Court Opinion

ID: 200552
Source: CourtListenerOpinion
Date Created: 2011-02-07 04:55:12+00
Date Added: 2024-06-11T17:27:09.450827
License: Public Domain

Not for Publication in West's Federal Reporter
              Citation Limited Pursuant to 1st Cir. Loc. R. 32.3

          United States Court of Appeals
                       For the First Circuit

No. 02-2443

                         M&D CYCLES,INC.
                   d/b/a DEPOT HONDA-KAWASAKI,

                        Plaintiff, Appellant,

                                     v.

                 AMERICAN HONDA MOTOR CO., INC.,

                        Defendant, Appellee.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF NEW HAMPSHIRE

         [Hon. Joseph A. DiClerico, U.S. District Judge]

                                  Before

                         Boudin, Chief Judge,

              Torruella and Howard, Circuit Judges.

     Stephanie A. Bray with whom Richard B. McNamara, Gregory A.
Holmes, and Wiggin & Nourie, P.A., were on brief, for appellant.
     Robert D. Cultice with whom Sean T. Carnathan, Benjamin M.
Stern, Hale & Dorr, LLP, James P. Bassett, and Orr & Reno, P.A.
were on brief, for appellee.

                             July 18, 2003
            Per Curiam.    In Rochester Lincoln-Mercury v. Ford Motor

Co., 248 F.3d 46 (1st Cir. 2001), we concluded that N.H. Rev. Stat.

Ann. § 357-C:3, I (prohibiting motor vehicle manufacturers from,

inter alia, engaging "in any action which is arbitrary, in bad

faith, or unconscionable and which causes damage to any [motor

vehicle dealer]") does not provide a motor vehicle franchisee a

cause of action against a manufacturer for unfairly denying it an

additional    franchise.      See   id.    at    47-48.      In    reaching   this

conclusion,    we   clarified   that      the   statute     protects   only    the

dealer's existing franchise.        Id. (applying Roberts v. Gen. Motors

Corp., 643 A.2d 956, 958-59 (N.H. 1994) and emphasizing that the

statute's enforcement provision, N.H. Rev. Stat. Ann. § 357-

C:12(II),     secures   the   franchisee        only   in   "his    business    or

property").

            Much like the plaintiff in Rochester Lincoln-Mercury,

plaintiff-appellant M&D Cycles, Inc., d/b/a Depot Honda-Kawasaki

("Depot"), a motorcycle dealership franchised by defendant-appellee

American Honda Motor Co., Inc., was aggrieved at American Honda's

course of conduct in establishing a second motorcycle dealership

that Depot's principal, Cynthia Mailloux, had hoped to acquire.

The alleged conduct, which we describe below, included actions and

representations made by American Honda District Sales Manager

William Pugh and American Honda Zone Manager Steven Nicholson.

                                     -2-
          Perhaps recognizing the constraints imposed by Rochester

Lincoln-Mercury and Roberts, Depot initiated a state court action

claiming, inter alia, that the conduct in question violated N.H.

Rev. Stat. Ann. § 357-C:3, I because it harmed Depot with respect

to its existing "business or property." American Honda removed the

action to federal court on the basis of diversity jurisdiction and

eventually secured summary judgment.   In ruling for Honda on the

statutory claim, the district court concluded that Depot's alleged

reliance upon conduct by Pugh and Nicholson was unjustifiable

because there existed in Depot's franchise agreement with American

Honda a provision stating that only a few, specified American Honda

officers (not including Pugh or Nicholson) were capable of making

promises and commitments that would bind the manufacturer.       This

provision, in the court's view, put Depot on notice that it acted

at its own peril in relying upon Pugh or Nicholson.   Depot appeals,

framing the issue presented as follows:

          May Depot's franchise agreement, which provides that
     no employee of American Honda, other than certain senior
     officers of the corporation, "may make any promise or
     commitment on behalf of American Honda or in any way bind
     American Honda" and that "[d]ealer agrees that it will
     not rely on any statements or purported statements except
     from" these top [American] Honda officers, preclude
     Depot's claims under the New Hampshire Dealer Protection
     Statute . . . where that Statute specifically forbids a
     manufacturer-franchisor from limiting its statutory
     liability in its franchise agreements?

Brief for Appellant at vii.

          The issue of New Hampshire law that Depot has raised is

                               -3-
interesting and potentially difficult, but it is not one that we

will decide in this appeal (or certify to the New Hampshire Supreme

Court, as Depot alternatively requests).          We are free to affirm on

any   ground    revealed   by   the   record,    e.g.,   Houlton   Citizens'

Coalition v. Town of Houlton, 175 F.3d 178, 184 (1st Cir. 1999),

and here perceive a considerably more straightforward basis for

upholding      the   district   court's     judgment.     The   conduct   and

statements of Pugh and Nicholson, when evaluated in an appropriate

factual context, simply cannot give rise to liability under N.H.

Rev. Stat. Ann. § 357-C:3, I even if they were imputed to American

Honda.    We briefly explain.

