Subaru of New England, Inc. v. Subaru of Wakefield, Inc.

11 Mass. L. Rptr. 481
CourtMassachusetts Superior Court
DecidedSeptember 24, 1999
DocketNo. 9601475
StatusPublished

This text of 11 Mass. L. Rptr. 481 (Subaru of New England, Inc. v. Subaru of Wakefield, Inc.) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Subaru of New England, Inc. v. Subaru of Wakefield, Inc., 11 Mass. L. Rptr. 481 (Mass. Ct. App. 1999).

Opinion

Brady, J.

INTRODUCTION

The plaintiff Subaru of New England, Inc., a distributor of Subaru motor vehicles, seeks a declaratory judgment that its approval of the relocation of a Subaru dealership from Salem to Danvers in 1996 complied with G.L.c. 93B. The defendant Subaru of Wakefield, Inc., a Subaru dealer, counterclaims for damages for violation of G.L.c. 93B, §4(3)(1), and G.L.c. 93B, §3. I heard evidence, jury-waived, over several days beginning on September 13, 1999 and concluding on September 22, 1999. At the request of the defendant, I viewed the locations of the defendant, Ira Subaru in Danvers, and the site of the former Gauthier Subaru dealership on Canal Street in Salem.

FINDINGS AND RULINGS

1. Subaru of New England, Inc. (SNE) entered into a dealership contract with defendant Subaru of Wake-field, Inc. (Wakefield) in 1991. (Exhibit 1.) Wakefield was refranchised in 1994 (Exhibit 3), in 1998 (Exhibit. 4). Wakefield is currently owned equally in one-third shares by Richard Kalika, Howard Belsky and Lawrence Belsky. Kalika is the president and general manager of the dealership; the other two owners do not participate actively in the business. From 1989 to 1991, another Subaru dealer operated from the same site at 888 East Main Street, Wakefield, a location a few miles east of Route 128.

2. Under the standard form dealership contract between SNE and its dealers, each dealer is assigned a so-called area of responsibility (AOR) within which the dealer assumes responsibility for the promotion, sales and service of Subaru products. The AOR’s are not necessarily exclusive; however, SNE tends to respect each dealer’s geographical prerogatives within its AOR.

3. Sometime in 1993, Wakefield, through Kalika, asked SNE to consider allowing it to relocate from Main Street in Wakefield to Route 1 in Danvers near the intersection of Route 114. There are numerous automobile dealerships located in the area along Route 114 between Route 128 and Route 95. It is a convenient location for consumers, and a generally desirable location for automobile dealerships. SNE did not have a dealership in that vicinity. However, Danvers was within the AOR of another Subaru dealership, Gauth-ier Subaru on Canal Street in Salem, MA. Mr. H.L. Burbank, SNE’s vice president of market development, told Kalika that SNE would consider it, but first he (Kalika) had to obtain the approval of Gauthier because Danvers was within Gauthier’s AOR. Kalika did not follow up.

4. Mr. Roland Gauthier owned several dealerships located on Canal Street in Salem, including a Subaru dealership. Canal Street is a generally poor area for dealerships, and in the mid-1990’s, Gauthier experienced declining sales. He lost Mercedes Benz and Saab franchises. Burbank tried to persuade Gauthier to relocate his Subaru dealership to Route 114, but he declined.

5. In 1995, primarily through contacts with SNE’s owner, Ernest Boch, Ira Rosenberg and his son David Rosenberg became interested in acquiring a Subaru dealership. Ira Rosenberg owns several automobile dealerships in the area of north of Boston on Route 114. The Rosenbergs wished to locate a Subaru dealership on Route 114 in the vicinity of their other dealerships. Because the location was within Gauthier’s AOR, Burbank told the Rosenbergs that they would have to obtain Gauthier’s consent.

