Richard Lundgren, Inc. v. American Honda Motor Co. ( 2005 )


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  •                               UNPUBLISHED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    Affirmed by unpublished per curiam opinion.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    Unpublished opinions are not binding precedent in this circuit.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
    19