Opinion ID: 152280
Heading Depth: 3
Heading Rank: 2

Heading: Arbitrary action claim

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