Saccucci Lincoln Mercury Inc. v. American Honda Motor Company, et al

Filing

OPINION issued by Juan R. Torruella, Appellate Judge; Michael Boudin, Appellate Judge and Jeffrey R. Howard, Appellate Judge. Published. [09-2110]

Case: 09-2110 Document: 00116095279 Page: 1

Date Filed: 08/04/2010

Entry ID: 5468161

United States Court of Appeals
For the First Circuit
No. 09-2110
SACCUCCI AUTO GROUP, INC.,
f/k/a SACCUCCI LINCOLN MERCURY INC., d/b/a SACCUCCI HONDA,
Plaintiff, Appellant,
v.
AMERICAN HONDA MOTOR COMPANY, INC.;
AMERICAN HONDA FINANCE CORPORATION,
d/b/a HONDA FINANCIAL SERVICES,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Mary M. Lisi, U.S. District Judge]
Before
Torruella, Boudin and Howard,
Circuit Judges.
Geoffrey W. Millsom, with whom Adam M. Ramos and Adler Pollock
& Sheehan P.C., were on brief, for appellant.
Joshua Teverow and Joshua Teverow, Esquire, Ltd on brief for The
Rhode Island Automobile Dealers' Association, Amicus Curiae.
David A. Kluft, with whom Michael B. Keating, Catherine H.
Wicker, Foley Hoag LLP, Gordon P. Cleary and Vetter & White, were
on brief, for appellees.

August 4, 2010

Case: 09-2110 Document: 00116095279 Page: 2

HOWARD,

Circuit

Judge.

Date Filed: 08/04/2010

This

is

a

Entry ID: 5468161

diversity

case

involving Rhode Island's "Dealer Act," R.I. Gen. Laws § 31-5.1-4,
which regulates the business relationship between car manufacturers
and dealers.

The plaintiff-appellant is a dealer located in Rhode

Island, Saccucci Auto Group Inc. ("Saccucci").

The defendants-

appellees, American Honda Motor Co. Inc. and American Honda Finance
Corp., are entities of Honda, a car manufacturer.

We refer to the

defendants-appellees collectively as "Honda."
The
decision

to

central
prohibit

issue
its

in

this

dealers

case

from

is

whether

selling

Honda

Honda's
Vehicle

Servicing Contracts ("VSCs") over the Internet violates the Dealer
Act.

VSCs are extended warranties, more or less.

Honda had

allowed its dealers to sell Honda VSCs over the Internet for a
number of years but put an end to the practice in 2007.
prompted

Saccucci,

a

dealer

which

sold

Honda

VSCs

over

This
the

Internet, to sue Honda in federal court, claiming, inter alia, that
Honda's prohibition violated the Dealer Act.
The district court granted summary judgment to Honda. It
held (1) that Saccucci's claims were not cognizable under the
Dealer Act; and that (2) even if they were, no reasonable jury
could find in Saccucci's favor on the claims.
second of these conclusions and affirm.

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We agree with the

Case: 09-2110 Document: 00116095279 Page: 3

I.
A.

Date Filed: 08/04/2010

Entry ID: 5468161

Facts

Background

Concerned that car manufacturers had more bargaining
power than car dealers, Congress and a number of states enacted
"legislation to protect car dealers from perceived abusive and
oppressive acts by the manufacturers."

New Motor Vehicle Bd. v.

Orrin W. Fox Co., 439 U.S. 96, 101 (1978).
Act is an example of such legislation.

Rhode Island's Dealer

Id. at 101 n.5.

Saccucci claims that Honda's decision to temporarily
prohibit its dealers from selling Honda VSCs over the Internet
violated three of the Dealer Act's provisions:

one prohibiting

manufacturers

enter

agreement,

from

R.I.

"coerc[ing]"

Gen.

Laws

§

a

dealer

to

31-5.1-4(b)(4),

one

into

an

prohibiting

manufacturers from engaging in "arbitrary" action that causes
damage

to

a

dealer,

id.

§

31-5.1-4(a),

and

one

prohibiting

manufacturers from engaging in any "predatory practice" against a
dealer.

Id. § 31-5.1-4(c)(26).
B.

VSCs

A VSC is a vehicle protection package similar to an
extended warranty.
repairing

certain

Generally speaking, it covers the cost of
mechanical

breakdowns

and

ancillary benefits such as roadside assistance.
a number of companies, including Honda.
"Honda Care."

