96-000734 Mazda Motor Of America, Inc., And J S Imports, Inc. vs. Stewart Mazda, Delray Mazda, Jupiter Dodge Mazda, And Department Of Highway Safety And Motor Vehicles Status: Closed Recommended Order on Thursday, May 1, 1997.

Summary: Petitioner was entitled to new point as community or territory inadequately represented.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MAZDA MOTOR OF AMERICA, INC., )

and J. S. IMPORTS, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 96-0734

)

STEWART MAZDA, DELRAY MAZDA, )

and JUPITER DODGE MAZDA, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on November 12-15, 1996, at Tallahassee, before J. D. Parrish, a

designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Dean Bunch, Esquire

Sutherland, Asbill and Brennan, L.L.P.

909 East Park Avenue

Tal lahassee, Florida 32301

For Respondents: James D. Adams, Esquire

ADAMS & QUINTON, P.A.

7300 West Camino Real

Boca Raton, Florida 33433

Gary M. Dunkel, Esquire

Lewis, Vegosen, Rosenbach and Silber, P.A.

500 South Australian Avenue

West Palm Beach, Florida 33401

STATEMENT OF THE ISSUES

Whether J.S. Imports, Inc. should be granted a new point

Mazda dealership at 631 South Military Trail, West Palm Beach,

Florida, pursuant to Section 320.642, Florida Statutes .

PRELIMINARY STATEMENT

This case began on January 5, 1996, when a notice was

published which announced a new point dealership sought by

Petitioner, Mazda Motor of America, Inc. (Mazda) to be

established by J.S. Imports, Inc. (JSI) at 631 South Military

Trail, West Palm Beach, Florida. The proposed new point was

timely opposed by Respondents, Stewart Mazda, Delray Mazda, and

Jupiter Dodge Mazda, existing dealerships within the community or

territory of the new dealer. The matter was forwarded to the

Division of Administrative Hearings for formal proceedings on

February 6, 1996.

Originally, based upon the joint response to initial order,

the case was scheduled for hearing July 15-19, 1997. Thereafter,

the hearing was continued and rescheduled for September 17-20,

1996. Based upon a stipulation of the parties, the hearing was

again rescheduled for November 12-15, 1996. Later motions for

change of venue and for continuance filed by Respondents were

denied.

The motion for continuance was predicated on the need for

additional discovery regarding an alleged impending sale of the

proposed dealership site. Respondents were granted leave to take

additional discovery and were granted leave, subsequent to the

hearing, to late-file depositions in support of their position.

Respondents had filed a motion to dismiss related to the proposed

dealership site and JSI's ability to control the location.

A prehearing stipulation was filed in this cause on

September 10, 1996. Such stipulation recognized that JSI would

not present a case in the dispute as Mazda bears the burden of

proof. The stipulation further identified the issue to be

resolved as “whether J.S. Imports will be permitted to establish

a dealership for the sale of Mazda automobiles and trucks at 631

South Military Trail, West Palm Beach, Florida 33425.”

Mazda’s position on the controversy was stated as “the

establishment of J.S. Imports is appropriate, in accordance with

Section 320.642, Florida Statutes, and that a recommended order

should be issued to the Department of Highway Safety and Motor

Vehicles recommending that the establishment of the dealership be

permitted.” In contrast, the Respondents’ position, as stated in

the prehearing stipulation, argued “the existing Mazda dealers

are providing adequate representation in the community or

territory, and therefore, the establishment of J.S. Imports

should not be permitted.” At the time of the prehearing

stipulation, Respondents did not challenge the adequacy of the

notice specifying the location of the proposed new point.

At the hearing, Mazda presented testimony from the following

witnesses: John English, Vice President for Sales, Mazda Motor of

America; and James A. Anderson, President of Urban Science

Applications, Inc. Its exhibits numbered 1 through 18, 19 (pages

denoted by the record), 20, 23, and 24 through 64 were admitted

into evidence.

Respondents offered the testimony of Dr. Ernest H. Manuel,

President of the Fontana Group; Earl Douglas Stewart, Jr., owner

of Stewart Mazda; Janet C. Goetz, an employee of Stewart Mazda;

Anthony Marino, general manager of Jupiter Dodge Mazda; and

Edward Morse, chairman of the board and CEO for Morse Operations.

Respondents’ exhibits numbered 1 through 16, and 18 through 42

have also been admitted into evidence.

The transcript of the proceeding was filed on December 26,

1996. The depositions of Terry Taylor, John Staluppi, Jr., John

Staluppi, Gary Busch, and William D. Goetze were filed by

Respondents on February 11, 1997. Pursuant to the order

extending time to file proposed recommended orders, the parties’

proposed orders were also filed February 11, 1997.

