08-004386 Adly Moto, Llc And Scooter Superstore Of America, Inc. vs. Solano Cycle, Inc. Status: Closed Recommended Order on Thursday, August 20, 2009.

Summary: Petitioners did not meet their burden of proving that the existing franchised dealer is not providing adequate representation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ADLY MOTO, LLC, AND SCOOTER )

SUPERSTORE OF AMERICA, INC., )

)

Petitioners, )

)

vs. ) Case No. 08-4386

)

SOLANO CYCLE, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

A formal hearing was conducted in this case on June 17,

2009, in Gainesville, Florida, before Barbara J. Staros,

Administrative Law Judge with the Division of Administrative

Hearings.

APPEARANCES

For Petitioners: Neil Davis

Adly Moto, LLC

Hammerhead

1725 Hurd Drive, Suite 108

Irving, Texas 75038

Mark Calzaretta

Scooter Superstore of America

2311 Thomas Street

Hollywood, Florida 33020

For Respondent: Martin Solano, President

Solano Cycle, Inc.

1024 South Main Street, Suite A

Gainesville, Florida 32601

STATEMENT OF THE ISSUE

The issue is whether Petitioners’ application to establish

a new dealership for the sale of motorcycles manufactured by

Herchee Industrial Co., Ltd. (HERH), at 203 Northeast Avenue,

Gainesville, Florida 32609, should be granted.

PRELIMINARY STATEMENT

In the Florida Administrative Weekly , Volume 34, Number 31,

August 1, 2008, the Department of Highway Safety and Motor

Vehicles (DHSMV) published a Notice of Publication for a New

Point Franchise Motor Vehicle Dealer in a County of Less than

300,000 Population. Said notice advised that Petitioner Adly

Moto, LLC, intended to establish Scooter Superstore of America,

Inc., as a new dealership for the sale of motorcycles

manufactured by Herchee Industrial Co., Ltd. (HERH), at 203

Northeast 39 Avenue, Gainesville, Alachua County, Florida 32609.

On or about August 28, 2008, Respondent Solano Cycle, Inc.,

filed a Petition or Complaint Protesting Establishment of

Dealership (Petition) with DHSMV about the proposed new

motorcycle dealership. DHSMV referred the Petition to the

Division of Administrative Hearings on September 4, 2008. The

case was assigned to Administrative Law Judge Ella Jane P. Davis

and was subsequently reassigned to the undersigned.

On September 30, 2008, a Notice of Hearing was issued

scheduling a final hearing on March 24 through 26, 2009.

Petitioners requested a continuance of the hearing which

was granted. An Order Re-Scheduling Hearing was issued

rescheduling the hearing for June 17 through 19, 2009.

On June 11, 2009, an Order granting Motion to Withdraw as

Counsel was issued to Respondent’s counsel. Neither party filed

any response in compliance with the Order of Pre-hearing

Instructions. Neither the Petitioners nor the Respondent were

represented by counsel at the hearing. No expert testimony was

presented.

The hearing commenced as scheduled and concluded in one

day. Petitioners presented the testimony of Neil Davis and Mark

Calzaretta. Petitioners offered Exhibits 1 through 4, which

were admitted into evidence. Respondent presented the testimony

of Martin Solano. Respondent offered Exhibits 1 through 9,

which were admitted into evidence.

The hearing was not transcribed. Petitioner Adly Moto

submitted a Proposed Recommended Order. Petitioner Scooter

Superstore submitted a Proposed Recommended Order and an After

Hearing Statement. Respondent did not file a post-hearing

submission.

FINDINGS OF FACT

1. While the dealership agreement between Petitioner Adly

Moto (Adly) and Respondent is not in evidence, the weight of the

evidence established that Respondent is an existing franchised

dealer for Petitioner Adly.

2. According to DHSMV's published notice, Petitioner Adly

intended to establish a new motorcycle dealership, Scooter

Superstore, at 203 Northeast 39th Avenue, Gainesville, Florida,

on or after July 16, 2008. There is no real dispute that this

location is only 3 to 4 miles from Respondent's place of

business. Therefore, Respondent has standing to protest

Petitioner’s application pursuant to Section 320.642(3)(a)2.,

Florida Statutes (2008).