-3-

provides

other,

VSCs are sold by

Honda's brand is known as

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Honda does not sell its VSCs directly to customers.
Rather, it provides its dealers with Honda VSCs, and the dealers
make the ground-level sale.
a fee for

Although Honda dealers must pay Honda

every Honda VSC they sell (these fees range from

$360–$1,365 per VSC), dealers are free to charge their customers
whatever price they wish for a Honda VSC, retaining the difference
between price and fee as profit.
making

the

sale

to

the

Although the dealer is the one

customer,

the

Honda

VSC

contract

is

ultimately between the customer and Honda, not between the customer
and the dealer.
Honda dealers may promote and sell different brands of
VSCs (e.g., a Toyota or General Electric VSC).
dealer's

customers

requests

a

Honda

But if one of the

VSC,

the

dealer

contractually obligated to make one available for purchase.
Honda dealers have other reasons to offer Honda VSCs.

is
And

Their

customers, Honda owners, generally prefer Honda VSCs over competing
brands because Honda VSCs guarantee that "all repairs will be made
by

factory-trained

Honda

technicians

at

authorized

Honda

dealerships using only Genuine Honda or American Honda authorized
parts."

Also,

Honda

pays

its

dealers

a

"performance

based

allowance" for each VSC sold. The amount of this allowance depends
on a quotient keyed to vehicle sales.

For example, if a Honda

dealer's Honda VSC sales are 70% of his total car sales (i.e., the
dealer sells seven Honda VSCs for every ten cars he sells), that

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dealer will receive more money than if its Honda VSC sales were 20%
of its total car sales.

A dealer, then, has a financial incentive

to increase its Honda VSC sales percentage.
C.

The Internet sale of Honda VSCs

Because Honda VSCs are typically sold in connection with
the purchase of a Honda car, Honda VSCs were initially sold only at
Honda dealerships.

Beginning sometime in 1997, however, a number

of Massachusetts-based Honda dealers began to sell Honda VSCs over
the Internet.

Other dealers began to follow suit, and, by 2008,

there were approximately twelve Honda dealers selling Honda VSCs
over the Internet.

Saccucci began selling Honda VSCs over the

Internet in 2006.

The dealers that sell Honda VSCs over the

Internet

sell

them

at

or

near

cost,

relying

on

the

performance–based allowance supplied by Honda for their profits.
D.

Honda's reaction to the Internet sale of Honda VSCs
Beginning sometime in 2002, Honda dealers who did not

sell Honda VSCs over the Internet began to complain to Honda about
the practice, focusing their complaints on the lower prices charged
by the Internet dealers.

Despite these complaints, Honda did not

attempt to curb Internet sales and actually appeared supportive of
such sales, which it believed reflected "capitalism at its best."
In 2007, however, Honda's position began to change.

In

January, Honda's Dealer Advisory Board ("DAB"), a body composed of

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Honda dealers who are elected to represent dealer interests,1
recommended that Honda stop the Internet sale of Honda VSCs.

The

DAB told Honda that such sales impacted "customer satisfaction" and
were resulting in "strained relations" between the dealers who were
selling

the

customers.

Honda

VSCs

locally

at

the

dealership

and

their

Honda told the DAB that it would further study the

issue. Both the DAB's recommendation to Honda and Honda's response
were published in a Dealer Direct newsletter sent to all Honda
dealers, including Saccucci.
Later that year, individual dealers complained to Honda
that the Internet sale of Honda VSCs was undermining customer
satisfaction with both the dealers and Honda.
Spafford,

Honda's

Manager

of

Consumer

Assurance

Services, testified about these complaints.
dealer in Illinois.

When deposed, Dan
Products

and

One came from a Honda

The dealer told Spafford that he had sold a

long-time customer both a Honda and a Honda VSC at his dealership,
charging the customer a traditional in-store price for the VSC.
The customer later found a Honda VSC being offered on the Internet
for a significantly lower price.

1

The customer returned to the

The DAB is formed as follows: Honda dealers elect district
representatives who, in turn, elect zone representatives to serve
on the DAB.
These zone representatives attend national DAB
meetings and also serve with Honda employees on national
subcommittees assigned to specific areas of business (e.g., sales).
As a unit, the DAB makes recommendations to Honda and Honda
publishes a "Dealer Direct" newsletter which includes a description
of each recommendation and Honda's response to the recommendation.
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dealership, called the dealer a "thief," and told him that he would
never go back to his dealership again.

The customer also told the

dealer that because Honda had condoned such practices, he would
never buy another Honda.

Following this interaction, the dealer

stopped promoting Honda VSCs and began offering a competing VSC.
Spafford testified further about a similar conversation he had with
a Honda dealer from California.

The dealer told Spafford that the

Internet sale of Honda VSCs was endangering the dealer's reputation
in the community.

This dealer also told Spafford that he was

considering promoting a competing VSC.
In response to these individual dealer complaints and the
DAB's earlier recommendation, Honda formed a committee to consider
the issues posed by the Internet sale of Honda VSCs.

The committee

consisted of members of Honda's management, Honda counsel, and
outside counsel.