Prior to hearing, the Respondents filed motions seeking

leave to allow additional discovery on an issue of whether the

notice published in this cause adequately identified the subject

location. More specifically, Respondents argued that

developments between third parties who are indirectly linked to

this case have materially affected JSI’s ability to secure the

subject site for use as a Mazda dealership. In this regard,

Respondents claimed that the property owner had entered into an

agreement to sell the assets of businesses located at the Mazda

site to a third party. Such agreement, according to Respondents,

impacted and perhaps negated JSI’s right to use the location

identified in the notice. Moreover, such a sale would

demonstrate that JSI was not the true applicant for the point but

was, in effect, substituting for another person or entity.

Accordingly, Respondents maintained that the case should be

dismissed.

Following discovery on the issues, Mazda asserted that the

transaction referenced by Respondents was no longer viable, and

that the depositions of the individuals involved established that

the owner of the property has not impaired JSI’s right to use the

parcel described in the notice. More important, however, Mazda

argues that the claim of a notice defect has been waived by

Respondents since they failed to include same in the prehearing

stipulation. Mazda maintains that Respondents knew of the

relationship between JSI and the property owner, knew there was

not a formal lease, and did nothing to challenge the sufficiency

of the notice. In anticipation of trial, Respondents’ portion of

the prehearing stipulation only indicated the issue as whether

there is a need for an additional dealer point in the community

or territory. Thus, alleges Mazda, Respondents are limited to

the issue of whether there is adequate representation; any other

evidence, they claim, is inadmissible.

On March 10, 1997, the Respondents filed a motion to reopen

proceedings, allow additional discovery and to present testimony

and evidence together with a request for oral argument on the

motion. Such motion was based, in part, on a newspaper article

which Respondents claimed established additional location issues.

After considering the written responses to the motion filed by

opposing counsel, such requests were denied by order entered

April 2, 1997. This recommended order addresses Respondents'

motion to dismiss as well as the criteria for a new point dealer

set forth in Section 320.642, Florida Statutes .

FINDINGS OF FACT

1. Petitioner, Mazda Motor of America, Inc., is a

manufacturer of automobiles and trucks which are distributed and

sold through a network of dealerships. Under Florida law Mazda

is denoted a "licensee."

2. On January 5, 1996, a notice of publication for a new

point franchise motor vehicle dealer was published which

announced Mazda intends to allow the establishment of J.S.

Imports, Inc., as a dealership for the sale of Mazda vehicles at

631 South Military Trail, West Palm Beach (Palm Beach County),

Florida 33415.

3. The notice further provided, in pertinent part:

Mazda Motor of America, Inc., intends to

engage in business with J. S. Imports, Inc.,

as a dealership on or after February 1, 1996.

The name and address of the dealer-operator

and principal investor of J. S. Imports,

Inc., is: John Staluppi, Jr., 42 Davidson

Lane East, West Islip, New York 11795.

* * *

Dealerships of the same line-make which can

establish standing to protest the

establishment of the new point may do so by

filing a written petition or complaint with

the Florida Department of Highway Safety and

Motor Vehicles.

4. Thereafter, on February 1, 1996, Respondents, Stewart

Mazda, Delray Mazda, and Jupiter Dodge Mazda, filed a petition or

complaint challenging the proposed new point dealer. Respondents

are the existing Mazda dealerships located within Palm Beach

County. There are no other same line-make motor vehicle

dealerships which are physically located so as to meet or satisfy

the requirements of Section 320.642(3), Florida Statutes . Thus,

all dealers with the potential for standing have participated in

this proceeding.

5. Palm Beach County is a county with more than 300,000

population.

6. Respondent, Stewart Mazda, is located at 2001 South

Dixie Highway, West Palm Beach, Florida, and is within 12.5

miles of the proposed location for the new point site. In fact,

the Stewart dealership is within five miles of the proposed new

point.

7. Respondent, Delray Mazda, is not located within 12.5

miles of the proposed location. Nevertheless, Delray Mazda

established that during any 12 month period of the 36 month

period preceding the filing of the licensee's application for the

proposed dealer Delray Mazda made 25% of its retail sales of new

motor vehicles to persons whose registered household addresses

were within a radius of 12.5 miles of the proposed site.

8. Respondent, Jupiter Dodge Mazda, is not within 12.5

miles of the location for the proposed new dealership yet it also

met the sales standard described in paragraph 7.

9. The proposed new motor vehicle dealer, J.S. Imports,

Inc., is owned by John Staluppi, Jr., the son of John Staluppi.

No other person or entity owns more than a 10% interest in JSI.

10. It is proposed that J.S. Imports, Inc. will be located

at 631 South Military Trail, West Palm Beach. Such real property

is part of an automobile mall or auto mall (a cluster of

automobile dealerships) which is owned or controlled by John

Staluppi.

