                          NOTICE: NOT FOR PUBLICATION.
   UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
          LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.




                                    IN THE
               ARIZONA COURT OF APPEALS
                                 DIVISION ONE


     YAMAHA MOTOR CORPORATION, U.S.A., Plaintiff/Appellant,

                                        v.

 ARIZONA DEPARTMENT OF TRANSPORTATION, an agency of the
     State of Arizona; EXECUTIVE HEARING OFFICE, ARIZONA
DEPARTMENT OF TRANSPORTATION MOTOR VEHICLE DIVISION,
 an agency of the State of Arizona; and YSA MOTORSPORTS, LLC, an
       Arizona Limited Liability Company, Defendants/Appellees.

                             No. 1 CA-CV 13-0242
                               FILED 07-03-2014


           Appeal from the Superior Court in Maricopa County
                        No. LC2011-000504-001
               The Honorable Crane McClennen, Judge

                                  AFFIRMED


                                   COUNSEL

Snell & Wilmer L.L.P., Phoenix
By Michael T. Liburdi, Mark A. Molique

Baker & Hostetler L.L.P.
By Maurice Sanchez, Kevin M. Colton
Co-Counsel for Plaintiff/Appellant
Arizona Attorney General’s Office, Phoenix
By Stephanie A. Lillie
Counsel for Defendants/Appellees ADOT, et al.

Jennings Haug & Cunningham L.L.P.
By Chad L. Schexnayder, Hillary P. Gagnon
Counsel for Defendant/Appellee YSA Motorsports, L.L.C.



                      MEMORANDUM DECISION

Judge Margaret H. Downie delivered the decision of the Court, in which
Presiding Judge Kenton D. Jones and Judge Donn Kessler joined.


D O W N I E, Judge:

¶1           Yamaha Motor Corporation, U.S.A. (“Yamaha”) appeals the
superior court’s judgment affirming the denial of its request to establish a
new dealership. For the following reasons, we affirm.

                             BACKGROUND

¶2           As required by statute, the Arizona Department of
Transportation (“ADOT”) notified two Yamaha franchisees — YSA
Motorsports, LLC (“YSA”) and Apache Motorcycles Inc. (“Apache”) — of
Yamaha’s recently filed notice of intent to establish a new dealership in
North Scottsdale. See Ariz. Rev. Stat. (“A.R.S.”) § 28-4453(A)-(B). Go AZ
Motorcycles (“Go AZ”) would operate the proposed new franchise, which
would sell Yamaha products exclusively. YSA objected to Yamaha’s
proposal and requested a hearing through the Executive Hearing Office
(“EHO”). See A.R.S. § 28-4454.

¶3           A multi-day hearing was held before an Administrative Law
Judge (“ALJ”). Both Yamaha and YSA presented numerous witnesses and
exhibits. The ALJ thereafter issued detailed findings of fact and
conclusions of law, ultimately concluding Yamaha had not established
good cause for the proposed new dealership. Yamaha sought review in
the superior court. See A.R.S. §§ 12-905(A), 28-4456(G). The superior
court affirmed, and Yamaha timely appealed. We have jurisdiction
pursuant to A.R.S. § 12-913.




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                         YAMAHA v. ADOT et al.
                          Decision of the Court

                               DISCUSSION

   I.         Standard of Review

¶4             In reviewing an administrative agency’s decision, the court
“shall affirm the agency action unless after reviewing the administrative
record . . . the court concludes that the action is not supported by
substantial evidence, is contrary to law, is arbitrary and capricious or is an
abuse of discretion.” A.R.S. § 12-910(E). We do not reweigh the evidence
to determine whether we would find it more or less persuasive or
significant than the ALJ. See Shaffer v. Ariz. State Liquor Bd., 197 Ariz. 405,
409, ¶ 18, 4 P.3d 460, 464 (App. 2000). We instead review the record to
determine whether there has been “unreasoning action, without
consideration and in disregard for facts and circumstances; where there is
room for two opinions, the action is not arbitrary or capricious if exercised
honestly and upon due consideration, even though it may be believed that
an erroneous conclusion has been reached.” Petras v. Ariz. State Liquor Bd.,
129 Ariz. 449, 452, 631 P.2d 1107, 1110 (App. 1981); see also E. Vanguard
Forex, Ltd. v. Ariz. Corp. Comm’n, 206 Ariz. 399, 409, ¶ 35, 79 P.3d 86, 96
(App. 2003) (substantial evidence exists to support agency decision if
either of two inconsistent factual conclusions is supported by the record).
However, we review de novo statutory interpretations by and legal
conclusions of the ALJ and superior court. See Anderson v. Ariz. Game &
Fish Dep’t, 226 Ariz. 39, 40, 243 P.3d 1021, 1022 (App. 2010); Eaton v. Ariz.
Health Care Cost Containment Sys., 206 Ariz. 430, 432, ¶ 7, 79 P.3d 1044,
1046 (App. 2003).

