the date at which the process began is not clear, AHMC concedes detailed analysis of cutting the number of dealers, already a foregone conclusion, got into full swing on Thomas' watch. In the second half of 1994, the Acura division began Project 99, which specifically looked at reducing the number of dealers. (E.g., Tr. 255, 276) Project 99 in turn gave way to an outside study, called the Fast Track Program, which still is underway and which is looking at ways to reduce the number of dealers and eliminate dualed franchises, among other means of improving Acura's performance. (E.g., Tr. 154-62, 257; PX 101)
AHMC argues that neither Project 99 nor the Fast Track Program had reached any conclusions by the time Bronx Acura was terminated and that the decision to terminate Bronx Acura was unrelated to dealer cutbacks. The Court accepts that no definitive conclusions had been reached by the time of trial as to the optimum number or locations of Acura dealers. Nevertheless, the Court does not fully credit the testimony of the AHMC witnesses on this point. It finds that the Acura division stopped adding new dealers and, by the time of the events in question here, had decided to eliminate dealers, especially dual dealers and dealers in less desirable locations, whenever possible. (See, e.g., Tr. 161-62, 175-76) AHMC, moreover, was very conscious of the potential limitations imposed by state franchise laws on its ability to eliminate dealers. (Id. 157) Hence, the mindset was an opportunistic one: if a less than desirable dealer could be portrayed as having given grounds for termination unrelated to a naked desire to cut the number of Acura dealers, AHMC was very much interested in taking advantage of the situation.
Bronx Acura's Relationship with Acura -- 1987 to 1994
Bronx Acura's history with AHMC paralleled the Acura division's performance. Initially, it was very successful. In 1989, AHMC renewed the franchise to run until January 31, 1994. AHMC did not request any facilities upgrades at the time of the renewal. But amity was not to prevail. As time went by, Bronx Acura's initial success turned into a declining sales trend, a decline even steeper than that experienced by the Acura division. (DX 12, at 51; DX 2, P 5) Other irritants came to the fore as well.
Perhaps spurred by Acura's declining popularity and its own less than ideal location, Bronx Acura competed aggressively. As Mr. Lundy foresaw before the franchise was issued, it sought to attract customers from outside the Bronx. In 1991 and 1992, Acura division zone personnel admonished it for "distress" pricing and advertising -- i.e., price cutting or making price a focus of competition -- on several occasions. (PX 21, PX 23, PX 29, DX 50, DX 55; see also Tr. 307-11; PX B, PP 26-27) The dealership was known to be selling a majority of its new vehicles to customers outside its primary market area (Tr. 311-12) -- in other words, it was competing hard with surrounding Acura dealers, a matter that the Acura division watches closely. (Id. 182-83)
Initial Facilities Issues
In view of the current controversy, one might expect that Bronx Acura's facilities, never ideal from AHMC's point of view, would have been an issue as well. But they were not, at least to any substantial extent. To be sure, Acura division personnel, who visited the facility regularly, complained on a number of occasions about the cleanliness of the showroom and restrooms. (PX 28 at AH1428, PX 29, DX 39, DX 51, DX 53, DX 55) A majority of the contact reports that they routinely prepared following such visits, however, made no adverse comments about the facilities. (PX 15, PX 23, PX 24, PX 31, PX 37, DX 36, DX 50, DX 52, DX 63). Indeed, a facility audit conducted in June 1990 rated the facilities overall as "good." (PX 27) But two events in the winter of 1993-94 combined to place Bronx Acura's facilities at the eye of the storm.
The first was a roof leak. The Acura and Honda service areas, which are in adjacent premises at 2637 and 2641 East Tremont Avenue, are in older wood frame buildings with flat roofs. Beginning in the fall of 1993, the roofs began to leak. Tiles in the dropped ceiling in the Acura area became wet and discolored, and water sometimes dripped into the service area. A wooden beam supporting the roof in the Honda area at 2641 broke and was supported temporarily by an unsightly wooden structure placed on a hydraulic lift. Ms. Arcaro, the Acura district parts representative, as well as Mr. Brent and Mr. Szabatura, repeatedly complained to Mr. Schlanger and noted the condition in their contact reports. (PX 45, PX 54, DX 30, DX 31, DX 33, DX 34, DX 58, DX 63-DX 68) Repairs no doubt were difficult to make during the winter months, as Mr. Schlanger contended, but there is little doubt that he delayed making necessary repairs for many months, far beyond what was reasonable.
The New Showroom Proposal Paves the Road to Termination
The second event that led to the current state of affairs, ironically, was Mr. Schlanger's decision in 1993 to build a new Acura showroom at 2541 East Tremont Avenue, about a block away from the showroom he had built in 1989. He first discussed the idea with Mr. Lundy, who had become zone manager in July 1992, and then submitted a written proposal.
(See PX 44 at AH0084)
On February 12, 1994, Mr. Lundy, the AHMC official who initially expressed skepticism about the Bronx as a market for Acuras, forwarded the new showroom proposal to Mr. Crowe. (Id.). His view of the Bronx had not improved in the years since Mr. Schlanger first applied for an Acura franchise. (See Tr. 122) His transmittal memorandum read in relevant part:
"This relocation does not affect Service and Parts, although those departments are substandard. Currently the Service Department heat is turned down because the showroom is vacant, the ceiling is caving in, and the customer waiting area has cardboard rather than carpeting. In addition, the financial statement is continually adjusted every quarter and includes another make. The real issue is do we need a dealer in this market. This is our opportunity to (pardon the pun) turn up the heat on this dealership, rather than to renew without any regard to Acura standards." (PX 44 at AH0080) (emphasis added)
And turn up the heat they did.
In short order, Mr. Crowe received details of alleged deficiencies in the service and parts departments at Bronx Acura.
Gregg Szabatura, the assistant zone manager for service in Bronx Acura's zone, sent Mr. Crowe a note on February 22, 1994, in which he stated that Mr. Schlanger had not invested anything in the facility, together with a sheaf of photographs of Bronx Acura. (PX 45) A few days later, he followed up with another memorandum listing alleged facilities deficiencies at Bronx Acura and Martin Manhattan Acura, which then was owned by Mr. Schlanger's brother. (DX 27)
Mr. Szabatura's photographs show some undesirable conditions at Bronx Acura. They depict, for example, the temporary roof repair which, to say the least, was unattractive. But it is important to note that the photographs of the shop area and parts department are indistinguishable in any material respect from those which were before Mr. Crowe when he approved Mr. Schlanger's franchise in 1987. (PX 45 at AH0078) The layout of both was unchanged.
The Demand for Unspecified Renovations
On March 23, 1994, Mr. Crowe approved Mr. Schlanger's proposal to relocate the showroom. (Plaintiff's facilities following completion of the new showroom are depicted in the Appendix.) But he limited the renewal of the Bronx Acura franchise to six months, expiring September 30, 1994, and coupled a further renewal to a complete renovation of the parts and service departments:
"While we are pleased with the action you have taken to upgrade the Acura showroom, you need to move forward immediately to completely renovate the Acura Parts & Service departments and customer lounge. I understand the Zone Office has discussed this matter with you on many occasions. However, you have not taken any steps to correct the deplorable conditions your employees have worked in and the Acura customers are exposed to. I have requested the Zone Office to schedule a meeting with you in the near future to develop renovation plans and a timetable to complete the remodel of these departments." (PX 48) (emphasis supplied)