Because Honda VSCs are typically sold in connection with

the purchase of a Honda car, Honda VSCs were initially sold only at

Honda dealerships. Beginning sometime in 1997, however, a number

of Massachusetts-based Honda dealers began to sell Honda VSCs over

the Internet. Other dealers began to follow suit, and, by 2008,

there were approximately twelve Honda dealers selling Honda VSCs

over the Internet. Saccucci began selling Honda VSCs over the

Internet in 2006. The dealers that sell Honda VSCs over the

Internet sell them at or near cost, relying on the

performance–based allowance supplied by Honda for their profits. 

D. Honda's reaction to the Internet sale of Honda VSCs

Beginning sometime in 2002, Honda dealers who did not

sell Honda VSCs over the Internet began to complain to Honda about

the practice, focusing their complaints on the lower prices charged

by the Internet dealers. Despite these complaints, Honda did not

attempt to curb Internet sales and actually appeared supportive of

such sales, which it believed reflected "capitalism at its best."

In 2007, however, Honda's position began to change. In

January, Honda's Dealer Advisory Board ("DAB"), a body composed of
 The DAB is formed as follows: Honda dealers elect district 1

representatives who, in turn, elect zone representatives to serve

on the DAB. These zone representatives attend national DAB

meetings and also serve with Honda employees on national

subcommittees assigned to specific areas of business (e.g., sales).

As a unit, the DAB makes recommendations to Honda and Honda

publishes a "Dealer Direct" newsletter which includes a description

of each recommendation and Honda's response to the recommendation.

-6-

Honda dealers who are elected to represent dealer interests,1

recommended that Honda stop the Internet sale of Honda VSCs. The

DAB told Honda that such sales impacted "customer satisfaction" and

were resulting in "strained relations" between the dealers who were

selling the Honda VSCs locally at the dealership and their

customers. Honda told the DAB that it would further study the

issue. Both the DAB's recommendation to Honda and Honda's response

were published in a Dealer Direct newsletter sent to all Honda

dealers, including Saccucci.

Later that year, individual dealers complained to Honda

that the Internet sale of Honda VSCs was undermining customer

satisfaction with both the dealers and Honda. When deposed, Dan

Spafford, Honda's Manager of Consumer Assurance Products and

Services, testified about these complaints. One came from a Honda

dealer in Illinois. The dealer told Spafford that he had sold a

long-time customer both a Honda and a Honda VSC at his dealership,

charging the customer a traditional in-store price for the VSC.

The customer later found a Honda VSC being offered on the Internet

for a significantly lower price. The customer returned to the
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dealership, called the dealer a "thief," and told him that he would

never go back to his dealership again. The customer also told the

dealer that because Honda had condoned such practices, he would

never buy another Honda. Following this interaction, the dealer

stopped promoting Honda VSCs and began offering a competing VSC.

Spafford testified further about a similar conversation he had with

a Honda dealer from California. The dealer told Spafford that the

Internet sale of Honda VSCs was endangering the dealer's reputation

in the community. This dealer also told Spafford that he was

considering promoting a competing VSC.

In response to these individual dealer complaints and the

DAB's earlier recommendation, Honda formed a committee to consider

the issues posed by the Internet sale of Honda VSCs. The committee

consisted of members of Honda's management, Honda counsel, and

outside counsel. For three months, the committee met on a weekly

basis, considering the positives and negatives of allowing its

dealers to sell Honda VSCs over the Internet. Ultimately, the

committee decided it was necessary to impose restrictions on such

sales. The committee based this decision on a number of

considerations, including the DAB's recommendation that Honda

prohibit the practice, complaints from individual dealers, and

concerns that customer dissatisfaction with Honda dealers would

harm "brand loyalty" and "brand image." The committee also took

into account factors not directly related to customer satisfaction.
-8-

Among other things, the committee expressed concerns that dealers

who were unhappy with the Internet sale of Honda VSCs would begin

to push the VSCs offered by competitors and that the Internet sale

of Honda VSCs might violate state laws. With respect to the

latter, Honda learned that the California code only allows sellers

licensed by the state to sell VSCs and also limits such sales to

sales incidental to the sale of a vehicle. 