            Depot is and since 1994 has been located in the town of

Rye, in Rockingham County, New Hampshire.           Depot's agreement with

American Honda gives it a nonexclusive right to buy Honda products

and to advertise itself as a Honda dealer.               The agreement also

reserves to American Honda the right to appoint other authorized

Honda dealers wherever it deems appropriate (except as limited by

law). In 1996, Dover Honda, a motorcycle dealership located in the

nearby town of Somersworth, in Strafford County, New Hampshire,

ceased operations.      Following Dover Honda's closure, Depot was the

dealer closest to Strafford County.          In January 1997, Pugh offered

Mailloux a six-month period for Depot to recoup Dover Honda's sales

and to help American Honda achieve 30% market share in Strafford

County.     Depot fell well short of achieving the market share

                                      -4-
American Honda sought within the six-month period or at any time

thereafter.

              The conduct underlying Depot's statutory violation claim

began    sometime    prior    to   August     1997   (when   the   six-month

probationary period expired) and continued throughout 1998.              As

summarized by Depot, it included (1) Pugh recruiting one Paul

Gladstone, who lacked motorcycle sales experience but employed

Pugh's then-girlfriend, to open a new Strafford County dealership

prior to the expiration of the six-month period during which Depot

was attempting to recoup Dover Honda's sales (and was concomitantly

investing in its facility and inventory to facilitate its efforts);

(2) Pugh informing Mailloux in October 1997 (after sending an

application to Gladstone) that American Honda would be establishing

an "open point," or location for a potential new dealership, in the

Strafford County town of Rochester, New Hampshire, but assuring

Mailloux that the open point would not be filled at that time and

that he would speak to her and permit her to apply before awarding

the dealership to another; (3) American Honda (apparently acting at

the behest of Pugh) sending a second application for the Rochester

open point to one Miles Cook, a friend of Pugh's, in February 1998

without informing Mailloux; (4) American Honda (again, apparently

acting   at    the   behest   of   Pugh)    tentatively   approving   Cook's

application in June 1998 (and subsequently extending deadlines by

which he was to complete construction of the dealership until

                                     -5-
February   1,   1999)   without   informing   Mailloux;   (5)   Pugh   and

Nicholson refusing to allow Mailloux to apply for the dealership

after she learned in December 1998 that the Rochester open point

was in the process of being filled by Cook; and (6) Pugh and

Nicholson conjuring an untruthful excuse for deterring Mailloux's

application -- that American Honda had a policy on not allowing a

single dealer to have two contiguous markets.             See Brief for

Appellant at 18-19.

           While these allegations, which we credit for summary

judgment purposes, certainly do not reflect well on Pugh and

Nicholson, we are at a loss to see how they describe "action which

[was] arbitrary, in bad faith, or unconscionable and which cause[d]

damage to [Depot] . . . ."        N.H. Rev. Stat. Ann. § 357-C:12, I

(emphasis supplied). Depot's submissions have been extraordinarily

vague on damage and causation, but a review of the record suggests

an intention to argue that the challenged conduct harmed the Depot

franchise by causing it to invest in its facility and to grow its

inventory so as to serve the Strafford County market, and/or by

causing it to lose sales to the new Rochester dealership.*        Yet no

reasonable fact-finder could fairly link either source of "damage"

to the allegedly unlawful conduct.

     *
      Rochester Lincoln-Mercury precludes any claim under the
statute for damage arising out of Depot's failure to secure the
Rochester dealership. See 248 F.3d at 47-48.

                                   -6-
            Because Depot's franchise agreement is both nonexclusive

and expressly reserves to American Honda the right to appoint

additional dealers wherever it deems appropriate, the harms Depot

suffered in attempting to serve the Strafford County market and in

losing sales to the Rochester dealership cannot be considered to

have     been   wrongly    inflicted      by       American   Honda   unless    the

manufacturer     was   somehow    bound      by    an   extra-contractual      legal

obligation to forswear appointing a dealer to rival Depot in the

Strafford County market.         The only such obligation even suggested

by the record was the January 1997 commitment to permit Depot to

service Strafford County without competition from a dealership

replacing Dover Honda.         But this commitment extended only through

August 1997, and was explicitly conditioned on Depot helping

American Honda achieve a 30% market share.                      And as we have

observed, Depot never came close to obtaining the specified market

share.     Nor did American Honda establish a competing dealership

until    approximately     a   year    and     a    half   after   the   six-month

probationary period expired.          The evidence thus does not allow for

a finding that American Honda breached the commitment it made to

Depot in January 1997.

            That leaves only the evidence that Pugh committed to

talking with Mailloux before American Honda awarded the dealership

to another. But this evidence simply cannot support a damage award

under the statute.        First, Pugh's commitment was temporally vague

                                       -7-
and   arguably   not   even   breached    because   Mailloux   undisputedly

learned of American Honda's plans to fill the Rochester open point

several months before the actual establishment of the Rochester

dealership.      Second, the record is bereft of evidence that any

investments in facility and/or inventory made in reliance on Pugh's

post-August 1997 failure to be upfront with Mailloux -- the only of

Depot's two damage theories potentially impacted by Pugh's silence

-- caused Depot economic harm.

           Affirmed.    Costs to appellee.

                                    -8-