Colonial Imports v. Volvo CV-98-342-B 01/09/01 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Colonial Imports Corporation d/b/a Volvo of Nashua

v. Civil No. 98-342-B Opinion NO. 01DNH008 Volvo Cars of North America, Inc.

MEMORANDUM AND ORDER

Colonial Imports Corporation, a retail automobile dealership

owned and operated by Wilfrid Piekarski, alleges that Volvo Cars

of North America, Inc., a distributor of automobiles, automobile

parts, and accessories, violated the New Hampshire Motor Vehicle

Franchise Act,

-C:1 et seq., by

instituting a flawed dealer incentive program and then

administering that program to the financial detriment of

Colonial. Colonial also asserts various other state law claims

for relief based on this same course of conduct. I have before

me Volvo’s motion for summary judgment, (Doc. N o . 3 9 ) . For the

reasons set forth below, I grant Volvo’s motion. I. BACKGROUND1

In 1986, Colonial entered into an agreement with Volvo to

sell and service its automobiles. The parties’ business

relationship initially appeared to be successful. Colonial was

consistently one of Volvo’s top dealers in New England in terms

of sales volume during the 1990's. This sales volume, combined

with Colonial’s high scores on customer satisfaction surveys,

enabled Colonial to receive $2,200,000 in cash incentive payments

under Volvo’s “Dealer of Excellence” program between 1992 and

1995.

A. The Partnering for Excellence Program

Volvo began to experience a downturn in its business during

the early 1990s. Competition increased during this period, sales

dropped from the record highs of the 1980's, and profits

declined. J.D. Power & Associates, a leading automobile industry

analyst, ranked Volvo in the bottom quartile of the industry for

customer satisfaction. Moreover, Volvo’s competitors began to

aggressively upgrade their facilities and dealership staff.

1 I describe the background facts in the light most favorable to Colonial, the nonmoving party. -2- In 1996, in response to this competitive environment, Volvo

encouraged its dealers to improve their facilities, hire new

employees and/or extensively retrain old employees through a

program known as “Partnering for Excellence” (“PFE”). The goal

of the PFE program was to improve Volvo’s J.D. Power customer

satisfaction ratings and, ultimately, its sales.

Volvo recognized that the improvements it wanted would place

a serious financial burden on its dealers. As an incentive to

encourage dealers to upgrade their facilities and staff, the PFE

program provided that a dealer could receive cash awards, in

addition to those available under the Dealer of Excellence

program, for every Volvo sold. In order to be eligible for PFE

awards a dealer had t o : (1) comply with certain facility and

personnel standards set by Volvo; and (2) maintain a customer

satisfaction index (“CSI”) rating of 83 in showroom satisfaction

and 70 in service satisfaction for each month during a six-month

period.2 There were two PFE periods: January 1st to June 30th

2 The CSI thresholds for the PFE program were at least as high as those for the Dealer of Excellence program. Dep. of Peter Butterfield, Ex. 1 to Aff. of W . Piekarski (hereinafter “Piekarski Aff.”), submitted with Pl.’s O b j . to Def.’s Mot. for Summ. J., (Doc. N o . 4 1 ) , at 124-25. Thus, if a dealer qualified for a PFE award, he most likely qualified for a Dealer of

-3- and July 1st to December 31st.

1. CSI Ratings

Under both the PFE program and the Dealer of Excellence

program, CSI ratings for showroom and service satisfaction were

determined by customers’ responses to surveys conducted by a

private contractor, Audits & Surveys Worldwide. Audits & Surveys

surveyed all Volvo customers who recently had purchased or leased

a new Volvo or who recently had had their Volvo serviced by a

Volvo dealer. PFE Section II §§ 3.1, 3.5, 4.1, 4.5.3 The

survey’s initial questions were “screening questions” intended to

establish that the proper person was being interviewed. PFE

Section II §§ 3.5, 4.5. Customers were then asked thirteen

showroom-related questions or fifteen service-related questions

about their experience with their Volvo dealer.4 PFE Section II

Excellence payment as well. 3 “PFE Section II” refers to “Section II - The Volvo Excellence Program Rules and Regulations” of the Partnering for Excellence documents submitted as Tab 8 in the Appendix (hereinafter “Def.’s App.”) to Volvo’s motion for summary judgment, (Doc. N o . 3 9 ) . 4 Customers also were asked a number of supplemental questions that served “as a diagnostic tool to provide a better understanding of customer expectations.” PFE Section II §§ 3.7, 4.7. Answers to these supplemental questions did not count

-4- §§ 3.6, 4.6. Customers were instructed to select from a range of

acceptable responses such as excellent, very good, good, fair, or

poor. PFE Section II §§ 3.6-.8, 4.6-.8.

