Beck Chevrolet Co., Inc., Appellant,v.General Motors LLC, Respondent.BriefN.Y.Jun 2, 2015To be Argued by: RUSSELL P. MCRORY (Time Requested: 30 Minutes) CTQ-2015-00002 Court of Appeals of the State of New York BECK CHEVROLET CO., INC., Appellant, – v. – GENERAL MOTORS LLC, Respondent. –––––––––––––––––––––––––––––– ON APPEAL FROM THE QUESTION CERTIFIED BY THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT IN DOCKET NOS. 13-4066-CV AND 13-4310-CV REPLY BRIEF FOR APPELLANT ARENT FOX LLP Attorneys for Appellant 1675 Broadway, 34th Floor New York, New York 10019 Tel.: (212) 484-3900 Fax: (212) 484-3990 Date Completed: October 1, 2015 TABLE OF CONTENTS Page -i- INTRODUCTION .................................................................................................... 1 ARGUMENT ............................................................................................................ 4 POINT I THE 2008 AMENDMENTS WERE THE MOST SIGNIFICANT AMENDMENTS TO THE NEW YORK DEALER ACT SINCE INCEPTION, AND INDICATE AN ATTEMPT TO QUASH NEW ABUSES BY MANUFACTURERS AGAINST DEALERS .......................... 4 POINT II GM OFFERS NO LEGITIMATE REASON FOR CHANGING THE FIRST CERTIFIED QUESTION ............. 10 POINT III THAT THE MANUFACTURING HALF OF THE INDUSTRY USES A STANDARD THAT GIVES THEM COERCIVE POWER DOES NOT MEAN THE STANDARD IS REASONABLE ............................................ 17 POINT IV GM’S “REVISION” TO BECK’S MARKET AREA IS A “MODIFICATION” UNDER 463(2)(FF) ........................... 33 CONCLUSION ....................................................................................................... 36 - ii - TABLE OF AUTHORITIES Page(s) CASES Application of Corp. Counsel of City of New York, Vernon Parkway & Garden Place, 285 N.Y. 326, 34 N.E.2d 341 (1941) ......................................... 14 Audi of Smithtown, Inc. v. Volkswagen Grp. of Am. Inc., 32 Misc. 3d 409, 924 N.Y.S.2d 773 (Sup. Ct. 2011) ........................................... 9 Barenboim v. Starbucks Corp., 21 N.Y.3d 460, 995 N.E.2d 153 (2013).............................................................. 14 Blue Cross & Blue Shield of NJ, Inc. v. Philip Morris USA Inc., 3 N.Y.3d 200, 818 N.E.2d 1140 (2004).............................................................. 17 Brown Motor Sales Co. v. Hyundai Motor America, No. 10AP–725, 2011 WL 4541304 (Ohio. App. Ct. Sep. 30, 2011).................. 23 Burgin Motor Co.,v. Am. Motors Sales Corp., 449 F. Supp. 842 (D. S.C. 1978) ........................................................................ 32 Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc., 192 A.D.2d 1066, 596 N.Y.S.2d 230 (1993) ........................................................ 7 Coady Corp. v. Toyota Motor Distributors, Inc., 361 F.3d 50 (1st Cir. 2004) ........................................................................... 20, 21 Commodity Futures Trading Comm’n v. Walsh, 17 N.Y.3d 162, 951 N.E.2d 369 (2011).............................................................. 14 Engel v. CBS, Inc., 93 N.Y.2d 195, 711 N.E.2d 626 (1999).............................................................. 14 Gen. Motors Corp. v. Darling’s, 444 F.3d 98 (1st Cir. 2006) ................................................................................. 32 Gen. Motors Corp. v. Fountain Oldsmobile-GMC Truck, No. 03-1319, Recommended Order at 15-17 (Fla. Div. Admin. Hr’gs May 27, 2004) ..................................................................................................... 28 - iii - Graff Chevrolet Co. v. Texas Motor Vehicle Bd., 60 S.W.3d 154 (Tex. App. 2001) ........................................................................ 24 Grand Light & Supply Co. v. Honeywell, Inc., 771 F.2d 672 (2d Cir. 1985) ............................................................................... 32 Halleen Chevrolet Inc. v. Gen. Motors Corp., No. 00AP-1454, 2001 WL 722101 (Ohio Ct. App. June 28, 2001) ................... 25 Halleen Chevrolet Inc. v. GMC, No. 03-050MVDB-277-59 .................................................................................. 25 Hartley Buick GMC Truck, Inc. v. American Honda Motor Co., Inc., No. FMD 2010-05 (N.Y.D.M.V. Nov. 7, 2011), (Admin. Appeals Bd. Feb. 28, 2012) ............................................................................................... 21, 22 Hinds Cnty, Miss. v. Wachovia Bank N.A., 700 F. Supp. 2d 378 (S.D.N.Y. 2010) ................................................................ 17 In re Ralph Gentile, Inc. v. Nissan North Am., Inc., No. TR-07-0001 (Wis. Div. of Hearings and Appeals Feb. 4, 2010) ........... 26, 27 Infiniti Automobiles of Norwood, Inc. v. Nissan North Am., Inc., Findings of Fact, Rulings of Law and Order No. 2004-00010 (Mass. Sup. Ct. Aug. 4, 2005) ................................................................................................................... 27 Lazar Auto Sales, Inc. v. Chrysler Fin. Corp., No. 99 Civ. 0213, 1999 WL 123501 (S.D.N.Y. Mar. 2, 1999) ........................ 7, 8 Love Pontiac, Cadillac, Buick, GMC Truck, Inc. v. Gen. Motors Corp., No. 97-2490, 1999 WL 125562, 173 F.3d 851 (4th Cir. Mar. 10, 1999) ........... 32 McElroy v. United States, 455 U.S. 642, 102 S. Ct. 1332, 71 L. Ed. 2d 522 (1982) ................................... 14 Michael Cadillac, Inc. v. Volkswagen of Am., Inc., No. PR-1819-02, at 12-13 (Cal. New Motor Veh. Bd. Jun. 17, 2003) ............... 29 Milos v. Ford Motor Co., 317 F.2d 712 (3d Cir. 1963) ............................................................................... 32 Mobil Oil Corp. v. Karbowski, 667 F. Supp. 927 (D. Conn. 1987) ...................................................................... 33 - iv - Nissan North America, Inc. v. California New Motor Vehicle Board, Case. No. 34-2014-8001963 (Cal. Sup. Ct., Sacramento County Sep. 4, 2015) ................................................................................................................... 30 Petereit v. S.B. Thomas, Inc., 63 F.3d 1169 (2d Cir. 1995) ............................................................................... 32 RCJD Motors, Inc. v. Chrysler Group, LLC, No. 608-10-5694 OIC (Tex. Office of Admin. Hr’gs Apr. 2, 2012) ............ 23, 24 Sabe Staino Motors, Inc. v. Volkswagen of Am., Inc., No. Civ. A. 99-5034, 2005 WL 1041196 (E.D. Pa. Apr. 29, 2005) ................... 32 Superior Pontiac Buick GMC, Inc. v. Nissan N. Am, Inc., No. 08-10642, 2012 WL 1079719 (E.D. Mich. Mar. 30, 2012) ................... 25, 26 The Premier Collection, LLC v. Jaguar Land Rover N. Am., LLC, No. 14-8329 (S.D.N.Y. Jun. 29, 2015) ............................................................... 33 Wildenstein & Co. v. Wallis, 79 N.Y.2d 641, 595 N.E.2d 828 (1992).............................................................. 14 Yesil v. Reno, 92 N.Y.2d 455, 705 N.E.2d 655 (1998).............................................................. 14 Zimbrick, Inc. v. American Honda Motor Co., Inc., No. TR-08-007 (Wis. Div. of Hearings & Appeals May 25, 2010) ................... 24 STATE STATUTES N.Y. Stat. Law § 321.................................................................................................. 9 N. Y. Veh. & Traf. Law § 463 ..........................................................................passim 1 INTRODUCTION Welcome to Lake Wobegon, where all the women are strong, all the men are good looking, and all the children are above average. – Garrison Keillor, Prairie Home Companion. Like the fictional version of Lake Wobegon, where all the children are above average, GM wants a dealer network in which all dealers are above average. The problem is that GM’s measure of sales performance – RSI – results in half of GM’s dealers being deemed below average at any one time, regardless of their actual performance. The hard rules of math make it impossible for most dealers to have above-average RSI scores and, therefore, be in compliance with their franchise agreements. Far from contractual non-compliance applying to only “the worst” dealers, by definition, about half of all dealers would be below average. That should not merit them to be subject to additional onerous demands by GM or termination. This case is not, as GM would have this Court believe, about a systemic change to motor vehicle franchising. Rather it is about GM’s use of a statewide standard to measure the sales performance of one of its Chevrolet dealers in metro New York and not taking into account local market conditions and consumer preferences that differ dramatically from the state as a whole. GM has asked this Court to reframe the first certified question because it knows it cannot win the question the Second Circuit requested this Court to 2 answer. Of course it is fundamentally unfair to allow GM to wield a sales metric that gives it the authority to terminate or take other adverse action against up to half of all of their dealers. Simply because GM arbitrarily chooses not to do so in certain instances, and does so in other instances—often after the dealer refuses to comply with GM’s additional oppressive demands leveraged by the fact that the dealer’s RSI score is below average—does not remove GM’s overwhelming power over its dealers as a result of its RSI standard. GM’s ability to arbitrarily punish some dealers and spare others is exactly what the Legislature sought to remedy through the 2008 Amendments to the New York Dealer Act,1 and what GM attempted to do to Beck here (albeit, unsuccessfully before the DMV). Contrary to GM’s selective quotations from the legislative history of the 2008 Amendment, numerous Legislators wrote in support of the bill to explain how it was needed to re-balance the relationship between dealers and manufacturers and to protect dealers from the manufacturers’ inequitable and superior bargaining power. The 2008 Amendments represented the most sweeping change to the New York Dealer Act since its inception, adding numerous rights and protections for dealers delineated in the laundry-list of new subsections added to Section 463(2), including the all-important lead-in phrase, “[i]t shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract” (emphasis 1 Capitalized terms have the same meaning as they do in Beck’s opening brief. 3 added), to ensure that manufacturers could not use their superior position to force dealers to sign away their statutory rights. The 2008 Amendments are remedial in nature and, thus, should be construed broadly to serve the ends that the Legislature intended. None of the cases or administrative decisions that GM has cited compel a different result. In fact, upon closer examination of each case and decision, it is clear that the dealer being accused of underperformance was, unlike Beck, underperforming on many metrics and measures in addition to sales, which had the cumulative effect of justifying the result. Therefore, the test of reasonableness for the sales metric employed by the manufacturers in the cases cited to by GM was easy to pass, as no other test would have a different result. Here, Beck has met or exceeded all of GM’s other metrics for performance evaluation (as determined by the DMV), and, if Beck were assessed only under GM’s RSI standard against the other downstate GM dealers (who actually experience market conditions similar to Beck, unlike GM’s upstate dealers), Beck’s performance would be average among its peers, and it would be evident that Beck has actually been an improving dealer for GM in a challenging market—facts that are masked by the RSI being skewed by GM’s upstate dealers. None of the cases that GM relies upon were in the same context. 4 Finally, GM blithely asserts that the Legislature was not attempting to curb abuses of relevant market area revisions in the 2008 Amendments, while completely ignoring those parts of the 2008 Amendments that, for the first time, defined “relevant market area” and prohibited manufacturers from establishing new or relocating existing dealers in another dealer’s relevant market area absent good cause. Section 463(2)(ff) did not need to spell out every possible change that may affect a dealer’s rights, as it is written broadly to cover all of them, including market area revisions. Accordingly, GM has not offered any compelling reason why both of the Second Circuit’s certified questions should not be answered in the affirmative. ARGUMENT POINT I THE 2008 AMENDMENTS WERE THE MOST SIGNIFICANT AMENDMENTS TO THE NEW YORK DEALER ACT SINCE INCEPTION, AND INDICATE AN ATTEMPT TO QUASH NEW ABUSES BY MANUFACTURERS AGAINST DEALERS GM is plain wrong when it states that the 2008 Amendments “were designed to increase transparency, not address any perceived abuses.” That is contrary to the very legislative history that GM has submitted to the Court. The 2008 Amendments were passed unanimously by both houses of the New York Legislature. (Respondent’s Compendium of Unpublished Cases, Legislative Documents and Case Filings (“GM’s Compendium”) at 389.) Members of the 5 Legislature who had voted for the bill wrote to the Governor to urge the signing of the 2008 Amendments into law because it would “better balance the relationship between franchised motor vehicle dealers and their franchisors,” and would “ensure fair dealings between the parties to the franchise agreement.” (GM’s Compendium at 393, Letter from Senator Johnson.) The 2008 Amendments were intended to “address inadequacies revealed in recent court decisions, and clarify ambiguities in the existing law, providing greater fairness in the franchise relationships.” (Id. at 396, Letter from Assemblyman Alessu.) The 2008 Amendments were enacted “in the best interest of New York State to protect our automotive dealers from an inequitable relationship with large, multi-national manufacturers.” (Id. at 397, Letter from Assemblywoman Sayward.) The Senate Introducer’s Memorandum in Support states in no uncertain terms as follows: “These amendments are designed . . . to ensure a level playing field and fair and open transactions, competition, and service to the public.” (Id. at 399.) The changes were made not just for purposes of clarifying the Dealer Act, but rather because “changes in the auto industry as a whole require updates to the law. New precedents in the auto industry occur all the time and the laws need to reflect these changes.” (Id.) (hence, the laundry-list of subsections added to § 463(2), ending with (gg) (GM’s Compendium at 444-446). 