Based on the committee's findings, Honda announced a

temporary prohibition on the Internet sale of Honda VSCs in

February 2008. To enforce this prohibition, Honda set up a scheme

of graduated penalties for non-compliant dealers. First–time

violators are temporarily suspended from selling Honda VSCs,

second–time violators are "permanently deactiva[ted]" from selling

Honda VSCs, and third–time violators must forfeit any payments they

have received under Honda's performance–based allowance program.

E. Procedural history

Shortly after Honda imposed the temporary prohibition on

the Internet sale of Honda VSCs, Saccucci filed a complaint against

Honda in Rhode Island Superior Court. In this complaint, Saccucci

claimed that Honda had violated three provisions of the Dealer Act

and breached Rhode Island's implied covenant of good faith and fair

dealing. Honda removed the case to federal district court. After

discovery and an evidentiary hearing, Saccucci sought to amend its

complaint to add a claim of equitable estoppel. The district court
 In its complaint, Saccucci also requested injunctive relief 2

and advanced a claim of promissory estoppel. The district court

denied the injunctive relief request and granted Honda summary

judgment on the promissory estoppel claim. Saccucci does not

appeal these rulings.

 A "material" fact is one "that might affect the outcome of 3

the suit under the governing law." Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is

"genuine" only "if a reasonable jury could resolve it in favor of

either party." Santoni v. Potter, 369 F.3d 594, 598 (1st Cir.

2004) (quoting Basic Controlex Corp., Inc. v. Klockner Moeller

Corp., 202 F.3d 450, 453 (1st Cir. 2000)).

-9-

denied this motion as futile. Honda then moved for summary

judgment on Saccucci's claims, which was granted. Saccucci

appeals.2

II. Discussion

We review a district court's grant of summary judgment de

novo. Lockridge v. Univ. of Me. Sys., 597 F.3d 464, 469 (1st Cir.

2010). Summary judgment is appropriate "if the pleadings, the

discovery and disclosure materials on file, and any affidavits show

that there is no genuine issue as to any material fact and the

movant is entitled to judgment as a matter of law." Fed. R. Civ.

P. 56(c). 

3

Saccucci claims that the district court erred when it:

(1) granted Honda summary judgment on its Dealer Act claims; (2)

granted Honda summary judgment on its claim that Honda breached the

implied covenant of good faith and fair dealing; and (3) denied its

motion to amend its complaint to add a claim of equitable estoppel.

We take up the claims in that order. In this diversity case, the
 Coercion holds the same meaning under the Automobile 4

Dealers' Day in Court Act ("ADDCA"), 15 U.S.C. § 1222, which is

basically a federal version of Rhode Island's Dealer Act. George

Lussier Enters. v. Subaru of New Eng., 393 F.3d 36, 47 (1st Cir.

2004) ("'[C]oercion' holds the same meaning under both the state

dealer acts and the ADDCA."). Accordingly, decisions considering

whether a manufacturer committed coercion within the meaning of the

ADDCA inform our analysis.

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substantive law of Rhode Island governs. Gibson v. City of

Cranston, 37 F.3d 731, 735 (1st Cir. 1994).

A. Dealer Act claims

Although the district court first held that the Dealer

Act did not apply to this case, we harbor some doubt about that

conclusion. In any event, we may bypass the question because,

assuming the Act applies, no reasonable jury could find in

Saccucci's favor on its Dealer Act claims.

1. Coercion claim

The Dealer Act makes it unlawful for a manufacturer "to

coerce, or attempt to coerce, any motor vehicle dealer . . . [t]o

enter into any agreement with the manufacturer or to do any other

act prejudicial to the . . . motor vehicle dealer by threatening to

terminate or cancel a franchise or any contractual agreement

existing between the dealer and the manufacturer." R.I. Gen. Laws

§ 31-5.1-4(b)(4). For purposes of the Dealer Act, coercion is

defined 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) . The focus here is on 4
 It is unclear whether Honda's scheme of graduated penalties 5

qualify as "sanctions" under the Dealer Act. We need not decide

that question here, as we conclude that Honda did not make a

wrongful demand.

