Ford Motor v. Meredith Motor CV-99-456-B 08/24/00 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Ford Motor Company

v. Civil N o . 99-456-B Opinion N o .

Meredith Motor Company, Inc.

MEMORANDUM AND ORDER

Meredith Motor Company, Inc. (“Meredith”) brings

counterclaims against Ford Motor Company (“Ford”) for breach of

contract (Count I ) , breach of the implied covenant of good faith

and fair dealing (Count I I ) , violation of the New Hampshire Motor

Vehicle Franchise Act, Rev. Stat. Ann. chapter 357-C (Count I I I ) ,

and violation of the New Hampshire Consumer Protection Act, Rev.

Stat. Ann. chapter 358-A (Count I V ) . Ford moves to dismiss

Meredith’s counterclaims for failure to state a claim. For the

following reasons, I deny Ford’s motion. I. Background1

Ford, an automobile manufacturer, sells its vehicles

primarily through independent franchised dealers. Meredith is

one such dealer. On or around June 1 , 1972, Ford and Meredith

entered into a standard Ford Sales and Service Agreement that

incorporated by reference certain standard provisions.2 At the

time that the parties formed their agreement, the town of

Plymouth, New Hampshire was included within Meredith’s “dealer

locality” or “relevant market area,” two industry terms that

1 Because Ford has moved to dismiss Meredith’s counterclaims for failure to state a claim, I accept the well- pleaded facts marshaled by Meredith in support of its counterclaims as true and draw all reasonable inferences in Meredith’s favor. See Miranda v . Ponce Fed. Bank,

1 , 43 (1st Cir. 1991). 2 Because Ford has appended a copy of the parties’ agreement to its complaint for declaratory judgment, and because Meredith’s counterclaims refer to and depend upon the agreement (the authenticity of which has not been challenged), I may consider it without converting Ford’s motion into one for summary judgment. See Beddall v . State Street Bank and Trust Co.,

2 , 16-17 (1st Cir. 1998).

-2- refer to a dealer’s sales territory.3

In July 1996, Ford proposed to relocate Fuller Ford

(“Fuller”), another of its dealers, from Bristol, New Hampshire

to New Hampton, New Hampshire. Meredith and two other New

Hampshire Ford dealers filed an action in state court protesting

the proposed relocation. After the suit was brought, Ford

abandoned its plan to relocate Fuller to New Hampton.

Shortly thereafter, Ford told Fuller that it would award

Fuller a new dealership in Plymouth, New Hampshire if Fuller

demonstrated its commitment to such a move by purchasing a

3 Under the parties’ agreement, a “dealer’s locality” is defined as “the locality designated in writing to the Dealer by the Company from time to time as the area of the Dealer’s sales and service responsibility for COMPANY PRODUCTS.” Compl. for Declaratory J. (Doc. # 1 ) , Exhibit A [hereinafter Agreement] ¶ 1 ( j ) . Under the New Hampshire Motor Vehicle Franchise Act, N.H. Rev. Stat. Ann. chapter 357-C, “relevant market area” is defined as “any area within the town or city where the motor vehicle dealer maintains his place of business or the area, if any, set forth in a franchise or agreement, whichever is larger.”

-C:1, XXI (1995). The parties treat the two terms of art as synonymous for purposes of this action, and I do likewise.

-3- facility in Plymouth.4 Fuller purchased a facility in Plymouth

during the summer of 1997, when Plymouth was still part of

Meredith’s dealer locality.

In or around December 1997, Ford notified Meredith that it

had redefined the dealer localities in its central New Hampshire

market. As a result, Plymouth was no longer included within

Meredith’s dealer locality.

On or about February 1 2 , 1998, Ford notified Meredith that

it was relocating Fuller to Plymouth. On February 2 5 , 1998,

Meredith filed a protest action with the New Hampshire Motor

Vehicle Industry Board, claiming that Ford’s decision to relocate

Fuller to Plymouth violated

-C:9.

