Court Opinion

ID: 1015692
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:37:10.152613+00
Date Added: 2024-06-11T08:02:20.092139
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 04-1137

In Re: AMERICAN     HONDA   DEALERSHIP   RELATIONS
LITIGATION

---------------------------------------------

RICHARD LUNDGREN, INCORPORATED, d/b/a Lundgren
Honda, a Massachusetts Corporation; BERNARDI’S
INCORPORATED,    d/b/a   Bernardi   Honda,   a
Massachusetts Corporation,

                                             Plaintiffs - Appellants,

           versus

AMERICAN HONDA MOTOR COMPANY, INCORPORATED, a
California Corporation,

                                                Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Baltimore. J. Frederick Motz, District Judge. (CA-
95-1069-MDL; CA-95-3313-JFM; CA-95-3314-JFM)

Argued:   November 30, 2004                  Decided:   March 17, 2005

Before TRAXLER, GREGORY, and DUNCAN, Circuit Judges.

Affirmed by unpublished per curiam opinion.

ARGUED: James Patrick Ulwick, KRAMON & GRAHAM, Baltimore, Maryland,
for Appellants.    Robert A. Van Nest, KEKER & VAN NEST, San
Francisco, California, for Appellee. ON BRIEF: David B. Irwin,
IRWIN, GREEN & DEXTER, L.L.P., Towson, Maryland; Stacey L. Wexler,
KEKER & VAN NEST, San Francisco, California, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

                                2
PER CURIAM:

     The dispute at issue in this appeal arose from multi-district

litigation (“MDL”) involving current and former Honda dealers who

sought     redress    against         American        Honda    Motor     Company,      Inc.

(“American Honda”), among other defendants, for fraudulent sales

and distribution schemes. See generally In re American Honda Motor

Co. Dealerships Relations Litig., 941 F. Supp. 528, 534-35 (D. Md.

1996).    On October 9, 1998, the district court for the District of

Maryland    entered       an   “Order      of       Final   Settlement      Approval    and

Judgment     of    Dismissal      of       Settled      Claims”     (the     “Settlement

Agreement”) in connection with the MDL.                     See In re American Honda

Motor Co. Dealerships Relations Litig., 315 F.3d 417, 432 (4th Cir.

2003).     Plaintiffs Richard Lundgren, Inc. and Bernardi’s, Inc.,

both Honda dealers and parties to the MDL, contend that American

Honda’s    decision       to   open    a    Honda      dealership      in   Westborough,

Massachusetts, near their dealerships, violates the Settlement

Agreement,        which    expressly        prohibits         American       Honda     from

retaliating against any Honda dealer because of that dealer’s

participation in the MDL.              The district court denied plaintiffs’

motion for a finding of retaliation.                    We affirm, concluding that

the district court’s factual findings were not clearly erroneous.

                                                3
                                      I.

     In 1994, Lundgren brought an action in Massachusetts state

court to prevent American Honda from awarding a dealership in

Westborough, Massachusetts, which is located in the same vicinity

as Lundgren’s dealership.      The state court enjoined the opening of

the dealership, concluding that “the intended creation of a new

dealership    in     Westborough   was     not    based    on    any   careful

consideration of relevant market data at the time, and was hence

arbitrary.”    Richard Lundgren, Inc. v. American Honda Motor Co.,

No. 921091, 1994 WL 879478, at *5 (Mass. Superior Ct. Sept. 1994).

     In May 1995, William Green became the manager of American

Honda’s Market Planning Department (“Marketing”), which is charged

with “ensur[ing] that Honda is properly represented in automobile

markets by having a sufficient number of dealers, dealers that are

properly located, and facilities that are competitive.” J.A. 1677.

Green testified that when he took this position, Marketing’s 1995

agenda already included plans to evaluate several specific markets

that were potentially suitable for new dealerships.                One of the

pending market studies was the “Worcester Multiple Point Market

Study,” which covered the Westborough area.               J.A. 1109.      Green

indicated that, in his capacity as department manager, he had the

authority to discontinue the Worcester Study or any other market

study included on the agenda.              In June 1995, however, after

reviewing    sales   data   related   to    the   Worcester     market,   Green

                                      4
concluded that it was a “viable study” and that it should move

forward.

