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A dispute between American Honda Motor Co. and two of its Massachusetts dealers intensified this week as the Massachusetts Supreme Judicial Court was called upon to clarify a commonwealth statute regulating the business practices of the motor vehicle industry. The Massachusetts statute, G.L. c. 93B, 4(3)(1), regulates trade practices among motor vehicle manufacturers, distributors and dealers. To prevent manufacturers and distributors from treating dealers unfairly, the statute prohibits the establishing of new dealerships within a present dealer’s “relevant market area.” American Honda Motor Co. Inc., intending to establish a new dealership in Westborough, Mass., brought an action in the spring of 1998 in the U.S. District Court for the District of Massachusetts, seeking a declaratory judgment that Honda dealers Bernardi’s Inc., of Natick, Mass., and Richard Lundgren Inc., of Auburn, Mass., would not have standing to sue over the proposed Westborough dealership because it would not fall within either dealership’s relevant market area. The dealers filed a counterclaim, alleging that the proposed Westborough dealership would fall within their relevant market area. The counterclaim also alleged that American Honda’s proposal to establish the Westborough dealership was an act of retaliation for the two dealerships’ involvement in a class action against American Honda over the alleged bribery by certain dealers of American Honda officials. Such retaliation is also prohibited by G.L. c. 93B, 4. What goes around … Under the U.S. district court’s decision, the relevant market area of a motor vehicle dealer “is a circle, with the dealer at the center, circumscribing the geographical area comprising either two-thirds of the dealer’s new vehicle sales or two-thirds of its service sales, whichever is smaller.” The district court entered a declaratory judgment in favor of American Honda and dismissed the dealerships’ retaliation claim based on their lack of standing. Bernardi’s and Lundgren appealed to the U.S. 1st Circuit Court of Appeals, which, after determining that there was no controlling state precedent pertinent to relevant market area, presented a certified question to the SJC seeking clarification on how the relevant market area of a motor vehicle dealer should be defined under G.L. c. 93B, 4(3)(1). The SJC, while generally agreeing with the district court’s use of statistical data regarding the sales and service of vehicles to determine the relevant market area, disagreed with the idea that the area must be a perfect circle. “[W]e conclude that the Legislature intended the shape of a dealer’s ‘relevant market area’ to be a geographic area generally circular in shape, although not a perfect circle, and contiguous to the existing dealer’s location,” wrote Justice Roderick L. Ireland for the court in the Sept. 1 opinion, American Honda Motor Co. v. Bernardi’s Inc., SJC-08193. Although the difference between a “generally circular” relevant market area and a relevant market area in the shape of a perfect circle may seem insignificant on its face, the SJC’s correction of the district court’s interpretation of G.L. c. 93B, 4(3)(1) will allow attorneys for Bernardi’s and Lundgren to resubmit their calculations for consideration by the 1st Circuit. If, under the 1st Circuit’s review, American Honda’s proposed Westborough dealership falls within the relevant market area of either Bernardi’s or Lundgren, the dealerships would then have standing to pursue their claims. “The bottom line is that we are having our experts review and prove our case for standing,” says attorney Richard B. McNamara of Wiggin & Nourie in Manchester, N.H., who represents Bernardi’s and Lundgren. McNamara also considers the issue of standing crucial because it is the only way for him to make the case that American Honda retaliated against his clients for their involvement in the class action against American Honda. CLASS ACTION The class action, a combination of several lawsuits that were consolidated as a multidistrict litigation heard in 1995 before Judge Frederick J. Motz, in the U.S. District Court for the District of Maryland, involved allegations of bribes made to American Honda by dealers to receive more than their proper allocation of automobiles. The case, in which Bernardi’s and Lundgren were the first and primary plaintiffs, was eventually settled by American Honda for $330 million. American Honda, in a written statement provided to American Lawyer Media, ignored the issue of retaliation and chose instead to view the SJC’s decision as a confirmation that G.L. c. 93B, 4(3)(1) is intended to protect open competition among car dealers. “[T]he Court recognized that the law must strike a balance between competing interests, as the ‘public interest will favor increased competition in most circumstances, where the existing dealers’ interest may be opposite,’ ” the statement said.

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