For three months, the committee met on a weekly

basis, considering the positives and negatives of allowing its
dealers to sell Honda VSCs over the Internet.

Ultimately, the

committee decided it was necessary to impose restrictions on such
sales.

The

committee

considerations,

based

including

the

this

decision

on

a

DAB's

recommendation

number
that

of

Honda

prohibit the practice, complaints from individual dealers, and
concerns that customer dissatisfaction with Honda dealers would
harm "brand loyalty" and "brand image."

The committee also took

into account factors not directly related to customer satisfaction.

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Among other things, the committee expressed concerns that dealers
who were unhappy with the Internet sale of Honda VSCs would begin
to push the VSCs offered by competitors and that the Internet sale
of Honda VSCs might violate state laws.

With respect to the

latter, Honda learned that the California code only allows sellers
licensed by the state to sell VSCs and also limits such sales to
sales incidental to the sale of a vehicle.
Based on the committee's findings, Honda announced a
temporary

prohibition

February 2008.

on

the

Internet

sale

of

Honda

are

in

To enforce this prohibition, Honda set up a scheme

of graduated penalties for non-compliant dealers.
violators

VSCs

temporarily

suspended

from

selling

First–time
Honda

VSCs,

second–time violators are "permanently deactiva[ted]" from selling
Honda VSCs, and third–time violators must forfeit any payments they
have received under Honda's performance–based allowance program.
E.

Procedural history

Shortly after Honda imposed the temporary prohibition on
the Internet sale of Honda VSCs, Saccucci filed a complaint against
Honda in Rhode Island Superior Court.

In this complaint, Saccucci

claimed that Honda had violated three provisions of the Dealer Act
and breached Rhode Island's implied covenant of good faith and fair
dealing.

Honda removed the case to federal district court.

After

discovery and an evidentiary hearing, Saccucci sought to amend its
complaint to add a claim of equitable estoppel. The district court

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Case: 09-2110 Document: 00116095279 Page: 9

denied this motion as futile.
judgment

on

Saccucci's

claims,

Date Filed: 08/04/2010

Entry ID: 5468161

Honda then moved for summary
which

was

granted.

Saccucci

appeals.2
II.

Discussion

We review a district court's grant of summary judgment de
novo.

Lockridge v. Univ. of Me. Sys., 597 F.3d 464, 469 (1st Cir.

2010).

Summary judgment is appropriate "if the pleadings, the

discovery and disclosure materials on file, and any affidavits show
that there is no genuine issue as to any material fact and the
movant is entitled to judgment as a matter of law."

Fed. R. Civ.

P. 56(c).3
Saccucci claims that the district court erred when it:
(1)

granted Honda summary judgment on its Dealer Act claims; (2)

granted Honda summary judgment on its claim that Honda breached the
implied covenant of good faith and fair dealing; and (3) denied its
motion to amend its complaint to add a claim of equitable estoppel.
We take up the claims in that order.

In this diversity case, the

2

In its complaint, Saccucci also requested injunctive relief
and advanced a claim of promissory estoppel. The district court
denied the injunctive relief request and granted Honda summary
judgment on the promissory estoppel claim.
Saccucci does not
appeal these rulings.
3

A "material" fact is one "that might affect the outcome of
the suit under the governing law."
Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is
"genuine" only "if a reasonable jury could resolve it in favor of
either party."
Santoni v. Potter, 369 F.3d 594, 598 (1st Cir.
2004) (quoting Basic Controlex Corp., Inc. v. Klockner Moeller
Corp., 202 F.3d 450, 453 (1st Cir. 2000)).
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substantive law of Rhode Island governs.
Cranston, 37 F.3d 731, 735
A.

Entry ID: 5468161

Gibson v. City of

(1st Cir. 1994).
Dealer Act claims

Although the district court first held that the Dealer
Act did not apply to this case, we harbor some doubt about that
conclusion.
assuming

the

In any event, we may bypass the question because,
Act

applies,

no

reasonable

jury

could

find

in

Saccucci's favor on its Dealer Act claims.
1.

Coercion claim

The Dealer Act makes it unlawful for a manufacturer "to
coerce, or attempt to coerce, any motor vehicle dealer . . . [t]o
enter into any agreement with the manufacturer or to do any other
act prejudicial to the . . . motor vehicle dealer by threatening to
terminate or cancel a franchise or any contractual agreement
existing between the dealer and the manufacturer."
§ 31-5.1-4(b)(4).

R.I. Gen. Laws

For purposes of the Dealer Act, coercion is

defined as a "wrongful demand which will result in sanctions if not
complied with."

Dunne Leases Cars & Trucks Inc. v. Kenworth Truck

Co., 466 A.2d 1153, 1160 (R.I. 1983)4.