     Marketing completed the Worcester Study in the fall of 1995,

finding    that     the        “Worcester       Metro    market     was     severely

underperforming.”      J.A. 1103.           The basis for this conclusion was

threefold.        First,       the   data   suggested     that    “Honda’s   market

penetration lagged significantly behind the expected performance

levels” as compared to an adjacent Boston-area market and Honda’s

national performance.            J.A. 1103-04.          American Honda’s market

penetration of the Worcester market was only 73% of its national

market penetration level and only 57.91% of that achieved in the

adjacent local market of North Boston.              Second, the data suggested

that “Toyota dominated the Worcester Metro market to a far greater

degree than it dominates Honda on a national or zone level” in

terms of market share, percentage of retail registrations, total

industry registrations, total competitive segment registrations,

and retail competitive segment registrations. J.A. 1104. Finally,

the data gathered by Marketing reflected that American Honda

suffered     substantial        lost    sales    opportunities--calculated        by

determining the number of Honda registrations in the Worcester

market    attributed      to    Honda    dealers   operating      outside    of   the

Worcester market and adding it to the deficit existing between the

market penetration of the Worcester market and the North Boston

market.

                                            5
     Based on the market data yielded by the Worcester Study,

Marketing recommended that improvements be made both to Lundgren’s

dealership and that of The Honda Store, a dealership in the

Worcester market that did not join the MDL.               Marketing also

recommended that American Honda create an “open point,” i.e.,

establish a location for a new dealership, in Westborough.            The

market study considered other locations within the Worcester market

but concluded that Westborough presented the best location based on

a number of factors, including passenger vehicle registration data,

population estimates for 1995 and 2000, and the projected household

income in Westborough for 1995 and 2000.         The Worcester Study also

included an analysis of the extent to which the creation of a new

dealership in Westborough would affect existing Honda dealerships,

but found it “unlikely” that there would be “any net impact on the

existing . . . dealerships.” J.A. 1106.      In January 1996, American

Honda presented the details of the Worcester Study, including the

recommendation for a new dealership, to the existing Honda dealers

operating within the Worcester market.

     In early 1998, American Honda issued a Letter of Intent

(“LOI”) to Mark Ragsdale and Robert Avolizi, awarding them the new

dealership   in    Westborough.     In   March    1998,   pursuant   to   a

Massachusetts     statutory   requirement,   American     Honda   formally

notified area Honda dealers of the new Westborough location.

Plaintiffs protested under the Massachussetts statutory scheme

                                    6
governing manufacturer-dealer relations.               See Mass. Gen Laws ch.

93B, § 4(3)(1).

     In April 1998, American Honda brought a declaratory judgment

action in the United States District Court for the District of

Massachusetts, seeking a preemptive ruling that neither Lundgren

nor Bernardi’s had standing to protest under § 4(3)(1) because

neither dealership was located within the “relevant market” of the

proposed dealership. Plaintiffs asserted counterclaims, arguing in

part that American Honda’s addition of the new dealership was

retaliatory conduct that violated the general provisions of § 4 of

the Massachusetts statute.         The federal court in Massachusetts

concluded that plaintiffs lacked standing to protest the opening of

the new dealership under § 4 of the statute because they did not

operate within the “relevant market area” under § 4(3)(1).                    See

American Honda Motor Co. v. Bernardi’s, Inc., 113 F. Supp. 2d 58,

59, 62 & n.6 (D. Mass. 1999).          The First Circuit Court of Appeals

then certified the “relevant market” issue to the Supreme Judicial

Court   of    Massachusetts.      See       American    Honda   Motor   Co.    v.

Bernardi’s, Inc., 198 F.3d 293, 294-96 (1st Cir. 1999).

     In November 1999, as the parties awaited a decision from the

First Circuit, plaintiffs proceeded to the District of Maryland,

which retained jurisdiction over issues relating to the MDL and the

Settlement Agreement, and filed a motion seeking a finding that

American     Honda’s   decision   to   open    the     Westborough   dealership

                                        7
constituted retaliation for their participation in the MDL, in

violation of the Settlement Agreement.     American Honda based its

opposition largely on the theory that plaintiffs’ motion could

“derail or seriously delay ongoing litigation in . . . the District

of Massachusetts,” and would create “duplicative proceedings” in

the District of Maryland.     J.A. 484.   The district court for the

District of Maryland declined to make any findings on retaliation

and concluded that the litigation in Massachusetts should proceed.