Meredith subsequently amended its protest action to add an

4 While Meredith alleged the facts set forth in this paragraph upon information and belief, see Meredith’s Answer and Countercls. (Doc. #8) ¶¶ 68-69, the First Circuit has noted that in cases that do not implicate the heightened pleading standard under Federal Rule of Civil Procedure 9(b), “a plaintiff can make allegations either on the basis of personal knowledge or on ‘information and belief.’” Langadinos v . American Airlines, Inc.,

8 , 73 (1st Cir. 2000) (emphasis in original).

-4- allegation that Ford had redefined Meredith’s dealer locality

without good cause, in violation of

-

C:3, III(o).

On September 2 8 , 1999, Ford filed suit in this court,

seeking a judgment declaring that chapter 357-C does not apply to

the parties’ agreement, o r , in the alternative, that application

of the statute to the agreement would violate the contract

clauses of the state and federal constitutions and/or the due

process clause of the Fourteenth Amendment.5 See Compl. for

Declaratory J. (Doc. # 1 ) . Meredith answered Ford’s complaint and

filed the four counterclaims at issue here.

The Board issued its decision in Meredith’s protest action

on August 1 6 , 2000. In that decision, the Board concluded that

(1) Ford lacked good cause for redefining Meredith’s dealer

5 I rejected Ford’s “statutory interpretation” and constitutional arguments in a separate memorandum and order denying Ford’s motion for summary judgment and granting Meredith’s cross-motion for summary judgement. See Ford Motor Co. v . Meredith Motor Co., Inc., CV-99-456-B (D.N.H. Aug. 2 4 , 2000).

-5- locality or relevant market area, and (2) Ford lacked good cause

for relocating Fuller to Plymouth. See Decision and Order of

N.H. Motor Vehicle Industry Board, In r e : Meredith Motors, Inc.,

Docket N o . 0060 [hereinafter Board decision] at 24-25 (August 1 6 ,

2000).

II. Analysis

A. Meredith’s Counterclaims Are Not Subject to the Colorado River Doctrine

Ford argues that under the doctrine developed by the Supreme

Court in Colorado River Water Conservation District v . United

States,

(1976), all four of Meredith’s counterclaims

should be dismissed in deference to Meredith’s protest action

before the Board.6 I disagree.

6 Although the Board has decided the protest action in Meredith’s favor, Ford has twenty days to apply to the Board for rehearing. If Ford exercises this right, it may appeal to the superior court within 30 days after the Board rules on its application for rehearing. See

-C:12, VII (Supp. 1999). Because Ford has an appeal as of right from the Board’s decision, the state proceeding continues to be concurrent with the action in this court.

-6- As a general rule, a federal court is obligated to exercise

the jurisdiction conferred upon it by Congress, even when there

is a parallel action pending in another forum. See Quackenbush

v . Allstate Ins. Co.,

(1996); Colorado River,

; Burns v . Watler,

(1st Cir.

1991). In Colorado River, the Supreme Court developed a narrow

exception to this rule. Under this exception, a federal court

may decline to exercise jurisdiction in deference to a parallel

proceeding under certain “exceptional” circumstances. See

Colorado River,

; Elmendorf Grafica, Inc. v . D.S.

America (East), Inc.,

6 , 50 (1st Cir. 1995). Unlike the

traditional doctrines of abstention, the Colorado River doctrine

rests not on “considerations of proper constitutional

adjudication and regard for federal-state relations,” but on

“considerations of ‘(w)ise judicial administration, giving regard

to conservation of judicial resources and comprehensive

disposition of litigation.’” Colorado River,

;

see also Elmendorf Grafica,

0 .

