Autofair 1477, L.P. v. American Honda Motor Company, Inc.

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THE SUPREME COURT OF NEW HAMPSHIRE

___________________________

Hillsborough-northern judicial district
No. 2012-914

AUTOFAIR 1477, L.P.

v.

AMERICAN HONDA MOTOR COMPANY, INC.

Argued: April 3, 2014
Opinion Issued: August 22, 2014

Holmes Law Offices PLLC, of Concord (Gregory A. Holmes on the brief
and orally), for the plaintiff.

Campbell Campbell Edwards & Conroy, P.C., of Boston, Massachusetts
(James M. Campbell on the brief and orally), for the defendant.

LYNN, J. The plaintiff, Autofair 1477, L.P., doing business as Autofair
Honda (Autofair), appeals an order of the Superior Court (Garfunkel, J.)
denying its motion for summary judgment and granting summary judgment to
the defendant, American Honda Motor Company, Inc. (AHM), on the plaintiff’s
petition for attorney’s fees. We affirm.

The following facts are drawn from the record or are otherwise
undisputed. AHM, located in Torrance, California, is a manufacturer and
distributor of Honda brand automobiles. Autofair is an authorized Honda
dealer located in Manchester. The relationship between the parties, pursuant
to which AHM supplies new vehicles that it manufactured to Autofair for sale,
is governed by the Automobile Dealer Sales and Service Agreement (the
Agreement). Under the Agreement, Autofair is obligated to perform warranty
work on Honda vehicles pursuant to AHM’s Service Operations Manual, and
AHM later reimburses Autofair for that work. However, AHM may later charge
back any amount paid for a warranty repair if, as the result of a warranty
audit, AHM determines that Autofair did not follow AHM’s policies and
procedures. Both parties are also subject to the provisions of RSA chapter
357-C (2009 & Supp. 2013) (the Dealership Act), which regulates the business
practices between motor vehicle manufacturers, distributors, and dealers.

In November 2010, AHM performed a warranty audit at Autofair, after
which it proposed $45,733.02 of chargebacks and a potential escrow reversal of
$54,571.17 for claimed warranty work that deviated from AHM’s policies and
procedures. AHM did not debit Autofair’s account for these amounts. Autofair
filed an “internal appeal” with AHM, contesting the escrow reversal and
$30,001.51 of the proposed chargebacks. After review, AHM reduced the
amount of the proposed chargebacks to $43,957.94.

In February 2011, Autofair filed a protest with the New Hampshire Motor
Vehicle Industry Board (the Board) pursuant to the Dealership Act. Even
though AHM had neither debited Autofair’s account nor held any disputed
funds in escrow, Autofair specifically requested a “finding and ruling that the
warranty audit charge backs and the [proposed] escrow violate RSA 357-C:4
and RSA 357-C:5, that the audit charge backs be reversed, and the escrow
funds released.”

Prior to a final hearing before the Board, the parties had ongoing
discussions and reduced the disputed amount to $29,729.92, and Autofair
withdrew its request for relief regarding the proposed escrow.1 The Board
conducted a hearing in October 2011. Following the hearing, in a written
order, the Board affirmatively ruled on whether Autofair had reasonably
substantiated each of the 123 claims still at issue, and thus whether AHM was
entitled to charge back the amounts associated with each claim. In total, the
Board determined that AHM was entitled to charge back claims totaling
$1,032.13, but not the remaining $28,697.79 of disputed claims. The Board
also stated that because “Honda has paid the claims, and not held the funds in
escrow, the request in the protest to find a statutory violation due to same is
moot.” Finally, the Board ordered Autofair to pay $1,032.13 to AHM, with
interest.

1In a sworn affidavit, a representative of Autofair said that the escrow portion of its protest
became moot when AHM informed Autofair that it was not planning to escrow funds, and Autofair
so advised the Board.

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 In January 2012, Autofair filed a petition for attorney’s fees and costs
with the trial court pursuant to RSA 357-C:12, X (2009). The statute provides,
in pertinent part, that a prevailing party is entitled to reasonable attorney’s fees
and costs when the Board finds that the other party violated the Dealership
Act. See RSA 357-C:12, X. Both parties moved for summary judgment. The
trial court denied Autofair’s motion and granted AHM’s cross-motion. It based
its ruling upon the fact that the Board had not found that AHM committed a
violation of the Dealership Act because it had not charged back Autofair, and
the court’s conclusion that an award of fees would not be consistent with the
public policy behind the Dealership Act. This appeal followed.

While this appeal was pending, the legislature amended RSA chapter
357-C and added the following definition of “chargeback” to the statute,
effective September 23, 2013 (the Amendment): “‘Chargeback’ means a
manufacturer induced return of warranty, incentive, or reimbursement
payments to a manufacturer by a dealer. The term includes a manufacturer
drawing or an announced intention to draw funds from an account of a dealer.”
RSA 357-C:1, XXX (Supp. 2013). Because it could affect the outcome of the
appeal, before addressing the merits, we must determine whether the
legislature intended the Amendment to apply retrospectively.