11. The new Mazda vehicle sales facility would be located

at 631 South Military Trail; however, the service facility for

the dealership would be located elsewhere within a shared space

at 561 South Military Trail, West Palm Beach. Both parcels are

owned or controlled by John Staluppi. Both parcels are part of

the same auto mall.

12. As part of its documentatio n to establish the

dealership, J.S. Imports, Inc. (JSI) submitted an unsigned lease

for the subject property between John Staluppi and the proposed

dealer.

13. On or about October 25, 1996, just prior to this case

going to hearing, John Staluppi entered into an agreement to sell

the assets of the automobile dealerships located within the auto

mall. He also agreed to lease the real estate upon which they

are located. The lease included the sites for the new Mazda

point as well as the service location. Without going into

details of the agreement which are not material to the issues of

this case, and without listing all of the corporate entities

involved in the transaction, the principals in this new agreement

were John Staluppi and Terry Taylor.

14. Material to this case, however, is the covenant between

Mr. Taylor and John Staluppi, Jr. Those parties reached an

agreement to sublease the real estate at 631 South Military Trail

and the service department at 561 South Military Trail, West Palm

Beach. Such agreement to sublease was also executed October 25,

1996. Based upon the foregoing, as of October 25, 1996, the

proposed site for the Mazda new point dealer continued to be 631

South Military Trail with service work to be at 561. These sites

are identical to the information submitted by the applicant to

the Department of Highway Safety and Motor Vehicles. This

information was also disclosed to Respondents during discovery of

the case, prior to the prehearing stipulation.

15. Subsequently, the transactio n between Mr. Taylor and

John Staluppi was abandoned. Mr. Taylor’s deposit on the

transaction was refunded. Apparently, these parties no longer

intend to abide by the terms of the asset purchase agreement.

16. JSI does not own the proposed site. If approved, JSI

will lease the property from John Staluppi or entities he owns or

controls. As of the time of hearing, JSI did not have a signed

lease for the subject property.

17. Typically, Mazda does not submit applications for new

point dealerships without some documentation substantiating

control of the proposed site. A proposed dealer would normally

either own or control the proposed site. Control of the site may

be shown by a lease, an option to purchase or an option to lease.

18. In this instance, Mazda presumed the proposed site

would be secured through the efforts of John Staluppi, Jr. on

behalf of his company which would lease from his father.

Moreover, Mazda believes its agreement with JSI (for the

applicant dealer to reimburse it for costs or expenses incurred

should the dealership effort fail due to an act or omission of

JSI) adequately protected its interests in this regard.

19. As of the dates of filing the application for a new

point dealership, the notice of same, and the hearing in this

cause, no person or entity, other than John Staluppi, Jr., had a

beneficial ownership interest in the proposed dealership.

20. To determine whether an additional same line-make

dealer should be approved, the existing network of motor vehicle

dealers must be evaluated to determine whether they are providing

adequate representation to the community or territory.

21. The applicable statutory criteria do not define

"adequate representation" nor the "community or territory."

22. Typically, sales data of past dealership performance is

utilized by all parties to establish a community or territory

(Comm/Terr) and to evaluate the dealers' effectiveness.

23. In this case how the Comm/Terr should be defined is

disputed by the parties. Although entitled to weight in the

consideration of how the Comm/Terr should be defined, the dealer

agreements with the three existing dealers (Respondents) do not

assign an area by geographical boundaries. Respondents believe

the Comm/Terr, based upon their interpretation of their

agreements, should be defined as Palm Beach County as a whole.

24. In contrast, Mazda studies have defined the market for

these dealers in different ways; however, it believes the

Comm/Terr should be Palm Beach County excluding the primary

market area (PMA) ascribed to Jupiter Dodge Mazda.

25. In making this determination, Mazda constructed the

PMAs for the existing dealers as well as the new point (or open

point) which has been designated as the Staluppi PMA. Within the

Staluppi PMA it is presumed that dealer would have a competitive

advantage in the market. Similarly, within the Stewart PMA that

dealer would have the competitive edge due to customer preference

and convenience.

26. The actual shopping patterns of Mazda customers was

also assessed. In this case, the three dealers are located in

three distinct geographical areas: one toward the northern

boundary of the county at Jupiter; one to the south at Delray;

and one in the eastern central portion at downtown West Palm

Beach. The proposed Staluppi/JSI site is west of the Stewart

location.

27. Based upon the actual shopping patterns the majority of

the sales by these three existing dealers are made to customers

in the same county. Because few of Mazda's customers come from

adjacent counties, the largest area which should be used to

define the Comm/Terr is the county itself.