Subsequently, the Supreme Judicial Court of Massachusetts rejected

the interpretation of “relevant market” adopted by the District of

Massachusetts, see American Honda Motor Co. v. Bernardi’s, Inc.,

735 N.E.2d 348, 350 (Mass. 2000), and the First Circuit then

remanded for reconsideration in light of the guidance provided by

the state court. See American Honda Motor Co. v. Bernardi’s, Inc.,

235 F.3d 1 (1st Cir. 2000).     Ultimately, the result was the same

because the federal district court in Massachusetts concluded that,

even under the new interpretation of “relevant market area,”

plaintiffs lacked standing to protest.     See American Honda Motor

Co. v. Bernardi’s, Inc., 188 F. Supp. 2d 27 (D. Mass. 2002), aff’d,

314 F.3d 17 (1st Cir. 2002).

                                 II.

     In March 2003, plaintiffs renewed their motion in the District

of Maryland for a finding that American Honda’s decision to open

                                  8
the   Westborough       dealership     was    retaliatory,    in       violation   of

Paragraph 3.1(b) of the Settlement Agreement, which states that:

      While expressly contesting the veracity of any Claim for
      Retaliation, the Honda Defendants represent that they
      shall not engage in any retaliatory or discriminatory
      conduct against a Settling Class Member as a result of a
      dealer’s participation in litigation against the Honda
      Defendants or status as a Settling Class Member.

J.A. 102-03.       Paragraph 1 of the Settlement Agreement defines

“Claim of Retaliation” as “any claim, allegation or assertion of a

Settling Class Member . . . assert[ing] that the Honda Defendants

have engaged in wrongful conduct directed at the Settling Class

Member because of that member’s status as a litigating dealership.”

J.A. 98.

      The district court applied a burden-shifting analysis similar

to the McDonnell-Douglas framework used in Title VII cases, see

Price v. Thompson, 380 F.3d 209, 212 (4th Cir. 2004), and the

parties have not questioned this approach to the applicable burdens

of proof, either below or on appeal.                 Under this scheme, the

plaintiff must establish a prima facie case of retaliation by

showing    that    he    “engaged    in      protected    activity,      that     [the

defendant] took adverse action against him, and that a causal

relationship      existed.”      Id.      The    burden   then     shifts    to    the

defendant, who must “establish a legitimate non-retaliatory reason”

for its actions.        Id.   Finally, the plaintiff bears the burden of

showing the “proffered reasons are pretextual.”                  Id.    Within this

                                          9
analytical framework, the district court made its factual findings,

which we now review for clear error.

                                         A.

     The district court concluded that plaintiffs established a

prima facie case of retaliation, and American Honda does not

challenge     this    conclusion.        Briefly      summarized,       plaintiffs’

evidence    of    retaliation     focused     on    three    arguments.        First,

plaintiffs       claimed   that   American     Honda’s      decision     to    add   a

dealership in Westborough was inconsistent with its nationwide

freeze on new dealerships during that time.                 Plaintiffs presented

evidence that, between August 1995 and July 1998, American Honda

issued only seven LOIs to proposed dealers nationwide, and only one

of those dealers actually began doing business.                    Moreover, two of

these LOIs covered the Westborough and Norwood areas, both of which

are in close proximity to plaintiffs, while all of the other LOIs

involved open points in different states, with no two proposed

locations in the same state.                Second, plaintiffs argued that

American Honda was particularly displeased with them in light of

their considerable litigation history with American Honda.                     Third,

plaintiffs asserted that the market data compiled in the 1996

Worcester    Study    and   used    to   support      the    opening     of    a   new

Westborough      dealership   was    stale     by    the    time    American    Honda

formally notified plaintiffs of the new dealership.                     Plaintiffs

                                         10
argued that because American Honda did not do another study of

market conditions in 1998, it had no factual support for its

position that the market required another dealership.

      In        response,    American      Honda     offered     its    legitimate,

nonretaliatory business justification for opening the Westborough

dealership -- the Worcester market was underperforming. In support

of its position, American Honda submitted the Worcester Study.

Additionally, American Honda presented evidence that Marketing

continued to evaluate data for the Worcester market on an on-going

basis after the formal market study was completed in 1996.                        Based

on the same factors included in the formal Worcester Study, Green

concluded that the Honda dealerships continued to underperform in

the Worcester market each year, up to and including the end of 2002

when this matter was submitted to the district court.                        American

Honda also offered Green’s affidavit to rebut plaintiffs’ claim

that,      in    1998   when    it    officially     announced    plans      for    the

Westborough dealership, American Honda had essentially put a hold

on   the    opening     of   new     dealerships    elsewhere    in    the   country.