3. Respondent’s license number is not in evidence.

4. According to DHSMV’s published notice, Adly intended to

establish Scooter Superstore as a dealer for the sale of HERH

motorcycles. Currently, Respondent sells Adly motorcycles. The

only evidence of record that HERH manufactures Adly products is

an announcement dated April 2008 which states that “Her Chee

Industrial/ADLY Moto LLC (USA) is proudly introducing Hammerhead

Off-Road as our scooter distribution partner in the US.” It is

therefore presumed that HERH manufactures Adly products.

5. According to the evidence presented, Respondent has

sold primarily scooters of 50 cubic centimeters or less.

Respondent insists that he has ordered vehicles over 50 cubic

centimeters from the distributor, but that the distributor has

refused to ship these vehicles to him. There is evidence that

at least three such vehicles were ordered by Solano Cycle, Inc.,

but the evidence is inconclusive as to whether or not these

vehicles were to be offered for sale at the Gainesville location

which is the subject of this controversy, or at another Solano

Cycle location in another city. However, the evidence is

insufficient to establish conclusively as to whether or not Adly

vehicles larger than 50 cubic centimeters have been sold by

Respondent. 1

6. The market in Gainesville, Florida, comprises primarily

college students and professors. According to Martin Solano,

president of Respondent, the market in Gainesville is primarily

scooters of 50 cubic centimeters or less.

7. Other than anecdotal observations, no competent

substantial evidence was presented as to the Gainesville market.

There is no evidence establishing an objective, reasonable

standard against which to compare the actual market penetration

achieved by the existing dealer.

8. Respondent moved to a larger location because the

earlier location was very small and, therefore, could not hold a

lot of stock.

9. There is no evidence as to Respondent’s profits,

capitalization, or financial resources to compete with the

proposed new dealership.

10. No market penetration data, whether inter-brand or

intra-brand, is in evidence.

11. Since an objective reasonable standard was not

established, the actual penetration achieved against the

expected standard cannot be established.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this

proceeding pursuant to Sections 320.699, 120.569, and 120.57(1),

Florida Statutes (2008).

13. The definition of motor vehicle does not include

motorcycles powered by a motor with a displacement of 50 cubic

centimeters or less. § 320.27(1)(b), Fla. Stat. (2008).

14. Section 320.642, Florida Statutes (2008), sets forth

the procedure for establishing proposed motor vehicle

dealerships or permitting the relocations of such dealerships as

follows in pertinent part:

(1) Any licensee who proposes to

establish an additional motor vehicle

dealership or permit the relocation of an

existing dealer to a location within a

community or territory where the same line-

make vehicle is presently represented by a

franchised motor vehicle dealer or dealers

shall give written notice of its intention

to the department. Such notice shall state:

(a) The specific location at which the

additional or relocated motor vehicle

dealership will be established.

(b) The date on or after which the

licensee intends to be engaged in business

with the additional or relocated motor

vehicle dealer at the proposed location.

(c) The identity of all motor vehicle

dealers who are franchised to sell the same

line-make vehicle with licensed locations in

the county or any contiguous county to the

county where the additional or relocated

motor vehicle dealer is proposed to be

located.

(d) The names and addresses of the

dealer-operator and principal investors in

the proposed additional or relocated motor

vehicle dealership.

Immediately upon receipt of such notice the

department shall cause a notice to be

published in the Florida Administrative

Weekly. The published notice shall state

that a petition or complaint by any dealer

with standing to protest pursuant to

subsection (3) must be filed not more than

30 days from the date of publication of the

notice in the Florida Administrative Weekly.

The published notice shall describe and

identify the proposed dealership sought to

be licensed, and the department shall cause

a copy of the notice to be mailed to those

dealers identified in the licensee's notice

under paragraph (c).

(2)(a) An application for a motor

vehicle dealer license in any community or

territory shall be denied when:

1. A timely protest is filed by a

presently existing franchised motor vehicle

dealer with standing to protest as defined

in subsection (3); and

2. The licensee fails to show that the

existing franchised dealer or dealers who

register new motor vehicle retail sales or

retail leases of the same line-make in the

community or territory of the proposed

dealership are not providing adequate

representation of such line-make motor

vehicles in such community or territory.