-7- The Supreme Court and the First Circuit have provided a set

of flexible factors for determining whether the exceptional

circumstances required for application of the Colorado River

doctrine are present. See Moses H. Cone Mem’l Hosp. v . Mercury

Constr. Corp.,

, 23-27 (1983); Colorado River,

; Rivera-Puig v . Garcia-Rosario,

(1st

Cir. 1992); Villa Marina Yacht Sales, Inc. v . Hatteras Yachts,

(1st Cir. 1991). Before these factors can be

applied, however, a court must first determine whether the

concurrent actions in question are parallel. See Al-Abood ex

rel. Al-Abood v . El-Shamari,

(4th Cir. 2000)

(“The threshold question in deciding whether Colorado River

abstention is appropriate is whether there are parallel suits.”);

Dittmer v . County of Suffolk,

(2d Cir. 1998)

(same); Fox v . Maulding,

(10th Cir. 1994)

(same); McLaughlin v . United Virginia Bank,

(4th Cir. 1992) (same). Concurrent actions need not be identical

to be parallel. See Villa Marina,

(noting that

-8- “perfect identity of issues is not a prerequisite for dismissal”

under Colorado River doctrine); Interstate Material Corp. v . City

of Chicago,

(7th Cir. 1988) (“[T]he

requirement is of parallel suits, not identical suits.”).

Rather, suits brought in different forums are parallel if

substantially the same parties are litigating substantially the

same issues. See Al-Abood,

; Dittmer,

; Interstate Material,

. Concurrent actions

that have certain facts and arguments in common, but raise

different legal issues or seek different remedies, are not

parallel for purposes of the Colorado River doctrine. See Al-

Abood,

; McLaughlin,

; Flanders

Filters, Inc. v . Intel Corp.,

(E.D.N.C.

2000).

The Colorado River doctrine does not apply to Meredith’s

counterclaims for breach of contract (Count I ) , breach of the

covenant of good faith and fair dealing (Count I I ) , and violation

of chapter 358-A (Count IV) because none of those claims is

-9- parallel to the concurrent state proceeding in question.

Meredith’s protest action before the Board, which was based

solely on chapter 357-C, presented only two issues: (1) whether

Ford had good cause to redefine Meredith’s dealer locality, and

(2) whether Ford had good cause to relocate Fuller to Plymouth.

By contrast, Meredith’s counterclaims for breach of contract and

breach of the covenant of good faith and fair dealing involve

legal issues not presented in the protest action before the

Board. Meredith’s counterclaim under chapter 358-A seeks a

remedy -- treble damages, see Meredith’s Answer and Countercls.

(Doc. #8) ¶ 95 -- that was not available in its protest action

before the Board. Accordingly, these three counterclaims are not

parallel to the Board proceedings for purposes of the Colorado

River doctrine.

Anticipating this lack of parallelism, Ford maintains that

at a minimum the Colorado River doctrine counsels dismissal of

Meredith’s counterclaim under chapter 357-C (Count I I I ) , which

raises the same issues as presented in the Board proceeding. I

-10- am precluded, however, from dismissing the chapter 357-C

counterclaim under the Colorado River doctrine because it

includes a request for monetary damages, a form of relief that is

not available to Meredith in the state proceeding. See

¶ 9 1 ;

Quackenbush,

(concluding that dismissal on

abstention grounds is not permissible when plaintiff is seeking

damages); DeMauro v . DeMauro,

4 , 98 (1st Cir. 1997)

(same). Because Ford has offered no viable reason other than the

Colorado River doctrine in support of its motion to dismiss

Meredith’s counterclaim under chapter 357-C, Ford’s motion is

denied as to Count III. 7

B. Meredith States a Claim for Breach of Contract

In Count I , Meredith asserts that Ford breached the parties’

agreement because Ford’s decisions to redefine Meredith’s dealer

locality and to relocate Fuller to Plymouth were motivated by a

7 As noted previously, see supra note 5 , I rejected Ford’s argument that chapter 357-C does not apply or cannot be applied to the parties’ agreement in my memorandum and order denying Ford’s motion for summary judgment and granting Meredith’s cross- motion for summary judgment.

