Unpublished Disposition, 861 F.2d 268 (9th Cir. 1985)

No. 87-3906.

United States Court of Appeals, Ninth Circuit.

Before GOODWIN, Chief Circuit Judge, ALARCON, Circuit Judge, and A. WALLACE TASHIMA,^*  District Judge.

MEMORANDUM^** 

Defendant-appellant Yamaha Motor Corporation U.S.A. ("Yamaha") appeals a permanent injunction prohibiting it from relocating one of its dealerships. The injunction was issued under Oregon Revised Statutes ("ORS") 650.150, based on the district court's determination that the relocated franchise would have an "unjustifiable adverse effect" on existing dealerships operated by plaintiff-appellee Town Center Motorcycles, Inc. ("Town Center"). We affirm.

BACKGROUND

As of February 1986, Yamaha sold vehicles through four outlets on Portland's east side. Gateway Motorcycles, Inc. ("Gateway") operated two dealerships, "Yamaha East" and "Country Yamaha," Ray E. Garner, Inc. operated "Garner's Yamaha" and Town Center operated "Town Center Yamaha." In March 1986, Gateway closed its two dealerships. In June of that year, Town Center acquired Gateway's "Country Yamaha" facility and reopened it as "Yamaha Sports Plaza." Then, in October of 1986, Yamaha advised Town Center that Portland Motorsports had acquired Garner's Yamaha and proposed moving it from 2232 E. Burnside to 10950 S.E. Division in Portland. The proposed site was approximately six miles closer to the Town Center dealerships than was Garner's Yamaha former location, although still eight miles away.

Yamaha approved the move. Town Center objected and brought this action to enjoin the relocation.

ORS 650.150 provides that a motor vehicle dealer may enjoin a motor vehicle manufacturer, distributor or importer from opening a new dealership or relocating an existing dealership for "good cause." In determining the existence of good cause, the statute directs the court to consider, inter alia, the following:

(c) Whether there will be an unjustifiable adverse effect upon existing dealers because of the grant of the new franchise or the relocation of an existing franchise. For purposes of this paragraph, the court may consider all factors that the court determines relevant, but in any case shall consider the following factors:

(A) The extent, nature and permanency of the investment of the existing motor vehicle dealers and the proposed motor vehicle dealer.

(B) The effect on the retail motor vehicle business in the relevant market area.

(C) The growth or decline in population and in new motor vehicle registrations in the relevant market area.

(d) The effect on consumers in the relevant market area. For purposes of this paragraph, the court may consider all factors that the court determines relevant, but in any case shall consider the following factors in the relevant market area:

(A) The adequacy and convenience of existing motor vehicle sales facilities and service facilities.

(B) The supply of motor vehicle parts and qualified service personnel.

(C) The existence of competition among existing dealers.

ORS 650.150(3) (c) & (d).

Yamaha argues that the district court failed to consider all of the factors enumerated in the statute. In particular, Yamaha claims that the legislative history indicates that the phrase "unjustifiable adverse effect upon existing dealers" was chosen to ensure that a court would require more than merely "some" economic harm to existing dealers; yet, the district court based its ruling solely on the evidence that the current dealers would lose "some customers" were the relocation permitted.

ISSUE

Yamaha does not challenge the district court's findings of fact. The sole issue raised on appeal is whether or not these findings support the conclusion that Yamaha's proposed dealer relocation would cause "an unjustifiable adverse effect" upon Town Center, i.e., an existing dealer.

STANDARD OF REVIEW

Issues of law are reviewed de novo, even when reviewing the issuance of an injunction where the abuse of discretion standard would otherwise apply. Brock v. Mazzola, 794 F.2d 427, 429 n. 3 (9th Cir. 1986). The independent de novo review standard applies to issues of state law and no special deference is given to a district court's interpretation of state law. In re McLinn, 739 F.2d 1395 (9th Cir. 1984) (en banc). Determinations of mixed questions of fact and law are reviewed de novo if they involve the exercise of judgment about the values underlying legal principles. United States v. McConney, 728 F.2d 1195, 1202 (9th Cir. 1984) (en banc). Here, because the issue tendered calls for a determination of whether the statute calls for the imposition of a permanent injunction, we review the district court's determination de novo.

