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

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.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