STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VESPA OF AMERICA CORPORATION ) PIAGGIO GROUP, and KAY-JO'S )

MOTORCYCLE SERVICES, INC., )

)

Petitioners, )

)

vs. ) CASE NO. 80-1512

) DEL REY CORPORATION d/b/a PALM ) BEACH AUTO CLINIC and DEPARTMENT ) OF HIGHWAY SAFETY AND MOTOR )

VEHICLES, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on December 19, 1980, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Edward A. Garrison, Esquire

Kay-Jo's Motorcycle 3003 South Congress Avenue, Suite 1-A Services, Inc. Palm Springs, Florida 33461

For Respondents: Peter M. Evans, Esquire Del Rey Corporation 2072 South Military Trail

d/b/a Palm Beach West Palm Beach, Florida 33406 Auto Clinic

STATEMENT OF THE ISSUE

Whether the application of Petitioner, Kay-Jo's Motorcycle Services, Inc., for a license to serve as a Vespa motor scooter franchised dealer in Boca Raton should be granted, on the ground that existing Vespa dealers are not adequately representing Vespa in the territory involved.

CONCLUSIONS AND RECOMMENDATION

Petitioners have met the burden of proof imposed by Section 320.642, Florida Statutes, and established that the existing Vespa dealers serving the territory involved are not providing adequate representation of Vespa.

Therefore, the application for a motor vehicle dealer's license should be granted.

BACKGROUND

On August 1, 1980, Petitioner, Kay-Jo's Motorcycles Services, Inc. ("Applicant"), filed an application with the Florida Department of Highway Safety and Motor Vehicles ("Department") for a license to operate a franchised Vespa motor scooter dealership in Boca Raton, Florida. On or about August 6, 1980, Respondent, Del Rey Corporation d/b/a Palm Beach Auto Clinic ("Del Rey")-- an existing Vespa dealer--protested the licensing of the proposed new dealership.

On August 11, 1980, the Department forwarded this matter to the Division of Administrative Hearings for assignment of a hearing officer and the conducting of a Section 120.57(1) formal proceeding.

Hearing was thereafter set for November 18, 1980. On November 7, 1980, Del Rey moved for continuance of hearing on grounds that counsel was retained on November 5, 1980, and required additional time to prepare for hearing. On November 17, 1980, the motion was granted, and hearing was reset for December 19, 1980.

At final hearing, the Applicant called Tueyell Hoover, Michael R. Beamer, Kay F. Hoover, and Rush Simonson as its witnesses, and offered Petitioner's Exhibit1 Nos. 1 through 15 into evidence, each of which was received. Del Rey called Rush Simonson as its only witness, and offered Respondent's Exhibit1 No.

1 into evidence.

At hearing, Michael R. Beamer, a non-attorney, sought to represent Vespa of America Corporation-Piaggio Group ("Vespa"). Pursuant to Rule 28-5.105, Florida Administrative Code, inquiry was made at hearing for the purpose of determining whether this representative was capable of preserving the right of his principal. After Mr. Beamer candidly admitted that he had no familiarity with Chapter 120, Florida Statutes, had never before represented his company in an evidentiary hearing, and had no understanding of the limitations on admissibility of hearsay evidence, it was ruled that, by virtue of his lack of knowledge and experience, he was not qualified to represent Vespa during the hearing. See, The Florida Bar v. Moses, 380 So.2d 412, 415 (Fla. 1980). Mr.

Beamer acknowledged that his company's interest in this case was essentially identical to the Applicant's. During the remainder of the hearing, he was called as a witness by the Applicant, and conferred freely with the Applicant's attorney.

At conclusion of hearing, the parties requested and were granted the opportunity to file proposed findings of fact by January 23, 1981. It was also agreed that the 30-day period for submittal of a recommended order to the Department would begin to run upon submittal of their proposed findings.