4

The focus here is on

Coercion holds the same meaning under the Automobile
Dealers' Day in Court Act ("ADDCA"), 15 U.S.C. § 1222, which is
basically a federal version of Rhode Island's Dealer Act. George
Lussier Enters. v. Subaru of New Eng., 393 F.3d 36, 47 (1st Cir.
2004) ("'[C]oercion' holds the same meaning under both the state
dealer acts and the ADDCA."). Accordingly, decisions considering
whether a manufacturer committed coercion within the meaning of the
ADDCA inform our analysis.
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whether Honda's prohibition of the Internet sale of Honda VSCs,
which it enforced by setting up a scheme of graduated penalties for
non-compliant dealers, constitutes a wrongful demand.5
One way that a manufacturer may make a wrongful demand is
by insisting that the dealer relinquish a contractual right.

See

e.g., Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296,
326 (3d Cir. 2001) ("A demand is wrongful if it . . . impels the
dealer into forfeiting its rights under the dealer agreement.");
Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 93
(3d Cir. 2000).

By contrast, a manufacturer's demand will not be

wrongful if the manufacturer is insisting that a dealer comply with
the reasonable terms of a contract.

R.I. Gen. Laws § 31-5.1-

4(b)(4) ("[T]his subdivision is not intended to preclude the
manufacturer . . . from insisting on compliance with the reasonable
terms

or

provisions

of

the

franchise

or

other

contractual

agreement, and notice in good faith to any new motor vehicle dealer
of the new motor vehicle dealer's violation of those terms or
provisions shall not constitute a violation of the chapter."); see
also New A.C. Chevrolet, Inc., 263 F.3d at 326 ("A manufacturer
does not make a wrongful demand if it merely insists that the

5

It is unclear whether Honda's scheme of graduated penalties
qualify as "sanctions" under the Dealer Act. We need not decide
that question here, as we conclude that Honda did not make a
wrongful demand.
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dealer comply with a reasonable obligation imposed by the franchise
agreement.").
For our purposes, then, it makes sense to start with the
contracts

between

the

parties.

The

1995

"Honda

Care

Dealer

Enrollment and Participation Agreement" ("VSC Contract") is the
contract of primary interest here, as it directly covers the
"terms,

conditions,

Program."

and

procedures

of

the

Honda

Care

[VSC]

But a few provisions of the 1990 "Automobile Dealer

Sales and Service Agreement" ("1990 Dealer Contract") are also
relevant, as the VSC Contract incorporates them by reference.6
Neither contract explicitly addresses the Internet sale
of Honda VSCs.

This is likely because both contracts were entered

into before the Internet was a widespread commercial medium.
Nevertheless, each party argues that the contracts require us to
find in their favor on the coercion claim.

As we will explain,

neither argument is persuasive.

6

Honda argues that a third contract, the 2003 "Automobile
Dealer Sales and Service Agreement," ("2003 Dealer Contract") is
relevant here as well. The 2003 Dealer Contract is a more recent
version of the 1990 Dealer Contract that is incorporated by
reference in the VSC Contract.
Saccucci argues that the 2003
Dealer Contract is irrelevant here because the VSC Contract does
not incorporate any of its provisions by reference. The district
court seems to have agreed with Saccucci, as its coercion analysis
appears restricted to the VSC Contract and the 1990 Dealer
Contract. Whether we were to consider it or not, the 2003 Dealer
Contract makes no difference in our analysis.
Accordingly, we
follow the district court's lead and ignore it.
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In arguing that the contracts give it the right to
prohibit

the

Internet

sale

of

Honda

provisions from the relevant contracts.
one

from

the

VSC

Contract

and

VSCs,

Honda

cites

three

Two of these provisions,

another

from

the

1990

Dealer

Contract, establish Honda's right to control the advertising of its
products, including Honda VSCs.

Neither of these provisions,

however, addresses whether Honda has the right to control where
Honda VSCs may be sold.

While the line between advertising a

product over the Internet and selling a product over the Internet
may be thin in some cases, there are surely methods of Internet
sale that could not be characterized as advertising.
The third provision Honda cites is from the 1990 Dealer
Contract and is listed under the heading, "Sale of Honda Products
to Dealer."

Honda argues that this provision permits it to revise

the "terms" under which it sells Honda products to a dealer and
thus permits it to condition its sale of Honda VSCs to a dealer on
the dealer's agreement to refrain from selling Honda VSCs over the
Internet.

This provision reads as follows:
American Honda will have the right at any time
and from time to time to establish and revise
terms . . . for its sales of Honda Products to
Dealer. Revised prices, terms or provisions
will apply to the sale of any Honda Products
as of the effective date of the revised
prices, terms or provisions, even though a
different price or different terms may have
been in effect at the time such Honda Products
were allocated to or ordered by Dealer.