According        to   Green’s   unrefuted       affidavit,   beginning       in   1995,

Marketing conducted “approximately 62 detailed market studies,”

half of which resulted in a recommendation that American Honda

create an open point.              J.A. 1107.      As of early 2003, new Honda

dealerships had been opened in twelve of these markets.

                                           11
      Based on these submissions, the district court concluded that

American Honda established a satisfactory nonretaliatory reason for

opening the Westborough dealership.           Thus, the district court

indicated that, in order to succeed, plaintiffs would “have to

prove that . . . [the Worcester Study was] pretextual” by attacking

the reliability of the report or providing convincing “evidence of

subjective retaliatory intent.” J.A. 1327. Cf. Price, 380 F.3d at

212   (“[T]he   plaintiff   can   prove   pretext   by   showing   that   the

explanation is unworthy of credence or by offering other forms of

circumstantial evidence sufficiently probative of retaliation.”

(alteration and internal quotation marks omitted)).

                                   B.

      In attempting to show pretext, plaintiffs emphasized that

neither Green, who headed Marketing when the market study was

conducted and was deposed as American Honda’s corporate designee

under Rule 30(b), nor other executives, such a Vice-President

Richard Colliver, were able to explain how or by whom the Worcester

Study was placed on the 1995 agenda.         Because American Honda was

not able to provide a definitive explanation, plaintiffs argued

that the only reasonable inference, in light of the timing of the

study and the troubled relationship that existed between the

parties, was “that Honda’s decision to do so was motivated by

retaliation.”    Brief of Appellants at 39.

                                    12
       The   district    court    disagreed,    however,   noting     that    the

Worcester Study was placed on the agenda before Lundgren and

Bernardi’s became MDL plaintiffs and that any retaliation for the

pre-MDL litigation was “beyond [the court’s] jurisdiction.”                  J.A.

1977.    Green’s decision that the Worcester Study should proceed

also occurred prior to plaintiffs joining the MDL. And, plaintiffs

fail    to   highlight   any     record    evidence   contradicting    Green’s

testimony that he was unaware of plaintiffs’ MDL status until after

the Worcester Study was completed.             We cannot conclude that the

district court’s failure to find pretext based on this evidence was

clearly erroneous.

                                          C.

       Plaintiffs’ next major pretext argument attacks the Worcester

Study as flawed because it used an unfair comparative market--the

affluent, import-receptive North Boston market--as its benchmark

for    assessing   market   penetration.        The   North   Boston   market,

plaintiffs argue, was created by dividing the Boston metro market

at a line where Honda’s market penetration began to decrease.

Relying on an affidavit from Dr. Ernest Manuel, the dealers’ expert

economic witness in prior Honda litigation, plaintiffs contend that

the creation of the North Boston market was unprecedented and

designed to ensure that the Worcester market compared poorly.                 Dr.

Manuel indicated that he reviewed market studies produced by

                                          13
American Honda and found that only two -- the Boston market study

(at issue in American Honda Motor Co. v. Clair International, Inc.)

and the Worcester Study -- used but a portion of a metro market as

a benchmark.     Green, who also testified in the Clair litigation,

indicated     that    American   Honda    used   a   split     metro   market   for

purposes of studying market penetration for Miami/Ft. Lauderdale,

San Francisco, and Los Angeles.           American Honda also presented the

affidavit of Jim Anderson, its expert witness in economics, who

explained that splitting a large metropolitan market for purposes

of comparison is not uncommon among automobile manufacturers when

there is inadequate representation in a sizable area within the

metro market. In Anderson’s opinion, using the North Boston market

as a benchmark for Worcester was appropriate because North Boston

was adjacent to but independent from the Worcester market, it was

substantial     in      size,    and     it   appeared        to   have    adequate

representation.

     The district court found that the choice of the North Boston

market as a benchmark for a market penetration comparison did not

show pretext.        Indeed, plaintiffs presented no expert testimony or

other evidence demonstrating that the selection of a portion of a

large metro market as a benchmark is inappropriate or unheard of in

the industry, or otherwise contradicting Anderson’s statements. We

see nothing in the record, moreover, showing that American Honda

failed   to    follow     its    standard     method     of    analyzing     market

                                         14
performance.    We conclude that the finding of the district court

was not clearly erroneous.

                                   D.

      Plaintiffs contend that pretext was also evident through

American Honda’s reliance on outdated data from a 1996 market study

to    justify   the    addition   of        another     dealership     in   1998.