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whether Honda's prohibition of the Internet sale of Honda VSCs,

which it enforced by setting up a scheme of graduated penalties for

non-compliant dealers, constitutes a wrongful demand.5

One way that a manufacturer may make a wrongful demand is

by insisting that the dealer relinquish a contractual right. See

e.g., Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296,

326 (3d Cir. 2001) ("A demand is wrongful if it . . . impels the

dealer into forfeiting its rights under the dealer agreement.");

Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 93

(3d Cir. 2000). By contrast, a manufacturer's demand will not be

wrongful if the manufacturer is insisting that a dealer comply with

the reasonable terms of a contract. R.I. Gen. Laws § 31-5.1-

4(b)(4) ("[T]his subdivision is not intended to preclude the

manufacturer . . . from insisting on compliance with the reasonable

terms or provisions of the franchise or other contractual

agreement, and notice in good faith to any new motor vehicle dealer

of the new motor vehicle dealer's violation of those terms or

provisions shall not constitute a violation of the chapter."); see

also New A.C. Chevrolet, Inc., 263 F.3d at 326 ("A manufacturer

does not make a wrongful demand if it merely insists that the
 Honda argues that a third contract, the 2003 "Automobile 6

Dealer Sales and Service Agreement," ("2003 Dealer Contract") is

relevant here as well. The 2003 Dealer Contract is a more recent

version of the 1990 Dealer Contract that is incorporated by

reference in the VSC Contract. Saccucci argues that the 2003

Dealer Contract is irrelevant here because the VSC Contract does

not incorporate any of its provisions by reference. The district

court seems to have agreed with Saccucci, as its coercion analysis

appears restricted to the VSC Contract and the 1990 Dealer

Contract. Whether we were to consider it or not, the 2003 Dealer

Contract makes no difference in our analysis. Accordingly, we

follow the district court's lead and ignore it.

-12-

dealer comply with a reasonable obligation imposed by the franchise

agreement."). 

For our purposes, then, it makes sense to start with the

contracts between the parties. The 1995 "Honda Care Dealer

Enrollment and Participation Agreement" ("VSC Contract") is the

contract of primary interest here, as it directly covers the

"terms, conditions, and procedures of the Honda Care [VSC]

Program." But a few provisions of the 1990 "Automobile Dealer

Sales and Service Agreement" ("1990 Dealer Contract") are also

relevant, as the VSC Contract incorporates them by reference.6

Neither contract explicitly addresses the Internet sale

of Honda VSCs. This is likely because both contracts were entered

into before the Internet was a widespread commercial medium.

Nevertheless, each party argues that the contracts require us to

find in their favor on the coercion claim. As we will explain,

neither argument is persuasive.
-13-

In arguing that the contracts give it the right to

prohibit the Internet sale of Honda VSCs, Honda cites three

provisions from the relevant contracts. Two of these provisions,

one from the VSC Contract and another from the 1990 Dealer

Contract, establish Honda's right to control the advertising of its

products, including Honda VSCs. Neither of these provisions,

however, addresses whether Honda has the right to control where

Honda VSCs may be sold. While the line between advertising a

product over the Internet and selling a product over the Internet

may be thin in some cases, there are surely methods of Internet

sale that could not be characterized as advertising.

The third provision Honda cites is from the 1990 Dealer

Contract and is listed under the heading, "Sale of Honda Products

to Dealer." Honda argues that this provision permits it to revise

the "terms" under which it sells Honda products to a dealer and

thus permits it to condition its sale of Honda VSCs to a dealer on

the dealer's agreement to refrain from selling Honda VSCs over the

Internet. This provision reads as follows:

American Honda will have the right at any time

and from time to time to establish and revise

terms . . . for its sales of Honda Products to

Dealer. Revised prices, terms or provisions

will apply to the sale of any Honda Products

as of the effective date of the revised

prices, terms or provisions, even though a

different price or different terms may have

been in effect at the time such Honda Products

were allocated to or ordered by Dealer.
-14-

But, as noted above, a manufacturer may only insist that

its dealers comply with the "reasonable terms or provisions of [a]

. . . contractual agreement." See R.I. Gen. Laws § 31-5.1-4(b)(4)

(emphasis added). Honda reads the reasonableness out of this

provision by construing it so broadly. Indeed, Honda could

seemingly commit a paradigmatic Dealer Act violation (e.g.,

threatening not to sell any cars to the dealer unless the dealer

agrees to purchase large stocks of undesirable vehicles) and still

defend its actions by reference to this provision. 