A customer’s answer for each survey question was assigned a

numerical rating on a scale of zero to eight. PFE Section II §§

3.8, 4.8. For example, an answer of “excellent” rated an 8 while

an answer of “very good” rated a 4 , a “good” rated a 2 , a “fair”

rated a 1 , and a “poor” rated a 0 . Id. The numerical ratings

for the answers provided by all of the dealer’s customers were

then added together to determine its overall score. Id. Next,

the total number of answers given by all of the dealer’s

customers for each question was determined and multiplied by

eight, the highest score possible for an individual question, to

identify the dealer’s maximum achievable score for that question.

Id. For example, if fifty-four answers were received to a

particular question, fifty-four was multiplied by eight to

determine that the maximum possible score that a dealer could

receive on that question was 432. PFE Section II §3.8 (chart).

The maximum achievable scores for each question were then added

towards the dealer’s CSI rating. Id. -5- together to determine the maximum overall achievable score. PFE

Section II §3.8. Finally, the dealer’s overall score was divided

by the maximum overall achievable score to obtain its showroom or

service CSI rating. Id.

To determine the value of a dealer’s PFE award, showroom and

service CSI ratings were each converted into a dollar value

according to a sliding scale.5 PFE Section II § 5.4. The two

dollar values were then added together and multiplied by the

number of eligible cars sold.6 Id. The higher the scores, the

higher the dealer’s PFE award; a dealer could receive up to

$1,500 for each eligible new car sold. Id.

2. The PFE Program’s Impact on Dealers

Volvo’s decision to tie CSI scores directly to cash

incentives proved to be controversial, in large part because CSI

ratings were based on the results of subjective surveys. As

dealers became dependent on Dealer of Excellence and PFE

5 For example, the threshold service CSI rating of 70 has a dollar value of $100 while a perfect 100 rating has a dollar value of $750. PFE Section II § 5.4. 6 Volvo set forth a number of rules to determine whether a a car sale is eligible to be included in this multiplier. See PFE Section II §§ 5.1-.3.

-6- payments, the temptation to manipulate survey results increased.

Volvo became aware, as early as 1993, that some dealers were

coaching, even bribing, customers to ensure favorable survey

responses to Dealer of Excellence surveys. See Mem. from Franson

to Dealer Principals of 07/02/1993, Ex. 10 to Piekarski Aff.

Other dealers falsified customer information to ensure that

disgruntled customers would never be surveyed. While Volvo

informed its dealers that such practices were impermissible, it

did little else to remedy the problem.

Volvo did not require its dealers to participate in the PFE

program. Nevertheless, the prospect of receiving PFE payments in

addition to Dealer of Excellence payments was too enticing for

dealers to pass up. Participating dealers obtained a significant

competitive advantage: they could simultaneously upgrade their

facilities and staff while charging lower prices in anticipation

of PFE award money.

3. Colonial Enters the PFE Program

Colonial entered the PFE program in January 1996, and agreed

to comply with the rules for the program established by Volvo.

Dep. of Wilfrid Piekarski (hereinafter “Piekarski Dep.”), Def.’s

App. Tab 2 , at 94-96. Colonial decided to use its anticipated

-7- PFE awards to help finance the relocation of its Volvo franchise

to a new location on the Daniel Webster Highway in Nashua, New

Hampshire (the “New Facility”). Piekarski, in his own name,

signed a purchase and sale agreement for the New Facility on

April 2 8 , 1996, at a cost of $2,600,000. The closing was set for

June 2 8 , 1996, and Piekarski put down a $25,000 non-refundable

deposit. Colonial planned to spend an additional $400,000 to

renovate the New Facility.

Colonial also operated a Toyota dealership at a different

site in Nashua. At the same time that it was negotiating to

purchase the New Facility, Colonial made a commitment to Toyota

that it would convert its existing Volvo site into a Toyota truck

dealership.