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But, as noted above, a manufacturer may only insist that
its dealers comply with the "reasonable terms or provisions of [a]
. . . contractual agreement."
(emphasis added).
provision

by

seemingly

commit

See R.I. Gen. Laws § 31-5.1-4(b)(4)

Honda reads the reasonableness out of this

construing
a

it

so

broadly.

paradigmatic

Dealer

Indeed,
Act

Honda

violation

could
(e.g.,

threatening not to sell any cars to the dealer unless the dealer
agrees to purchase large stocks of undesirable vehicles) and still
defend its actions by reference to this provision.
Saccucci's

contract-based

ambitious, is no more persuasive.

argument,

although

equally

It says that the silence of the

contracts with respect to the Internet sale of Honda VSCs creates
an ambiguity and requires us to consider extrinsic evidence to
interpret the contracts.

And, in Saccucci's view, this extrinsic

evidence makes clear that the intent of the parties at the time of
contracting was to allow Saccucci to sell Honda VSCs over the
Internet.
This argument must be rejected, as there is no ambiguity
in the contracts. "Under Rhode Island law, a contract is ambiguous
'if it is reasonably susceptible of different constructions.'"

N.

Ins. Co. v. Point Judith Marina, LLC, 579 F.3d 61, 72 (1st Cir.
2009); Irene Realty Corp. v. Travelers Prop. Cas. Co. of Am., 973
A.2d 1118, 1122 n.2 (R.I. 2009).

Here, the contracts simply do not

address the Internet sale of Honda VSCs, much less the Internet

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sale of Honda VSCs in a manner reasonably susceptible to different
interpretations.
To be sure, some courts have said that silence creates
ambiguity when it involves a matter "naturally within the scope of
the contract."

Water Rights of Pub. Serv. Co. v. Meadow Island

Ditch Co. No. 2, 132 P.3d 333, 339-40 (Colo. 2006); Azat v.
Farruggio, 162 Md. App. 539, 551 (Md. Ct. Spec. App. 2005); Trs. of
Southampton v. Jessup, 173 N.Y. 84, 90 (N.Y. 1903); see also
Moncrief v. Williston Basin Interstate Pipeline Co., 174 F.3d 1150,
1173 (10th Cir. 1999) (citing Colorado law); Consolidated Bearings
Co. v. Ehret-Krohn Corp., 913 F.2d 1224, 1233 (7th Cir. 1990)
(citing Illinois law); 11 Richard A. Lord, Williston on Contracts
§ 30.4 (4th ed. 1999).

Assuming that the Rhode Island Supreme

Court would endorse this principle of contract interpretation, it
would be unhelpful to Saccucci here.

It cannot reasonably be

argued that the Internet sale of Honda VSCs was a matter naturally
within the scope of the contracts.

At the time the parties entered

into the most recent of the contracts in 1995, the Internet was not
a widespread commercial medium.

As Saccucci itself observes, "The

Honda Care VSC Agreement was drafted in 1995 at a time when use of
the Internet was still predominantly restricted to research and
education,

and

theoretical."

commercial

use

of

the

Internet

was

largely

As the Seventh Circuit has said, "A contract is not

ambiguous merely because it fails to address some contingency; the

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general presumption is that 'the rights of the parties are limited
by

the

terms

expressed'

in

the

contract."

See

Consolidated

Bearings Co., 913 F.2d at 1233 (quoting In re Estate v. Morrow, 501
N.E.2d 998, 1002 (Ill. App. Ct. 1986)).
Under other circumstances, the next question might have
been whether, in the absence of an contract governing the Internet
sale of Honda Care VSCs, Honda's demand that its dealers cease such
sales was wrongful.
question.
alone:

Here, though, there is no need to consider the

Saccucci's coercion argument proceeds on one premise

that it had a contractual right to sell Honda VSCs over the

Internet.

Saccucci fails to argue that Honda's demand is wrongful

even in the absence of such a contractual right.7
But even if Saccucci had made such an argument, there are
several reasons to doubt that it would have been a winning one.

In

George Lussier Enterprises, we explained that a manufacturer's
demand will be wrongful if it imposes "unfair or inequitable"
conditions upon a dealer.

393 F.3d at 43.

7

Here, the temporary

In its reply brief, Saccucci appears to argue that if a
contract does not expressly give the manufacturer the right to make
the demand in question, the demand will necessarily be wrongful.
For one thing, this argument is waived because it makes its debut
in the reply brief. Evans Cabinet Corp. v. Kitchen Int'l, Inc., 593
F.3d 135, 148 n.20 (1st Cir. 2010). But, more importantly, there
is no authority to support the argument. The cases that Saccucci
cites stand for a different proposition altogether, namely, that if
a manufacturer is demanding that the dealer comply with the
reasonable terms of a contract, the demand will not be considered
wrongful. See, e.g., Dunne Leases Cars & Trucks Inc., 466 A.2d at
1160-61.
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prohibition on the Internet sale of Honda VSCs seems fair and
equitable, given that Honda imposed the prohibition on all of its
dealers equally and that the dealers themselves, through the DAB,
sought the prohibition. Moreover, we have said that a "distributor
acting honestly is entitled to latitude in making commercial
judgments."