FINDINGS OF FACT

Based upon the evidence presented at hearing, the following facts are determined:

1. The Parties

   
   

   1. Applicant operates a business at 152 Northwest 20th Street, Boca Raton, which sells and services mopeds, motorcycles, and motor scooters. It now seeks a Department license which would allow it to sell and service Vespa motor scooters at is existing business location. (Testimony of T. Hoover; P-10).

   2. On January 30, 1980, Applicant executed a standard dealership franchise agreement with Vespa. Since Applicant was already a licensed motor vehicle dealer, Applicant erroneously believed it could proceed to sell Vespa motor scooters without further licensing action by the Department. As a result, Applicant promoted and sold Vespa motor scooters at its Boca Raton location from February 1980 until August 1980 when the Department requested that it cease and desist such activity until final Department licensing action. (Testimony of T. Hoover; P-14, P-15.)

      
      

   3. Vespa was formed in 1975, and is the exclusive distributor of Vespa motor scooters, parts, and accessories in the United States. It has concluded that Florida is a key Vespa scooter market with high potential for increased sales, and seeks to increase the number of Vespa dealerships in Florida. It supports the licensing of a new Vespa dealership in Boca Raton. (Testimony of Beamer; P-6, P-15.)

      
      

   4. Del Rey operates an automobile repair and parts distribution business at 2532 Okeechobee Boulevard, West Palm Beach, Florida. It also sells and services a variety of mopeds and motor scooters, including Vespa, Motobecane, Puch, and Carabala; since 1978, it has been the only franchised Vespa dealership in Palm Beach County. It now protests the licensing of a second Vespa dealership in the county, as proposed by Applicant.

      
      

2. Community or Territory involved.

   
   

   1. The Applicant seeks to operate a Vespa dealership in Boca Raton to satisfy what it perceives as a potential market demand for Vespa scooters in that area. The closest Vespa dealerships are located in West Palm Beach, 34 miles to the north, and in Fort Lauderdale, 27 miles to the south. Boca Raton is located 3-4 miles from the boundary between Palm Beach and Broward Counties and has experienced rapid population growth. (Testimony of T. Hoover.)

      
      

   2. The primary market territory which would be served by Applicant's proposed Vespa dealership encompasses Boca Raton, and communities within the immediate vicinity, including Deerfield Beach, 4 1/2 miles to the south, and Pompano Beach, 10 miles to the south, both in Broward County, and Delray Beach,

   10 miles to the north in Palm Beach County. (Testimony of T. Hoover, K. Hoover; R-1.)

   
   

3. Adequacy of Existing Dealers' Representation of Vespa in Territory Involved

7 The sole issue in this case is whether existing Vespa dealers are adequately representing Vespa in the territory involved, infra, which centers on Boca Raton and extends from Pompano Beach northward to Delray Beach. Neither Vespa nor Applicant contend that Del Rey has failed to comply with its franchise agreement. (Stipulation of counsel.)

1. As compared with motorcycles, Vespa motor scooters are sold in low volume and targeted to a narrow segment of the motoring public. For example, in the year prior to Del Rey opening its Vespa dealership in 1978, 30 motor scooters were sold in Palm Beach County while 7,700 motorcycles were sold. Because of its limited appeal, Vespa dealers require a larger market area than would dealers of popular brands of motorcycles. There are only 27 Vespa dealers in Florida--which averages one dealer for each 2.481 counties. (Testimony of Beamer, Simonson; R-1.)

2. Prior to the opening of the Del Rey Vespa dealership in 1978, there were virtually no Vespa motor scooter sales in Palm Beach County. Del Rey thus embarked on an aggressive Vespa advertising and market development program. It spent over $9,500 in Vespa advertising. Its market development plan envisioned that a loss would be sustained during the first three years of Vespa sales, due to intense advertising costs; a break-even point would then be reached, to be followed by profitable operations during the fourth and fifth years of Vespa sales. 1980 is the first year during which Del Rey's Vespa sales reached a break-even point. Del Rey contends that the opening of Applicant's Vespa dealership in Boca Raton will siphon off sales which it would otherwise enjoy, thereby significantly delaying its realization of profit from its Vespa sales. (Testimony of Simonson.)