   II.        Statutory Framework

¶5            A franchisor such as Yamaha may not establish “an
additional new motor vehicle dealership in a community in which the
same line-make is then represented, unless there is good cause for the
additional new motor vehicle dealership under the franchise and unless it
is in the public interest.” A.R.S. § 28-4452(B). To establish such a
dealership, the franchisor must file a “notice of intention to enter into a
franchise for additional representation of the same line-make.” A.R.S. §
28-4453(A). ADOT then sends notice “to all franchisees of the same line-
make in the community and to all other franchises located within ten
miles of the proposed dealership . . . if located outside the community,
who are then engaged in the business of offering to sell or selling the same
line-make.” A.R.S. § 28-4453(B). If a franchisee that has standing to object




                                      3
                             YAMAHA v. ADOT et al.
                              Decision of the Court

does so, ADOT refers the matter to EHO for a hearing. 1 See A.R.S. §§ 28-
4454 to -4455.

¶6           The ALJ is required to consider the “existing circumstances,”
including the following specific factors:

            1. Amount of business transacted by other franchisees of the
            same line-make in that community.

            2. Investment necessarily made and obligations incurred by
            other franchisees of the same line-make in that community
            in the performance of their part of their franchises.

            3. Whether the franchisees of the same line-make in that
            community are providing adequate consumer care for the
            new motor vehicle products of the line-make, including the
            adequacy of new motor vehicle dealer sales and service
            facilities, equipment, supply of parts and qualified
            management, sales and service personnel.

            4. The economic impact on existing franchisees of the same
            line-make due to the addition of a franchise.

            5. The effect on the retail motor vehicle business and the
            consuming public.

A.R.S. § 28-4457(E).

¶7            Yamaha conceded in its written closing argument filed with
the ALJ that it bore the burden of proof, stating: “The applicable standard
of proof is whether Yamaha has established, by a preponderance of the
evidence, that good cause exists to appoint the new dealer franchise.”

     III.          The Administrative Hearing

¶8           Both Yamaha and YSA presented extensive evidence
regarding the A.R.S. § 28-4457(E) factors. The ALJ articulated and
discussed each factor and also addressed other “existing circumstances”
she deemed relevant. Yamaha’s primary challenge on appeal is to the
ALJ’s interpretation and analysis of the (E)(4) factor: the economic impact



1   Yamaha has not challenged YSA’s standing.



                                         4
                         YAMAHA v. ADOT et al.
                          Decision of the Court

the proposed dealership would have on existing franchisees of the same
line-make.

¶9             The record does not support Yamaha’s claim that the ALJ
required it to prove “there is no possibility of any adverse effects on other
dealers as a result of the appointment of the new dealership.” (Original
emphasis.) The ALJ instead observed that the (E)(4) factor “is the most
difficult one to evaluate because it is based on speculation. Neither party
can definitively say that the addition of a new dealer point will increase or
decrease the sales of the existing dealers.” It was in this context that the
ALJ agreed with Yamaha “that neither YSA nor Apache proved that they
would be negatively impacted by the appointment of a new dealer.”
(Emphasis added.)

¶10           Although the ALJ concluded that neither side definitively
established the economic impact a new dealership would have on existing
franchisees, she was able to say, based on the evidence presented, that it
was “more likely that an added competitor will reduce sales at the existing
dealers and negatively impact them, than have a positive impact.”
(Emphasis added.) See, e.g., State v. Rojers, 216 Ariz. 555, 559, ¶ 19, 169
P.3d 651, 655 (App. 2007) (“preponderance of the evidence” means “more
likely than not”). Evidence of record supports this conclusion.