6 Thus, contrary to GM’s assertion that “dealer protection cannot explain . . . the 2008 Amendments” (GM Br. at 29), the legislative history that GM submitted to this Court shows that the 2008 Amendments were passed precisely because the Legislature wanted to protect dealers from new and unique abuses that manufacturers had employed since the New York Dealer Act had originally been enacted. Indeed, an examination of the text of the 2008 Amendments demonstrates that the Legislature enacted the most comprehensive set of remedial rules to the New York Dealer Act since the Act’s inception, adding prohibitions and requirements on manufacturers to curb specific patterns of oppressive conduct that had emerged since the New York Dealer Act was originally enacted and strengthening numerous protections for dealers as set forth in the original statutory scheme. In addition to adding subdivison (gg) at issue here, prohibiting unfair, unreasonable or arbitrary sales performance standards, the 2008 Amendments also added the following language to subdivision (e)(2), which lays out procedures for a dealer to challenge an attempted termination of its franchise: “The franchisor shall also have the burden of proving that all portions of its current and proposed sales and service requirements for the protesting franchised new motor vehicle dealer are reasonable.” GM’s Compendium at 438 (§ 463(2)(e)(2)). In other words, the 7 Legislature was laser-focused on sales requirements and sales performance standards as areas requiring remedial legislation, shifting the burden of proof onto the manufacturer in a termination proceeding and allowing dealers to challenge those standards independently of any adverse action by a manufacturer. In addition, the 2008 Amendments added captive finance sources under the control of manufacturers as manufacturers’ agents who also could not coerce dealers, (id. at 436 (§ 462(1)(16)), 442 (§ 463(2)(u))), legislatively abrogating cases like Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc., 192 A.D.2d 1066, 1067, 596 N.Y.S.2d 230 (1993) (captive finance company not liable under Dealer Act because finance company has no dealer agreement with dealer) and Lazar Auto Sales, Inc. v. Chrysler Fin. Corp., No. 99 Civ. 0213, 1999 WL 123501, at *8 (S.D.N.Y. Mar. 2, 1999) (same), which upheld loopholes exploited by manufacturers. The 2008 Amendments also expanded the definition of dealer “termination” to include the non-renewal of the dealer agreement in addition to affirmative cancellation, id. at 436 (§ 462(1)(17)), closing another loophole that manufacturers were trying to take advantage of. The 2008 Amendments further prevented manufacturers from charging for mandatory training programs, id. (§ 463(1)(d)), which had become another oppressive tactic of manufacturers. The 2008 Amendments added the highly important lead-in phrase for subsection (2) of § 463, “notwithstanding the terms of any franchise contract,” to prevent 8 manufacturers (like GM has done here) from utilizing its superior bargaining power to economically coerce dealers to sign away their statutory rights. (Id. (§ 463(2)).) It prevented manufacturers from using mergers or corporate restructuring to eliminate existing franchise agreements. (Id. at 437 (§ 463(2)(d)(2)).) In addition, the 2008 Amendments added an automatic stay provision to termination proceedings so that dealers could not be closed by the manufacturer while the termination was being legally challenged by the dealer. (Id. at 438 (§ 463(2)(e)(1)).) The 2008 Amendments shifted the burden to the manufacturer of proving due cause and good faith in any termination proceeding. (Id. (§ 463(2)(e)(2)).) They prevented manufacturers from opening new or relocating existing dealers into the relevant market area of another dealer without notice, and empowered the dealer to legally challenge that decision. (Id. at 444 (§ 463(2)(cc)).) They prevented manufacturers from unreasonably refusing a request by a dealer to relocate. (Id. at 445 (§ 463(2)(dd)).) And after all of this, the 2008 Amendments finally added subsections (ff) and (gg), prohibiting manufacturers from engaging in unfair franchise modifications and utilizing unreasonable, arbitrary or unfair performance standards, respectively. Thus, contrary to GM’s position, the 2008 Amendments were in fact “protectionist franchise regulations that place a thumb 9 on the scale in favor of dealers.” (GM Br. at 31.) The 2008 Amendments at issue in this appeal should be construed accordingly. The legislative history and the vast scope of the 2008 Amendments demonstrate that the Legislature rightfully perceived there to be continuing abuses by motor vehicle manufacturers against dealers, and the Legislature sought to correct those abuses. Accordingly, there can be no reasonable dispute that the Dealer Act (including the 2008 Amendments) is remedial in nature and should be construed broadly, not narrowly. See Audi of Smithtown, Inc. v. Volkswagen Grp. of Am. Inc., 32 Misc. 3d 409, 418-19, 924 N.Y.S.2d 773, 780 (Sup. Ct. 2011), aff’d sub nom., 100 A.D.3d 669, 954 N.Y.S.2d 106 (2d Dep’t 2012) (analyzing subsection of Dealer Act § 463(2) added by 2008 Amendments and noting that “[t]he Legislature made it clear that this was a remedial statute, enacted to improve the marketplace by attempting to equalize the disparate economic positions of automobile manufacturer and automobile dealer.”). By statute, remedial statutes are construed broadly under New York law. N.Y. Stat. Law § 321 (McKinney’s) (“Generally, remedial statutes are liberally construed to carry out the reforms intended and to promote justice.”). GM’s attempts to spin the 2008 Amendments as only an unnecessary, ministerial act to increase transparency and communication is not supported by the clear legislative history of the 2008 Amendments. This Court should read 10 subsections (ff) and (gg) of § 463(2) in the broad, remedial fashion that the Legislature intended when it enacted the 2008 Amendments. POINT II GM OFFERS NO LEGITIMATE REASON FOR CHANGING THE FIRST CERTIFIED QUESTION GM asks that the language “in order for the automobile dealer to retain its dealership” be removed from the first certified question because, while GM admits that it has the right to terminate dealers who fail to meet 100 RSI, it contends that it exercises its own discretion and “generally reserves” termination for dealers “at the very low end of the [ratings] spectrum.” (GM Br. at 35.) In essence, GM is asking this Court to allow it to continue to pick and choose when it will arbitrarily drop the proverbial anvil on its dealers who have an RSI score below 100—half of its dealer population as a matter of mathematical necessity. But as Beck has shown this Court, GM should not be trusted with such substantial and arbitrary power. Indeed, the New York DMV has found that GM used this power against Beck arbitrarily, in violation of § 463(2)(gg), in this very instance. (A1883-1891.) Whether GM is permitted to terminate a dealer (or take other adverse action against it) due to its failure to achieve an RSI score of 100 is a fundamental part of the controversy in this appeal. Indeed, this action was commenced by Beck because in April 2011 GM sent Beck a letter stating that if Beck failed to meet its 2011 RSI “performance requirements,” GM would have no obligation to extend 11 Beck’s Dealer Agreement beyond April 30, 2012. (A229.) That is, Beck commenced this action because, inter alia, GM threatened to non-renew (i.e., a “termination,” as defined by the Dealer Act) Beck’s franchise if Beck failed achieve its “‘2011 RSI . . . performance requirements.’” Id. (emphasis added).2 Beck did not commence this action to have the trial court determine an abstract question, but rather because Beck believed (correctly) that GM was going to try to use RSI to terminate its franchise. In fact, GM tried to do that in this very case: GM entered into the Participation Agreement based on Beck’s promise to significantly improve its sales effectiveness as measured using adjusted state average RSI. Because Beck utterly disavowed that commitment, GM asserted a counterclaim to rescind the Participation Agreement and return the parties to their rights and obligations under the Wind Down Agreement. GM Second Circuit Brief at 59 (A1779); see also id. at (A9) (“GM’s willingness to rescind the Wind Down Agreement and enter into the Participation Agreement was specifically conditioned on Beck’s agreement to achieve an RSI score of 70 in 2010, 85 in 2011, and 100 by 2012, providing Beck with three years to meet the minimum requirement of 100 RSI under the Dealer Agreement.”) (emphasis added). Accordingly, the first certified question as the Second Circuit articulated it— 2 Beck had previously rejected GM’s attempt to coerce Beck to agree to this as part of an extension of time to renovate its facility. 12 ”Is a performance standard that requires ‘average’ performance based on statewide sales data in order for a dealer to retain its dealership . . .”—more accurately sets forth the legal issue raised by the facts of this case than GM’s requested alternative language: Is a performance standard that uses requires “average” performance based on statewide sales data in order to determine for an automobile dealer to retain its dealership compliance with a franchise agreement “unreasonable, arbitrary, or unfair” under New York Vehicle & Traffic Law section 463(2)(gg) because it does not account for local variations beyond adjusting for the local popularity of general vehicle types? GM’s Br. at 36 (underlined text showing GM’s suggested additional/alternative language; strike-through text added to show language from Second Circuit’s certified question that GM wishes to delete). N.Y. Veh. & Traf. Law § 463(2)(gg) would be meaningless if it affected only the manufacturer’s measuring of a sales metric and not the consequences that flow from that measure. Under GM’s reading of the statute, all that matters is that the manufacturer clearly articulate its sales performance standard to its dealers in writing in advance.3 But a sales metric like GM’s, which necessarily renders half of its entire New York dealer population and over 80% of its downstate New York 3 GM Br. at 34 (“the statute was designed to safeguard dealers from conduct that transcends the bounds of commercial standards, with the primary focus on whether the standard was clearly communicated and capable of being understood.”) (without citation to any authority whatsoever). 13 dealers in breach of their dealer agreements due to market conditions outside of their control, is clearly “unreasonable, arbitrary, or unfair,” in violation of Dealer Act § 463(2)(gg). And while a manufacturer like GM could utilize a unreasonable, arbitrary or unfair sales standard to coerce one of its dealers into doing something that it would not otherwise do (for instance, renovate its facilities at a cost of millions of dollars or, if it refused, face termination or non-renewal based on its below average RSI score) rather than seek termination, here, GM utilized its unreasonable, arbitrary or unfair sales standard to terminate Beck. Beck’s termination was based solely on Beck’s RSI score and was only stopped by the New York DMV, which held that GM’s RSI measure was not only unreasonable, but also arbitrarily applied. (See A1883-1891.) It is undisputed that Beck had met or exceeded its contractual expectations on every other material metric that GM measures. (See A1890.) It is also undisputed that dealers with lower RSI scores than Beck had not been issued termination notices from GM. (See A1886.) While this demonstrates that GM does not terminate all of its dealers with subpar RSI scores, it also demonstrates that GM acts arbitrarily against those dealers that it does not like for whatever reason. This type of capricious decision-making is precisely what the Legislature sought to prevent in passing N.Y. Veh. & Traf. Law § 463(2)(gg). 14 Therefore, there is no reason to reframe the first certified question on appeal.4 It is fundamental that a court’s holding is limited by and to the facts of the case before it. See McElroy v. United States, 455 U.S. 642, 656 n.19, 102 S. Ct. 1332, 71 L. Ed. 2d 522 (1982) (“The implications of this case are limited by the facts . . . .”); see also Wildenstein & Co. v. Wallis, 79 N.Y.2d 641, 645, 595 N.E.2d 828 (1992) (New York Court of Appeals declining to answer pure questions of law divorced from the facts of the case and only providing case-specific answers – “The first two questions are not academic abstractions and must be construed in the context of the real case in controversy in order to provide meaningful and appropriate answers.”). The first certified question raised by the facts of this case is whether GM can use its RSI sales performance standard, which is based on an average of statewide sales data only adjusted by segment, to evaluate Beck’s sales performance and, ultimately, non-renew or terminate Beck’s dealership. It is the gravity of this 4 GM’s cases are inapposite. See Yesil v. Reno, 92 N.Y.2d 455, 705 N.E.2d 655 (1998) (declining certified questions; here, they have already been accepted); Application of Corp. Counsel of City of New York, Vernon Parkway & Garden Place, 285 N.Y. 326, 34 N.E.2d 341 (1941) (same); Barenboim v. Starbucks Corp., 21 N.Y.3d 460, 469, 995 N.E.2d 153 (2013) (reframing lengthy, four sub-part certified question into one question at request of non-party state agency); Engel v. CBS, Inc., 93 N.Y.2d 195, 199, 711 N.E.2d 626 (1999) (though stating what the Court understood the certified question to mean, it did not reframe the question); Commodity Futures Trading Comm’n v. Walsh, 17 N.Y.3d 162, 178, 951 N.E.2d 369 (2011) (drawing a two-vote dissent due to reformulation of the original question that was “narrowly tailored” and “relatively simple to answer”). 