B. Colonial’s CSI Ratings Fall Below PFE Minimums

Prior to either of these negotiations, Colonial began to

consider a significant personnel decision. Piekarski had become

increasingly disenchanted with the performance of his general

manager and son-in-law, Richard Lovering. During Lovering’s

December 1995 performance review, Piekarski informed him of the

possibility that he might be replaced as general manager.

Piekarski ultimately placed Lovering on a leave of absence in

-8- March 1996. Lovering resigned shortly thereafter.

Lovering subsequently purchased a dealership in Concord, New

Hampshire, that carried both Isuzu and Volvo vehicles. He began

operations in Concord in May 1996 and proceeded to hire six

experienced Colonial employees, including his father and brother.

Piekarski Dep. at 167-72.

On June 2 8 , 1996, the Purchase and Sale Agreement for the

New Facility expired and Piekarski forfeited his deposit.7 Two

days later, the first period for the 1996 Dealer of Excellence

and PFE programs ended. Colonial received approximately $189,000

in payments under these programs for this period. Def.’s Stmt.

of Undisputed Material Facts (hereinafter “Def.’s Stmt.”),

submitted with Def.’s Mot. for Summ. J., (Doc. N o . 3 9 ) , ¶ 4 5 ;

Pl.’s O b j . to Def.’s Stmt., (Doc. N o . 4 3 ) , ¶ 4 5 .

7 Volvo asserts that Piekarski decided not to purchase the New Facility and knowingly forfeited the $25,000 deposit. Colonial contends that Piekarski’s relationship with the seller was such that he did not ask for a formal extension but checked periodically on the availability of the property after June 2 8 , 1996. Piekarski Dep. at 106, 291-92. In essence, Piekarski suggests that he had an informal understanding with the seller that effectively gave him a right of first refusal or an ongoing option to purchase the New Facility. See id. Colonial further asserts that its decision not to purchase the New Facility was the result of Volvo’s “bad faith conduct” towards Colonial.

-9- The departure of Lovering, and the other key employees who

went to work for him, caused Colonial’s CSI ratings to drop

during the second half of 1996. Showroom satisfaction dropped to

the upper 70's, below the threshold score of 8 3 , beginning in

July. Letter from W . Piekarski to Butterfield of 01/21/1997

(hereinafter the “Appeal Letter”), Ex. 19 to Piekarski Aff.

Service satisfaction dipped to 69.6 for the month of September,

just below the threshold of 7 0 . Id. Volvo sales representatives

warned Colonial in the summer of 1996 that it was in danger of

not receiving any PFE payments because of the drop in its CSI

ratings. Piekarski Dep. at 291. Circumstances did not improve

during the remainder of the year. Thus, Colonial did not qualify

for any PFE money during the second half of 1996.

C. Colonial’s Appeal

The PFE program provided for appeals by dealers who

“require[d] a variance on a rule or contest[ed] a judgment or

violations.” PFE Section II § 1.7. The PFE manual states that

before preparing an appeal, a dealer should ask the following

four questions:

(1) “Does the issue being raised have a material effect on the results of the [PFE] award?”

-10- (2) “Does the issue pertain to the rules of the program? (If the issue concerns the design or methodology of [the PFE program], it is not suitable for appeal.)” (3) “Have the rules been applied unfairly? (If rules of the program have been administered fairly, the issue is not suitable for appeal.)” (4) “Has a situation occurred which places the [dealer] in an unfair disadvantage? (i.e. natural disasters.)”

Id. Volvo’s Retail Audit Appeal Committee (the “Appeal

Committee”), comprised of Volvo representatives and dealers,

considered dealer appeals and then forwarded its decision, along

with an explanation, to the dealer. PFE Section II §§ 1.7, 7.1.

The PFE manual states that “[i]n all appeals and other matters

relating to the interpretation and application of any rule or

aspect of the [PFE] Program, the decision of Volvo shall be

final.” PFE Section II § 1.7.

Colonial requested an exception to the minimum CSI standards

because it felt that the departure of Lovering, and the key

employees who subsequently went to work for him, put Colonial at

an unfair disadvantage. See Appeal Letter. The Appeal Committee

considered Colonial’s appeal and ultimately denied i t , without

explanation, by letter dated April 1 6 , 1997.8

8 Volvo asserts that the Appeal Committee denied Colonial’s appeal “after concluding that retailers are responsible for management during personnel changes.” Aff. of Peter Butterfield

-11- Two months before the Appeal Committee rejected the appeal,

Colonial formally requested that Toyota approve the proposed

relocation of its Toyota truck franchise to the current Volvo

site. In its letter to Toyota, Colonial stated that it intended

to either sell or terminate the Volvo franchise by April 17th.