28. Within Palm Beach County there are also identifiable

plots associated with the three dealers which show that while

Stewart and Delray are connected to the JSI site (via established

purchasing patterns), Jupiter is not. For this reason, Mazda's

expert in rendering his initial opinions regarding this matter

excluded Jupiter from the Comm/Terr. This approach has been

deemed persuasive.

29. Currently, there are three clusters of automobile and

truck dealerships within the Palm Beach Comm/Terr: Delray, where

Mazda is now located; Military Trail/Okeechobee Boulevard, where

Mazda wants to be located; and North Lake Boulevard.

30. Eighty percent of the customers who shop for new cars,

regardless of brand, go to one of the three clusters. Mazda is

not represented in two of these popular shopping venues. Mazda

and Dodge are the only brands offered in Jupiter. Less than 5%

of the customers from the remainder of Palm Beach County (away

from the Jupiter PMA) went to Jupiter to purchase a new vehicle.

31. To determine a reasonable expected market penetration

standard, it is appropriate to exclude certain factors, such as

the consumer preferences for certain types of vehicles

(independent of brand) over which the dealers have no control.

32. Market penetration is the traditional standard used to

measure adequacy of representation because it reflects the

competitive efforts of the competing dealers. Registration data

of all brands is used to comprise a single indicator called

market share, which is an objective and accurate measure of

market activity.

33. Registration data reflects actual consumer purchases.

Actual registrations account for demographic characteristics,

including age, income, education, size-class preferences, and

product popularity.

34. Market penetration for any area is computed utilizing

all registrations to addresses in the area, regardless of the

location of the selling dealer.

35. After registration data is com piled, the performance of

the Comm/Terr can be compared to another market area (allowing

for differences in segment popularity).

36. In this case, Mazda compared the Palm Beach Comm/Terr

to the Miami/Ft. Lauderdale market.

37. Typically, manufacturers and companies which compile

data regarding vehicle sales classify new vehicle sales into

segments. These segments list models which are comparable to one

another and are, presumably, competing for the same customer.

Mazda classifies its vehicles into nine segments.

38. Although it could be argued Mazda is ineffective

against Ford, General Motors, and Chrysler, part of that

theoretical ineffectiveness is due to the lack or absence of

entries from Mazda into markets or segments flooded by those make

vehicles. For example, Mazda does not have a vehicle to compete

with a Chevrolet Suburban.

39. Nevertheless, on a segment-by-segment basis where Mazda

competes with an entry comparable to the other line-makes (in

size and class) Mazda's effectiveness can be computed and

demonstrated.

40. By measuring Mazda's penetration in each segment

achieved in the Miami/Ft. Lauderdale area, applied to the

industry data available in each segment in the Staluppi/JSI PMA,

an appropriate standard is established for what could be expected

if the latter were receiving adequate representation.

41. Similarly, by applying the penetration rate to the Palm

Beach Comm/Terr as a whole it is possible to establish what could

be expected if the Comm/Terr were receiving adequate

representation.

42. By considering the segment analysis the process takes

into account differences in consumer preferences between markets

as to the popularity of segments, and thereby gives a more

accurate measure of what Mazda's reasonably expected market

penetration should be.

43. Utilizing this segment analysis, the reasonably

expected 1995 Mazda market share in the Staluppi/JSI PMA was

5.97%. The actual penetration for Mazda in this PMA was 3.81%.

44. Similarly, in the Palm Beach Comm/Terr in 1995, Mazda's

reasonably expected share in the segments was 6.21%. The actual

penetration for Mazda in the Comm/Terr was 4.49%.

45. Alternatively, adding Jupiter to the Palm Beach

Comm/Terr, Mazda's reasonably expected market share in 1995 was

6.19%.

46. The actual penetration in the Palm Beach Comm/Terr

(adding Jupiter) was 4.65%.

47. Thus, in each analysis Mazda performance fell short of

its reasonably expected penetration.

48. With a properly constructed dealer network, containing

the appropriate number of dealerships in proper locations, it is

reasonable to expect the dealer network in Palm Beach County to

perform as well as the dealer network in Miami/Fort Lauderdale

after adjusting for the local consumer patterns that make Palm

Beach different from the other area.

49. Net shortfall is the number of additional Mazdas that

would have to be registered in order to equal the expected level

based on average performance across an area.

50. On the basis of the net shortfall in units, or units

required to be registered in order to bring the Staluppi/JSI PMA

up to the expected performance, the 1995 shortfall was 246 units.

51. In reviewing the Palm Beach Comm/Terr as a whole over

the three year period from 1993 to 1995, the efficiency has

changed from 70.1% to 72.4%. For the Comm/Terr plus Jupiter, the

efficiency has changed from 68.6% to 75.2% during the three years

immediately following the insertion of Jupiter Dodge Mazda.

52. Mazda was not receiving adequate representation from

the standpoint of not achieving reasonably expected market share.