Saccucci's contract-based argument, although equally

ambitious, is no more persuasive. It says that the silence of the

contracts with respect to the Internet sale of Honda VSCs creates

an ambiguity and requires us to consider extrinsic evidence to

interpret the contracts. And, in Saccucci's view, this extrinsic

evidence makes clear that the intent of the parties at the time of

contracting was to allow Saccucci to sell Honda VSCs over the

Internet. 

This argument must be rejected, as there is no ambiguity

in the contracts. "Under Rhode Island law, a contract is ambiguous

'if it is reasonably susceptible of different constructions.'" N.

Ins. Co. v. Point Judith Marina, LLC, 579 F.3d 61, 72 (1st Cir.

2009); Irene Realty Corp. v. Travelers Prop. Cas. Co. of Am., 973

A.2d 1118, 1122 n.2 (R.I. 2009). Here, the contracts simply do not

address the Internet sale of Honda VSCs, much less the Internet
-15-

sale of Honda VSCs in a manner reasonably susceptible to different

interpretations. 

To be sure, some courts have said that silence creates

ambiguity when it involves a matter "naturally within the scope of

the contract." Water Rights of Pub. Serv. Co. v. Meadow Island

Ditch Co. No. 2, 132 P.3d 333, 339-40 (Colo. 2006); Azat v.

Farruggio, 162 Md. App. 539, 551 (Md. Ct. Spec. App. 2005); Trs. of

Southampton v. Jessup, 173 N.Y. 84, 90 (N.Y. 1903); see also

Moncrief v. Williston Basin Interstate Pipeline Co., 174 F.3d 1150,

1173 (10th Cir. 1999) (citing Colorado law); Consolidated Bearings

Co. v. Ehret-Krohn Corp., 913 F.2d 1224, 1233 (7th Cir. 1990)

(citing Illinois law); 11 Richard A. Lord, Williston on Contracts

§ 30.4 (4th ed. 1999). Assuming that the Rhode Island Supreme

Court would endorse this principle of contract interpretation, it

would be unhelpful to Saccucci here. It cannot reasonably be

argued that the Internet sale of Honda VSCs was a matter naturally

within the scope of the contracts. At the time the parties entered

into the most recent of the contracts in 1995, the Internet was not

a widespread commercial medium. As Saccucci itself observes, "The

Honda Care VSC Agreement was drafted in 1995 at a time when use of

the Internet was still predominantly restricted to research and

education, and commercial use of the Internet was largely

theoretical." As the Seventh Circuit has said, "A contract is not

ambiguous merely because it fails to address some contingency; the
 In its reply brief, Saccucci appears to argue that if a 7

contract does not expressly give the manufacturer the right to make

the demand in question, the demand will necessarily be wrongful.

For one thing, this argument is waived because it makes its debut

in the reply brief. Evans Cabinet Corp. v. Kitchen Int'l, Inc., 593

F.3d 135, 148 n.20 (1st Cir. 2010). But, more importantly, there

is no authority to support the argument. The cases that Saccucci

cites stand for a different proposition altogether, namely, that if

a manufacturer is demanding that the dealer comply with the

reasonable terms of a contract, the demand will not be considered

wrongful. See, e.g., Dunne Leases Cars & Trucks Inc., 466 A.2d at

1160-61.

-16-

general presumption is that 'the rights of the parties are limited

by the terms expressed' in the contract." See Consolidated

Bearings Co., 913 F.2d at 1233 (quoting In re Estate v. Morrow, 501

N.E.2d 998, 1002 (Ill. App. Ct. 1986)). 

Under other circumstances, the next question might have

been whether, in the absence of an contract governing the Internet

sale of Honda Care VSCs, Honda's demand that its dealers cease such

sales was wrongful. Here, though, there is no need to consider the

question. Saccucci's coercion argument proceeds on one premise

alone: that it had a contractual right to sell Honda VSCs over the

Internet. Saccucci fails to argue that Honda's demand is wrongful

even in the absence of such a contractual right. 

7

But even if Saccucci had made such an argument, there are

several reasons to doubt that it would have been a winning one. In

George Lussier Enterprises, we explained that a manufacturer's

demand will be wrongful if it imposes "unfair or inequitable"

conditions upon a dealer. 393 F.3d at 43. Here, the temporary
 In arguing that Honda's decision was arbitrary, Saccucci 8

claims that Honda did not arrive at its decision honestly. We

address that claim below.