Letter from W . Piekarski to Norton of 02/11/1997, Def.’s App. Tab

13. In the interim, Colonial was in somewhat of a bind. It had

promised Toyota that it would use its existing Volvo site

exclusively for Toyota trucks but, since Piekarski had not

purchased the New Facility, it had no other location for the

Volvo dealership.

Colonial initially attempted to balance the competing needs

of both dealerships by combining them at its current site. It

soon began, however, to refuse some shipments of Volvo inventory

it had previously ordered. After Volvo denied Colonial’s appeal,

Colonial decided to stop accepting all shipments of new Volvos,

but offered to continue servicing existing customers. Piekarski

Dep. at 265.

(“Butterfield Aff.”), submitted with Def.’s Mot. for Summ. J., (Doc. N o . 3 9 ) , ¶ 1 2 .

-12- On March 6, 1997, Colonial told Volvo that it had Colonial’s

consent to “discuss and present to us potential buyers” for their

Volvo dealership. Letter from W . Piekarski to Hauge of

03/06/1997, Def.’s App. Tab 1 4 . Colonial explained, however,

that “[n]ew facilities will be required as we intend to operate

our Toyota Truck Center in the present Volvo facility.” Id. On

April 4 , Toyota approved the relocation of the franchise to the

Volvo site on the condition that the Volvo franchise would be

moved to a different location.

On April 1 8 , 1997, two days after Volvo denied Colonial’s

appeal, it informed Colonial that it was in default under the

Sales Agreement for refusing delivery of its allocation of new

Volvos. Letter from Butterfield to W . Piekarski of 04/18/1997,

Def.’s App. Tab 1 6 . Volvo requested that Colonial cure these

defaults by June 26th, but Colonial did nothing. By letter dated

June 3 0 , 1997, Volvo notified Colonial that it was terminating

the Sales Agreement, effective October 3 , 1997. Letter from

Butterfield to W . Piekarski of 06/30/1997, Def.’s App. Tab 1 7 .

D. The Grace Period

On June 5 , 1997, Volvo notified all dealers that it was

modifying the PFE program to include a “grace period.” Under

-13- this modification, dealers with a proven track record in

satisfying customers would receive PFE payments even if their

scores fell below the threshold for one period. On June 2 6 ,

1997, Volvo sent Colonial a check in the amount of $142,100.

Letter from Hauge to W . Piekarski of 06/26/1997, Ex. 22 to

Piekarski Aff. Volvo’s letter to Colonial described the enclosed

check as payment in satisfaction of Colonial’s second-half 1996

PFE awards, in accordance with the newly instituted grace period.

Id.

Prior to the scheduled termination date of the Sales

Agreement, Colonial transferred whatever interest it had in the

Volvo franchise to M r . Piekarski’s daughter, Linda Lovering.

Volvo ultimately approved Mrs. Lovering, the wife of Colonial’s

former general manager, as the new dealer. She began operating

from the New Facility in March, 1998.

II. STANDARD OF REVIEW

Summary judgment is appropriate if the record, viewed in the

light most favorable to the non-moving party, shows that no

genuine issues of material fact exist and that the moving party

-14- is entitled to judgment as a matter of law. See Fed. R. Civ. P.

56(c); Ayala-Gerena v . Bristol Myers-Squibb Co.,

6 , 94-

95 (1st Cir. 1996). A material fact is one “that might affect

the outcome of the suit under the governing law.” Anderson v .

Liberty Lobby, Inc.,

(1986). A genuine factual

issue exists if “the evidence is such that a reasonable jury

could return a verdict for the nonmoving party.”

The party moving for summary judgment “bears the initial

responsibility of informing the district court of the basis for

its motion, and identifying those portions of [the record] . . .

which it believes demonstrate the absence of a genuine issue of

material fact.” Celotex Corp. v . Catrett,

(1986). Once the moving party has properly supported its motion,

the burden shifts to the nonmoving party to “produce evidence on

which a reasonable finder of fact, under the appropriate proof

burden, could base a verdict for i t ; if that party cannot produce

such evidence, the motion must be granted.” Ayala-Gerena,

(citing Celotex,

; Anderson,

4 9 ) . I apply this standard in ruling on Volvo’s motion for

summary judgment.