That conclusion is the same whether the area under review is the

Staluppi/JSI PMA, the larger Palm Beach Comm/Terr, or the Palm

Beach Comm/Terr with Jupiter included.

53. Increases in performance in 1996 (after the existing

dealers knew an additional dealer was being sought for the Palm

Beach Comm/Terr) while commendable do not negate the historical

pattern of providing inadequate representation.

54. The growth of population and households in Palm Beach

County has been predominately to the west and central portions of

the county and throughout the Delray Beach area. The proposed

Staluppi/JSI PMA has also experienced rapid growth in households

and population which is expected to continue.

55. Among Mazda buyers, 28.5% thought that the location of

the dealer was extremely important; 35.1% thought it was very

important; 22.8% thought it was somewhat important; whereas only

8.7% thought it was not important, and 4.9% not important at all.

56. The Military Trail auto mall into which JSI proposes to

open the additional Mazda dealership, now contains Toyota, Jeep

Eagle, Chrysler Plymouth, Nissan, Infiniti, Kia, GMC, Saturn,

Ford and Isuzu. Other brands considered part of this cluster are

on Okeechobee Boulevard. They are VW, Hyundai, Acura, Subaru,

Volvo, Oldsmobile, Buick, Audi, BMW, Lexis, Lincoln Mercury,

Chevrolet, Dodge, Mitsubishi and Mercedes Benz.

57. Mazda would be required to have 3.2 dealerships in

order to have the same share of the franchises in the Palm Beach

Comm/Terr as it has in the Miami/Ft. Lauderdale area.

58. Because Jupiter Dodge Mazda does not serve the Palm

Beach Comm/Terr in a meaningful way, the Comm/Terr has two Mazda

dealerships, and needs at least one more dealership to have a

reasonable opportunity to receive adequate interbrand competition

and gain expected market share.

59. The likely cause of the current inadequacy of

performance for the Palm Beach Comm/Terr is insufficient dealer

count and poor dealer location.

60. Without a dealer in the Staluppi/ JSI PMA, consumers

average 9.9 miles from the nearest Mazda dealer, which is higher

than the major competitors located in the Staluppi/JSI PMA.

61. With the addition of a Mazda dealer in the Staluppi/JSI

PMA customers will be 7.2 miles, on average, to the nearest Mazda

dealer a distance which should be more competitive with other

brands such as Ford (3.9 miles), Chevrolet (4.7 miles), Nissan

(7.2 miles), and Toyota (7.2 miles).

62. Optimal location analysis also demonstrates that the

proposed location would maximize customer convenience. If the J.

S. Imports dealership is allowed to "float" in the Palm Beach

Comm/Terr, while the other dealer locations are fixed, the

location which would maximize customer convenience is near the

proposed site.

63. The proposed location is near the optimal location, and

in the midst of a cluster of dealerships where approximately 30%

of the sales of all Palm Beach County dealers are made. The

proposed site is good in terms of solving the customer

convenience problem in the area, and providing Mazda a presence

in the cluster where many sales are made.

64. The addition of a dealership will likely benefit

consumers and the public interest. It will provide the growing

population of the Staluppi/JSI PMA with a more convenient place

to shop for Mazdas and more convenient Mazda service. It will

take Mazda to a growing cluster of dealerships allowing customers

a one stop opportunity to comparison shop Mazda and its

competitors.

65. Moreover, with increased interbrand and intrabr and

competition Mazda and the existing dealers should be able to

improve sales penetration and take advantage of the available

market for Mazda products.

66. Therefore, because of the large untapped opportunity

for Mazda in the Palm Beach Comm/Terr as a whole, in the

Comm/Terr plus Jupiter, and in the "identifiable plot" known as

the Staluppi/JSI PMA, the addition of a new dealer should not

cause a decrease in the existing Mazda dealers' sales over the

long term. The addition should have a positive impact upon the

overall sales opportunities for all the Mazda dealers.

67. If you compute the total lost opportunity for sales in

this market (941 units) and allocate a portion of sales to the

Staluppi/JSI PMA (555), the remainder would be available to the

existing dealers of the Comm/Terr.

68. This remainder of the lost opportunity, (467 units

utilizing the average penetration profile; 386 using the Jupiter

profile), would be available for all Palm Beach Mazda dealers.

69. Therefore, the proposed addition of a dealership can

take place without taking any sales from existing Mazda dealers.

The existing dealers should increase their sales because a large

number of customers are now shopping in the Northlake and

Okeechobee/Military Trail clusters, and could not previously

consider Mazda conveniently because of the lack of a dealer.

Having a dealer in the Okeechobee/Military Trail cluster should

stimulate interest in Mazdas.