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prohibition on the Internet sale of Honda VSCs seems fair and

equitable, given that Honda imposed the prohibition on all of its

dealers equally and that the dealers themselves, through the DAB,

sought the prohibition. Moreover, we have said that a "distributor

acting honestly is entitled to latitude in making commercial

judgments." Coady Corp. v. Toyota Motor Distribs., Inc., 361 F.3d

50, 56 (1st Cir. 2004). Honda's decision here was, at bottom, a

commercial judgment. Honda was concerned not only that the

Internet sale of Honda VSCs was harming brand image and loyalty but

that a failure to stop Internet sales would result in its dealers

promoting competing products.8

2. Arbitrary action claim

The Dealer Act makes it unlawful for a manufacturer to

engage in "arbitrary" action that causes damage to the dealer.

R.I. Gen. Laws § 31-5.1-4(a). The Dealer Act does not define

"arbitrary" nor has any Rhode Island court expressly defined the

term for purposes of the statute. That said, the Rhode Island

Supreme Court has suggested that a manufacturer's action will not

be arbitrary if it is based on "due cause," Dunne Leases Cars &

Trucks Inc., 466 A.2d at 1156-57, and, when considering an

arbitrary action claim under Maine's Dealer Act, we defined

arbitrary as "selected at random and without reason." Schott
-18-

Motorcycle Supply, Inc. v. Am. Honda Motor Co., 976 F.2d 58, 63

(1st Cir. 1992) (citing the dictionary definition of the term).

Regardless of which definition is applied here, no

reasonable jury could have concluded that Honda's decision to

temporarily prohibit the Internet sale of Honda VSCs was arbitrary.

Honda's decision–making process was thorough. After receiving

complaints about the Internet sale of Honda VSCs, Honda formed a

committee to study the issue. This committee met regularly for

several months and considered both the positives and negatives of

the current system (which allowed dealers to sell Honda VSCs over

the Internet) and various alternatives to restrictions on Internet

sales. Ultimately, based on the committee's findings, Honda

decided to temporarily prohibit Internet sales. It based this

decision on a number of factors, including (1) the DAB's

recommendation that Honda prohibit the practice; (2) complaints

from individual dealers that the Internet sale of Honda VSCs was

harming the reputation of the Honda dealers; (3) concerns that

customer dissatisfaction with Honda dealers would harm brand

loyalty and brand image; (4) concerns that dealers who were unhappy

with the Internet sale of Honda VSCs would begin to push the VSCs

offered by competitors; and (5) concerns that dealers selling Honda

VSCs over the Internet might be violating state laws, including the

law of California. 
-19-

Claiming that Honda's decision was nevertheless

arbitrary, Saccucci advances several arguments. First, Saccucci

complains about the decision–making process employed by Honda. It

says that Honda should have consulted the customer and sales

satisfaction surveys of both it and its dealers before concluding

that a prohibition on the Internet sale of Honda VSCs was needed to

protect brand loyalty or brand image.

Because these surveys are not part of the record, it is

impossible to tell whether they provide a useful metric for

assessing customer satisfaction with the Internet sale of Honda

VSCs (as opposed to other Honda products) and, if they do, whether

they show that customers were satisfied with the Internet sale of

Honda VSCs.

But even assuming that the surveys were relevant, and

that they reflected customer satisfaction with the Internet sale of

Honda VSCs, that does not mean that Honda's failure to consult them

would allow a reasonable jury to find its decision was arbitrary.

First, Honda had other evidence on which to base a judgment on

customer satisfaction. It is undisputed that it had received

reports from dealers that the Internet sale of Honda VSCs was

undermining the reputation of Honda dealers. Therefore, although

it might be debatable whether Honda exercised the best judgment in

failing to consult the customer surveys in addition to this

evidence, its decision was nevertheless based on "due cause" and
-20-

was not "selected at random and without reason." Second, and

perhaps more importantly, Honda's decision to temporarily ban the

Internet sale of Honda VSCs was not solely based on concerns that

the Internet sale of Honda VSCs was resulting in customer

dissatisfaction with Honda and its dealers. Among other things,

Honda was concerned that the Internet sale of Honda VSCs might

violate the laws of certain states and was leading dealers to

promote competing products. Nowhere in its brief does Saccucci

argue that these were not independently valid reasons for imposing

the prohibition. 