Coady Corp. v. Toyota Motor Distribs., Inc., 361 F.3d

50, 56 (1st Cir. 2004).
commercial

judgment.

Honda's decision here was, at bottom, a
Honda

was

concerned

not

only

that

the

Internet sale of Honda VSCs was harming brand image and loyalty but
that a failure to stop Internet sales would result in its dealers
promoting competing products.8
2.

Arbitrary action claim

The Dealer Act makes it unlawful for a manufacturer to
engage in "arbitrary" action that causes damage to the dealer.
R.I. Gen. Laws § 31-5.1-4(a).

The Dealer Act does not define

"arbitrary" nor has any Rhode Island court expressly defined the
term for purposes of the statute.

That said, the Rhode Island

Supreme Court has suggested that a manufacturer's action will not
be arbitrary if it is based on "due cause," Dunne Leases Cars &
Trucks

Inc.,

arbitrary

466

action

A.2d
claim

at

1156-57,

under

and,

Maine's

when

Act,

an

we

defined

arbitrary as "selected at random and without reason."

Schott

8

Dealer

considering

In arguing that Honda's decision was arbitrary, Saccucci
claims that Honda did not arrive at its decision honestly.
We
address that claim below.
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Date Filed: 08/04/2010

Entry ID: 5468161

Motorcycle Supply, Inc. v. Am. Honda Motor Co., 976 F.2d 58, 63
(1st Cir. 1992) (citing the dictionary definition of the term).
Regardless

of

which

definition

is

applied

here,

no

reasonable jury could have concluded that Honda's decision to
temporarily prohibit the Internet sale of Honda VSCs was arbitrary.
Honda's decision–making process was thorough.

After receiving

complaints about the Internet sale of Honda VSCs, Honda formed a
committee to study the issue.

This committee met regularly for

several months and considered both the positives and negatives of
the current system (which allowed dealers to sell Honda VSCs over
the Internet) and various alternatives to restrictions on Internet
sales.

Ultimately, based on the committee's findings, Honda

decided to temporarily prohibit Internet sales.
decision

on

a

number

of

factors,

including

It based this
(1)

the

DAB's

recommendation that Honda prohibit the practice; (2) complaints
from individual dealers that the Internet sale of Honda VSCs was
harming the reputation of the Honda dealers; (3) concerns that
customer

dissatisfaction

with

Honda

dealers

would

harm

brand

loyalty and brand image; (4) concerns that dealers who were unhappy
with the Internet sale of Honda VSCs would begin to push the VSCs
offered by competitors; and (5) concerns that dealers selling Honda
VSCs over the Internet might be violating state laws, including the
law of California.

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Case: 09-2110 Document: 00116095279 Page: 19

Claiming
arbitrary, Saccucci

that

Honda's

Date Filed: 08/04/2010

decision

was

advances several arguments.

Entry ID: 5468161

nevertheless

First, Saccucci

complains about the decision–making process employed by Honda.

It

says that Honda should have consulted the customer and sales
satisfaction surveys of both it and its dealers before concluding
that a prohibition on the Internet sale of Honda VSCs was needed to
protect brand loyalty or brand image.
Because these surveys are not part of the record, it is
impossible

to

tell

whether

they

provide

a

useful

metric

for

assessing customer satisfaction with the Internet sale of Honda
VSCs (as opposed to other Honda products) and, if they do, whether
they show that customers were satisfied with the Internet sale of
Honda VSCs.
But even assuming that the surveys were relevant, and
that they reflected customer satisfaction with the Internet sale of
Honda VSCs, that does not mean that Honda's failure to consult them
would allow a reasonable jury to find its decision was arbitrary.
First, Honda had other evidence on which to base a judgment on
customer satisfaction.

It is undisputed that it had received

reports from dealers that the Internet sale of Honda VSCs was
undermining the reputation of Honda dealers.

Therefore, although

it might be debatable whether Honda exercised the best judgment in
failing

to

consult

the

customer

surveys

in

addition

to

this

evidence, its decision was nevertheless based on "due cause" and

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Case: 09-2110 Document: 00116095279 Page: 20

Date Filed: 08/04/2010

was not "selected at random and without reason."

Entry ID: 5468161

Second, and

perhaps more importantly, Honda's decision to temporarily ban the
Internet sale of Honda VSCs was not solely based on concerns that
the

Internet

sale

of

Honda

VSCs

was

resulting

dissatisfaction with Honda and its dealers.

in

customer

Among other things,

Honda was concerned that the Internet sale of Honda VSCs might
violate the laws of certain states and was leading dealers to
promote competing products.