   
   

3. Although its dealership agreement does not expressly grant Del Ray an exclusive right to market Vespa products within a particular geographical area, Del Rey considers its market area to be Palm Beach County. Its advertising and marketing efforts have been concentrated within Palm Beach County. It is now one of the largest Vespa dealers within Florida. Because of Del Rey's efforts, Palm Beach County has a significantly higher Vespa "saturation factor" than any other county in south Florida: as of November 1980 registration showed one Vespa scooter for each 6,980 people. In contrast, Broward County has one of the lowest "saturation factors"--one Vespa for each 124,020 people. Although Vespa sales declined in south Florida from 1979 to 1980, Del Rey increased its 1980 sales to 60, as compared with 51 during 1979. The only other existing Vespa dealership in the vicinity is located in Fort Lauderdale. Its Vespa scooter sales declined from 69 during 1979, to 5 during 1980. (Testimony of Simonson;

   P-15.)

   
   

4. Del Rey contends that it should have the right to sell Vespa scooters in Palm Beach County, to the exclusion of all others, because of oral promises to that effect purportedly made by two Vespa agents. Whether or not such promises were made, are not germane here. Del Rey admits that the promises were not placed in writing. And the Vespa-Del Rey dealership agreement expressly provides that it incorporates all understandings of the parties and supersedes all prior communications regarding the subject matter. However, the following testimony sheds light on Del Rey's opposition to the licensing of Applicant:

   
   

   [Attorney for Petitioner]

   Q: Are you objecting to Kay-Jo's [Applicant] having a dealership because Vespa has breached the [dealership[ agreement with you?

   
   

   [Rush Simonson, President of Del Rey]

   A: Yes. Not in writing. It is a verbal agreement. (Tr. 125.)

   
   

   Del Rey also indicated that if the Applicant was located 3-5 miles further south, below the Palm Beach County line, it "would not have any basis for an objection because I was not promised anything in Broward county." (Tr. 125.) (Testimony of Simonson.)

   
   

5. Seventy-five to eighty percent of Del Rey's Vespa scooter sales are made to customers located in West Palm Beach and communities in northern Palm Beach County. During 1979, Del Rey sold only three Vespa scooters to customers in Boca Raton. (Testimony of Beamer, Simonson; P-2.)

6. The Applicant sold nine Vespa scooters during the five to six month period during which it operated a Vespa dealership in Boca Raton during 1980. Of the nine customers, seven lived in the Boca Raton area, one in Pompano, and one in Boynton Beach.2 The Applicant also participated in promotional displays of Vespa scooters at malls in Boca Raton and Pompano Beach. Four hundred ninety-four written responses were received from persons indicating an interest in Vespa products. Applicant discovered an interest in and demand for Vespa

   products because of their superiority over competing products--such as Lambretta and Bajaj. It did not advertise or promote Vespa sales north of Boca Raton.

   Instead, it focused its sales efforts in the Boca Raton area, and communities immediately south in Broward County. (Testimony of K. Hoover.)

   
   

7. The foregoing evidentiary facts support an ultimate finding that the existing dealers, Del Rey and the unnamed Ft. Lauderdale dealership, are not adequately representing Vespa within the territory and market area identified in Section II above. Although market studies and expert analysts are helpful in determining adequacy of market penetration, such evidence is not essential. Here, the evidence consists of comparative sales made by existing dealers and the Applicant in the territory involved. Applicant's sales, in Boca Raton alone, if annualized over a 12-month period, would total 14. During all of 1979, Del Rey sold only three Vespa scooters in Boca Raton. In sum, Applicant's promotional efforts and proximity to customers in the Boca Raton area resulted in almost a 500 percent increase in Vespa sales over Del Rey's sales in the same area the previous years. As for the unnamed Ft. Lauderdale dealership, it sold a total of only five Vespa scooters during 1980, so it is concluded that it does not adequately represent Vespa in the territory involved. (Testimony of Beamer, Simonson, T. Hoover, K. Hoover.)