-15- III. DISCUSSION

Colonial asserts claims for (1) violation of the Motor

Vehicle Franchise Act, N.H. Rev. Stat. Ann. 357-C:1 et seq.; (2)

breach of the covenant of good faith and fair dealing implied by

law in the Sales Agreement between Volvo and Colonial; (3)

violation of the New Hampshire Consumer Protection Act, N.H. Rev.

Stat. Ann. 358-A:1 et seq.; (4) tortious interference with

prospective business relations; (5) negligent misrepresentation;

and (6) intentional misrepresentation. I examine Volvo’s

challenges to these claims in the sections that follow.

A. The Motor Vehicle Franchise Act

New Hampshire’s Motor Vehicle Franchise Act provides that it

is unlawful for any

manufacturer, factory branch, factory representative, distributor, distributor branch, distributor representative, or motor vehicle dealer to engage in any action which is arbitrary, in bad faith, or unconscionable and which causes damage to any such parties or to the public.

-C:3, I (2000). An action is arbitrary

under the Act if it is “selected at random and without reason.”

Schott Motorcycle Supply, Inc. v . Am. Honda Motor Co.,

8 , 63 (1st Cir. 1992) (construing Maine’s Motor Vehicle

-16- Franchise Act) (internal citations and quotations omitted); see

also Appeal of Bd. of Trustees of Univ. Sys. of N.H. for Keene

State College,

(1987) (“[t]he common meaning of

arbitrary is a decision based on random or convenient selection

or choice rather than on reason”) (internal citations and

quotations omitted).

Colonial argues that Volvo violated the Motor Vehicle

Franchise Act by arbitrarily: (1) using subjective surveys to

determine a dealer’s eligibility for PFE awards; (2) hiring an

unqualified contractor to conduct the surveys; and (3) un-

reasonably denying Colonial’s appeal.9

1. The CSI Scores

I reject Colonial’s claim that Volvo arbitrarily used

subjective and manipulable customer satisfaction surveys to

determine a dealer’s eligibility for PFE awards. Many automobile

manufacturers and distributors use surveys to measure customer

9 Colonial has failed to produce any evidence to support its contentions that Volvo’s actions were “unconscionable” or that it acted in “bad faith.” Nor does it contend that Volvo terminated it without “good cause” in violation of

-C:3, III ( c ) . See Transcript (hereinafter “Tr.”) of Oral Argument on 11/16/2000 (Doc. N o . 4 9 ) , 57-58.

-17- satisfaction. See Ford Motor C o . v . West Seneca Ford, Inc., N o .

91-CV-0784E(F),

, at *5 (W.D.N.Y. Jan. 3 0 , 1997);

In r e : Van Ness Auto Plaza, Inc.,

(Bankr. N.D.

Cal. 1990). Customer satisfaction is ultimately a subjective

opinion, not an objective fact, because only the customer knows

whether she truly feels satisfied. See generally Susan J.

Becker, Public Opinion Polls and Surveys as Evidence: Suggestions

for Resolving Confusing and Conflicting Standards Governing

Weight and Admissibility, 70 O r . L. Rev. 463, 516-17 (1991).

This subjectivity does not, however, lead inevitably to the

conclusion that the use of customer satisfaction surveys is

arbitrary. Cf. West Seneca Ford, Inc.,

, at *5

(stating that distributor was justified in terminating dealer who

failed to “achieve a sufficient level of customer satisfaction

and service”); In r e : Van Ness Auto Plaza, Inc.,

(stating that “it is not beyond the realm of reasonable

decisions” for a manufacturer to refuse to accept a dealer with

below average C S I ) . Given the inherently subjective nature of

customer satisfaction and its importance to any commercial

endeavor, it was not unreasonable for Volvo to base dealer

incentives on the results of surveys that attempted to measure

-18- customer satisfaction.