-11- desire “to avoid possible legal action by Fuller concerning its

disallowed relocation to New Hampton,” rather than by “any valid

economic reasons, justifiable policy or customer demands.” See

Meredith’s Answer and Countercls. (Doc. #8) ¶ 7 5 . Meredith’s

contract claim depends in large part on its interpretation of

paragraph 9(a) of the parties’ agreement, which reads as follows:

Representation Planning. The Company reserves the right to determine, from time to time, in its best judgment, the numbers, locations and sizes of authorized dealers necessary for proper and satisfactory sales and service representation for COMPANY PRODUCTS within or without the DEALER’S LOCALITY. In making such determinations, the Company from time to time conducts, to the extent deemed adequate by the Company and subject to the ready availability of information, studies of the locality, including such factors as its geographic characteristics, consumer shopping habits, competitive representation patterns, sales and service requirements, convenience of customers or potential customers and past and future growth and other trends in marketing conditions, population, income, UIO [units in operation], VEHICLE sales and registrations and COMPETITIVE and INDUSTRY CAR and TRUCK registrations.

Agreement ¶ 9 ( a ) . According to Meredith’s interpretation of this

paragraph, when making determinations regarding dealer locality

and/or market representation, Ford must exercise its “best

-12- judgment” in accordance with the factors listed in the second

sentence of the paragraph. Meredith therefore contends that Ford

breached its obligations under the agreement by redefining

Meredith’s dealer locality and/or relocating Fuller based on a

desire to placate Fuller, rather than based on the enumerated

factors.

Ford advances an alternative interpretation of paragraph

9(a). Under Ford’s interpretation, its discretion to make the

determinations described in the first sentence of the paragraph

is not limited by the factors listed in the paragraph’s second

sentence. According to Ford, while the paragraph indicates that

Ford is free to conduct market studies that focus on the

enumerated factors, it neither obligates Ford to conduct such

studies nor requires Ford to make the determinations described in

the first sentence of the paragraph in accordance with such

factors.8

8 Ford’s interpretation arguably receives additional support from the agreement’s definition of a “dealer’s locality” as “the locality designated in writing to the Dealer by the Company from time to time as the area of the Dealer’s sales and

-13- Ford also points to another provision of the agreement,

paragraph 9 ( c ) , to support its contention that it has broad

discretion to relocate dealers. Paragraph 9(c) provides in

relevant part that

The Company [i.e., Ford] shall have the right to appoint additional dealers in VEHICLES within or without the DEALER’S LOCALITY except that, if an additional dealer will be within the DEALER’S LOCALITY and within ten (10) miles driving distance of the dealer’s principal place of business, the Company shall not appoint the additional dealer unless a study made pursuant to subparagraph 9(a) reasonably demonstrates, in the Company’s opinion, that such appointment is necessary to provide VEHICLES with proper sales and service representation in such locality with due regard to the factors referred to above in subparagraph 9 ( a ) .

Agreement ¶ 9 ( c ) . Ford argues that under this paragraph, it has

unbridled discretion to locate new dealers inside or outside an

existing dealer’s dealer locality, unless the new dealer is to be

located both within the existing dealer’s dealer locality and

within ten miles of the existing dealer. Ford maintains that its

obligation to act in accordance with the factors listed in the

service responsibility for COMPANY PRODUCTS.” Agreement ¶ 1 ( j ) .

-14- second sentence of paragraph 9(a) only attaches when it is

placing a new dealer within the protected ten-mile zone.

I interpret the parties’ agreement under Michigan law.9

Michigan interprets contracts under the plain meaning rule. See

In re Arbors of Houston Assocs. Ltd. Partnership,

7 ,

N o . 97-2099,

, at *3 (6th Cir. Jan. 4 , 1999) (table;

text available on Westlaw); Kukowski v . Piskin,

1 2 ,

613 (Mich. C t . App. 1980), aff’d,

(Mich. 1982).

Under that rule, if contract language is unambiguous, then its

construction is a matter of law for the court and the language

must be given its plain meaning. See Ford Motor C o . v .

Northbrook Ins. Co.,

, 832 (6th Cir. 1988) (applying

9 The agreement provides that the parties intend it to be construed in accordance with Michigan law. See Agreement ¶ 3 2 . New Hampshire recognizes such choice of law provisions when the contract bears a significant relationship to the jurisdiction whose law is designated as the rule of decision. See Allied Adjustment Serv. v . Heney,

(1984). Here, the requisite relationship is present because Ford has its principal place of business in Michigan. See Compl. for Declaratory J. (Doc. #1) ¶ 3 . The parties do not dispute that Michigan law applies to their agreement.