DISCUSSION

The court below made a number of findings regarding the elements constituting good cause to enjoin the relocation of a dealership listed in ORS 650.150. Its finding that the relocation would cause Town Center to lose customers was only one of them. First, the court addressed the relevant statutory factors in its ruling on the preliminary injunction. The trial court found under (3) (c) (A), that Town Center had made significant investments in both of its dealerships, whereas Yamaha had spent only $2,000 in anticipation of opening the new dealership. Under (3) (c) (B), the court found that the retail motor vehicle business would not be aided by an additional dealership, since the recent failures of two dealerships indicated that there was no market for added dealerships, but that the present dealers would be harmed. Under (3) (c) (C), the court found that there had been little change in population in the relevant market area, so that there was no need for an additional dealership. Finally, under (3) (d), the court found that consumers were being served adequately by the current dealerships, and that the failure of prior dealerships in the area indicated that consumers would not benefit by the establishment of an additional dealership. These findings were incorporated into the trial court's ruling after trial. See F.R.Civ.P. 65(a) (2) (evidence received at preliminary injunction hearing may be considered at trial on the merits).

In granting the permanent injunction, the court placed further reliance on the testimony of the prospective Yamaha franchisee who testified that he was concerned about the proximity of the Town Center dealerships, and that he anticipated competition between the dealerships. The court further found that the evidence supported Town Center's claim that the market for its products was flat or declining. Thus, the establishment of a new facility would merely cut into Town Center's share of the market. Finally, the court found that the evidence supported Town Center's claim that its dealership's performance had been highly regarded, and in fact would probably win the "Pacesetter" award for its performance. The district court found that if this ideal franchise could not increase Yamaha's sales, Yamaha's difficulties should not be attributed to Town Center but should be attributed to the weakness of the market, indicating again that there was no need for another dealership, and that an additional dealership would only siphon off customers from Town Center without benefiting consumers.

Yamaha characterizes these findings as merely indicating that Town Center would lose "some customers" were a new facility to be opened, and argues that the resulting loss of some customers cannot constitute "unjustifiable adverse effect." As the above review of the findings demonstrates, however, that simply is not the case; Yamaha's contention is without merit.

This is the first case to interpret ORS 650.150 since its amendment in 1985 to add subsections (3) (c) and (d). The guidance provided by these subsections is less than precise. Unfortunately, the legislative history also is unclear. The district court adopted the position that "unjustifiable" adverse effect was intended by the legislature to be a middle ground somewhere between "adverse" and "substantially adverse." Where exactly it falls is unspecified. It is left to the courts to weigh the enumerated statutory factors and then to determine whether the adverse effect is "unjustifiable."

As originally enacted in 1980, ORS 650.150 did not expressly require a court to consider the issue of economic effect in determining whether or not "good cause" existed. Then, in Armstrong Buick, Inc. v. General Motors Corp., 597 F. Supp. 932 (D. Or. 1984), Judge Solomon held that the ordinary economic impact of an additional dealer was not a factor to be considered under the statute. There, the court further held that the addition of a new dealership "will not present an unjustifiable adverse economic impact on the other dealers in the Portland area." Id. at 934. However, the opinion also employs the terms "serious adverse economic impact" and "substantial adverse economic impact," id. at 933, and Judge Solomon appears to use these three terms interchangeably.

In 1985, the Oregon Automobile Dealers Association asked the Oregon Legislative Assembly to overrule Judge Solomon's interpretation of ORS 650.150. The legislature responded by amending ORS 650.150 to require courts to consider the potential adverse effect new dealerships would have on existing ones. Subsections (3) (c) and (d) were added to aid the courts in balancing "the dealer's interest in maintaining viable businesses, the manufacture's interest in promoting sales, and the public's interest in adequate competition and convenient service." 63d Or. Legislative Assembly, House Comm. on Consumer and Business Affairs, Feb. 26, 1985, Minutes, quoting Piano v. State ex rel. New Motor Vehicle Bd., 103 Cal. App. 3d 412, 417, 163 Cal. Rptr. 41, 44 (1980). Thus, courts were specifically empowered to consider the economic effect of new dealers on existing facilities.

In drafting the amendment, the legislature debated the language to be included regarding the impermissible adverse effect upon dealers. Hearings on HB 2883 Before the Houise Comm. on Consumer and Business Affairs, 63d Or. Legislative Assembly, Reg.Sess.1985. As originally proposed, the bill merely used the language "adverse effect." After some debate, that phrase was modified to refer to "unjustifiable" adverse effect, one of the phrases used by Judge Solomon.

CONCLUSION

We agree with the district court's conclusion that in adopting the modifier "unjustifiable," the Oregon legislature's intent was to require a heightened showing above that required to prove that the effect was simply "adverse." Given the uncontested findings of the district court, the conclusion that the proposed dealership relocation fell within the broad parameters of "unjustifiable adverse effect" is amply supported. This statute, as amended, has not yet been construed by the Oregon courts. We are not required to and we decline to parse the statute further, a task better left to the Oregon courts.

The judgment is AFFIRMED.¹