15 question—the termination of Beck’s franchise—which triggers the fundamental concerns of New York’s Franchised Motor Vehicle Dealer Act and, as a result, has caused the Second Circuit to certify the question to this Court. This case is not an abstraction but is about Beck Chevrolet and, throughout this case, GM has stated its desire to use Beck’s RSI score to terminate Beck’s franchise (whether by non- renewal, rescission or, ultimately, a formal notice of termination). GM’s proposed modification to the certified question misses the point and muddles the issue, presumably because the precise issue, as properly articulated by the Second Circuit, makes the answer self-evident. Of course an automobile manufacturer’s sales performance standard that necessarily renders half of its dealers in violation of their franchise agreements (and subject to adverse action up to and including termination) is patently “unreasonable, arbitrary, or unfair.” N.Y. Veh. & Traf. Law § 463(2)(gg). Because the answer is so clear when properly asked, GM has apparently felt compelled to try to change the question. This Court should decline GM’s invitation. Lastly, it is worthwhile to refocus attention on the core of the Second Circuit’s certified question. The focus of the Second Circuit’s inquiry is the undisputed fact that RSI does not take into account any local market conditions or consumer preferences beyond segment popularity: “Is a performance standard that requires ‘average’ performance based on statewide sales data . . . ‘unreasonable, 16 arbitrary, or unfair’ under sectionN.Y. Veh. & Traf. Law § 463(2)(gg) because it does not account for local variations beyond adjusting for the local popularity of general vehicle types?” Beck’s operations are what they are and its sales are what they are. Beck’s operations—whether good, bad or indifferent—do not make GM’s failure to consider other relevant market conditions and consumer preferences (a fact established within the certified question) any more or less fair, reasonable or arbitrary. Nevertheless, GM expends much effort rearguing factual issues that do not go to the core of the Second Circuit’s question (i.e., refusing to take into account most local conditions), but instead focuses on Beck’s alleged operational shortfalls. See e.g. GM Brief at 17-19, 22. However, the district court had excluded evidence on Beck’s operations (A877-A912). But, when the issue of Beck’s operations was actually litigated in the DMV proceeding, the ALJ held definitively that Beck’s operations are excellent and that GM offered no other ground to terminate other than supposed sales performance. (A1889-A1890).5 GM’s efforts are nothing more than a distraction from the actual question asked by the Second Circuit, which is focused on the lack of consideration of most local conditions under GM’s 5 Although the district court excluded direct evidence and testimony on Beck’s operations, it did allow GM to present testimony concerning so-called “other indicia of reasonableness.” All of these issues were also raised by GM in the DMV proceeding and discounted by the ALJ. A short response to these issues may be found in Beck’s Second Circuit reply brief at pages 29-31(A1815-A1817). 17 RSI standard. And here, where local market conditions and consumer preferences differ so dramatically from the state-wide benchmark territory, the failure to adjust for them is unfair, unreasonably and arbitrary, in violation of N.Y. Veh. & Traf. Law § 463(2)(gg). POINT III THAT THE MANUFACTURING HALF OF THE INDUSTRY USES A STANDARD THAT GIVES THEM COERCIVE POWER DOES NOT MEAN THE STANDARD IS REASONABLE GM touts that “every motor vehicle manufacturer” uses RSI to measure dealer performance. That may be true, but that does not mean that the standard is reasonable. The entire point of the New York Dealer Act is to protect dealers as a class from abuses committed by manufacturers as a class. Just because all manufacturers use a standard that gives them enormous power over approximately half of their dealers by mathematical necessity does not make that standard fair or reasonable. Cf. Blue Cross & Blue Shield of NJ, Inc. v. Philip Morris USA Inc., 3 N.Y.3d 200, 818 N.E.2d 1140 (2004) (lawsuit regarding industry-wide practice to mislead the public regarding cigarette smoking); Hinds Cnty, Miss. v. Wachovia Bank N.A., 700 F. Supp. 2d 378 (S.D.N.Y. 2010) (lawsuit regarding industry-wide conspiracy to fix prices for municipal derivatives). The New York Dealer Act is brimming with provisions that override former common business practices used by manufacturers. 18 Manufacturers have used state or regional market share, adjusted only for segment popularity, for decades to evaluate dealer sales performance. Cars, and the way they are designed, made, and sold, have evolved dramatically over the decades. Cars today are better constructed, more reliable, more efficient and bristle with modern technology. Cars today are designed on computers and manufactured by robots to exacting specifications. Their navigation systems will guide you around traffic jams and their sensors and systems will help stop the car safely in an accident and then call the police for you. Cars are now even beginning to drive themselves. Marketing today is high-tech, with manufacturers being able to target customers over the Internet using the vast amounts of consumer data available. Yet GM would have this Court believe that there is no finer tool available today to evaluate dealer sales performance than the tired, old state or regional segment-adjusted market share metric in use for decades, and that it would somehow be burdensome to implement more accurate and fair methodologies. GM would have this Court believe that adjusting for segment popularity alone is sufficient and no other local consumer preferences or market conditions should be considered. In short, GM is asking this Court to ignore what our eyes and ears and common sense tell us: that in some markets, imports are more popular than domestics; that consumers in different areas of a state may respond differently to 19 the same model; that an upstate Chevrolet dealer not having any nearby competition from Honda, Toyota or Hyundai has a distinct advantage over a downstate Chevrolet dealer with such competition in close proximity; that in some markets leasing is more popular than in others and the availability to competitive factory lease programs affects sales; etc. GM cites to several decisions in which a court or administrative tribunal found that regional or state segment-adjusted market share was a reasonable benchmark to evaluate sales performance. However, it is entirely unremarkable that in some specific cases, some courts and tribunals have accepted state or regional average market share as a reasonable benchmark because the dealer being accused of underperformance was, in fact, underperforming in nearly every metric. The devil, as they say, is in the details. GM would have this Court believe that these decisions stand for the proposition that state or regional average benchmarks should be blindly accepted with little further analysis. That is simply not the case, and is belied by the authority cited to by Beck and ignores the fact that the New York Legislature specifically targeted the manufacturers’ use of those benchmarks as an area requiring intervention through remedial legislation. In fact, in each of the cases cited to by GM, the results under state or regional market share benchmarks were compared to more localized benchmarks. In all of these cases, the results under the 20 localized benchmarks were consistent with the results under the larger state or regional benchmarks. Here, the opposite is true—there is dramatic disparity between Beck’s much higher RSI scores under every localized benchmark compared to state average. GM offers no plausible explanation why Beck’s RSI score should be impacted by how Chevrolet performs hundreds of miles away in Buffalo but not by how Chevrolet performs a few miles away across the Hudson River in New Jersey.GM itself does not organize itself by state but by Zones and Districts which are geographically localized. Accordingly, the cases cited to by GM in its brief are all distinguishable and, in most instances, actually support Beck’s position. GM cites to Coady Corp. v. Toyota Motor Distributors, Inc., 361 F.3d 50 (1st Cir. 2004). But Coady dealt primarily with an attack on Toyota’s allocation system. It’s from Coady that the district court here got the “only the egregious decision” proposition: [C]hapter 93B (as we read it) does not demand perfection in allocation or warrant a substitution of judicial for business judgment. A distributor acting honestly is entitled to latitude in making commercial judgments; and chapter 93B was not meant to insulate dealers from the ordinary flux of pressure and striving that is part of a free economy. In this context, it is only the egregious decision that should be labeled “arbitrary” or “unfair. 361 F.3d at 56. However, the First Circuit was not pleased with the manufacturer: Toyota ought to reflect that it has enjoyed a measure of good fortune in escaping unscathed in this lawsuit. Its allocation practices vis à vis Coady were no model of 21 perfection and a factfinder who condemned them might well have been upheld. Further, Toyota has virtually admitted to other violations of chapter 93B (tying, short notice) even if neither damages nor a need for any injunction were proved as to these actions. Coady, 361 F.3d at 61. Moreover, after affirming the allocation claim, the First Circuit went on to discuss the dealer’s claim related to Toyota’s sales performance standard: The most serious renewal claim involves Toyota’s apparent continued insistence on the provision requiring 100 percent sales efficiency. Admittedly, it has not enforced this provision by termination or refusal to renew; and, as the district court found and Coady does not dispute, this negates any obvious damages. But this does not explain why, if the provision is improper, Coady does not deserve an injunction…. Even if the provision were not enforced, its presence could hamper Coady’s operations and impair its ability to borrow… Yet the threshold question remains whether the 100 percent sales efficiency provision is improper…. Id. (emphasis added). GM also relies upon Hartley Buick GMC Truck, Inc. v. American Honda Motor Co., Inc., No. FMD 2010-05 (N.Y.D.M.V. Nov. 7, 2011), aff’d, No. 28447 (Admin. Appeals Bd. Feb. 28, 2012). Hartley is a New York administrative decision and involves a western New York Honda dealer asserting the existence of a domestic brand bias in his market (the converse of Beck’s argument here). Unfortunately, the ALJ’s Findings were wholly conclusory (and hardly laudatory) on the question of Honda’s use of state average as a sales performance standard: 22 Although not a perfect system, I find sales effectiveness standards similar to the RSE to be utilized by most manufacturers, including America Honda’s principal competitors’ Toyota and Nissan. Findings at ¶ 30 (GM’s Compendium at 140). Luckily, the Decision on Appeal provides the necessary details lacking in the ALJ’s Findings. Again, the devil is in the details. Notably, Hartley was “the worst performing dealer in the State.” Decision on Appeal at 2 (GM Compendium at 123). Moreover, “[t]he average Honda dealership has six to seven trained salespeople. [Hartley] had only one. Id. at 3. Hartley consistently failed to send any representatives to training meetings. Id. Thus, Hartley had serious operational issues. Critically, however, Honda’s own expert (Farhat, GM’s expert here), did not rely solely on state average but instead “ran models for the zone; New York State; New York State excluding New York City, Long Island and Westchester; removing all domestic lines from analyses, and using a reduced ASA size advocated by Hartley.” Id. at 6. And, after all of that analysis, “[i]n every case, [Hartley] was the worst performer.” Id. (emphasis added). In other words, in Hartley, Farhat ran the very same alternate more localized benchmarks that Beck’s expert Roesner did in this case. In Hartley, Farhat relied on those alternate more localized benchmarks because they supported Honda’s case. Here, on the other hand, when those very same alternate, more localized, benchmarks supported 23 Beck’s case, Farhat conveniently rejected them. GM cites to Brown Motor Sales Co. v. Hyundai Motor America, No. 10AP– 725, 2011 WL 4541304 (Ohio. App. Ct. Sep. 30, 2011), which upheld Hyundai’s use of national average. The dealer asserted that a “domestic bias” explained his poor performance, but Hyundai was able to rebut this by pointing to several nearby Hyundai dealers, all operating under the same market conditions, that were able to meet national average. Critically, “[t]he hearing examiner found that [the dealer’s] own expert could not explain why Taylor Hyundai performs as well as it does in the Toledo market if the domestic manufacturing bias is as significant a factor as alleged . . . .” Id. at, *10 (internal quotation omitted; emphasis added). Here, it is undisputed that no nearby GM dealer came close to 100 RSI. Nineteen out of twenty-three downstate dealers came nowhere near 100 RSI. Of the four that do, three are located in eastern Suffolk County (the least metro-like part of downstate New York). GM also cites to RCJD Motors, Inc. v. Chrysler Group, LLC, No. 608-10- 5694 OIC (Tex. Office of Admin. Hr’gs Apr. 2, 2012). In RCJD, an administrative tribunal accepted Texas state average as one basis to conclude that the Dallas market was underperforming enough to allow the addition of a new Chrysler-Jeep- Dodge point in the market. Chrysler’s own expert, also from Urban Science, did not rely solely on state average, but also evaluated the Dallas market against the 24 other metro markets in Texas.6 Thus, RCJD only proves Beck’s point: GM cannot simply rely on the contractual state average benchmark alone, but must demonstrate the validity of that benchmark by comparing it against other localized benchmarks to establish that state average adequately factors in local market conditions. This GM failed to do. Moreover, although RCJD was focused on the sales performance in Dallas as a whole, GM overlooks that the tribunal also looked at the performance of the individual protesting dealer and found that the protesting dealer did not breach its franchise agreement by failing to attain state average market share. See id. at, *29-32. Also misplaced is GM’s reliance on Graff Chevrolet Co. v. Texas Motor Vehicle Bd., 60 S.W.3d 154 (Tex. App. 2001). In Graff, the court did not simply rely on Texas state average, but rather was “provided data outlining Chevrolet’s penetration rate in Texas, the greater Fort Worth area, the Fort Worth MDA and AGSSA I. This data showed that Chevrolet’s penetration in AGSSA I was significantly below state and area average.” Id. at 157. In other words, in Graff, GM established underperformance by comparing the dealer against four separate benchmarks—only one of which was state average, and the others were more localized geographies. In Zimbrick, Inc. v. American Honda Motor Co., Inc., No. TR-08-007 (Wis. 6 This Texas Metro benchmark is the very same benchmark that was adopted in Landmark, which is discussed by Beck in its opening brief at pp. 32-34. 