I am also unpersuaded by Colonial’s claim that Volvo’s use

of CSI scores was arbitrary because other dealers manipulated

their customers’ responses to the surveys or acted in cahoots

with Volvo to do s o . See Pl.’s Stmt. of Disputed Material Facts,

(Doc. N o . 4 2 ) , ¶¶ 21-31. Colonial has failed to identify any

evidence to support its assertion that the manipulation of CSI

data by other dealers led to its own failure to achieve the

requisite CSI ratings for the second half of 1996.10 Thus, even

if such manipulation occurred, Colonial cannot prove that it

produced the injury on which it bases its claim.

2. Selection of an Unqualified Survey Firm

Colonial has also produced insufficient evidence to support

its contention that the PFE program was flawed because Volvo

10 At oral argument, I suggested that perhaps Volvo set the CSI thresholds for the PFE program at an unreasonably high level because of the manipulation of customers’ survey responses by other dealers. See Tr. at 26-27. Colonial, however, cannot point to any evidence that reasonably supports that inference. See Tr. at 73-74. I also note that while CSI thresholds for the Dealer of Excellence program changed over time, the record suggests that CSI thresholds for the PFE program remained constant from January 1996, when Colonial entered the program, through at least the end of 1996. See PFE Rules, Section I , Def.’s App. Tab 8 , at 1298 (stating that award entry level will be kept constant).

-19- hired an unqualified survey firm to conduct the surveys. While

Volvo’s survey firm had little or no experience with the

automobile industry, it had a long history of measuring and

supplying customer satisfaction data to clients in other

industries. See Report of Fred Winkel, Senior V.P. of Audits &

Surveys, Ex. 6 to Piekarski Aff., ¶¶ 3-5. I cannot accept

Colonial’s contention that Volvo acted arbitrarily merely because

it selected a contractor that had not previously worked in the

automobile industry.

3. The Appeal

Colonial also argues that Volvo acted arbitrarily by denying

Colonial’s appeal.11 To support this claim, it points to Section

1.7 of the PFE rules, which states that a dealer should ask the

following question before preparing an appeal: “[h]as a situation

occurred which places the [dealer] in an unfair disadvantage?

(i.e. natural disasters).” PFE Section II § 1.7. It then argues

that Volvo should have granted its appeal because the departure

11 That decision was final according to the PFE rules: “[i]n all appeals and other matters relating to the interpre- tation and application of any rule or aspect of the [PFE] Program, the decision of Volvo shall be final.” PFE Section II § 1.7.

-20- of Lovering and other key employees put Colonial at an unfair

disadvantage.

Colonial’s argument fails for two reasons. First, it

depends upon the flawed premise that Section 1.7 obligates Volvo

to grant an appeal whenever a dealer is unable to earn a PFE

award because it has been placed at an “unfair disadvantage.”

Notwithstanding Colonial’s contrary assertions, this section of

the PFE rules merely lists a series of questions that a dealer

must ask itself before preparing an appeal. It does not restrict

Volvo’s discretion to deny unjustified appeals. Second, even if

Colonial had a contractual right to receive PFE payments for the

period in question if it could demonstrate that it had been

placed at an “unfair disadvantage,” it is not entitled to relief

because the circumstances it cites to support its appeal do not

qualify as an “unfair disadvantage.” In an effort to explain

what it meant by “unfair disadvantage,” Volvo gave as an example

“natural disasters.” Colonial, in contrast, cited only the loss

of several key employees to a competitor as the basis for its

appeal. This is hardly the kind of serious unforeseeable

difficulty that is akin to a natural disaster. Accordingly,

Volvo did not act arbitrarily in denying Colonial’s appeal.

-21- 4. Conclusion

Construing the evidence in the light most favorable to

Colonial, I conclude that no reasonable person could find that

Volvo violated the Motor Vehicle Franchise Act. Accordingly, I

grant Volvo’s motion for summary judgment with respect to Count

II of Colonial’s complaint.