70. All existing dealers have made substantial financial

investments to perform their obligations under their dealers'

agreements.

71. In Stewart's case, the total investment is close to

$5,000,000. Stewart's real estate and building are valued at

approximately $3,000,000.

72. Jupiter Dodge Mazda has about $1,000,000 invested in

its dealership.

73. Delray Mazda has approximately $3,500,000 invested in

its dealership.

74. All three existing dealerships should benefit from an

increased Mazda presence in the market place.

75. The reasonably expected market penetration for Mazda

should improve with an additional dealership at the Staluppi auto

mall.

76. Mazda has not denied its existing dealers an

opportunity for reasonable growth, expansion or relocation. In

fact, Mazda urged Stewart to establish the dealership at the

proposed location. Only when efforts with Stewart failed did

Mazda go outside the existing dealers for an operator for the

additional point.

77. Mazda has not attempted to coerce the existing dealers

into consenting to the additional dealership. In reaching this

conclusion the single incident complained of by one existing

dealer (that Mazda withdrew some advertising support) has been

considered but is not persuasive that Mazda has acted improperly

in its efforts to establish the new point.

78. The distance travel time, considering traffic patterns

and accessibility, between the proposed site and its nearest same

line-make dealer (Stewart) is approximately ten minutes. While

geographically closer than other dealers of same line-make

vehicles, traffic and accessibility put the proposed site and

Stewart at a reasonable distance.

79. No evidence in this case supports a conclusion that

consumers could have the same benefits offered by the proposed

dealership from other changes.

80. No evidence suggests the existing dealers are not in

compliance with their dealer agreements.

81. Intrabrand and interbrand competition should improve

with the establishment of the new point. Service and sales

facilities will be more convenient to customers.

82. All existing dealers make sales into the area of the

proposed site. With anticipated population growth and market

availability, any sales lost to the new point should be offset by

Mazda’s increased market presence, improved market penetration,

and greater overall sales for all dealerships.

CONCLUSIONS OF LAW

83. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings.

84. Section 320.642, Florida Statutes , sets forth the

criteria which govern this proceeding. Such statute, provides,

in part:

(1) Any licensee who proposes to establish

an additional motor vehicle dealership . . .

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 by certified mail to the

department. Such notice shall state:

(a) The specific location at which the

additional . . . motor vehicle dealership

will be established.

(b) The date on or after which the

licensee intends to be engaged in business

with the additional . . . 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 . . . motor

vehicle dealer is proposed to be located.

(d) The names and addresses of the

dealer-operator and principal investors in

the proposed additional . . . 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 the

protesting dealer or dealers prove 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 registratio ns 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 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:

* * *

(b) If the proposed additional or

relocated motor vehicle dealer is to be

located in a county with a population of more

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:

1. Any existing motor vehicle dealer or

dealers of the same line-make have a licensed

franchise location within a radius of 12.5

miles of the location of the proposed

additional or relocated motor vehicle dealer;

or

2. Any existing motor vehicle dealer or

dealers of the same line-make can establish

that during any 12-month period of the 36-

month period preceding the filing of the

licensee's application for the proposed

dealership, such dealer or its predecessor

made 25 percent of its retail sales of new

motor vehicles to persons whose registered

household addresses were located within a

radius of 12.5 miles of the location of the

proposed additional or relocated motor

vehicle dealer; provided such existing dealer

is located in the same county or any county

contiguous to the county where the additional

or relocated dealer is proposed to be

located.

85. Rule 15C-7.004, Florida Administrative Code , sets

forth criteria related to the notice which must be published

pursuant to Section 320.642, Florida Statutes . The rule

provides, in pertinent part:

(1) Purpose and Scope. The purpose of this

rule is to provide guidelines and standards

for the filing of a notice of intent to

establish an additional point franchise motor

vehicle dealer license and to establish the

requirements for filing a preliminary

application for a franchise motor vehicle

dealer license. The rule addresses the

requirement for notifying potentially

affected dealers of their rights and provides

for the handling and disposition of advanced

letters of commitment either protesting or

not protesting the establishment of a

dealership. The rule further provides time

frames within which certain actions must

occur, clarifies the conditions for licensing

a supplemental location and for the

relocation and reopening of existing

dealerships. The rule also specifies the

manner and time frames for the reporting of

minority recruitment efforts.

(2) Definitions.

(a) The words or terms "Department", "line-

make", "dealer", and "minority dealer" as

used in this rule shall have the meanings

ascribed to them in Sections 320.60 --

320.70, Florida Statutes.

(b ) As used in this rule, the following

words or terms shall have the meanings

ascribed herein:

1. Applicant -- means a business seeking a

license as a franchise motor vehicle

dealership.

2. Contiguous county -- means a county

having a point of common boundary with

another county. Boundaries of counties which

meet at a diagonal across the intersecting

lines shall be deemed to be contiguous.