25 Div. of Hearings & Appeals May 25, 2010), an add point case, the protesting dealer dramatically exceeded state average market share. Thus, the protesting dealer’s sales performance was not even an issue in that case. GM mischaracterizes the 2001 Ohio Court of Appeals decision in Halleen Chevrolet Inc. v. Gen. Motors Corp., No. 00AP-1454, 2001 WL 722101 (Ohio Ct. App. June 28, 2001), an add point case, as “citing state average standard as reliable.” GM Br. at 57. But this was not in dispute. The reference to state average was to the Chevrolet brand’s penetration performance in the Relevant Market Area, i.e., the Chevrolet brand’s registration effectiveness. Those numbers were undisputed. Even the dealer’s expert “testified that the actual Chevrolet registrations for the RMA fell below expected penetration levels.” Halleen, 2001 WL at, *9. On the other hand, the subsequent 2006 case involving Halleen and GM did involve use of state average to evaluate a dealer’s sales performance. See Halleen Chevrolet Inc. v. GMC, No. 03-050MVDB-277-59 (Ohio Mot. Veh. Dealer Bd. July 21, 2006, aff’d, No. 06CVF-11739 (Ohio Ct. Com. Pleas Sep. 20, 2008). The 2006 Halleen case is discussed in more detail in Beck’s opening brief at pages 34- 35. Suffice it to say, the 2006 Halleen case found that state average “creates a statistical flaw,” and called segment-adjusted state average “inappropriate.” In Superior Pontiac Buick GMC, Inc. v. Nissan N. Am, Inc., No. 08-10642, 26 2012 WL 1079719 (E.D. Mich. Mar. 30, 2012), Nissan sought to terminate one of its Michigan dealers, that was also a dealer of GM line-makes. Like the other cases cited by GM, Superior has some rather remarkable facts. For example, Superior’s sales effectiveness scores were in the teens, and were declining even though Nissan market share was increasing in its district and in the Detroit Metro. Id. at, *6-7. The dealers own expert “did not compare Superior’s performance to any other dealer.” Id. at, *11. Moreover, Superior had decreased its new car advertising spending in favor of used car advertising and favored its GM brands over Nissan in its marketing. Id. at, *18. Superior also overpriced its vehicles. Id. Nissan’s expert was Farhat, the same expert GM used in this case. But, contrary to Farhat’s testimony here, the Superior court acknowledged that customers could have biases for or against import makes. Id. at, *12. (“In contrast, Oakland County is the most import friendly among the three counties because of its population of higher educated people with higher incomes”). Id. at, *9. Also, unlike here, in Superior Farhat compared Superior to localized metro and district averages. Id. at, *6-7. In re Ralph Gentile, Inc. v. Nissan North Am., Inc., No. TR-07-0001 (Wis. Div. of Hearings and Appeals Feb. 4, 2010), aff’d sub. nom, Ralph Gentile, Inc v. State Div. Hearings and Appeals, No. 10-cv-1050 (Wis. Cir. Ct. Racine Co. Sep. 27 13, 2010, aff’d, 334 Wis. 2d 712, 800 N.W. 2d 555 (2011), a Wisconsin administrative decision permitted the termination of a Nissan dealership. Notably, the agency had rejected Nissan’s use of regional average because, among other deficiencies, “there are too many variables such as market conditions.” Final Decision at 13 (GM’s Compendium at 154). Instead, the agency adopted a benchmark comprised of “other Wisconsin single point Nissan dealers.” Id. Moreover, as detailed in the Final Decision, Gentile Nissan had major operational deficits. The dealership has low advertising spending, no dedicated executive manager, and it shared a sales staff with Gentile Hyundai but provided better incentives for those salespeople to sell Hyundais. Id. at 10-11. Not surprisingly, the agency had found that “Gentile is the lowest performing dealer in terms of sales performance.” Id. at 13. Infiniti Automobiles of Norwood, Inc. v. Nissan North Am., Inc., Findings of Fact, Rulings of Law and Order No. 2004-00010 at 27-28 (Mass. Sup. Ct. Aug. 4, 2005), was an add-point case focused not on individual dealer performance, but the Infiniti brand’s performance in the market and whether Infiniti had too few dealers as compared to other competitive brands. The court simply found that based on available data that a location at the outer limit of the statutory definition of relevant area was underrepresented prior to appointment of new dealer. In Hampton Automotive Grp. v. Nissan North Am., Inc., Recommended 28 Order Case No. 11-1157 at 9-11, ¶¶ 34-37, 40 (Fla. Div. Adm. Hr’gs Sep. 12, 2012), a dealer was properly terminated on a rather remarkable set of facts. Incredibly, the dealer “intentionally put his dealership on finance hold so it could not order any more vehicles.” Recommended Order at 12 (GM’s Compendium at 77). In addition, “[b]y October 2008, the dealership had no executive manager, general manager, sales manager or finance and inventory manager.” Id. at 14. The dealership’s own manager testified at the hearing: “He stated that the dealership was disorganized, there was no accountability, they were not following procedures, they lacked training, they lacked leadership, there were no checks and balances . . . . He admitted that the dealership was performing poorly in all areas – sales, service, parts, and finance and insurance (F&I).” Id. at 21. Gen. Motors Corp. v. Fountain Oldsmobile-GMC Truck, No. 03-1319, Recommended Order at 15-17 (Fla. Div. Admin. Hr’gs May 27, 2004), had nothing to do with individual dealer sales performance. Rather, it was an add- point case in which the agency held “that Buick, Pontiac, and GMC do not have a sufficient number of dealers in the Orlando community/territory to be able to adequately compete for all the opportunity available in the market.” Recommended Order at 20-21 (GM’s Compendium at 31-32). Moreover, GM apparently overlooks that Fountain Oldsmobile actually supports Beck’s position here. In Fountain Oldsmobile, GM argued, and the 29 agency agreed, that “[t]here is a strong statistical correlation between share of franchises and a brand’s performance in the market. In Florida, Buick, Pontiac, and GMC’s share of franchises is below their national average share of franchises.” Id. at 12. In other words, a brand tends to do better where it has more dealerships compared to the competition. Here, it is undisputed that Chevrolet’s share of franchises is much higher upstate than it is down state. See Beck Brief at 13-14. And it is undisputed that upstate dealers dominate the New York state benchmark with the great majority of Chevrolet dealers located in upstate New York and the great majority of Chevrolet sales occurring in upstate New York. In other words, applying a New York State benchmark to downstate dealers is fundamentally unfair because it is skewed towards upstate markets where Chevrolet has a decided advantage due to its outsized dealer network. Michael Cadillac, Inc. v. Volkswagen of Am., Inc., No. PR-1819-02, at 12-13 (Cal. New Motor Veh. Bd. Jun. 17, 2003), an add-point case, did not simply rely on a single benchmark, but several covering areas both large and more localized. And under every benchmark, the Volkswagen brand was underperforming, pointing strongly to the need for an additional dealership in the market: “In fact, every comparison made by the expert, comprising over one hundred penetration models, shows Volkswagen’s penetration rate in the Fresno market to be lower than the measuring standard.” Proposed Decision (A215). 30 Moreover, just recently in Nissan North America, Inc. v. California New Motor Vehicle Board, Case. No. 34-2014-8001963 (Cal. Sup. Ct., Sacramento County Sep. 4, 2015),7 the court affirmed an administrative decision of the New Motor Vehicle Board preventing the termination of a Nissan franchise primarily on the ground that Nissan’s use of regional segment-adjusted market share as a benchmark was unreasonable: The ALJ found (and the Board agreed) that RSE is not reasonable, at least as applied to the facts of this case. (See Facts 99-109 [facts relating to Nissan’s expansion of SCN’s primary market area shortly after serving notice of default to include Watsonville, including ultimate findings that this expansion (1) “was not an exercise of the ‘reasonable discretion’ contemplated by Sections 1.N. and 3.A. of the Dealer Agreement,” (2) “negatively affected SCN’s ‘sales performance’ score and ranking,” and (3) rendered the RSE calculations “not reliable.”); Fact 120C [size of primary market area affects dealer’s sale’s effectiveness ratings]; Facts 114- 115 [prior to August 2013, Nissan used regions that were “too large” to serve as appropriate benchmarks and that could lead to “inaccurate or misleading” results]; Fact 135 [sales criteria like RSE which are based on “averages” can be “misleading” because at any given time, about half of all dealers will be above average and about half will be below. “If underperforming dealers do become more successful, this will raise the average line, but there will still always be the roughly 50%-50% split of numbers above and below the average line. So even successful dealers could (inappropriately) be characterized as ‘underperformers’ if they fall below the average line.” “When Nissan requires an ‘underperforming’ dealer to ‘achieve 100% RSE’, and 7 A copy of the ruling is annexed hereto in the addendum. 31 the dealer does so, all that happens is that another dealer will fall below the average line (and the rankings will change). By using ‘averages’, there will always be around 50% ‘underperforming’ dealers. Nissan’s use of ‘100% RSE’ as a performance goal . . . is not reasonable.”].) Id. at 18. Notably, in contrast to what GM tried to do to Beck, the California court recognized that, “historically the Board has not terminated dealers for poor sales alone, not because of a policy prohibiting such terminations, but because (1) the manufacturers have not tried to do so and (2) poor sales are usually coupled with other factors.” Id. at 9 (emphasis added). And that is all that most of the cases that GM cites to really stand for. None of GM’s cases simply adopted state or regional segment adjusted market share and declared that sales standard to be reasonable. Rather, GM’s cases make it clear that the performance results under the manufacturer’s preferred metric had to: (a) be corroborated with similar results under more localized benchmarks, with (b) clear evidence that the dealer had serious operational deficiencies. Indeed, the ALJ in Beck’s DMV proceeding recognized the same dynamic in holding that the cases cited to by GM were inapposite: “The cases cited by GM to support its statewide standard of determining RSI show dealers who are performing very poorly on many levels of comparison including sales.” (A1887). GM’s other cases regarding reasonableness and ordinary business judgment 32 are similarly distinguishable. See Gen. Motors Corp. v. Darling’s, 444 F.3d 98, 109 (1st Cir. 2006) (stands for unremarkable proposition that where statute is silent, the contract controls, and found that statute actually favored dealer); Petereit v. S.B. Thomas, Inc., 63 F.3d 1169, 1183 (2d Cir. 1995) (in discussing whether distributor’s actions effected constructive termination, court merely ruled out “every minor alteration” that resulted in “reduction of income” as “not the will of the Connecticut legislature;” court actually remanded to elicit further proof as to whether franchisees were constructively terminated); Grand Light & Supply Co. v. Honeywell, Inc., 771 F.2d 672, 677 (2d Cir. 1985) (refusing to apply franchise law because plaintiff not franchisee, since it only made 3% of its business from defendant’s products; therefore inapposite); Love Pontiac, Cadillac, Buick, GMC Truck, Inc. v. Gen. Motors Corp., No. 97-2490, 1999 WL 125562 at *3, 173 F.3d 851 (4th Cir. Mar. 10, 1999) (affirming based solely on contract interpretation; no statute like § 463(2)(cc) at issue, and only had to interpret whether GM acted arbitrarily, in bad faith, or unconscionably; did not interpret “unfair” or “unreasonable” statutory requirements); Milos v. Ford Motor Co., 317 F.2d 712, 717-719 (3d Cir. 1963) (old case interpreting meaning of “good faith” under ancient federal Automobile Dealer’s Day in Court Act, which also requires acts of “coercion” or “intimidation”); Burgin Motor Co.,v. Am. Motors Sales Corp., 449 F. Supp. 842, 851 (D. S.C. 1978) (same); Sabe Staino Motors, Inc. v. 33 Volkswagen of Am., Inc., No. Civ. A. 99-5034, 2005 WL 1041196 at, *12 (E.D. Pa. Apr. 29, 2005) (unremarkably finding that, under unique circumstances of case, refusing to transfer dealership to dealer with consistently poor ratings was not unreasonable); Mobil Oil Corp. v. Karbowski, 667 F. Supp. 927, 936 n. 14 (D. Conn. 1987) (in unnecessary dicta, court states that completely different federal statute regarding petroleum franchises requires assessment of business judgment; most of decision focuses on whether federal statute preempts much more protective state petroleum franchise statute); The Premier Collection, LLC v. Jaguar Land Rover N. Am., LLC, No. 14-8329 (S.D.N.Y. Jun. 29, 2015) (oral bench decision denying motion for preliminary injunction, merely finding that plaintiff dealer did not meet burden; not finally determining anything on merits). In sum, none of GM’s cases survive scrutiny, nor does GM adequately explain the numerous cases that Beck cited in its opening brief demonstrating that statewide market share is an inappropriate standard to apply to metro-area dealers. Thus, the first certified question should be answered in the affirmative. POINT IV GM’S “REVISION” TO BECK’S MARKET AREA IS A “MODIFICATION” UNDER 463(2)(FF) Contrary to GM’s statement that the Legislature did not mean “to curb some perceived abuse accompanying the long-standing practice of leaving market area revisions to the discretion of the manufacturer” (GM Br. at 64), the Legislature did, 34 in fact, have market area on its mind when it passed the 2008 Amendments. Members of the Legislators who passed the bill wrote to the Governor to express their support of balancing the unfair power dynamic between dealers and manufacturers. (See Point I, supra.) And as part of righting that imbalance, in § 463(2)(cc), the Legislature prohibited manufacturers from adding new or relocating existing dealers into another dealer’s pre-existing territory without notice and without the ability of that pre-existing dealer to protest the add point. (GM’s Compendium at 444.) It is the 2008 Amendments that add a definition of “Relevant market area” to the Dealer Act, namely a six-mile radius in a county having a population greater than 100,000 or a ten-mile radius in a county having a population less than 100,000. (Id. at 435 (§ 462(15)).) Therefore, the Legislature absolutely contemplated issues with respect to relevant market area when it enacted the 2008 Amendments. And § 463(2)(ff) is written broadly to cover all such concerns. Subsection (2) of § 463(2)(ff) specifically states that, “[f]or the purposes of this paragraph, the term ‘modify’ or ‘modification’ means any change or replacement of any franchise if such change or replacement may substantially and adversely affect the new motor vehicle dealer’s rights, obligations, investment or return on investment.” § 463(2)(ff)(2) (emphasis added). The Legislature did not need to list every possible adverse change because the statute covers all of them. 35 Moreover, GM’s argument that it reserved the right in the franchise contract to change Beck’s AGSSA (assigned market territory) is inapplicable, as Beck’s statutory rights apply, “notwithstanding any franchise contract.” § 463(2). GM cannot reserve itself a right in express contradiction to the New York Dealer Act. In addition, GM itself admitted that it was serving notice pursuant to “New York Vehicle & Traffic Law §463(2)(ff)(1)” when it notified Beck of its unilateral attempt to change Beck’s contractually-assigned market territory (A234), and “that there may be sufficient evidence to support dealer’s concern” (A675-675). Finally, it is important to note that because the district court found that the change to Beck’s market territory was not a franchise modification in the first instance, it (and the Second Circuit) never reached the question of whether it was an unfair modification. The sole issue before the Court on this certified question is whether a change to a market territory assigned in the franchise agreement is a modification as defined in the New York Dealer Act. Whether it is an unfair modification is not before the Court. Therefore, the second certified question should be answered in the affirmative. 