B. Good Faith and Fair Dealing

Colonial argues that the same conduct discussed above also

violated the implied covenant of good faith and fair dealing

inherent in the Sales Agreement between Colonial and Volvo.12 I

analyze this claim using New Hampshire law.13

12 Colonial also alleges that Volvo violated its obligation under the Preamble of the Sales Agreement to “deal fairly” with Colonial and to conduct its business “ethically and equitably”. See Sales Agreement, Def.’s App. Tab 6, Preamble. I construe the terms of the Preamble as simply an explicit statement of the covenant of good faith and fair dealing implied by law. 13 The Sales Agreement provides that it is to be interpreted in accordance with New Jersey law. My research, however, reveals no material conflict between the law of New Jersey or New Hampshire with regard to the implied covenant of good faith and fair dealing. Compare Sons of Thunder, Inc. v . Borden, Inc.,

(N.J. 1997) with Centronics Corp. v . Genicom Corp.,

(1989). Accordingly, I need not reach the issue of whether the Sales Agreement’s choice-of-law provision governs Colonial’s good faith and fair dealing claim. See Fratus v . Republic Western Insur. Co.,

5 , 28 (1st Cir. 1998); Fashion House, Inc. v . Kmart Corp.,

-22- In Centronics v . Genicom Corp., the New Hampshire Supreme

Court held:

[U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement’s value, the parties’ intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties’ purpose or purposes in contracting.

(emphasis added).

I assume, for purposes of analysis, both that the rules of

the PFE gave Volvo discretion sufficient to deprive Colonial of a

substantial portion of the contract's value and that the Sales

Agreement, and by extension, the PFE, created a legally

enforceable contract. See

. Therefore, in determining

whether Volvo violated an implied covenant of good faith and fair

dealing, I need only consider whether Volvo's actions “exceeded

the limits of reasonableness.”

. The answer to this

question, according to the New Hampshire Supreme Court,

depends on identifying the common purpose or purposes of the contract, against which the reasonableness of the complaining party’s expectations may be measured, and in furtherance of which community standards of honesty, decency and reasonableness can be applied.

(1st Cir. 1989). -23- Id. at 144.

Since I have previously concluded that Volvo did not act

arbitrarily or in bad faith in implementing the PFE program and

applying it to Colonial, I have little difficulty in determining

that Volvo’s actions in adopting and administering the PFE

program were a reasonable attempt to measure and improve customer

satisfaction that fell well within the bounds of community

standards of honesty, decency, and reasonableness. See

Centronics,

. Therefore, I reject Colonial’s

claim that Volvo breached its duty of good faith and fair

dealing.

C. The Consumer Protection Act

In Count III of its complaint, Colonial alleges that Volvo’s

conduct violated the New Hampshire Consumer Protection Act,

-A:1 et seq. Volvo argues that this claim

is barred by § 358-A:3, I , which exempts from the scope of the

Consumer Protection Act all “[t]rade or commerce otherwise

permitted under laws as administered by any regulatory board or

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

or of the United States.”

-A:3, I

(2000).

-24- Relying on Gilmore v . Bradgate Assocs., Inc.,

(1992), I previously have held that § 358-A:3, I does not

preclude an automobile dealer from bringing a Consumer Protection

Act claim against an automobile distributor or manufacturer. See

Ford Motor C o . v . Meredith Motor Co., Inc.,

(D.N.H. Aug. 2 4 , 2000); see also Nault’s Auto. Sales, Inc. v .

American Honda Motor Co., Inc.,

5 , 47-48 (D.N.H.

1993). Given the New Hampshire Supreme Court’s recent decision

overruling Gilmore, see Averill v . Cox,

(N.H.

2000), I now reassess this conclusion.

In Averill, the New Hampshire Supreme Court reaffirmed its

previous holding that the practice of law falls within the scope

of the exemption provided by § 358-A:3, I .

(reaffirming Rousseau v . Eshleman,

(1986)). In

reaching its holding, the Court: (1) expressly overruled its

holding in Gilmore that had limited the reach of § 358-A:3, I to

actions that are expressly permitted by a regulatory board or

officer; and (2) outlined a new, broader interpretation of § 358-

A:3, I . See id. at 1087-89.

According to Averill, in order for specific trade or

commerce to be exempt under § 358-A:3, I , it must b e : (1)

-25- subject to regulation that is “comprehensive . . . [involving]

more than ‘mere licensing requirements, approval of plans or

declarations, limited trade provisions, and consumer protection

prohibitions,’” Averill,

(quoting Gilmore,

(Horton, J., concurring)); and (2) “governed by a

statutorily authorized regulatory regime that protects consumers

from the same deception, fraud, and unfair trade practices as

intended by” the Consumer Protection Act.