-15- Michigan l a w ) ; Port Huron Educ. Ass’n, MEA/NEA v . Port Huron Area

Sch. Dist.,

2 8 , 237 (Mich. 1996); Schroeder v . Terra

Energy, Ltd.,

8 7 , 896 (Mich. C t . App. 1997) (citing

G & A Inc. v . Nahra,

(Mich. C t . App. 1994));

Orley Enters., Inc. v . Tri-Pointe, Inc.,

(Mich. C t . App. 1994). “Where the contract language is unclear

or susceptible to multiple meanings, interpretation becomes a

question of fact.” Port Huron Educ. Ass’n, 550 N.W.2d at 237.

In the present case, I determine that Meredith’s

interpretation of Ford’s obligations under paragraph 9(a) is

reasonable.10 I need not decide at this point whether Ford’s

10 My conclusion that Meredith has offered a reasonable interpretation of the language of ¶ 9(a) is in no way based on Meredith’s argument under In re Ten Mile Relief Drain,

(Mich. 1963). Ten Mile Relief Drain is inapposite because it involved interpretation of the discretion delegated to an administrative board under state statute. Statutory interpretation differs from the interpretation of contract language. See Major Oldsmobile, Inc. v . General Motors Corp., 93 CIV. 2189 (SWK),

, at *4 (S.D.N.Y. May 3 1 , 1995) (“The legal standards applicable to issues of statutory interpretation have evolved separately from those involving matters of contract interpretation.”), aff’d,

, N o . 95-7595,

(2d Cir. May 1 7 , 1996) (table; text available on Westlaw); Margaret N . Kniffen, Corbin on Contracts §

-16- alternative interpretation of that provision is also reasonable.

If both interpretations are reasonable, then the provision is

ambiguous and its meaning becomes a question of fact that cannot

be resolved on a motion to dismiss. I f , on the other hand, only

Meredith’s interpretation is reasonable, then Ford’s only

surviving objection to Meredith’s contract claim is undermined.

In either instance, Meredith’s counterclaim survives Ford’s

motion. Accordingly, I deny Ford’s motion as to Count I.11

24.2 (rev. ed. 1998) (“[T]he task of interpreting legislation usually differs from that of interpreting a contract.”). 11 Meredith also seeks to buttress its counterclaim for breach of contract with language contained in the preamble to the agreement. The language upon which Meredith relies reads as follows: “[T]he Company [i.e., Ford] endeavors to provide each of its dealers with a reasonable profit opportunity based on the potential for sales and service of COMPANY PRODUCTS within his locality.” Preamble to Agreement at i i . Ford contends that such language is merely prefatory and cannot give rise to a legally binding obligation. While I have already determined that Ford’s motion must be dismissed as to Count I , and therefore need not resolve whether language in the agreement’s preamble supports Meredith’s counterclaim, I note that Michigan law on this issue is not as simple as Ford suggests. Rather, Michigan law seems to suggest that, at least in certain circumstances, such “recitals” may be relevant to interpreting otherwise ambiguous contract provisions. See Acme Cut Stone C o . v . New Center Dev. Corp.,

(Mich. 1937).

-17- C. Meredith States a Claim for Breach of the Implied Covenant of Good Faith

In Count I I , Meredith alleges that its agreement with Ford

includes an implied covenant of good faith that obligates Ford to

redefine Meredith’s dealer locality “only for valid economic

reasons and/or customer demands.” Meredith’s Answer and

Countercls. (Doc. #8) ¶ 8 0 . According to Meredith, Ford breached

the covenant because it redefined Meredith’s dealer locality and

relocated Fuller based on its desire to avoid a potential lawsuit

by Fuller. See

¶ 8 1 .

Michigan law recognizes an implied covenant of good faith

only in limited circumstances. See Clark Bros. Sales C o . v . Dana

Corp.,

(E.D. Mich. 1999) (noting that

implied covenant “cannot form the basis for a claim independent

of that contract”); Van Arnem C o . v . Manufacturers Hanover

Leasing Corp.,

(E.D. Mich. 1991) (same).