36 CONCLUSION Based on the foregoing, Beck respectfully submits that the certified questions should be answered in the affirmative. Respectfully submitted, ARENT FOX LLP By: _______________________ Russell P. McRory James M. Westerlind Michael P. McMahan 1675 Broadway New York, NY 10019 Tel.: (212) 484-3900 Fax: (212) 484-3990 Email:firstname.lastname@example.org email@example.com firstname.lastname@example.org Attorneys for Plaintiff-Appellant Beck Chevrolet Co., Inc. Dated: October 2, 2015 ADDENDUM 1 SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO DATE/TIME JUDGE September 4, 2015, 1:30 p.m. HON. CHRISTOPHER KRUEGER DEPT. NO CLERK 44 M. GRECO NISSAN NORTH AMERICA, INC. Petitioner, v. CALIFORNIA NEW MOTOR VEHICLE BOARD, Respondent. SANTA CRUZ NISSAN, INC. Real Party in Interest. Case No.: 34-2014-80001963 Nature of Proceedings: PETITION FOR WRIT OF MANDATE Following is the court’s tentative ruling denying the petition for writ of mandate. INTRODUCTION Petitioner Nissan North America, Inc. (“Nissan”) challenges a decision by Respondent New Motor Vehicle Board (“Board”) finding that good cause did not exist for terminating a franchise held by Real Party in Interest Santa Cruz Nissan (“SCN”). For the reasons stated below, the petition is denied. UNDERLYING STATUTORY SCHEME The franchise relationship between vehicle manufacturers and distributors (here, Nissan), and their dealers (here, SCN) is heavily regulated by statute. (Vehicle Code § 3000 et seq.;1 Tovas v. American Honda Motor Co. (1997) 57 Cal.App.4th 506, 512.) The purpose of this statutory scheme “is to avoid undue control of the independent new motor vehicle dealer by the 1 Further undesignated statutory references are to the Vehicle Code. 2 vehicle manufacturer or distributor and to insure that dealers fulfill their obligations under their franchises and provide adequate and sufficient service to consumers generally.” (Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corporation, U.S.A. (2013) 221 Cal. App. 4th 867, 877 [internal quotes omitted].) In upholding California’s statutory scheme, the United States Supreme Court has recognized that it was enacted to address the “disparity in bargaining power between automobile manufacturers and their dealers” and “to protect retail car dealers from perceived abusive and oppressive acts by the manufacturers.” (New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co. (1978) 439 U.S. 96, 100–101.) Of relevance to this case, the statutory scheme provides that “no franchisor shall terminate . . . any existing franchise” unless the Board finds “good cause” exists for the termination. (§ 3060, subd. (a)(2).) A franchisee who receives notice that its franchise is being terminated may file a “protest” with the Board. (§ 3060, subd. (a)(1).) If a protest is filed, an evidentiary hearing is held before either the Board or an administrative law judge (“ALJ”) designated by the Board. (§ 3066.) At the hearing, the franchisor has the burden of establishing that good cause exists to terminate the franchise. (§ 3066, subd. (b).) In determining whether good cause exists, the Board “shall take into consideration the existing circumstances, including, but not limited to, all of the following:” (a) Amount of business transacted by the franchisee, as compared to the business available to the franchisee. (b) Investment necessarily made and obligations incurred by the franchisee to perform its part of the franchise. (c) Permanency of the investment. (d) Whether it is injurious or beneficial to the public welfare for the franchise to be modified or replaced or the business of the franchisee disrupted. (e) Whether the franchisee has adequate motor vehicle sales and service facilities, equipment, vehicle parts, and qualified service personnel to reasonably provide for the needs of the consumers for the motor vehicles handled by the franchisee and has been and is rendering adequate services to the public. (f) Whether the franchisee fails to fulfill the warranty obligations of the franchisor to be performed by the franchisee. 3 (g) Extent of franchisee’s failure to comply with the terms of the franchise. (§ 3061.) Following the hearing, the Board issues a written decision that “shall sustain, conditionally sustain, overrule, or conditionally overrule the protest. Conditions imposed . . . shall be for the purpose of assuring performance of binding contractual agreements between franchisees and franchisors or otherwise serving the purposes of this article . . . .” (§ 3067, subd. (a).) “Either party may seek judicial review of final decisions of the board.” (§ 3068.) FACTUAL AND PROCEDURAL BACKGROUND Unless otherwise noted, the facts are taken from the challenged decision in this case.2 Nissan is the U.S. distributor for Nissan brand vehicles and parts. SCN is a Nissan dealership authorized to sell Nissan products pursuant to a written dealer agreement with Nissan. It is one of the oldest Nissan dealerships in the country and has been in business for over 40 years. It is located in Santa Cruz, California. As relevant to this case, the dealer agreement between Nissan and SCN provides as follows: Dealer shall actively and effectively promote . . . the sale at retail . . . of Nissan Vehicles to customers located within Dealer’s Primary Market Area. Dealer’s Primary Market Area is a geographic area which Seller [i.e., Nissan] uses as a tool to evaluate Dealer’s performance of its sales obligations. Seller may, in its reasonable discretion, change Dealer’s Primary Market Area from time to time. (Sec. 3(A) [emphasis added].) The agreement further states: Dealer’s performance of its sales responsibilities for Nissan Cars and Nissan Trucks will be evaluated by Seller on the basis of such reasonable criteria as Seller may develop from time to time, including for example: 2 The challenged decision in this case has three parts: (1) the ALJ’s proposed decision; (2) the ALJ’s proposed decision following the Board’s order sustaining the protest and remanding the matter; and (3) the Board’s decision adopting the proposed decision. All three documents are found in the Administrative Record (“AR”) at pages 1144 through 1190. “Fact” refers to the numbered factual findings in the proposed decision. 4 (1) Achievement of reasonable sales objectives which may be established from time to time by Seller for Dealer as standards of performance; (2) Dealer’s sales of Nissan Cars and Nissan Trucks in Dealer’s Primary Market Area . . . , or Dealer’s sales as a percentage of: (i) registrations of Nissan Cars and Nissan Trucks; (ii) registrations of Competitive Vehicles; . . . (3) A comparison of Dealer’s sales and/or registrations to sales and/or registrations of all other Authorized Nissan Dealers combined in Seller’s Sales Region and District in which Dealer is located . . . ; and (4) A comparison of sales and/or registrations achieved by Dealer to the sales or registrations of Dealer’s competitors. (Sec. 3(B) [emphasis added].) The agreement also provides it may be terminated by Nissan if, based on Nissan’s evaluation, “Dealer shall fail to substantially fulfill its responsibilities with respect to . . . [s]ales of new Nissan Vehicles . . . .” (Sec. 12(B).) In March 2012, Nissan sent SCN a “notice of default” under the dealer agreement, citing “unsatisfactory sales penetration performance.” The notice stated that in 2011 SCN’s “RSE” was 51.6%, which ranked it 187th out of 194 Nissan dealers in the “West Region” and 95th out of 97 dealers in California. The notice advised that SCN had to achieve 100% of the West’s regional average sales penetration with 180 days (later extended by an additional 60 days). “RSE” stands for “regional sales effectiveness,” and is the metric by which Nissan evaluates its dealers’ sales effectiveness.3 Briefly (and vastly over-simplified), RSE is calculated as follows.4 First, the total sales of Nissan vehicles in a particular region is divided by the total number of “competitive set” vehicle registrations in that region. Competitive set vehicles are those brands and models of other manufacturers which Nissan has determined compete most closely with its models for customers.5 So, for example, if 100 Nissans were sold in a region that had 1000 competitive set vehicle registrations, Nissan’s sales penetration in that region would be 10 percent. This percentage is then multiplied by the number of competitive set 3 It apparently changed the way it calculates that metric after the protest was filed. It does not argue that the change has any effect on the outcome of this case. 4 If the court has this wrong, or if it has simplified the calculation too much, the parties may so state at the hearing. 5 For example, presumably Nissan’s Sentra does not compete with Lamborghini’s Aventador, so Aventador sales would not be part of Nissan’s competitive set. 5 registrations in each particular dealer’s primary market area, which yields the number of expected sales for that particular dealer. Using the same example, if there were 210 competitive set registrations in a dealer’s primary market area, that dealer would be expected to sell about 21 Nissans (i.e., 10 percent of 210). A dealer who meets this expectation is operating at 100% RSE – which means that dealer’s sales are exactly average compared to the sales of all dealers. A dealer whose RSE is above or below 100% is selling, respectively, more or less Nissan vehicles than expected, and more or less vehicles than the average Nissan dealer sells. SCN’s RSE for 2005 through 2011 was as follows: Year RSE 2005 113.7% 2006 68.3% 2007 84.4% 2008 83.2% 2009 56.3% 2010 45.9% 2011 51.6% Despite the notice of default, SCN did not achieve 100% RSE. Instead, its RSE actually declined slightly to under 50%. In January 2013, Nissan thus notified SCN that it intended to terminate the dealer agreement due to unsatisfactory sales penetration performance. SCN filed a timely protest with the Board. A 12-day evidentiary hearing was held before an ALJ. Following the hearing, the ALJ issued a lengthy proposed decision. Although the ALJ acknowledged that SCN “did not capture sales opportunities available to it” (Fact 131) and that it “is a below-average performer” and “clearly lacks competitive ‘energy’” (Fact 189), it ultimately found that Nissan failed to establish good cause for terminating the franchise. In particular, and as noted in more detail below, the ALJ found that many aspects of Nissan’s criteria for evaluating sales performance – particularly its use of averages – were not reasonable. The ALJ thus sustained SCN’s protest. After considering the proposed decision and the administrative record, the Board conditionally sustained the protest but remanded the matter to ALJ to recommend conditions to impose on SCN. Presumably, the Board wanted to impose conditions due to concerns about SCN’s undisputed below-average performance. The ALJ recommended various conditions, only one of which is seriously at issue here: 6 Effective immediately to December 31, 2015, the Board shall have exclusive jurisdiction to assess the sales performance of [SCN] and the following shall be the exclusive measurement of [SCN’s] sales performance to December 31, 2015. (1) The assessment shall compare [SCN’s] sales to the sales of the 10 dealers other than [SCN] in Nissan’s District 8. (2) No less frequently than quarterly, Nissan shall calculate the average percentage increase (or decrease) in number of sales of new Nissan vehicles of the 10 dealers in District 8 other than [SCN] and transmit the calculations to [SCN]. (3) The number of [SCN’s] sales shall meet or exceed the average percentage increase in sales of the 10 dealers. (4) In any proceeding before the Board regarding [SCN’s] sales performance using the foregoing standard, [SCN] will not challenge the reasonableness of the standard, nor shall [Nissan] be required to prove the reasonableness of the standard. The court refers to this as the “sales performance” condition. The Board thereafter adopted both the ALJ’s proposed decision and the recommended conditions. Nissan now challenges the Board’s decision. ANALYSIS Nissan challenges the Board’s decision on four separate grounds. It argues: (1) the decision is based on an unlawful underground regulation; (2) it was denied a fair trial because the ALJ improperly excluded certain evidence; (3) the findings are not supported by the evidence; and (4) the Board lacks authority to impose the sales performance condition. 