Nowhere in its brief does Saccucci

argue that these were not independently valid reasons for imposing
the prohibition.
Next,

Saccucci

argues

that

Honda's

decision

to

temporarily ban the Internet sale of Honda VSCs was arbitrary
because

it

was

in

tension

with

Honda's

policy

regarding

the

Internet sale of cars (Honda allows dealers to make such sales) and
in harmony with Honda's policy regarding the Internet sale of its
power equipment (Honda controls such sales).

Saccucci argues,

"[T]he District Court should have recognized that Honda's decision
to align the rules for internet sales of Honda Care VSCs with those
applicable to lawnmowers and snowblowers, rather than new and used
automobiles, supports Saccucci's claim that Honda's ban on internet
VSC sales is arbitrary."
But Saccucci overlooks the fact that Honda had a good
reason for aligning its Honda VSC policy with its power equipment
policy instead of its car policy.

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Honda's power equipment policy

Case: 09-2110 Document: 00116095279 Page: 21

Date Filed: 08/04/2010

Entry ID: 5468161

was enacted because of concerns that the uncontrolled Internet sale
of power equipment was having a "negative impact on Honda brand
image and the [Honda] dealer network." Honda had the same concerns
about the Internet sale of Honda VSCs.

In contrast, there is

nothing in the record indicating that the Internet sale of cars
raised brand or dealer network concerns for Honda.

In light of

these considerations, Honda's decision to align its VSC policy with
its

power

equipment

policy

actually

undercuts

a

finding

of

arbitrariness.
Finally, Saccucci argues that the decision was arbitrary
because it was motivated by Honda's desire to appease a powerful
dealer in California, Dave Conant.

In support of this claim,

Saccucci points to the following: (1) an email from Dean Hardesty,
a Honda executive, to Robert Wilkinson, another Honda executive, in
which Hardesty tells Wilkinson that Conant had joined the DAB, that
he was "apparently against" the Internet sale of Honda VSCs, and
that his opposition was "helping the topic get escalated"; (2) a
follow up email from Wilkinson to Hardesty in which Wilkinson
writes that he "needs to know, if [Honda's interest in prohibiting
Internet sales] is a politically motivated decision by someone of
authority.

(Just kidding)"; (3) testimony from Wilkinson that

Conant "was connected and pretty tight" with the Vice President of
Honda Motor Company and that Wilkinson had heard "rumors" that
Conant "was one of the individuals who was complaining" about the

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Case: 09-2110 Document: 00116095279 Page: 22

Internet

sale

of

Honda

VSCs

and;

Date Filed: 08/04/2010

(4)

the

fact

Entry ID: 5468161

that

Honda

implemented its policy shortly after Conant was appointed to the
chair of the DAB.
At least part of Wilkinson's testimony is inadmissible
hearsay

that

cannot

be

considered

on

judgment,9 SEC v. Ficken, 546 F.3d 45, 53

a

motion

for

(1st Cir. 2008).

summary
And we

fail to see how the rest of the evidence could allow a reasonable
jury to infer that Honda's decision was geared towards pleasing
Conant.

At best, this evidence might allow a jury to find that

Conant helped put the VSC issue on Honda's radar.

But this would

be neither wrongful nor unexpected, given that Conant was the
elected chair of the DAB subcommittee assigned to address the
issue.

Relatedly, Saccucci has failed to point to any evidence

that is probative of Honda's reaction to Conant's complaints. When
laid against the considerable evidence indicating that Honda's
decision was based on valid considerations, this argument cannot
forestall summary judgment.
3.

Predatory practice claim

The Dealer Act makes it unlawful for a manufacturer "[t]o
engage in any predatory practice" against a dealer. R.I. Gen. Laws
§ 31-5.1-4(c)(26).

The Dealer Act does not define "predatory" and

there is no case law (Rhode Island or otherwise) defining the term

9

We refer in particular to Wilkinson's testimony that there
were "rumors" that Conant had complained about the policy.
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Case: 09-2110 Document: 00116095279 Page: 23

for purposes of the Dealer Act.
term's ordinary meaning.

Date Filed: 08/04/2010

Entry ID: 5468161

In such a case, we may look to the

Field v. Mans, 157 F.3d 35 (1st Cir.

1998); San Jose Christian Coll. v. City of Morgan Hill, 360 F.3d
1024, 1034 (9th Cir. 2004).

The ordinary meaning of predatory, at

least in the business context, is "inclined or intended to injure
or exploit others for personal gain or profit."
Collegiate Dictionary 915 (10th ed. 1993).

Merriam-Webster's
This definition is

consistent with a classic example of a predatory business practice,
predatory pricing.