The burden of proof in establishing

inadequate representation shall be on the

licensee.

(b) In determining whether the

existing franchised motor vehicle dealer or

dealers are providing adequate

representation in the community or territory

for the line-make, the department may

consider evidence which may include, but is

not limited to:

1. The impact of the establishment of

the proposed or relocated dealer on the

consumers, public interest, existing

dealers, and the licensee; provided,

however, that financial impact may only be

considered with respect to the protesting

dealer or dealers.

2. The size and permanency of

investment reasonably made and reasonable

obligations incurred by the existing dealer

or dealers to perform their obligations

under the dealer agreement.

3. The reasonably expected market

penetration of the line-make motor vehicle

for the community or territory involved,

after consideration of all factors which may

affect said penetration, including, but not

limited to, demographic factors such as age,

income, education, size class preference,

product popularity, retail lease

transactions, or other factors affecting

sales to consumers of the community or

territory.

4. Any actions by the licensees in

denying its existing dealer or dealers of

the same line-make the opportunity for

reasonable growth, market expansion, or

relocation, including the availability of

line-make vehicles in keeping with the

reasonable expectations of the licensee in

providing an adequate number of dealers in

the community or territory.

5. Any attempts by the licensee to

coerce the existing dealer or dealers into

consenting to additional or relocated

franchises of the same line-make in the

community or territory.

6. Distance, travel time, traffic

patterns, and accessibility between the

existing dealer or dealers of the same line-

make and the location of the proposed

additional or relocated dealer.

7. Whether benefits to consumers will

likely occur from the establishment or

relocation of the dealership which cannot be

obtained by other geographic or demographic

changes or expected changes in the community

or territory.

8. Whether the protesting dealer or

dealers are in substantial compliance with

their dealer agreement.

9. Whether there is adequate

interbrand and intrabrand competition with

respect to said line-make in the community

or territory and adequately convenient

consumer care for the motor vehicles of the

line-make, including the adequacy of sales

and service facilities.

10. Whether the establishment or

relocation of the proposed dealership

appears to be warranted and justified based

on economic and marketing conditions

pertinent to dealers competing in the

community or territory, including

anticipated future changes.

11. The volume of registrations and

service business transacted by the existing

dealer or dealers of the same line-make in

the relevant community or territory of the

proposed dealership.

(3) An existing franchised motor

vehicle dealer or dealers shall have

standing to protest a proposed additional or

relocated motor vehicle dealer where the

existing motor vehicle dealer or dealers

have a franchise agreement for the same

line-make vehicle to be sold or serviced by

the proposed additional or relocated motor

vehicle dealer and are physically located so

as to meet or satisfy any of the following

requirements or conditions:

(a) If the proposed additional or

relocated motor vehicle dealer is to be

located in a county with a population of

less than 300,000 according to the most

recent data of the United States Census

Bureau or the data of the Bureau of Economic

and Business Research of the University of

Florida:

* * *

2. The existing motor vehicle dealer

or dealers of the same line-make have a

licensed franchise location within a radius

of 20 miles of the location of the proposed

additional or relocated motor vehicle

dealer;

(emphasis added)

15. Respondent met its burden of proving that it had

standing to protest Petitioners' applications.

16. Petitioners have the burden to establish that

Respondent is not providing adequate representation of the line-

make in the community or territory. See § 320.642(2)(a)2., Fla.

Stat. (2008).

17. The above-referenced statute sets forth 11 factors

which may be considered in determining whether there is adequate

representation for the line-make.

18. Factor 1 addresses the impact a new dealership will

have on consumers, the public interest, existing dealers and the

licensee. Other than anecdotal testimony and conjecture, there

is no competent evidence establishing the impact on these

entities.

19. Factor 2 relates to the size and permanency of the

dealer’s investments and obligations it has incurred to comply

with its dealer agreement. The dealer agreement is not in

evidence, nor are the totality of the dealer’s investments and

obligations. Thus, it is impossible to reach a conclusion of

law as to factor 2.