1. The Board Has Not Adopted An Underground Regulation Nissan’s first argument is that the Board has sub silentio adopted a policy of not allowing a vehicle manufacturer and distributor to terminate a dealer for poor sales performance alone, and that the Board applied that policy in this case. Nissan claims this policy constitutes an “underground regulation” – i.e., a regulation that was adopted without complying with the 7 requirements of the Administrative Procedures Act (“APA”).6 (Gov. Code § 11340 et seq.) The APA defines the term “regulation” very broadly to include “every rule, regulation, order, or standard of general application or amendment, supplement, or revision of any rule, regulation, order, or standard adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure . . . .” (Gov. Code § 11342, subd. (g).) One of the defining characteristics of a regulation is that the agency must intend the rule to apply generally to a large class of cases rather than to a specific case. (Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 571.) Although the rule need not apply universally, it must declare how a particular class of cases will be decided. (Id.) So long as it meets this definition, an unwritten policy can be deemed a regulation subject to the APA. (Bollay v. Office of Administrative Law (2011) 193 Cal.App.4th 103, 109.) Whatever the merits of Nissan’s argument in the abstract, it fails to convince that the Board has a generally applicable policy or rule that dealers may not be terminated based solely on poor performance. Nissan’s argument is based entirely on a few comments made during a public meeting held by the Board to consider the ALJ’s recommended conditions. Four public members of the Board attended the meeting.7 In its opening brief, Nissan cites just three comments made during this meeting as evidence that the Board has adopted a rule that a dealer cannot be terminated for performance issues alone. All three comments were made by one Board member – Glenn Stevens.8 None of the comments – viewed either singly or in combination – establish the existence of Nissan’s hypothesized policy. First comment. Counsel for SCN (who obviously does not make policy for the Board) stated, “I don’t think any dealer should be terminated for performance issues alone.” Board member Stevens then stated: “It hasn’t happened in the years I’ve been doing this.”9 (AR 6 The APA, which is codified at Gov. Code § 11340 et seq., establishes procedures by which state agencies may adopt regulations. Among other things, the agency must give the public notice of the proposed regulation and an opportunity to comment thereon. (Gov. Code §§ 11346.4, 11346.5, 11346.8, 11346.9.) 7 The Board has nine members – four new motor vehicle dealers appointed by the Governor and five public members (i.e., not new motor vehicle dealers or their employees) appointed by the Senate, the Assembly and the Governor. (§ 3000, 3001.) For purposes of considering a petition involving a dispute between a franchisee and franchisor, three public members constitutes a quorum. (§ 3010.) 8 Although Stevens is apparently the longest serving member of the Board, it goes almost without saying that the views of one Board member do not establish Board policy. 9 Nissan consistently uses the word “never” in quotes when describing this particular comment by Stevens. (Opening at 7:21-24; Reply at 4:11-12.) At no time during the hearing does Stevens say the Board has “never” terminated a dealer for poor performance. In fact, Stevens never uses the word “never.” Neither does Robin Parker, 8 7048.) This one sentence is scant evidence (if any) of the rule Nissan posits. The fact that the Board has not terminated a dealer solely for performance issues does not establish that it has a rule against doing so. Second comment. Counsel for Nissan stated the Board “can’t have an absolute rule and bar that no dealer is ever going to be terminated for lack of sales. If that’s what this Board is saying, then that’s just wrong.”10 Board Member Stevens then said: “The dealers that have been terminated are usually that [i.e., not meeting sales goals] coupled with something else. For example, their doors are closed for seven days in a row. For example, they don’t keep their place in a clean manner; where they don’t stock adequate parts. They’re all symptomatic of the same problem.” (AR 7050.) In other words, dealers with poor sales performance “usually” have other problems as well. Again, however, Stevens’ comments do not establish that the Board has a rule against terminating dealers solely for performance issues. Third comment. The following exchange occurred between Board members Brooks and Stevens: BROOKS: At the end of the day if you can’t sell more Nissans, if you’re still at the bottom of the line, my policy question to the Board . . . is should we pull that product line or allow Nissan to do it? STEVENS: We can, but it’s usually, like I said, it’s usually multiple good cause factors. That’s why there are multiple good cause factors. (AR 7056 [emphasis added].) Far from proving Nissan’s hypothesized policy, Stevens’ comment actually tends to prove the opposite – that the Board has no such policy (“We can” counsel for the Board, to whom Nissan also attributes use of the word “never.” (Opening at 7:24-27.) Other than counsel for the parties, the only Board member who actually uses the word “never” is Ryan Brooks, who states, “I’ve only been on the Board since April of six, seven years, and I’ve never seen a case where a product line has been terminated. That doesn’t mean that they shouldn’t be terminated.” (AR 7053 [emphasis added].) Although not entirely clear, Brooks appears to be saying that in the six or seven years he has served on the Board, he has never seen a franchise terminated, regardless of the reason. That no franchise has been terminated in seven years, however, does not establish that the Board has a policy of not allowing termination for poor performance alone. Even if Brooks’ comment is interpreted to mean he has never seen a franchise terminated for poor performance alone, however, and as with the similar comment by Stevens, this does not establish that the Board has a policy against allowing such terminations, particularly where Brooks immediately acknowledges “[t]hat doesn’t mean they shouldn’t be terminated.” 10 Nissan notes that no Board member spoke up in response to this comment from counsel and said “we don’t have such a rule,” and suggests this silence in the face of counsel’s comment is evidence such a rule exists. This silence could just as easily be seen as evidence no such rule exists – i.e., if someone says “you can’t have a rule that says X,” and you don’t have a rule that says X, why speak up and say anything? 9 terminate a dealer who can’t sell more Nissans, but there are usually other factors as well). The Board’s counsel reiterated this at another point during the meeting: “There’s nothing that says you can’t terminate for bad sales. It’s just historically the Board hasn’t.” Board member Doi then added, “The manufacturers haven’t asked for it.”11 (AR 7053.) In other words, historically the Board has not terminated dealers for poor sales alone, not because of a policy prohibiting such terminations, but because (1) the manufacturers have not tried to do so and (2) poor sales are usually coupled with other factors. In its reply brief, Nissan cites two other comments by Stevens as evidence of a generally applicable Board policy. As a general rule, the court will not consider arguments raised or evidence cited for the first time in a reply brief, because “obvious considerations of fairness” demand that the moving party “present all of his points in the opening brief.” (Neighbours v. Buzz Oates Enterprises (1990) 217 Cal.App.3d 325, 335, fn. 8; see also Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764; American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.)12 Even if the court were to consider these two newly cited comments, however, they fail to establish that the Board has a policy of not terminating dealers based solely on poor performance. The first comment by Stevens is, “We’re trying to keep him [presumably SCN] in business and get them [presumably Nissan] what they want at the same time and it may not be possible.” (AR 7056 [emphasis added].) Nissan cites just the first part of the sentence but disingenuously tries to ignore the italicized portion. Again, far from proving Nissan’s posited policy, this statement shows that even Stevens recognizes it “may not be possible” to keep a poor performing dealer in business if the manufacturer wants to terminate it. Nissan also cites this comment by Stevens: “I don’t like standards at all. That makes it impossible for a dealer to retain their franchise agreement if they don’t meet certain sales standards. It really bothers me.” (AR 7033.) That Stevens doesn’t like sales standards, however, does not prove that the Board has a rule against terminating dealers based solely on poor performance. 11 Nissan argues that counsel’s comment is irrelevant because she is not a Board member. Counsel’s comment may not be dispositive, but it is provides some insight into the Board’s historical decision making process. Moreover, Board member Doi immediately expanded on counsel’s comment by noting that the Board has not historically terminated dealers for bad sales because “manufacturers haven’t asked for it.” 12 The rule applies to all of the evidence that Nissan cited in its reply brief but not its opening brief. 10 2. Nissan Fails To Convince Any Evidentiary Rulings Were Improper Or Prejudicial Nissan also complains about numerous rulings by the ALJ excluding certain evidence. Improper exclusion of admissible evidence can amount to an abuse of discretion and deprive a party of the right to a fair trial, but only if prejudice is shown (i.e., a “reasonably probab[ility] a result more favorable to the appellant would have been reached absent the error”). (Lewis v. City of Benicia (2014) 224 Cal.App.4th 1519, 1538; see also King v. Board of Medical Examiners (1944) 65 Cal.App.2d 644, 649; Carden v. Board of Registration for Professional Engineers (1985) 174 Cal.App.3d 736, 744.) Nissan states it was precluded “time and time again” from offering evidence about the three other brands (Volkswagen, Dodge, and Ram) sold by SCN. As evidence that the ALJ excluded such evidence “time and time again,” it cites one ruling by the ALJ excluding Exhibit 240 because it was too “attenuated.”13 (AR 6636.) The problem is that Nissan has not proffered Exhibit 240 to the court, or directed the court’s attention to where in the nearly 8000 page Administrative Record it may be found.14 The court thus cannot evaluate either the ALJ’s ruling or its potential prejudicial effect on Nissan’s case. The court notes that nothing prohibited Nissan from asking this court to review the excluded evidence. Indeed, such a request would have been perfectly proper (even advisable) because of the general rule that “[i]f it should appear from th[e] record that . . . the board had improperly refused to entertain admissible evidence the litigant should not be foreclosed from offering it at the trial.” (Ashdown v. State Department of Employment (1955) 135 Cal.App.2d 291, 297; see also Pomona Valley Hospital Medical Center v. Superior Court (1997) 55 Cal.App.4th 93, 101.) The court thus finds that Nissan fails to establish the ALJ’s decision to exclude Exhibit 240 was either erroneous or prejudicial. 13 It also cites two stipulated facts (“2AR, T73:897-899, Fact #3 and #5”) which establish only that SCN has been a Nissan dealer for 40 years and that it also sells Volkswagen, Dodge and Ram vehicles. (See Opening at 13:23-24.) Nissan fails to explain how these facts advance its argument regarding the improper exclusion of Exhibit 240. 14 The court notes for the record that it would not look favorably on an eleventh hour attempt at the hearing on the merits to provide this information. (See In re Marriage of Stanton (2010) 190 Cal.App.4th 547, 561 [where party’s brief lacks citation to authority, court may treat points as waived or meritless]; Reichardt, supra, 52 Cal.App.4th at 764 [court need not consider arguments or evidence cited for first time reply].) 11 Nissan then provides a “non-exhaustive but exemplary list” of other objectionable evidentiary rulings.15 Again, however, Nissan fails to explain how the challenged rulings had any effect on its case, much less a prejudicial effect. For example, James Courtright, SCN’s general manager, testified that it would be “very difficult to operate our dealership without Nissan,” and that it might not be “viable” to do so. (AR 6245-46.) He also testified, however, that “[i]f we don’t have Nissan, we’re not going to just quit. We’re going to try to make it.” (AR 6245.) Counsel for Nissan then asked, “couldn’t you sell more Volkswagen to try to make up some of the deficit? You would try to do that, correct?” Courtright answered, “We’re always trying to sell more product of any make.” Counsel for Nissan then asked the following question (which is the key question for purposes of Nissan’s argument): “I know you testify you’re always trying to do it. But would you specifically try to make more Volkswagen sales if you no longer had Nissan, correct?” Counsel for SCN objected: “I object to any question regarding Volkswagen sales. This is not a Volkswagen sales performance case.” The ALJ sustained the objection. (AR 6246-47.) Even if the court assumes the objection should not have been sustained, it is difficult to conceive of how any answer Courtright might have given could have reasonably effected the outcome of this case, particularly where, as here, Courtright immediately went on to testify that if SCN lost Nissan, it would do “whatever it took” to surviving, including “sell[ing] more vehicles,” which would include Volkswagens. (AR 6247.) Nissan also complains the ALJ would not allow it to examine Courtright on whether statements he made in a letter to Volkswagen about the demographics of the Santa Cruz market being unfavorable to Volkswagen (this letter is Exhibit 240, discussed above) were inconsistent with his deposition testimony that other brands (including Volkswagen) outsell Nissan because of those same conditions. Again, Nissan does not point the court to the deposition testimony or the letter, so it is difficult to even analyze Nissan’s “prior inconsistent statement” argument. From reading the portion of the transcript that Nissan does cite, however, it does not appear that the ALJ actually excluded any evidence – she simply stated “Let’s move on. I think you’ve probably made the point you wanted to make, Mr. Sanchez [Nissan’s counsel].” Sanchez then 15 The list, which is single-spaced, contains the entirety of Nissan’s argument regarding the challenged evidentiary rulings. Single-spacing of argument is impermissible. (Cal. Rule Court, Rule 2.108.) Presumably, Nissan utilized single-spacing in order to avoid the court’s 30-page limit on opening briefs. It is counseled to avoid such tactics in the future. 