¶11           The proposed dealership would be roughly 8.6 miles from
YSA’s existing location. YSA’s witnesses testified about adverse economic
effects YSA and other Yamaha dealers would suffer if the new dealership
opened. W. Michael Richards, general manager of Apache Motorcycles
Group, testified that if the new franchise were awarded, Apache would
“ultimately close down, sooner rather than later.” 2 He opined that the
closure of Apache’s store, which has operated in the same location for
roughly 15 years, would also have a “terrible effect” on customers,
requiring them to “travel two or three times the distance, or maybe ten
times the distance if they need servicing.” Richards testified that the
proposed dealership would take customers away from existing dealers.
He further stated that Richard McKim, Yamaha’s district manager for
Arizona and Nevada, acknowledged there were “too many dealerships in
this town for the number of customers that were available in the
economy” when discussing weak sales at a now-closed Yamaha-exclusive
dealership in North Phoenix. Richards testified there was insufficient

2 Apache Motorcycle Group owns three motorsports stores in the Phoenix
trade market, including Apache.



                                     5
                       YAMAHA v. ADOT et al.
                        Decision of the Court

business for existing dealers, “much less adding new dealerships and
franchises in.” On cross-examination, he rejected Yamaha’s suggestion
that Apache could make up for lost Yamaha sales by selling other
products, stating:

      Counselor, if there is extra business to have out there, I’m
      already chasing it. There isn’t extra business to have. The
      problem is there isn’t enough customers as there is. And
      now is not the time to be opening new stores, in my opinion,
      because we’re just chasing after smaller and smaller group of
      customers.

      Until our economy settles down here in Maricopa County
      and people get their jobs back and we see the industry either
      flatten or start to rebound, that will be the time to open up
      more opportunities to people. But we haven’t seen that.

      Those of us that have stayed in this community for 20, 25
      years and worked 50, 60 hours a week to build our business
      are doing everything, believe me, everything we can to keep
      our customers and make sure that they’re happy. We’ve
      invested our entire lives her[e]. This is not the time to be
      bringing in more dealerships; that is my opinion.

Consistent with Richards’ testimony, the ALJ found that “[a] reduction in
sales of Yamaha products at YSA Motorsports and Apache Scottsdale
could not be recouped through the sales of its other manufacturing
brands.”

¶12           William Nash, chief operating officer of RideNow, William
Coulter, YSA’s owner, and William Marx, RideNow’s business
development director, also testified that the proposed new franchise
would negatively affect existing Yamaha dealers. 3 Nash opined it “would
redistribute the current sales.” Coulter explained that he moved another
RideNow-affiliated Yamaha dealership located within a half-mile of the
proposed new franchise (Desert Motorsports) because it was competing
with YSA for sales and service customers. Yamaha reportedly permitted
the relocation because it did not believe the “area was underserved.”


3RideNow is a national conglomerate to which YSA belongs and is one of
two organizations with which all Yamaha dealers in the Phoenix trade
market are affiliated (the other being Apache Motorcycle Group).



                                   6
                        YAMAHA v. ADOT et al.
                         Decision of the Court

Nash testified that after Desert Motorsports moved, YSA’s customers and
market share increased. Marx discussed the competition for customers
between Desert Motorsports and YSA and the decrease of sales due to
their proximity. He ended his direct testimony by stating:

      [T]here’s no need for an additional dealership in this area. I
      know that it will negatively impact our Phoenix store. I
      know that from experience. The geography is virtually
      unchanged from what it was before, just going in the
      opposite direction. I know it will negatively impact sales at
      that store.

      I also know, based on Go AZ’s business model that it’s going
      to negatively impact every one of our stores in the region.
      They’re very big on the Internet. They’re very big on selling
      at or below invoice and it’s going to hurt all of the stores; not
      just the RideNow stores, it’s going to really affect the Apache
      stores as well.

¶13         Coulter offered similar testimony, making clear that his
opinions were based on his substantial experience with the Phoenix
motorsports market:

      Q. . . . . You’re aware of what is going on economically in
      the motorsports industry right now, correct?

      A. Absolutely.

      Q. Last few years, how would you characterize the market
      generally?

      A. Most difficult that I’ve seen in my career.

      ....

      Q. If your sales at YSA decreased further or if you are forced
      to lower prices on product even more by increased
      competition, do you believe that could threaten the survival
      of YSA as a business entity?

      ....

      A. Absolutely.




                                     7
                        YAMAHA v. ADOT et al.
                         Decision of the Court

Coulter also testified that Yamaha products are adequately represented in
the North Phoenix/Scottsdale area.

¶14            We recognize that Yamaha offered contrary evidence,
including testimony by and a report from Donald Vivrette. But as
discussed supra, ¶ 4, it was the ALJ’s role to weigh the evidence and to
determine what was the most credible and persuasive. See Siler v. Ariz.
Dep’t of Real Estate, 193 Ariz. 374, 382, ¶ 41, 972 P.2d 1010, 1018 (App.
1998). Where, as here, “there is room for two opinions,” Petras, 129 Ariz.
at 452, 631 P.2d at 1110, we will not set aside the ALJ’s ruling.