20. Factor 3 relates to the reasonably expected market

penetration of the line-make for the community or territory. No

market penetration data is in evidence.

21. Factor 4 relates to the actions of the licensee to

deny existing opportunities for growth, expansion, or

relocation. Respondent presented some evidence that he

requested vehicles from the distributor that were not shipped to

Respondent. However, the evidence is inconclusive as to whether

those vehicles were for the Gainesville location.

22. Factor 5 addresses attempts of the licensee to coerce

the existing dealer into consenting to the additional franchise.

There is no evidence that Petitioner Adly attempted to coerce

Respondent into consenting to the proposed dealership.

23. Factor 6 concerns the distance, travel time, traffic

patterns, and accessibility between the existing dealer and the

proposed dealer. Other than acknowledgment that the proposed

dealership is approximately 3 to 4 miles from the existing

dealership, no evidence was presented to reach a conclusion of

law regarding this factor.

24. Factor 7 addresses the benefits to the consumer from

the proposed dealership, which can not be obtained by other

geographic or demographic changes in the community or territory.

Other than anecdotal speculation, there is no evidence to

establish whether benefits to consumers is likely to occur.

25. Factor 8 concerns whether the protesting dealer is in

substantial compliance with the dealer agreement. Clearly, the

distributor is unhappy with Respondent. Respondent is

frustrated with the dealer. However, as the dealer agreement is

not in evidence, it cannot be determined whether Respondent is

in substantial compliance with said agreement.

26. Factor 9 addresses the adequacy of inter-brand and

intra-brand competition with respect to the subject line-make in

the community or territory and adequately convenient customer

care. No competent evidence was presented as to inter-brand or

intra-brand competition to support a conclusion regarding this

factor.

27. Factor 10 concerns the justification of the proposed

dealership based on the economic and marketing conditions

pertinent to dealers competing in the community. There is no

evidence establishing an objective, reasonable standard in which

to compare the actual market penetration of the existing dealer.

28. Factor 11 considers the volume of registrations and

service business transacted by the existing dealer of the same

line-make in the community of the proposed dealership. There is

no competent evidence regarding the volume of registrations and

service business transacted in the community.

29. Petitioners argue that Respondent has failed to

present any argument or evidence as to why Petitioners’ request

for an additional line-make franchise should be denied.

However, Section 320.642(2)(a)2., Florida Statutes, clearly

places the burden on Petitioners to prove that the existing

franchised dealer is not providing adequate representation.

30. Having weighed the statutory criteria enumerated in

Section 320.642(2), Florida Statutes, Petitioners have not met

this burden.

RECOMMENDATION

Based on the forgoing Findings of Fact and Conclusions of

Law, it is

ORDERED:

That the Department of Highway Safety and Motor Vehicles

enter a final order denying Petitioners’ application.

DONE AND ENTERED this 20th day of August, 2009, in

Tallahassee, Leon County, Florida.

S

BARBARA J. STAROS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of August, 2009.

ENDNOTE

1/ A “sales report” from Petitioner Adly is in evidence which

reflects one Adly 150 cubic centimeter invoiced to Solano Cycle.

Respondent’s exhibit 1 reflects Adly sales from 2007-June 2009.

While most are identified with the designation “50”, others are

not clearly identified as to their size.

COPIES FURNISHED :

Michael James Alderman, Esquire

Department of Highway Safety and

Motor Vehicles

Neil Kirkman Building, Room A-432

2900 Apalachee Parkway

Tallahassee, Florida 32344

Martin Solano, President

Solano Cycle, Inc.

1024 South Main Street, Suite A

Gainesville, Florida 32601

Henry Li

Neil Davis

Adly Moto, LLC

Hammerhead

1725 Hurd Drive, Suite 108

Irving, Texas 75038

Peter Warrick

Mark Calzaretta

Scooter Superstore of America

2311 Thomas Street

Hollywood, Florida 33020

Carl A. Ford, Director

Division of Motor Vehicles

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room B-439

2900 Apalachee Parkway

Tallahassee, Florida 32399-0500

Robin Lotane, General Counsel

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building

2900 Apalachee Parkway

Tallahassee, Florida 32399-0500

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.