12 agreed he had made his point: “Well, I did, Your Honor.” (AR 6294 [emphasis added].) Nissan cannot now be heard to complain that Sanchez had not made his point, or that his inability to make his point (whatever it might be) was prejudicial. Nissan also complains it was not allowed to ask Courtright whether he agreed or disagreed with a statement in a report prepared by SCN’s expert, Edward Stockton.16 Nissan’s counsel asked the ALJ if he could read “one paragraph” from “Mr. Stockton’s surrebuttal report,”17 and then ask Courtright “if he agrees with it or disagrees with it.” (AR 6297.) Counsel for SCN objected: “[H]e’s attempting to impeach our expert with the opinion of a lay person. We retained an expert to do this analysis and find an expert opinion. They’ve had an expert to challenge that expert opinion.” Counsel also noted “Both [parties’] experts have been on and off the stand, and both rebutted each other.” The ALJ sustained the objection. The court finds no prejudicial error, because there is no suggestion that Nissan was not allowed to rebut Stockton’s opinion with the opinion of its own expert, and no suggestion Nissan was not allow to fully cross examine Stockton about his opinion. It is also difficult to understand how Courtright’s opinion of his expert’s opinion could have affected the outcome of this case. Nissan also cites the fact that, at one point, the ALJ stated, “I’m going to call a halt to more questions about Volkswagen . . . otherwise we’ll get out into the weeds real quickly.” (AR 880.) Counsel for Nissan had just asked Stockton a question about a “regression display” included in his report: “What geographic area did you use in your regression to determine whether or not Volkswagen was favored?” (Id.) Again, Nissan fails to point the court to any evidence that would allow it to analyze either the relevance of the question Nissan wanted to ask or the propriety of the ALJ’s ruling. Nissan also argues the ALJ improperly excluded evidence that Courtright had made prior inconsistent statements about Santa Cruz being a “pump-out” market in 2004,18 when SCN’s RSE was above average. Nissan’s two citations to the record, however, do not show any evidence was excluded. It cites pages 6270 and 1860 of the administrative record. (Opening at 16 In other words, Nissan’s counsel wanted to ask Courtright whether he agreed or disagreed with his own expert. The court notes that both sides had experts. 17 We are not told what information that one paragraph contained or pointed to where in the record it might be found. 18 In a pump-out market, a dealer sells cars to people who live outside that dealer’s primary market area (i.e., it pumps out sales to another market). 13 18:2.) On page 6270, a witness is asked about an article written in 2004. Although an objection is made (“asked and answered”), it is overruled (“Go ahead, Mr. Sanchez”). Page 1860 is one page from a 2007 letter from Nissan to SCN that appears to have nothing to do with pump outs. Finally, Nissan also argues the ALJ improperly refused to admit into evidence a 2004 magazine article in Ward’s Auto for which Courtright had been interviewed.19 The ALJ disallowed the article because “It’s too remote in time to be relevant to the proceeding.” (AR 6633.) The court agrees. The notice of termination was issued in 2013, and cited SCN’s sales from 2008 to 2012; the article was published in 2004.20 Moreover, the ALJ did allow Courtright to testify about whether certain quotes in the article were accurate. (AR 6267.) The court thus finds no prejudice in disallowing an article that was written at least four years prior to any relevant time period. 3. Nissan Fails To Prove The Findings Are Not Supported By The Evidence Nissan also argues the Board’s decision is not supported by the findings and the findings are not supported by the evidence. Because an automobile franchise is not a fundamental right, the court reviews the Board’s findings using the substantial evidence test. (Code Civ. Proc. § 1094.5, subd. (c); Duarte & Witting, Inc. v. New Motor Vehicle Bd. (2002) 104 Cal.App.4th 626, 632; Kawasaki Motors Corp. v. Superior Court (2000) 85 Cal.App.4th 200, 204-05.) Under the substantial evidence test, the court “may not reweigh the evidence, and is bound to consider the facts in the light most favorable to the administrative decision, giving that decision every reasonable inference and resolving all conflicts in the decision’s favor.” (Amerco Real Estate Co. v. City of West Sacramento (2014) 224 Cal.App.4th 778, 786; see also Ryan v. California Interscholastic Federation-San Diego Section (2001) 94 Cal.App.4th 1048, 1077-78.) The court starts with the presumption the Board’s findings are supported by the evidence and Nissan bears the burden of demonstrating otherwise. (Donley v. Davi (2009) 180 Cal.App.4th 447, 456.) The court may reverse the Board only if, based on the evidence as a whole, a reasonable person could not have reached its decision. (Donley, supra, 180 Cal.App.4th at 456.) 19 Nissan apparently avoided the obvious hearsay problem by stating it wanted to use the article solely as evidence of a prior inconsistent statement made by Courtright. (Evid. Code § 1235.) 20 We are not told when it was written, or when Courtright was interviewed. And, again, Nissan neither proffers the article nor points the court to where it can be found in the Administrative Record, which makes it next to impossible to intelligently analyze the merits of Nissan’s argument that it was improperly excluded. 14 The ALJ made over 150 separate findings of fact (Facts 41 through 200),21 all of which were adopted by the Board. Although Nissan argues the Board’s findings are not supported by the evidence, with only a few exceptions it fails to identify which findings it challenges. Instead, it states that the Board’s errors “are far too numerous to productively list in this brief,” but that it would be happy to cite those errors “if the Court pleases.” This is thoroughly unacceptable.22 Any finding which Nissan did not bother to specifically challenge is presumed to be true. (See Von Durjais v. Board of Trustees (1978) 83 Cal.App.3d 681, 687 [finding which is not specifically attacked is to be accepted as true]; see also Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 [reviewing court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record]; Camarena v. State Personnel Board (1997) 54 Cal.App.4th 698, 703 [failure to attack factual finding tantamount to concession it is true].) In its opening brief, Nissan specifically identifies only ten findings to which it objects: Facts 187, 189, 120, 142A, 142B, 106-09, and 126. Fact 187 is that “[b]etween 2009 and 2011, there were lost sales opportunities which Santa Cruz Nissan failed to capture.” Fact 189 is that “Santa Cruz Nissan is a below-average performer. It clearly lacks competitive ‘energy.’ . . . . SCN’s performance deficiencies are due to an insufficient level of resources to accomplish the task, no sense of urgency to change the situation, and no one in charge capable of executing plans for improvement.” Nissan obviously agrees with both findings. Its real argument is that, given these findings, the Board could not also have found that SCN transacted a sufficient amount of business compared to the business available to it, or that it complied with the terms of its franchise (both of which are “good cause” factors enumerated in section 3061). Not so. Although the Board agreed SCN was a below- average performer, it also found that the way Nissan judged SCN’s sales performance was both suspect and unreasonable in several respects (region too large to be useful; reliance on averages without further information has tendency to mislead; threatening termination if dealer does not achieve 100% RSE is “misusing” date; expanding SCN’s primary marketing area to include Watsonville “for no discernible reason” which contributed to decline in RSE). (Facts 185-86.) 21 Facts 1 through 40 are essentially undisputed and/or procedural-type facts (for example, identifying the parties and counsel, identifying the witnesses, summarizing the parties’ contentions, etc.). 22 Equally improper is Nissan’s use of single-spacing to discuss the findings. (Cal. Rule Court, Rule 2.108.) 15 Fact 120 contains an explanation of how RSE is calculated and what “segment adjusting” consists of. Nissan argues the ALJ’s explanation contains “numerous errors,” but it fails to identify a single error.23 The court thus treats the point “as waived, or meritless, and pass[es it] without further consideration.” (In re Marriage of Stanton, supra, 190 Cal.App.4th 547, 561; see also Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979 [reviewing court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record].) Nissan argues the following two findings are erroneous: • “The net ‘out commute’ to San Jose-Silicon Valley of workers who live in SCN’s PMA takes them ‘over the hill’ into the PMAs of five other Nissan dealers. That some of these workers do buy near their work is shown by the cumulative ‘In-sell’ dot map at Exh 200H:4781.”24 (142A.) • “At year-end 2012, My Nissan [a Nissan dealer located in Salinas, approximately 25 miles from SCN] had 439 sales of Nissan vehicles; although most sales were concentrated around its dealership in Salinas, another concentration was in SCN’s PMA in Watsonville. (Exh 200H:4765).”25 (142B.) 23 It does cite a bar graph on page 2260 of the Administrative Record and points the court to “2AR, T78:806-812” for “accurate and jointly stipulated definitions of RSE and Segment Adjusting.” The court respectfully declines the implicit request to do Nissan’s work for it. If Nissan believes these documents show that Fact 120 is not supported by the evidence, it needs to explain why. For what it is worth, the court did review the stipulated definitions and found no obvious errors in the ALJ’s description of the relevant terms. 24 Nissan’s criticism of this finding appears to be that although it acknowledges the relevant “in-sell” numbers (i.e., people who live in SCN’s primary market area, but who purchased their Nissan outside that area), it believes the map does not establish that the “in-sell” buyers purchased their vehicles near their workplaces. Nissan fails to explain why this criticism is relevant. Perhaps it believes it was actually SCN’s “lack of energy” that drove buyers to other dealers? Moreover, as the Board notes, the ALJ found that “More workers commute eastward ‘over the hill’ from Santa Cruz to jobs in Santa Clara County than westward into Santa Cruz County. The net commuter ‘outflow’ is approximately 1.5 persons for every 1 person coming into Santa Cruz,” (Fact 87), and Nissan does not challenge this finding. It is a reasonable inference that some of these Santa Cruz residents who commute over the hill to jobs in Santa Clara County also purchase vehicles close to their workplaces. 25 Curiously, Nissan describes this particular finding as follows: “ALJ Hagle erroneously concluded that the 2012 RSE performance increase of another dealer, My Nissan, was correlated to and a ‘mirror image’ of the 2012 RSE decrease for SCN.” (Opening at 20:3-5 [emphasis added].) Again, although the phrase “mirror image” is in quotes, it does not appear in finding 142B. Perhaps Nissan meant to challenge a portion of finding 106 (that My Nissan’s RSE “soared” in 2012 and were “a mirror image of SCN’s decline”). But it did not do so. The court thus assumes this portion of finding 106 is accurate. Nissan does appear to challenge the following finding (which is also part of Fact 106): “The two closest dealers to Watsonville are My Nissan in Salinas and Gilroy Nissan in Gilroy.” Nissan states that, “in fact, SCN was the closest [dealer to Watsonville] by drive distance and drive time and equidistant with Gilroy in terms of air distance.” (Opening at 20:5-7.) Nissan cites no evidence to establish this “fact.” In any event, any discrepancy appears inconsequential. From eyeballing a map, it appears Watsonville is about equidistant 16 Again, Nissan fails to explain how or why these two findings are not supported by the evidence. Finally, Nissan complains about the ALJ’s citation (in a footnote) to an article about a corporate shakeup at Target that appeared in the Wall Street Journal in June 2014. (See Proposed Decision, p. 24, fn.19.) This citation was indeed odd. As Nissan notes, this article was not introduced into evidence and it is difficult to see how it could possibly be relevant to this case.26 Nissan fails to explain, however, how the ALJ’s citation to this article in a footnote demonstrates that the entire decision is “fatally flawed and unsupported.” 4. Nissan Fails To Show That The Board Lacked Authority To Impose The Sales Performance Condition Nissan’s final argument is that the Board exceeded its authority by imposing the sales performance condition. It cites the rule (which no-one disputes) that “an administrative agency has only such power as has been conferred upon it by . . . statute and an act in excess of the power conferred upon the agency is void.” (BMW of North America, Inc. v. New Motor Vehicle Board (1984) 162 Cal.App.3d 980, 994.) The Board has been expressly authorized to impose conditions when deciding a protest, and Nissan does not suggest otherwise. (§ 3067.) Nissan argues, however, that the sales performance condition in particular goes beyond the Board’s statutory authority. Again, that condition provides: Effective immediately to December 31, 2015, the Board shall have exclusive jurisdiction to assess the sales performance of [SCN] and the following shall be the exclusive measurement of [SCN’s] sales performance to December 31, 2015. (1) The assessment shall compare [SCN’s] sales to the sales of the 10 dealers other than [SCN] in Nissan’s District 8.27 to Santa Cruz, Gilroy, and Salinas. Moreover, unless flying crows purchase cars, it is difficult to understand the relevance of Nissan’s comment about “air distance” being equidistant. 