“We have long held that statutes are presumptively intended to operate
prospectively.” Appeal of Silk, 156 N.H. 539, 542 (2007). “When the legislature
is silent as to whether a statute should apply prospectively or retrospectively,
as is the case here, our interpretation turns on whether the statute affects the
parties’ substantive or procedural rights.” Id. (quotation and brackets omitted).
“When a statute is remedial or procedural in nature, it may be applied to cases
pending at the time of enactment.” Id. “If application of a new law would
adversely affect an individual’s substantive rights, however, it may not be
applied retroactively.” Id. “Nevertheless, in the final analysis, the question of
retrospective application rests on a determination of fundamental fairness,
because the underlying purpose of all legislation is to promote justice.” Id.
(quotation omitted).

Autofair argues that the Amendment is remedial and should apply
retrospectively because it merely supplements the existing fee statute by
providing a definition of the term “chargeback.” AHM counters that the
Amendment is substantive and applies only prospectively because, by defining
“chargeback” to include both a manufacturer’s drawing of funds and
announcement of an intention to draw funds, it expands the scope of conduct
that violates the Dealership Act. To determine whether the Amendment
adversely affects AHM’s substantive rights, we compare AHM’s rights under the
Dealership Act before and after the Amendment became effective. If the
application of the Amendment creates a new disability in respect to past
transactions, the Amendment affects substantive rights and may not be applied
retrospectively. See Lessard v. City of Manchester Fire Dep’t, 118 N.H. 43, 47

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(1978) (an amendment should not be applied retrospectively “so as to create a
new obligation, impose a new duty or attach a new disability in respect to past
transactions” (quotation omitted)); see also Martin v. Pat’s Peak, 158 N.H. 735,
737, 742-43 (2009) (holding that even when legislature only sought to clarify a
statutory ambiguity by defining a term, the amendment applied prospectively
because the clarified intent was not clearly expressed in original version of the
statute).

Resolving this issue requires us to interpret the Dealership Act. In the
instant case, if AHM could propose chargebacks without violating the
Dealership Act prior to the Amendment, but the Amendment now prohibits
those same proposed chargebacks, then the Amendment has placed a new
disability upon AHM and it may not be applied retrospectively. “The
interpretation of a statute is a question of law, which we review de novo.” State
Employees’ Assoc. of N.H. v. State of N.H., 161 N.H. 730, 738 (2011). “In
matters of statutory interpretation, we are the final arbiter of the intent of the
legislature as expressed in the words of the statute considered as a whole.” Id.
“We first look to the language of the statute itself, and, if possible, construe
that language according to its plain and ordinary meaning.” Id. “We interpret
legislative intent from the statute as written and will not consider what the
legislature might have said or add language that the legislature did not see fit
to include.” Id. “We construe all parts of a statute together to effectuate its
overall purpose and avoid an absurd or unjust result.” Id. “Moreover, we do
not consider words and phrases in isolation, but rather within the context of
the statute as a whole.” Id.

We first determine AHM’s rights under the Dealership Act prior to the
application of the Amendment. The Act’s fees section, RSA 357-C:12, X,
provides: “In cases where the board finds that a violation of this chapter has
occurred or there has been a failure to show good cause under RSA 357-C:7 or
RSA 357-C:9, the superior court, upon petition, shall determine reasonable
attorney’s fees and costs and award them to the prevailing party.” Under the
plain language of the statute, assuming, without deciding, that Autofair is a
“prevailing party,” Autofair is entitled to attorney’s fees only if AHM violated the
Dealership Act. Autofair argues that AHM violated RSA 357-C:5, II(b)(1) (Supp.
2012) (amended 2013). In its order, the Board expressly declined to find that
AHM had violated the statute. Nevertheless, Autofair urges us to rule that the
Board implicitly found that AHM violated RSA 357-C:5, II(b)(1) when the Board
determined that AHM was not entitled to charge back $28,697.79 of the
proposed chargebacks. RSA 357-C:5, II(b)(1) provides, in relevant part:

No claim which has been approved and paid by the manufacturer
or distributor may be charged back to the dealer unless it can be
shown that the claim was false or fraudulent, that the repairs were
not properly made or were unnecessary to correct the defective
condition, or that the dealer failed to reasonably substantiate that

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 the claim was in accordance with the written requirements of the
manufacturer or distributor in effect at the time the claim arose.

The language “[n]o claim . . . may be charged back” plainly prohibits only
actual chargebacks. Actual and proposed chargebacks are different actions
that have different effects: Actual chargebacks deprive dealers of the use of
funds, while proposed chargebacks cause no such deprivation.

This interpretation is reinforced by the legislature’s treatment of
“chargeback” and “proposed chargeback” in the statute as a whole. We find
RSA 357-C:5, II(d)(5) instructive because it differentiates between actual and
proposed chargebacks while setting out the procedure for how a manufacturer
may make a chargeback:

Any chargeback resulting from any audit shall not be made until a
final order is issued by the New Hampshire motor vehicle industry
board if a protest to the proposed chargeback is filed within 30
days of the notification of the final amount claimed by the
manufacturer . . . to be due after exhausting any procedure
established by the manufacturer . . . to contest the chargeback,
other than arbitration.