Specifically, plaintiffs assert that by 1998, American Honda was

experiencing product shortages and was unable to adequately supply

dealers like Lundgren, who had trouble meeting customer demand

around this time.        Plaintiffs also mention a number of other

factors affecting the market that the Worcester Study failed to

take into account, such as the advent of the Internet.

      Clearly, the 1996 Worcester Study could not fully account for

future events or predict the market in 1998, but that does not make

the   study   itself   flawed.    Plaintiffs          have   not   presented   any

evidence showing that the shortages skewed their market performance

numbers in comparison to dealers in the North Boston market, the

New England zone, or even the national market.               Actually, American

Honda presented evidence that the Worcester market continued to

perform below national and local standards.              Green began reviewing

the data for the Worcester market following the completion of the

Worcester study in 1996, and he continued to do so on at least an

annual basis.    We cannot say that the district court clearly erred

                                       15
by refusing to find American Honda’s use of the market study

pretextual because of subsequently changing market conditions.

                                  E.

     Finally, plaintiffs allege that American Honda is paying a

“subsidy” to Ragsdale, the selected candidate who holds an LOI

awarding him the Westborough dealership, which plaintiffs argue is

evidence of retaliatory intent.    American Honda selected Ragsdale

in 1998, five years before the district court entered its order in

this case. In the meantime, Ragsdale was incurring financing costs

associated with the land he acquired for the new dealership at a

cost of approximately $2.2 million.    In March 2001, American Honda

agreed to pay Ragsdale $500 per day to defray these costs and,

ultimately, agreed to continue such payments until the litigation

reached a conclusion.

     Apparently, this precise arrangement was unique -- American

Honda did not identify any other dealer candidate with whom it had

a comparable arrangement. However, Green testified that it was not

unprecedented for American Honda to “assist” a proposed dealer

financially by purchasing and holding the land during the course of

a protest by a competitive dealer.     Green also indicated that the

property was ideal and American Honda did not want to lose it as

the legal wrangling continued.

                                  16
     The district court found that the arrangement was “not so

incredibly unusual [as] to show pretext. . . . This has been

litigated for a long time. . . . [Honda] wanted to hold onto [the]

property . . . [and] the deal with Ragsdale in the event it

prevailed.”   J.A. 1978.   We cannot conclude that this finding was

clearly erroneous.

                                  III.

     Finally, Lundgren and Bernardi’s argue that the district court

abused its discretion in refusing to afford them an evidentiary

hearing via live or videotaped testimony to determine whether to

grant injunctive relief. Plaintiffs claim the issue of retaliatory

intent   ultimately   required   the    district   court   to   assess   the

credibility of American Honda’s witnesses and that it was error for

the district court to rule only on the basis of affidavits,

deposition transcripts, and documentary evidence.

     Plaintiffs, however, never requested an evidentiary hearing or

objected to the absence of one.           On the contrary, the record

suggests that all of the parties acquiesced to the resolution of

plaintiffs’ motion on the basis of their written submissions

instead of live testimony. Although plaintiffs indicated that they

would be “willing” to participate in an evidentiary hearing, they

took the position that “the Court is more than justified in ruling

in plaintiffs’ favor on the current record.”         J.A. 1814.    Because

                                   17
the record belies any suggestion that the district court was

presented with a demand for an evidentiary hearing, Lundgren and

Bernardi’s cannot now complain that the district court rendered its

decision on the basis of written submissions.

     Moreover, even if plaintiffs made an adequate request for an

evidentiary hearing, we cannot agree that the district court abused

its discretion in ruling in the absence of one.           Plaintiffs have

not specifically explained how an evidentiary hearing would have

affected the basis of the district court’s decision or the primary

issues   on   appeal.     Plaintiffs     have   not   introduced   evidence

contradicting the key points established by American Honda’s expert

witness,   nor   have   they   identified   any   specific   testimony   by

American Honda’s decision-makers regarding Westborough that they

believe to be false.      The district court afforded plaintiffs 60

days of discovery on the issue of pretext, even though plaintiffs

had access to the market report as early as 1998.            Following the

close of discovery, the district court conducted a hearing at which

plaintiffs presented additional evidence on the issue of pretext.

Plaintiffs have had ample opportunity to thoroughly anticipate

these issues which could have been identified long before the

merits hearing.

                                    18
                            IV.

    For the foregoing reasons, we affirm the district court’s

ruling.

                                                     AFFIRMED

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