A covenant of good faith will be implied “[w]here a party to a

contract makes the manner of its performance a matter of its own

discretion.” Burkhardt v . City Nat’l Bank of Detroit, 226 N.W.2d

-18- 678, 680 (Mich. C t . App. 1975); see also Hubbard Chevrolet C o . v .

General Motors Corp.,

(5th Cir. 1989) (applying

Michigan l a w ) ; Paradata Computer Networks, Inc. v . Telebit Corp.,

(E.D. Mich. 1993) (observing that

“discretion is the hallmark of the covenant”); Ferrell v . Vic

Tanny Int’l, Inc.,

(Mich. C t . App. 1984) (per

curiam).

In Burkhardt, the court considered whether a contract

between mortgagors and their mortgagee bank included an implied

covenant of good faith. The contract established accounts into

which the mortgagors were required to contribute an amount

estimated by the bank to be sufficient to pay the mortgagors’

taxes and insurance premiums. The contract, however, did not

specify the accounting method the bank would use to make such

estimates. See Burkhardt, 226 N.W.2d at 679. The mortgagors

argued that the contract included an implied covenant of good

faith and that the accounting method the bank employed violated

the covenant. See id. Although the court found no evidence of

-19- bad faith, it concluded that the covenant of good faith attached

to the parties’ contract because it gave the mortgagee bank a

“considerable amount of discretion in the evaluation of the sum

necessary to provide an adequate and available fund from which to

pay taxes and insurance premiums.” Id. at 8 0 .

The implied covenant serves a “supplementing function” and

is intended to protect the parties’ reasonable expectations under

the contract. See Hubbard Chevrolet Co.,

.

Accordingly, Michigan law will not imply a covenant of good faith

“where parties have unmistakably expressed their respective

rights.”

(internal quotation marks and citation

omitted). In other words, the covenant cannot be employed to

“override express contract terms.” Cook v . Little Caesar

Enters., Inc.,

(6th Cir. 2000); Clark Bros.

Sales Co.,

; Van Arnem Co.,

.

Whether the implied covenant of good faith even comes “into

play” in this case depends upon the language of Meredith’s

-20- agreement with Ford. See Hubbard Chevrolet Co.,

(finding that the covenant did not attach). Meredith has

identified language in the contract to which it argues the

implied covenant of good faith attaches. In particular,

paragraphs 9(a) and 9(c) of the agreement could be interpreted to

mean that the manner of Ford’s performance with respect to

determinations of dealer locality and dealer relocation is a

matter of Ford’s discretion.12 Under this reading of the

contract, Ford must exercise “honestly and in good faith,”

12 At the pleadings stage, Meredith is entitled to take inconsistent positions in Counts I and II regarding the interpretation of the agreement’s language. See Fed. R. Civ. P. 8(e)(2); Allied Vision Group, Inc. v . RLI Prof’l Techs., Inc.,

(N.D. Ill. 1996) (explaining that Rule 8(e)(2) allows inconsistency between claims, but not inconsistency within a single claim). At some point Meredith may be required to elect “a theory of its case that is internally consistent.” See Nault’s Auto. Sales, Inc. v . American Honda Motor Co., Inc.,

5 , 50 (D.N.H. 1993); see also Aetna Cas. Sur. C o . v . P & B Autobody,

, 1555 (1st Cir. 1994) (“Because procedural law allows alternative contentions, parties to a civil action involving such an array of factual and legal theories as this case presents may be allowed to defer choice at least until late stages of proceedings in the trial court.”).

-21- see Burkhardt, 226 N.W.2d at 680, its discretion to determine (1)

when it will examine market representation in a dealer’s

locality; (2) whether, and to what extent, it will conduct market

studies before making a decision about market representation; and

(3) whether it will appoint additional dealer(s) within the

dealer’s locality. See Agreement ¶¶ 9 ( a ) , 9 ( c ) .