See Cargill, Inc. v. Monfort of Colo., Inc.,

479 U.S. 104, 110-11 (1986) ("Predatory pricing may be defined as
pricing below an appropriate measure of cost for the purpose of
eliminating competitors in the short run and reducing competition
in the long run.").
No reasonable jury could conclude that Honda's decision
to temporarily prohibit the Internet sale of Honda VSCs was a
predatory practice.

Nothing in the record suggests that Honda

imposed the temporary prohibition on the Internet sale of Honda
VSCs to exploit Internet dealers like Saccucci for its own benefit.
To the contrary, the evidence indicates that Honda enacted the
policy to protect brand loyalty and image, something in the best
interest of Honda's dealers. See Scuncio Motors, Inc. v. Subaru of
New Eng., Inc., 555 F. Supp. 1121, 1138 n. 27 (D.R.I. 1982)
(concluding that there was "little need to address [the dealer's]
claims of predatory conduct in violation of" Rhode Island's Dealer

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Case: 09-2110 Document: 00116095279 Page: 24

Date Filed: 08/04/2010

Entry ID: 5468161

Act where the manufacturer "acted in good faith and with good
cause").
Again, we find Saccucci's arguments to the contrary to be
unavailing.

It

begins

by

citing

Aspen

Skiing

Co.

v.

Aspen

Highlands Skiing Corp., 472 U.S. 585, 605 (1985) for the principle
that commercial predation occurs where there is an exclusion of the
competitor

from

efficiency."

the

marketplace

"on

some

basis

other

than

But that case involved a business that was allegedly

trying to exclude a competing business from the marketplace.

Id.

Here, Honda did not act as a competitor to Saccucci, nor did it
exclude Saccucci from the Honda VSC marketplace.

Next, Saccucci

asserts that a finding that Honda's conduct here is not predatory
"ignores serious antitrust issues raised by . . . geographical
trade restraints."

This argument is hardly developed and, because

no antitrust claims have been made here, we need not consider it.
B.

Implied covenent of good faith and fair dealing claim
Saccucci argues that the district court erred when it

granted Honda summary judgment on Saccucci's claim that Honda
breached the implied covenant of good faith and fair dealing. This
argument requires only cursory treatment.

Under Rhode Island law,

"it is well settled that there is an 'implied covenant of good
faith

and

fair

dealing

between

parties

.

.

.

so

that

the

contractual objectives may be achieved.'" Now Courier, LLC v.
Better Carrier Corp., 965 A.2d 429, 435 (R.I. 2009) (quoting Ide

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Case: 09-2110 Document: 00116095279 Page: 25

Date Filed: 08/04/2010

Entry ID: 5468161

Farm & Stable, Inc. v. Cardi, 297 A.2d 643, 645 (R.I. 1972)).

As

developed in the coercion analysis above, Honda's actions here did
not unfairly interfere with any contractual objectives, nor is
there evidence of bad faith.
C.

Motion to Amend

After the district court held an evidentiary hearing
relating to Saccucci's preliminary injunction request, Saccucci
filed a motion for leave to file a second amended complaint to add
a claim for equitable estoppel.
amendment as futile.

The district court denied the

Our review is for an abuse of discretion.

Windross v. Barton Protective Servs., 586 F.3d 98, 104 (1st Cir.
2009).
The district court did not abuse its discretion in
denying the amendment as futile.

To make out a claim of equitable

estoppel, Saccucci would have to show:
first,
an
affirmative
representation
or
equivalent conduct on the part of the person
against whom the estoppel is claimed which is
directed to another for the purpose of
inducing the other to act or fail to act in
reliance thereon; and secondly, that such
representation or conduct in fact did induce
the other to act or fail to act to his injury.
Providence Teachers Union v. Providence Sch. Bd., 689 A.2d 388,
391-92 (R.I. 1997).
Here,

the

record

is

devoid

of

any

affirmative

representation (or equivalent conduct) directed at Saccucci for the
purpose of inducing reliance.

Furthermore, "[e]quitable estoppel
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Case: 09-2110 Document: 00116095279 Page: 26

Date Filed: 08/04/2010

Entry ID: 5468161

is 'extraordinary' relief, which 'will not be applied unless the
equities clearly [are] balanced in favor of the party seeking
relief.'" Southex Exhibitions, Inc. v. R.I. Builders Ass'n, Inc.,
279 F.3d 94, 104 (1st Cir. 2002) (applying Rhode Island law)
(quoting Greenwich Bay Yacht Basin Assocs. v. Brown, 537 A.2d 988,
991 (R.I. 1988))).

Saccucci has also failed to develop why the

equities are balanced so clearly in its favor.
III.

Conclusion

For the reasons provided above, the district court's
decision is affirmed.

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