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes (1979).

   
   

9. Section 320.642, Florida Statutes (1979), establishes the following standards for acting on an application for a motor vehicle dealer license:

   
   

   The department [of Highway Safety and Motor Vehicles] shall deny an application for a motor vehicle dealer license in any community or territory where the licensee's presently licensed franchised motor vehicle dealer or dealers have complied with licensee's agreements and are providing adequate representation in the community or territory for such licensee. The burden of proof in showing inadequate representation shall be on the licensee.

   
   

   The parties agree that Del Rey is complying with its licensee agreement with Vespa. Hence, the sole issue is whether the existing Vespa dealerships in West Palm Beach and Ft. Lauderdale are providing "adequate representation" of Vespa in the community or territory involved. If "adequate representation" is found, Applicant's license must be denied. Hess Marine, Inc. v. Calvin, 296 So.2d 114 (Fla. 1st DCA 1974).

10. The Boca Raton marketing area, extending form Pompano Beach northward to Delray Beach, constitutes the territory sought to be served by Applicant, and within which the adequacy of the existing dealers' representation of Vespa must be measured. Section 320.642, supra.

    
    

11. The Applicant sustained the burden of proof imposed by Section 320.642 and established by a preponderance of evidence that existing Vespa dealers are not adequately representing Vespa in the specific territory involved. A comparison of the sales performances of the Applicant and the existing dealers establishes that the territory involved

    
    

    "remains an identifiable plot not yet cultivated, which . . . [can] be expected to flourish if given the attention which the others . . . received." Bill Kelley Chevrolet, Inc. v. Calvin, 322 So.2d 50, 52 (Fla. 1st DCA 1975).

    
    

    Del Rey's otherwise adequate representation of Vespa in Palm Beach County, taken as a whole, does not preclude a finding of inadequate representation in an identifiable area straddling the boundaries of Palm Beach and Broward Counties. See, e.g., Bill Kelley Chevrolet, supra, at 52.

    
    

12. The purpose of Section 320.642 is to prevent powerful manufacturers from taking unfair advantage of their dealers by overloading a market area with more dealers than can be justified by the legitimate interests of the manufacturer and its dealers, existing and prospective. Plantation Datsun, Inc.

    v. Calvin, 275 So.2d 26 (Fla. 1st DCA 1973). Del Rey experienced substantial overall Vespa sales gains in 1980, over 1979, despite the operation of Applicant's dealership during a five to six month period. This is because most of Del Rey's sales take place in the West Palm Beach area, and the northern part of Palm Beach County. The opening of a new dealership 34 miles to the south does not, under the circumstance, constitute unfair treatment which Section 360.642 was enacted to prevent.

    
    

13. Only Del Rey submitted proposed findings of fact. To the extent they are incorporated herein, they are adopted; otherwise they are rejected as being irrelevant to the issue presented, or unsupported by a preponderance of the evidence.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Kay-Jo's Motorcycle Services, Inc., for a motor vehicle license be GRANTED.

DONE AND ENTERED this 13th day of February 1981 in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 13th day of February 1981.

ENDNOTES

1/ Petitioner's and Respondent's Exhibits will be referred to as "P- " and "R- ", respectively.

2/ Witnesses Beamer, T. Hoover, and K. Hoover presented conflicting testimony on the number of Vespa sales made by Applicant during 1980. K. Hoover examined and referred to sales documentation when she testified, and her testimony is therefore considered credible and persuasive.

COPIES FURNISHED:

Peter M. Evans, Esquire 2072 South Military Trail

West Palm Beach, Florida 33406

Edward A. Garrison, Esquire Suite 1-A

3003 South Congress Avenue Palm Springs, Florida 33461

Mike Beamer

Vespa of America Corporation- Piaggio Group

355 Valley Drive

Brisbane, California 94005

John D. Calvin, Director Division of Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32301

Docket for Case No: 80-001512

Orders for Case No: 80-001512