Next, Saccucci argues that Honda's decision to

temporarily ban the Internet sale of Honda VSCs was arbitrary

because it was in tension with Honda's policy regarding the

Internet sale of cars (Honda allows dealers to make such sales) and

in harmony with Honda's policy regarding the Internet sale of its

power equipment (Honda controls such sales). Saccucci argues,

"[T]he District Court should have recognized that Honda's decision

to align the rules for internet sales of Honda Care VSCs with those

applicable to lawnmowers and snowblowers, rather than new and used

automobiles, supports Saccucci's claim that Honda's ban on internet

VSC sales is arbitrary."

But Saccucci overlooks the fact that Honda had a good

reason for aligning its Honda VSC policy with its power equipment

policy instead of its car policy. Honda's power equipment policy
-21-

was enacted because of concerns that the uncontrolled Internet sale

of power equipment was having a "negative impact on Honda brand

image and the [Honda] dealer network." Honda had the same concerns

about the Internet sale of Honda VSCs. In contrast, there is

nothing in the record indicating that the Internet sale of cars

raised brand or dealer network concerns for Honda. In light of

these considerations, Honda's decision to align its VSC policy with

its power equipment policy actually undercuts a finding of

arbitrariness. 

Finally, Saccucci argues that the decision was arbitrary

because it was motivated by Honda's desire to appease a powerful

dealer in California, Dave Conant. In support of this claim,

Saccucci points to the following: (1) an email from Dean Hardesty,

a Honda executive, to Robert Wilkinson, another Honda executive, in

which Hardesty tells Wilkinson that Conant had joined the DAB, that

he was "apparently against" the Internet sale of Honda VSCs, and

that his opposition was "helping the topic get escalated"; (2) a

follow up email from Wilkinson to Hardesty in which Wilkinson

writes that he "needs to know, if [Honda's interest in prohibiting

Internet sales] is a politically motivated decision by someone of

authority. (Just kidding)"; (3) testimony from Wilkinson that

Conant "was connected and pretty tight" with the Vice President of

Honda Motor Company and that Wilkinson had heard "rumors" that

Conant "was one of the individuals who was complaining" about the
 We refer in particular to Wilkinson's testimony that there 9

were "rumors" that Conant had complained about the policy.

-22-

Internet sale of Honda VSCs and; (4) the fact that Honda

implemented its policy shortly after Conant was appointed to the

chair of the DAB.

At least part of Wilkinson's testimony is inadmissible

hearsay that cannot be considered on a motion for summary

judgment, SEC v. Ficken, 546 F.3d 45, 53 (1st Cir. 2008). And we 9

fail to see how the rest of the evidence could allow a reasonable

jury to infer that Honda's decision was geared towards pleasing

Conant. At best, this evidence might allow a jury to find that

Conant helped put the VSC issue on Honda's radar. But this would

be neither wrongful nor unexpected, given that Conant was the

elected chair of the DAB subcommittee assigned to address the

issue. Relatedly, Saccucci has failed to point to any evidence

that is probative of Honda's reaction to Conant's complaints. When

laid against the considerable evidence indicating that Honda's

decision was based on valid considerations, this argument cannot

forestall summary judgment.

3. Predatory practice claim

The Dealer Act makes it unlawful for a manufacturer "[t]o

engage in any predatory practice" against a dealer. R.I. Gen. Laws

§ 31-5.1-4(c)(26). The Dealer Act does not define "predatory" and

there is no case law (Rhode Island or otherwise) defining the term
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for purposes of the Dealer Act. In such a case, we may look to the

term's ordinary meaning. Field v. Mans, 157 F.3d 35 (1st Cir.

1998); San Jose Christian Coll. v. City of Morgan Hill, 360 F.3d

1024, 1034 (9th Cir. 2004). The ordinary meaning of predatory, at

least in the business context, is "inclined or intended to injure

or exploit others for personal gain or profit." Merriam-Webster's

Collegiate Dictionary 915 (10th ed. 1993). This definition is

consistent with a classic example of a predatory business practice,

predatory pricing. See Cargill, Inc. v. Monfort of Colo., Inc.,

479 U.S. 104, 110-11 (1986) ("Predatory pricing may be defined as

pricing below an appropriate measure of cost for the purpose of

eliminating competitors in the short run and reducing competition

in the long run.").