In addition to alleging sufficient facts to “bring the

covenant into play,” Meredith has alleged sufficient facts to

support an allegation that Ford acted in bad faith. Bad faith is

defined as “‘arbitrary, reckless, indifferent, or intentional

disregard of the interests of the person owed a duty.’” Maida v .

Retirement and Health Servs. Corp., Nos. 93-1625, 93-1635,

, at *5 (6th Cir. Sept. 1 9 , 1994) (per curiam) (citation

omitted). Evidence of dishonesty or fraud, however, is not

necessary to establish bad faith. See

Meredith has alleged

that Ford acted with indifferent or intentional disregard for its

interests when Ford acted to advance the interests of another

dealer (Fuller) and to protect its own interests without regard

-22- to the negative impact those actions would have on Meredith.

Because Meredith has identified contract language to which

an implied covenant of good faith could attach and has alleged

facts that would support an inference of bad faith, I deny Ford’s

motion with respect to Count II. 13

D. Ford’s Alleged Conduct Is Not Exempted Under RSA § 358-A:3, I

Ford argues that Meredith’s counterclaim under chapter 358-A

(Count IV) must be dismissed because it is barred by § 358-A:3,

I , which exempts from the scope of the Consumer Protection Act

transactions that constitute “[t]rade or commerce otherwise

permitted under laws as administered by any regulatory board or

officer acting under statutory authority of [New Hampshire] or of

the United States.”

-A:3, I (1995).

Because Ford’s argument directly conflicts with the

interpretation given to the exemption by this court and the New

13 Because I find that Meredith has alleged sufficient facts to withstand Ford’s motion to dismiss, I express no opinion on Meredith’s alternative argument that the parties’ contract includes an express covenant of good faith.

-23- Hampshire Supreme Court, I reject i t .

Meredith’s chapter 358-A counterclaim against Ford is not

barred simply because Ford is subject to the specialized

regulatory scheme created under chapter 357-C.14 See Nault’s

Auto. Sales, Inc. v . American Honda Motor Co., Inc.,

In New Hampshire Automobile Dealers Association, Inc. v . General Motors Corp.,

(D.N.H. 1985), aff’d in part, vacated in part on other grounds by

(1st Cir. 1986), Chief Judge Devine determined that the plaintiffs were limited to bringing claims against the defendant automobile manufacturer under chapter 357-C, and were not entitled to seek relief under chapter 358-A. See id. at 1160. In the absence of any applicable precedent from New Hampshire, Chief Judge Devine followed the Massachusetts Supreme Judicial Court’s decision in Reiter Oldsmobile, Inc. v . General Motors Corp.,

(Mass. 1979), which interpreted analogous Massachusetts statutes. Thereafter, in Gilmore v . Bradgate Associates, Inc.,

(1992), the New Hampshire Supreme Court held that the existence of a regulatory body charged with overseeing certain standards in a defendant’s industry did not necessarily immunize the defendant from liability under chapter 358-A. See

. A year later, Judge McAuliffe of this court relied on Gilmore to conclude that the existence of chapter 357-C did not preclude a claim against an automobile manufacturer under the more general terms of chapter 358-A. See Nault’s Auto. Sales, Inc. v . American Honda Motor Co., Inc.,

5 , 47-48 (D.N.H. 1993). As indicated in the text, I conclude that Gilmore and Nault’s represent the correct view of the relationship between chapters 357-C and 358-A.

-24- 2 5 , 48 (D.N.H. 1993) (“The mere existence of legislation aimed at

regulating a particular industry does not necessarily preclude an

action under the Consumer Protection Act against individuals

operating within that industry.”); cf. Therrien v . Resource Fin.