26 The article noted that Target’s culture had shifted to one where store managers “had latitude to make their own calls on everything from product picks to special promotions,” to one that focused on “rigid performance metrics.” Presumably the ALJ’s point was Nissan, like Target’s corporate managers, was excessively focused on rigid performance metrics. Or, equally likely, and as SCN notes, the ALJ was simply attributing the phrase “rigid performance metrics” to the article in which he saw it. 27 District 8 includes dealers located in Bakersfield, Selma, Fresno, Visalia, Salinas, Gilroy, San Luis Obispo, Santa Maria, Clovis, and Seaside. In other words, under the Board’s conditions, SCN will be compared only to other dealers located in its immediate vicinity. 17 (2) No less frequently than quarterly, Nissan shall calculate the average percentage increase (or decrease) in number of sales of new Nissan vehicles of the 10 dealers in District 8 other than [SCN] and transmit the calculation to [SCN]. (3) The number of [SCN’s] sales shall meet or exceed the average percentage increase in sales of the 10 dealers. (4) In any proceeding before the Board regarding [SCN’s] sales performance using the foregoing standard, [SCN] will not challenge the reasonableness of the standard, nor shall [Nissan] be required to prove the reasonableness of the standard. Nissan argues that the sales performance criteria imposed on SCN by the Board is not the sales performance criteria that it uses to evaluate its dealers. This is no doubt true. As the ALJ found, Nissan uses RSE to evaluate its dealers’ sales performance.28 (Fact 110.) The Board, however, has specified that (at least through the end of 2015), SCN will be evaluated using different criteria. Does it have the power to do so? Nissan fails to convince it does not. Nissan’s core argument is that the Board may not impose criteria that do not appear in the parties’ agreement, but may only enforce the terms of that agreement. There is some intuitive appeal to this argument. Nissan, however, cites no authority for this argument, and the court is not convinced it is an accurate statement of the law. After all, in the words of one court, the Board has the “power to intrude upon the contractual rights and obligations of dealers [here, SCN] and their product suppliers [here, Nissan], entities whose respective economic interests are in no way identical or coextensive, frequently not even harmonious.” (Tovas, supra, 57 Cal.App.4th at 512; see also McKay v. Retail Auto. Salesmen’s Local Union (1940) 16 Cal.2d 311, 350 [“freedom of contract does not guarantee a citizen the right to contract without abridgement or interference by any legislative authority. Such right is subject to control and regulation under the police power”].) The court agrees there does seem to be a limit on the type of conditions the Board is empowered to impose, because the relevant statute provides that “[c]onditions imposed by the board shall be for the purpose of assuring performance of binding contractual agreements 28 The ALJ also found Nissan has a right to do so under the terms of its dealer agreement so long as it also complies with a different section of the agreement (Sec. 3(D).) that requires it to consider other “reasonable criteria” when evaluating sales performance. (Facts 111, 126.) Those other criteria include: dealership location; shopping habits of the public in the market area; any special local marketing conditions that would affect the dealer’s sales; and any other factors that would affect the dealer’s sales performance. (Sec. 3(D) of dealer agreement.) 18 between franchisees and franchisors or otherwise serving the purposes of this article . . . .” (§ 3067, subd. (a).) “This article” refers to Article 4, which deals with hearings on franchise termination. Thus, any condition imposed by the Board must either (1) be for the purpose of assuring performance of the dealer agreement between Nissan and SCN, or (2) otherwise serve the purpose of Article 4. The court finds this particular condition meets both requirements. First, the dealer agreement in this case specifies that Nissan will evaluate sales performance “on the basis of such reasonable criteria as [Nissan] may develop from time to time.”29 (Sec. 3.B [emphasis added].) Thus, any criteria developed and used by Nissan must be reasonable. The ALJ found (and the Board agreed) that RSE is not reasonable, at least as applied to the facts of this case. (See Facts 99-109 [facts relating to Nissan’s expansion of SCN’s primary market area shortly after serving notice of default to include Watsonville, including ultimate findings that this expansion (1) “was not an exercise of the ‘reasonable discretion’ contemplated by Sections 1.N. and 3.A. of the Dealer Agreement,” (2) “negatively affected SCN’s ‘sales performance’ score and ranking,” and (3) rendered the RSE calculations “not reliable.”); Fact 120C [size of primary market area affects dealer’s sale’s effectiveness ratings]; Facts 114-115 [prior to August 2013, Nissan used regions that were “too large” to serve as appropriate benchmarks and that could lead to “inaccurate or misleading” results]; Fact 135 [sales criteria like RSE which are based on “averages” can be “misleading” because at any given time, about half of all dealers will be above average and about half will be below. “If underperforming dealers do become more successful, this will raise the average line, but there will still always be the roughly 50%-50% split of numbers above and below the average line. So even successful dealers could (inappropriately) be characterized as ‘underperformers’ if they fall below the average line.” “When Nissan requires an ‘underperforming’ dealer to ‘achieve 100% RSE’, and the dealer does so, all that happens is that another dealer will fall below the average line (and the rankings will change). By using ‘averages’, there will always be around 50% ‘underperforming’ dealers. Nissan’s use of ‘100% RSE’ as a performance goal . . . is not reasonable.”].) 29 Although the agreement then goes on to list examples of such “reasonable criteria” as may be developed from time to time, the list is not exclusive (“including for example”). (Sec. 3.B.; see also, e.g., Rea v. Blue Shield of California (2014) 226 Cal.App.4th 1209, 1227028 [word “including” is word of enlargement not limitation].) 19 Nissan does not suggest that the Board lacks the power to decide (as it did in this case) that Nissan’s actual performance criteria are unreasonable. Indeed, because the Board is specifically required to consider the terms of the dealer agreement in determining whether good cause exists for terminating that agreement, and because the dealer agreement in this case requires that performance criteria be “reasonable,” it follows that the Board has the power to determine whether the particular criteria used by Nissan are reasonable. And having found that Nissan’s actual criteria are unreasonable, there would appear to be no obvious prohibition against the Board imposing different, and reasonable, criteria in order to assure that SCN fulfills its obligation under the dealer agreement to “actively and effectively promote” sales of Nissan vehicles. (Sec. 3(A).) In other words, the sales performance condition is “for the purpose of assuring performance” by SCN of its contractual obligations. (§ 3067.) Nissan thus fails to convince that the Board lacks the power to temporarily impose performance criteria on SCN that are different than the criteria used by Nissan. Second, the performance criteria condition imposed by the Board also serves the purposes of Article 4, which provides, in relevant part, that a distributor like Nissan cannot terminate a dealer like SCN unless the Board finds “good cause,” and which provides a non- exclusive list of things for the Board to consider in determining whether good cause exists, including “existing circumstances.” (§§ 3060, 3061.) The Board argues that one of the things it may consider when making the “good cause” determination is the Legislature’s findings and declarations upon enacting the statutory scheme in the first instance: “The Legislature finds and declares that the distribution and sale of new motor vehicles in the State of California vitally affects the general economy of the state and the public welfare and that in order to promote the public welfare . . . it is necessary to regulate . . . vehicle dealers, manufacturers, [and] distributors . . . in order to avoid undue control of the independent new motor vehicle dealer by the vehicle manufacturer or distributor . . . .” (Quoted in Tovas, supra, 57 Cal.App.4th at 512, fn. 7 [emphasis added].) The Board argues it may thus impose any condition that would benefit either the public welfare or the general economy. The court is not convinced that the Board may impose any condition so long as it has some relationship to the public welfare or the general economy, but it need not decide the precise parameters of the Board’s authority – only whether it exceeded those parameters here. Under Article 4, the Board is expressly empowered to 20 determine whether “good cause” exists to terminate a franchise, and also expressly empowered (indeed, required) to consider “existing circumstances” when making that determination. The court sees no reason why, for example, the Legislature’s desire “to avoid undue control of the independent new motor vehicle dealer by the vehicle manufacturer or distributor” is not one of the existing circumstances that the Board may properly consider when determining whether good cause exists to terminate a franchise and in imposing conditions if it chooses to do so. The sales performance condition furthers this legislative purpose (i.e., it avoids undue control of SCN by Nissan). Nissan disagrees, arguing the Board is only empowered to impose conditions that serve the purpose of Article 4, and noting the Legislature’s findings and declarations are not part of Article 4. This may technically be true – but the Legislature made its findings and declarations as part of the bill that added Article 4. Nissan’s reading of section 3061 (that it only permits the Board to enforce the terms of the existing dealership agreement) is too narrow. Nissan also complains that the criteria developed by the Board suffers from a fatal flaw – it fails to adequately address the finding that led to the imposition of conditions in the first instance (i.e., that SCN is a below-average performer). This is partially true. The Board’s criteria merely require SCN to keep pace, on a percentage basis, with any sales increases by the other dealers in District 8. In other words, all SCN has to do to meet the Board’s criteria is match any sales increase by other dealers, or, as Nissan puts it, “float” up or down with the other dealers. But if all SCN does is match others’ increases (or float with the rising tide), it will still remain a below-average performer (because the average will rise). The Board never addresses this argument. In the abstract, it is quite persuasive. As noted above, however, the Board found that the use of averages to evaluate SCN’s performance in this case is not reasonable (Facts 120- 21, 135), a finding which it is empowered to make. Thus, the fact that the Board’s performance criteria may not improve SCN’s sales relative to other Nissan dealers is not fatal. In a related vein, Nissan also complains that the Board set conditions, and then failed to specify what will happen if the conditions are not met. This is also true. The decision simply provides that Nissan “may file a written request to the Board for an appropriate order if [SCN] fails to meet any of the foregoing conditions,” and that “[i]n any [future] proceeding where termination of [SCN’s] franchise may be ordered, [Nissan] shall have the burden of showing 21 ‘good cause’ to terminate the franchise.”30 Presumably, Nissan would prefer it if the Board had stated “failure to meet any of the foregoing conditions will result in termination of SCN’s franchise.” But it cites no authority for the proposition that the Board must specify a penalty for failure to comply whenever it imposes conditions. Moreover, imposing a specific penalty for failure to comply would appear to conflict with the rule that it is Nissan’s burden to establish good cause for terminating SCN’s franchise. (§ 3066, subd. (b).) At least up to this point in time, the Board has found that Nissan has failed to meet that burden. It is not clear that SCN’s failure to comply with any of the Board’s conditions would automatically, and in all circumstances, sustain Nissan’s burden of proof in this case. Presumably, however, if SCN fails to comply with the Board’s conditions, Nissan’s burden will be much easier to meet the second time around. As for whether SCN will meet the Board’s conditions, and what, if anything, the Board will do if it does not, Nissan will simply have to wait and see what actually happens. CONCLUSION For the reasons stated above, the petition for writ of mandate is denied. The tentative ruling shall become the court’s final ruling and statement of decision unless a party wishing to be heard so advises the clerk of this department no later than 4:00 p.m. on the court day preceding the hearing, and further advises the clerk that such party has notified the other side of its intention to appear. The court prefers that any party intending to participate at the hearing be present in court. Any party who wishes to appear by telephone must contact the court clerk by 4:00 p.m. the court day before the hearing. (See Cal. Rule Court, Rule 3.670; Sac. County Superior Court Local Rule 2.04.) In the event that a hearing is requested, oral argument shall be limited to no more than thirty (30) minutes per side. If a hearing is requested, any party desiring an official record of the proceeding shall make arrangement for reporting services with the clerk of the department not later than 4:30 p.m. 30 This last sentence merely restates the law. (§ 3066, subd. (b) [“the franchisor shall have the burden of proof to establish that there is good cause to . . . terminate . . . a franchise”].) 22 on the day before the hearing. The fee is $30.00 for civil proceedings lasting under one hour, and $239.00 per half day of proceedings lasting more than one hour. (Local Rule 9.06(B) and Gov’t. Code § 68086.) Payment is due at the time of the hearing.