No reasonable jury could conclude that Honda's decision

to temporarily prohibit the Internet sale of Honda VSCs was a

predatory practice. Nothing in the record suggests that Honda

imposed the temporary prohibition on the Internet sale of Honda

VSCs to exploit Internet dealers like Saccucci for its own benefit.

To the contrary, the evidence indicates that Honda enacted the

policy to protect brand loyalty and image, something in the best

interest of Honda's dealers. See Scuncio Motors, Inc. v. Subaru of

New Eng., Inc., 555 F. Supp. 1121, 1138 n. 27 (D.R.I. 1982)

(concluding that there was "little need to address [the dealer's]

claims of predatory conduct in violation of" Rhode Island's Dealer
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Act where the manufacturer "acted in good faith and with good

cause").

Again, we find Saccucci's arguments to the contrary to be

unavailing. It begins by citing Aspen Skiing Co. v. Aspen

Highlands Skiing Corp., 472 U.S. 585, 605 (1985) for the principle

that commercial predation occurs where there is an exclusion of the

competitor from the marketplace "on some basis other than

efficiency." But that case involved a business that was allegedly

trying to exclude a competing business from the marketplace. Id.

Here, Honda did not act as a competitor to Saccucci, nor did it

exclude Saccucci from the Honda VSC marketplace. Next, Saccucci

asserts that a finding that Honda's conduct here is not predatory

"ignores serious antitrust issues raised by . . . geographical

trade restraints." This argument is hardly developed and, because

no antitrust claims have been made here, we need not consider it.

B. Implied covenent of good faith and fair dealing claim

Saccucci argues that the district court erred when it

granted Honda summary judgment on Saccucci's claim that Honda

breached the implied covenant of good faith and fair dealing. This

argument requires only cursory treatment. Under Rhode Island law,

"it is well settled that there is an 'implied covenant of good

faith and fair dealing between parties . . . so that the

contractual objectives may be achieved.'" Now Courier, LLC v.

Better Carrier Corp., 965 A.2d 429, 435 (R.I. 2009) (quoting Ide
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Farm & Stable, Inc. v. Cardi, 297 A.2d 643, 645 (R.I. 1972)). As

developed in the coercion analysis above, Honda's actions here did

not unfairly interfere with any contractual objectives, nor is

there evidence of bad faith. 

C. Motion to Amend

After the district court held an evidentiary hearing

relating to Saccucci's preliminary injunction request, Saccucci

filed a motion for leave to file a second amended complaint to add

a claim for equitable estoppel. The district court denied the

amendment as futile. Our review is for an abuse of discretion.

Windross v. Barton Protective Servs., 586 F.3d 98, 104 (1st Cir.

2009).

The district court did not abuse its discretion in

denying the amendment as futile. To make out a claim of equitable

estoppel, Saccucci would have to show:

first, an affirmative representation or

equivalent conduct on the part of the person

against whom the estoppel is claimed which is

directed to another for the purpose of

inducing the other to act or fail to act in

reliance thereon; and secondly, that such

representation or conduct in fact did induce

the other to act or fail to act to his injury.

Providence Teachers Union v. Providence Sch. Bd., 689 A.2d 388,

391-92 (R.I. 1997). 

Here, the record is devoid of any affirmative

representation (or equivalent conduct) directed at Saccucci for the

purpose of inducing reliance. Furthermore, "[e]quitable estoppel
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is 'extraordinary' relief, which 'will not be applied unless the

equities clearly [are] balanced in favor of the party seeking

relief.'" Southex Exhibitions, Inc. v. R.I. Builders Ass'n, Inc.,

279 F.3d 94, 104 (1st Cir. 2002) (applying Rhode Island law)

(quoting Greenwich Bay Yacht Basin Assocs. v. Brown, 537 A.2d 988,

991 (R.I. 1988))). Saccucci has also failed to develop why the

equities are balanced so clearly in its favor. 

III. Conclusion

For the reasons provided above, the district court's

decision is affirmed.