Group, Inc.,

2 2 , 328-29 (D.N.H. 1989) (holding that

provisions of federal Truth in Lending Act do not preclude a

chapter 358-A action against lender); WVG v . Pacific Ins. Co.,

0 , 72-73 (D.N.H. 1986) (holding that provisions of

New Hampshire Unfair Insurance Trade Practices statute do not

preclude a chapter 358-A action against insurer). Similarly, the

mere existence of an administrative body such as the Board does

not immunize a defendant subject to that body’s authority from

suit under chapter 358-A. See Gilmore v . Bradgate Assocs., Inc.,

3 4 , 238-39 (1992) (“The mere existence of a regulatory

body to oversee certain standards of an industry does not remove

all acts and practices of that industry from the provisions of

the Consumer Protection Act.”). 15

15 Ford‘s reliance on Rousseau v . Eshleman,

(1986), reconsideration denied,

(1987), which held

-25- Furthermore, Ford misapprehends the meaning of the exemption

provided in § 358-A:3, I . As both the New Hampshire Supreme

Court and this court have explained, the applicability of this

exemption turns on whether the specific conduct challenged by a

plaintiff is “otherwise permitted” by an authorized regulatory

board or officer, not on whether the defendant’s business or

industry is subject to regulation by such an authority. The New

Hampshire Supreme Court has adopted the following interpretation

of the exemption:

[T]he plain meaning of the exemption is that transactions deemed lawful by other laws of New Hampshire or of the United States will be exempt from the provisions of RSA chapter 358-A. This construction of the act focuses on the act which is alleged, rather than the industry regulated, and requires the conduct to be permitted by a regulatory board or officer under another statute, in order for the RSA 358-A:3, I , exemption to apply. According to this theory, the exemption will apply where a party attempts to label as

that an attorney’s practice of law does not fall within the scope of chapter 358-A, is unavailing. The New Hampshire Supreme Court has since limited the reasoning of Rousseau to “the context of attorneys, whose individual conduct and practice is subject to a comprehensive regulatory and disciplinary framework under the jurisdiction of the [New Hampshire Supreme Court].” Gilmore,

.

-26- fraud, deceit or misrepresentation conduct which is “otherwise permitted” under laws administered by regulatory boards or officer’s [sic] acting under the statutory authority of this State or the United States.

Gilmore,

. This court has similarly concluded

that

The plain meaning of the exemptive section of the Consumer Protection Act is that transactions permitted under other laws of New Hampshire or the United States will not be deemed illegal under RSA ch. 358-A. Conversely, if transactions are not permitted under other laws, either expressly or impliedly, then they are subject to regulation under the Consumer Protection Act. The goal of the legislature would seem to encompass avoidance of a direct conflict with a regulatory scheme. Under RSA ch. 358-A:3, I the issue is whether a transaction is “otherwise permitted,” and not whether an agency exists to review the transaction.

WVG,

2 . This narrow reading of the exemption is

consistent with the New Hampshire Supreme Court’s relatively

expansive interpretation of chapter 358-A’s reach. See Gilmore,

(describing the New Hampshire Consumer Protection

Act as “a comprehensive statute designed to regulate business

practices for consumer protection”) (quoting Chase v . Dorais,

(1982)) (internal quotation marks omitted).

-27- Ford’s contention that the exemption applies to Meredith’s

counterclaim under chapter 358-A fails because Ford has not

demonstrated (and cannot demonstrate) that the specific conduct

of which Meredith complains -- i.e., the relocation of Fuller to

Plymouth and the redefinition of Meredith’s dealer locality -- is

“otherwise permitted” under chapter 357-C as administered by the

Board. To the contrary, the Board has determined under chapter

357-C that Ford lacked good cause for the two challenged actions.

See Board decision at 24-25. Because the exemption does not

apply, Meredith has stated a cognizable claim under chapter 358-

A. Accordingly, Ford’s motion is denied as to Count IV.

III. Conclusion

For the reasons set forth above, Ford’s motion to dismiss

Meredith’s counterclaims (Doc. #12) is denied.16

16 Because I have denied Ford’s motion for the reasons stated herein, I need not address whether the timing of Ford’s declaratory judgment action evidences bad faith or an unfair or deceptive practice in support of Counts I I , III, and/or IV. See Meredith’s Answer and Countercls. (Doc. #8) ¶¶ 7 8 , 8 2 , 9 0 .

-28- SO ORDERED.

Paul Barbadoro Chief Judge

August 2 4 , 2000

cc: James E . Higgins, Esq. Nicholas T . Christakos, Esq. Gregory A . Holmes, Esq.

-29-