3. Licensee -- means a motor vehicle

manufacturer, importer or distributor.

4. The terms petition, complaint, no tice of

protest, and letter of protest are

interchangeable.

5. Principal investor -- means any person,

firm or entity having a ten percent (10%) or

more financial interest in a proposed

dealership. In the case of a publicly held

corporation, principal investor shall mean

the individuals or entities who manage the

corporation.

6. Specific location -- means a

sufficiently identified piece of property

that can be described by a physical location

address assigned by the United States Postal

Service or by a legal description, or both.

In those instances where an address is

unavailable, the legal description shall

refer to generally known public streets and

highways, including the distance from the

nearest major cross street, for example:

"North side of U.S. Highway 301, 1.3 miles

east of intersection with State Road 60."

(3) Filing of Licensee's Notice and

Applicant's Preliminary Application.

(a) Simultaneously with the filing of the

notice by the licensee required by Section

320.642(1), Florida Statutes, the applicant,

which is not currently a licensed dealer at

the proposed location, may file a preliminary

application for a franchised motor vehicle

dealer license on form HSMV 84011,

Application For A License As A Motor Vehicle,

Mobile Home or Recreational Vehicle Dealer,

which is hereby adopted by reference,

furnished by the Department. The filing of a

preliminary application is optional but if

filed the application shall be completed in

the same manner as a final application,

except that the following items are not

required at the time of the filing of the

preliminary application:

1. The physical inspection report of the

facility completed by the Department.

2. The surety bond or irrevocable letter of

credit.

3. Evidence of garage liability insurance.

4. Evidence of completion by a dealership

representative of the training offered by the

Department.

5. Evidence of registration for sales and

use tax purposes with the Department of

Revenue.

6. A true copy of the lease of the property

on which the dealership is to be located, if

applicable.

7. Evidence that a Federal Employer's

Identification number has been applied for or

obtained.

(b) The following items must accompany the

completed preliminary application:

1. A copy of the articles of incorporation

to show that the corporate name has been

reserved (if the business is to operate as a

corporation).

2. Fingerprint cards for all

owners/partners/officers/directors whose

names appear on the application.

3. The initial application fee.

(c) If the notice by the licensee proposes

to add a line-make to a dealership not

previously franchised for that line-make, the

licensed dealer shall, simultaneously with

the filing of the licensee's notice, file an

application on form HSMV 84011, Application

For A License As A Motor Vehicle, Mobile Home

or Recreational Vehicle Dealer, which is

hereby adopted by reference, provided by the

Department to amend its license to add that

line-make to its license.

(d) If the notice by the licensee proposes

a supplemental location to a currently

licensed line-make dealership, the dealer

shall, simultaneously with the filing of the

licensee's notice, file an application for a

supplemental license on form HSMV 84011,

Application For A License As A Motor Vehicle,

Mobile Home or Recreational Vehicle Dealer,

which is hereby adopted by reference,

provided by the Department in accordance with

Section 320.27(5), Florida Statutes.

(e) A notice by the licensee may not be

amended in any manner which alters the

specific location of the proposed dealership,

nor may a preliminary filing of an

application be amended to be inconsistent

with the specific location contained in the

notice. Alteration of a specific location

requires the filing of a new notice and a new

preliminary application.

* * *

(6) Filing of Petitions or Complaints by

Existing Dealers.

(a) Petitions or complaints protesting the

establishment or relocation of dealerships

may be filed only after the publication of

the notice required in Section 320.642(1),

Florida Statutes.

(b) Petitions, complaints or notices

protesting the establishment or relocation of

a dealership must be filed with and received

by the agency clerk not more than thirty

calendar days from the date notice is

published in the Florida Administrative

Weekly.

(c) Any petitions or complaints, or

correspondence indicating any intent to file

or not to file a petition or complaint, which

are filed prior to publication of the notice

shall be returned to the sender.

* * *

(d) If the proposed additional or relocated

dealership is approved, construction on the

dealership shall begin within twelve months

of the date of final order. The applicant

must complete construction and finalize its

preliminary application for license within

twenty-four months of the date of the final

order. This period may be extended by the

Department for good cause.

* * *

(8) Transfer, Assignment or Sale of Franchise

Agreements.

(a) Subsequent to the notif ication by a

dealer to a licensee of a proposed transfer

of a franchise as required by Section

320.643, Florida Statutes, the proposed

transferee may file a preliminary application

with the Department.

(b) This preliminary application shall

fulfill all requirements of the final

application with the exception of the

provision of a copy of the franchise

agreement between the proposed transferee and

the licensee, a forfeiture statement by the

transferor, an acceptance statement by the

transferee, and the surrender of the license

of the selling dealer.