The remedies

“available to aggrieved consumers under qualifying regulatory

schemes” need not be identical to those provided by the Consumer

Protection Act. Id. at 1089. “Rather, it is sufficient that the

regulatory scheme protects consumers from fraud and deception in

the marketplace ‘in a manner calculated to avoid the same ills’”

as the Consumer Protection Act. Id. at 1089 (quoting Gilmore,

(Horton, J., concurring)).

The commercial relationship of motor vehicle dealers to

distributors, or manufacturers, clearly fits under the first

prong of the Averill test. The Motor Vehicle Franchise Act

governs all written or oral agreements between motor vehicle

distributors, or manufacturers, and dealers. N.H. Rev. Stat.

-26- Ann. § 357-C:6 (2000). It prohibits a broad array of conduct,

and goes well beyond mere licensing requirements. See, e.g.,

-C:3 (prohibited conduct), 358-C:4

(delivery and preparation obligations), 357-C:5 (warranty

obligations), 357-C:9 (limitations on establishing or relocating

dealerships); see also

-C:12 (creating

New Hampshire Motor Vehicle Industry Board to enforce the statute

and to adopt rules as necessary).

As for the second prong of Averill, I note that the Motor

Vehicle Franchise Act prevents manufacturers or dealers from

engaging in “any action which is arbitrary, in bad faith, or

unconscionable and which causes damage to [automobile dealers or

manufacturers] or to the public.”

-

C:3. This prohibition encompasses the same “unfair or deceptive

act[s] or practice[s]” prohibited by the Consumer Protection Act.

See

-A:2.

Accordingly, I conclude that the commercial relationship of

motor vehicle dealers to distributors, or manufacturers, falls

within the exemption to the Consumer Protection Act provided by §

358-A:3, I . Colonial’s Consumer Protection Act claim is

-27- therefore barred; and I grant Volvo’s motion for summary judgment

with regard to Count III.

D. Tortious Interference

In Count IV of its complaint, Colonial alleges that Volvo’s

withholding of PFE payments damaged Colonial’s relationship with

present and potential customers. I assume for purposes of

analysis that this allegation could potentially give rise to a

claim of tortious interference with prospective business

relations, but cf. Lawton v . Great Southwest Fire Ins. Co.,

(1978) (“a breach of contract standing alone does

not give rise to a tort action”).

Colonial nevertheless cannot prevail on its tortious

interference claim because, as discussed above with regard to

Colonial’s other claims, no reasonable person could conclude that

Volvo acted “wrongfully” in refusing to pay Colonial any PFE

awards, either initially or on appeal. See Montrone v . Maxfield,

2 4 , 726 (1982) (to prevail on a tortious interference

claim, plaintiff must show that defendant “wrongfully”

interfered). Accordingly, I grant Volvo’s motion for summary

judgment with respect to Count IV of Colonial’s complaint.

-28- E. Misrepresentation

Lastly, Colonial alleges that Volvo negligently and/or

intentionally misrepresented its intent to honor its contractual

obligations toward Colonial under the PFE program.

Under New Hampshire law, a contractual promise can give rise

to a claim of misrepresentation only in those extremely rare

circumstances where: (1) the promisor breached the contract; and

(2) the promisee can show that the promisor had no intent, or no

ability, to fulfill the contract at the time that the promisor

entered into the contract. See Hydraform Prods. Corp. v .

American Steel & Aluminum Corp.,

(1985); Malone

v . Cemetary Street Dev., Inc., Civ. N o . 94-339-B,

,

at *2 (D.N.H. Feb. 1 7 , 1995); see also Thompson v . H.W.G. Group,

Inc.,

(1995). As I have concluded that Volvo

did not breach the contract at issue here, I must also conclude

that Colonial fails to state a claim for either negligent or

intentional misrepresentation. Accordingly, I grant Volvo’s

motion for summary judgment as to Counts V and VI of the

complaint.

-29- IV. CONCLUSION

When the evidentiary record is taken in the light most

favorable to Colonial it cannot support the claims asserted in

Colonial’s complaint. Therefore, I grant Volvo’s motion for

summary judgment, (Doc. N o . 3 9 ) , and direct the clerk to enter

judgment accordingly.

SO ORDERED.

Paul Barbadoro Chief Judge

January 9, 2001

cc: Richard B . McNamara, Esq. Irvin D. Gordon, Esq. James C . McGrath, Esq.

-30-