This statutory provision shows that making a chargeback and proposing a
chargeback are two distinct and separate actions. Therefore, RSA 357-C:5,
II(b)(1) clearly and unambiguously prohibits only making certain chargebacks;
it does not prohibit proposing chargebacks. In the instant case, AHM did not
violate RSA 357-C:5, II(b)(1) because AHM did not debit Autofair’s account for
the proposed chargebacks that the Board determined Autofair had reasonably
substantiated. Therefore, AHM would not be liable for attorney’s fees under the
Act prior to the Amendment. See RSA 357-C:12, X.

We next determine AHM’s rights under the Dealership Act after the
enactment of the Amendment. The Amendment did not change the relevant
language of either RSA 357-C:5, II(b)(1) or RSA 357-C:12, X, but it did define
the term “chargeback.” See RSA 357-C:1, XXX. Incorporating the newly
codified definition of chargeback, a manufacturer can violate RSA 357-C:5,
II(b)(1) either by withdrawing funds or by announcing an intention to withdraw
funds from a dealer for claims that the dealer can reasonably substantiate. Id.
In the instant case, because AHM announced its intention to charge back
warranty claims that the Board later determined that Autofair had reasonably
substantiated, and again assuming, without deciding, that Autofair was a
prevailing party, AHM’s proposed chargebacks would violate RSA 357-C:5, II(b),
and AHM would thus be liable for attorney’s fees under RSA 357-C:12, X.

Because AHM’s proposed chargebacks would not violate the Dealership
Act prior to the enactment of the Amendment, but would violate RSA 357-C:5,

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II(b) under the amended statutory scheme, the Amendment creates a new
disability by prohibiting conduct that was previously allowed. The Amendment
adversely affects AHM’s substantive rights, and, therefore, we will not apply it
retrospectively.

We turn now to the merits of Autofair’s appeal regarding its request for
attorney’s fees and costs. Autofair argues that the trial court erred by denying
its petition for attorney’s fees because: (1) the trial court misconstrued the
Dealership Act and the Board’s order when it concluded that the Board did not
find that AHM had violated the statute; and (2) the trial court’s construction of
the Dealership Act is inconsistent with its statutory purpose as evidenced by
its legislative history. “In reviewing the trial court’s rulings on cross-motions
for summary judgment, we consider the evidence in the light most favorable to
each party in its capacity as the nonmoving party.” Eby v. State of N.H., 166
N.H. ___, ___ (decided June 13, 2014). “Where, as here, the parties agree that
there are no genuine issues of material fact in dispute, our task in reviewing
the trial court’s summary judgment rulings is to determine whether the moving
party is entitled to judgment as a matter of law.” Id. “In such circumstances,
the analysis for summary judgment purposes is not meaningfully different from
that employed in ruling on a motion to dismiss.” Id.

Autofair argues that it is entitled to fees under RSA 357-C:12, X because
the Board implicitly found in its order that AHM had violated RSA 357-C:5,
II(b). As noted above, the Board did not expressly find a statutory violation. To
the contrary, it declined to find a statutory violation, reasoning that because
AHM “has paid the claims, and not held the funds in escrow, the request in the
protest to find a statutory violation due to same is moot.”2 Instead, the Board
decided, for each proposed chargeback, whether or not AHM was entitled to
make the chargeback. Because we have already determined that proposed
chargebacks did not violate RSA 357-C:5, II(b)(1) prior to the Amendment, the
Board’s order cannot constitute an implicit finding of a statutory violation.
Therefore, AHM did not violate RSA 357-C:5, II(b)(1) or any other provision of
the Dealership Act. Because Autofair can be awarded attorney’s fees under
RSA 357-C:12, X only in cases where the Board finds that a violation of the
Dealership Act has occurred, we affirm the trial court’s ruling that AHM was
entitled to judgment as a matter of law.

Because we have determined that RSA 357-C:5, II(b) and RSA 357-C:12,
X are clear and unambiguous, we need not address Autofair’s final argument

2Autofair argues that the Board’s reference to an “escrow” in this statement was to AHM’s
potential escrow reversal, which Autofair had challenged before withdrawing its request for relief
on that issue. Whether or not this statement was in reference to that withdrawn request or to its
protest of the proposed chargebacks, even viewing this statement in the light most favorable to
Autofair, it is still silent on the issue of whether AHM’s proposed chargebacks violated the
Dealership Act, and, therefore, neither interpretation changes our determination that the Board
did not expressly or implicitly find a statutory violation.

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— that this interpretation of the statute is inconsistent with the statute’s
purpose as evidenced by its legislative history. See In re Guardianship of
Eaton, 163 N.H. 386, 389 (2012) (“We do not consider legislative history to
construe a statute that is clear on its face.”).

Affirmed.

DALIANIS, C.J., and HICKS, CONBOY, and BASSETT, JJ., concurred.

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