(c) The Department shall immediately

commence processing the application and, upon

completion of processing, shall indicate to

the proposed transferee whether its license

will be issued if the licensee approves the

transfer and the transfer is consummated

between the selling dealer and the

transferee.

(d) If the application complies with all

requirements of law, it shall be issued, upon

the consummation of the transfer, and the

provision to the Department of:

1. a copy of the transferee's franchise

with the licensee;

2. a forfeiture statement by the selling

dealer;

3. an acceptance statement by the

transferee; and

4. the license of the selling dealer.

(9) Computation of Sales. For the purpose

of computing sales in compliance with Section

320.642(3)(a)3. and Section 320.642(3)(b)2.,

the thirty-six month period shall be deemed

to expire on the last day of the month

preceding the month in which the notice of

the licensee is published in the Florida

Administrative Weekly.

86. In this case, the Respondents have alleged that

inadequate notice has rendered the instant action subject to

dismissal. They claim that the notice published by the

Department failed to disclose that the service facility would be

located at an address other than as published. The facts are not

disputed. The sales facility for the proposed new point will be

located at the address specified in the notice. Service for the

new point will be in a shared facility at a different dealership

within the same auto mall. When the prehearing stipulation was

filed on September 10, 1996, the Respondents knew the service

facility would be at the second address but did not contest the

notice which had been provided.

87. The challenge to the adequacy of the notice was first

raised incidental to the claim that JSI did not control the

property to be used for this new point. This allegation stemmed

from an alleged sale of the subject site which was first

discovered approximately two weeks before the hearing. The

Respondents maintained that the subject property was being

transferred to a third party who was, for all legal purposes, the

true applicant in this cause. Mazda and JSI disputed the legal

conclusions reached by Respondents and argued that all challenges

to the notice and control of the property issues were waived by

failing to include them in the prehearing stipulation.

88. The rule specifies that notice is to be provided in the

manner and form designated. In this case, the notice accurately

depicted the location of the new sales facility. That the

service would be rendered at a nearby shared location does not

result in defective notice. Notice allows all parties who may be

adversely affected by the proposed new point an opportunity to

participate in the administrative process. It affords a point of

entry to any existing dealer who may allege standing under the

statute to challenge the proposed addition. In this case, all

dealers in the Comm/Terr who might have alleged standing and

participated in this proceeding have, in fact, been parties to

the action. Clearly, no existing dealers outside of the

Comm/Terr could have established standing on the basis of mileage

nor sales volume. No purpose would be served by re-advertising

this proposal with the additional information of the service

address being included. Thus, Respondents’ assertion of

inadequate notice is rejected.

89. As to Respondents’ claim that John Staluppi, Jr. (JSI)

is not the applicant, such argument is also rejected. JSI will

have to abide by the terms of its application and, if approved,

take steps to construct the dealership as set forth in the rule.

Any transfer, assignment or sale of the franchise would also have

to comply with the rule and Section 320.643, Florida Statutes .

Nothing in the law prohibits an approved dealer from later

transferring his interest. Accordingly, the motion to dismiss is

denied.

90. Having weighed the statutory criteria found in Section

320.642, Florida Statutes , it is concluded that the existing

Mazda dealers are providing inadequate representation to the

Comm/Terr. Thus, a new point Mazda dealership located at the

Okeechobee/Military Trail auto cluster as proposed by JSI will

allow this market to achieve a greater sales presence which

should translate into a greater number of sales and improved

market penetration.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED

That the Department of Motor Vehicles and Highway Safety

enter a final order approving the new point dealership sought by

Mazda Motor of America on behalf of J.S. Imports, Inc.

DONE AND ENTERED this 1st day of May, 1997, in Tallahassee,

Florida.

___________________________________

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 1st day of May, 1997.

COPIES FURNISHED:

Dean Bunch, Esquire

Sutherland, Asbill & Brennan, L.L.P.

909 East Park Avenue

Tallahassee, Florida 32301

James D. Adams, Esquire

Adams & Quinton

7300 West Camino Real

Camino Real Centre

Boca Raton, Florida 33433

Douglas E. Thompson

Post Office Box 16480

West Palm Beach, Florida 33416

Dean J. Rosenbach

Lewis, Vegosen, Rosenbach & Silber, P.A.

Post Office Box 4388

West Palm Beach, Florida 33402-4388

Michael J. Alderman, Esquire

Division of Motor Vehicles

Neil Kirkman Building, Room A-432

Tallahassee, Florida 32399-0504

Charles J. Brantley, Director

Division of Motor Vehicles

Neil Kirkman Building, Room B439

Tallahassee, Florida 32399-0500

Enoch Jon Whitney, General Counsel

Division of Motor Vehicles

Neil Kirkman Building

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.