6. Late in 1995, Mr. Gauthier’s financial problems became severe and he was unable to maintain so-called floor plan financing with a lender. He advised Burbank that he wished to sell his Subaru franchise and asked for SNE’s assistance (Exhibit 14). Burbank provided Gauthier with the necessary paperwork to request assistance from SNE. Because of Gauthier’s inability to maintain floor plan financing, SNE formally notified Gauthier that he was in default under his dealership agreement.

7. The Rosenbergs and Gauthier began to negotiate the possible sale of the Gauthier Subaru franchise. On May 1, 1996, they reached a basic agreement on the sale of the franchise to David Rosenberg, subject to SNE’s approval (Exhibit 21). On June 18, 1996, SNE granted conditional approval of David Rosenberg’s application to become a Subaru dealer in Salem (Exhibit 31).

8. On June 3, 1996, while SNE was considering the Rosenberg proposal, Kalika called Burbank to ask if the rumor that Ira Rosenberg was going to buy Gauth-ier and move it to Route 114 was true. Burbank confirmed that that was a proposal now under consideration. Mr. Kalika responded that he could not let that happen, and that he would protest. Mr. Burbank responded that he felt that the addition of a strong Subaru dealership on Route 114 in Danvers would [483]*483increase Wakefield’s sales, citing a similar recent situation where the placement of a Subaru dealership in Arlington, about seven miles from Wakefield, proved to have a positive effect on Wakefield’s sales.

9. Once Rosenberg and Gauthier reached a tentative agreement, Burbank updated a market study concerning the proposed relocation of the Gauthier franchise to Route 114 in Danvers (Exhibit 28). As the crow flies, Wakefield was about 8.9 miles from the Gauthier Salem franchise, and about 7 miles from the proposed Rosenberg relocation site on Route 114. Burbank’s market study concluded that Subaru market penetration in the Gauthier and Wakefield AOR’s, as well as in the adjacent Wilmington AOR, had been poor compared to market penetration in Massachusetts and in New England. Thus, for the 1995 calendar year, Subaru sales were 3.7% of the total competition in Massachusetts and 5.6% in New England. By comparison, the Subaru penetration in the Salem/Danvers AOR was 3.4%, the Wakefield AOR was 2.4%, and the Wilmington AOR was 2.3%. These numbers do not necessarily indicate that the dealers in these AOR’s were performing poorly, as dealers cam and do acquire sales from anywhere, but the data did indicate to Burbank that there was “considerable additional sales potential among these three AOR’s.” (Exhibit 28.)1

10. SNE was well aware of its obligations to existing dealers under G.L.c. 93B. That statute prohibits distributors such as SNE from “arbitrarily and without notice to existing franchisees” granting a franchise to an additional franchisee which would be conducting its dealership operations within the so-called relevant market area (RMA) of an existing franchise. G.L.c. 93B, §4(3)(1). The RMA is a defined term based on sales or service of the existing franchise. Based on the sales data regularly furnished SNE by Wakefield, Burbank knew that c. 93B would not apply to relocating the Salem dealership to Danvers. However, because the RMA is the smaller of the geographical areas defined by sales or service, he needed to obtain service data from Wakefield to complete his RMA analysis. He advised Kalika by letter dated June 19, 1996 (Exhibit 32) that SNE was willing to consider Wakefield’s own analysis of its RMA and asked Kalika to provide service data for such analysis by June 26, 1996. The possibility of a dealer protest under c. 93B was, of course, on the minds of the Rosenbergs and Gauthier in connection with their desired transaction. They were anxious to move, and Burbank was doing the best he could to resolve that issue and, if necessary, obtain a court judgment. SNE’s formal notice of its intent to appoint David Rosenberg as an authorized Subaru dealer was given in Burbank’s June 19, 1996 letter to Wakefield.

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Bluebook (online)
11 Mass. L. Rptr. 481, Counsel Stack Legal Research, https://law.counselstack.com/opinion/subaru-of-new-england-inc-v-subaru-of-wakefield-inc-masssuperct-1999.