¶15           We also disagree with Yamaha’s characterization of YSA’s
evidence as “unfounded self-serving testimony, speculation, and
conjecture as to the effect that the proposed franchise might have on the
existing market.” 4 YSA’s witnesses were competent to testify based on
their substantial experience with the Phoenix motorsports market. They
were able to offer market-specific explanations for trends that Yamaha’s
expert identified. They opined, for example, that a post-2006 downturn in
sales of Yamaha products was the result of the bad economy, Yamaha’s
failure to timely respond to competitors’ aggressive pricing and rebate
programs, and Yamaha’s inability to provide franchisees a sufficient
supply of a popular vehicle. They also testified about actual market
effects caused by the closure of the Apache dealership and by Desert
Motorsports’ move to the West Valley. Yamaha had the opportunity to

4 Yamaha elicited lay testimony as well, some of which was even more
conclusory than YSA’s evidence. McKim, for example, testified:

      Q. Mr. McKim, do you have an opinion as to how opening
      Go AZ in Scottsdale would impact RideNow Phoenix and
      the other Phoenix dealers?

      A. How it will impact them?

      Q. If it will impact them, how it would impact them?

      A. I think there’s -- I think there’s opportunity there. I think
      that through -- I think that’s what we’ve shown. That the
      missing units, there’s more to go around. There’s clearly --
      there’s people still -- people want to be a part of Phoenix,
      prospects and so forth. So it’s -- yeah, there’s room.




                                     8
                         YAMAHA v. ADOT et al.
                          Decision of the Court

cross-examine YSA’s witnesses and to highlight perceived deficiencies in
their testimony.

¶16            Yamaha stresses that YSA failed to quantify the claimed
adverse economic effects. The statute, though, does not mandate such
specificity, and Yamaha conceded that it bore the burden of establishing
good cause for the new franchise. At most, the lack of quantification
would affect the weight to be given YSA’s evidence. And to the extent
Yamaha suggests expert evidence is always superior to lay testimony, we
disagree. Indeed, jurors in civil trials are routinely instructed that:

       Expert opinion testimony should be judged just as any other
       testimony. You are not bound by it. You may accept or reject
       it, in whole or in part, and you should give it as much
       credibility and weight as you think it deserves, considering
       the witness’s qualifications and experience, the reasons
       given for the opinions, and all the other evidence in the case.

Revised Arizona Jury Instructions (Civil) Preliminary 6. The ALJ gave
credence to some, but not all, of Yamaha’s expert’s evidence. For
example, she found Vivrette’s market share calculations for the Phoenix
market to be accurate, but did “not find all of the conclusions Yamaha
draws from those numbers to be accurate.”

¶17            Nor does the record support Yamaha’s assertion that the ALJ
placed undue weight on the economic impact factor. The ALJ analyzed
each statutory factor individually, offering roughly equal coverage to
each. Moreover, nothing required her to give equal weight to each factor.
Cf. US W. Commc'ns, Inc. v. Ariz. Corp. Comm'n, 201 Ariz. 242, 246, ¶ 17, 34
P.3d 351, 355 (2001) (although corporation commission must consider fair
value of public service company’s property when setting rates, the weight
to be afforded the fair value factor, relative to other information, is within
commission’s broad discretion); Morris v. Ariz. Corp. Comm'n, 24 Ariz.
App. 454, 457, 539 P.2d 928, 931 (1975) (The rate-making process “does not
lend itself to rule formulation because the relevant factors may be given
different weight in the discretion of the Commission at the time of the
inquiry.”).

¶18           Yamaha places great emphasis on the ALJ’s statement that,
“General business sense . . . suggests that less competition is better.”
Read in context, we do not read these nine words, culled from an 18-page
decision, as an erroneously broad proclamation that less competition is
always “better.” We instead understand the ALJ to be saying that, based



                                      9
                         YAMAHA v. ADOT et al.
                          Decision of the Court

on the statutory factors and existing circumstances in this case, added
competition in the form of the proposed new dealership would benefit
neither existing franchisees nor the public interest. See A.R.S. § 28-4452(B).

¶19           Furthermore, the economic impact on existing franchisees
was one of several factors the ALJ weighed. She also discussed A.R.S. §
28-4457(E)(1) (amount of business transacted by other franchisees of the
same line-make in the community). Although the ALJ concluded Yamaha
is “not meeting its national averages for sales in the Phoenix trade area,”
she found both parties’ explanations for the under-performance “overly
simplified” and “lack[ing] some credibility.” Yamaha, she concluded,
blamed existing franchisees for “[a]ny low number,” ignoring
competitors’ actions and a Phoenix economy that is “struggling more”
than others. But the ALJ also rejected YSA’s contention the economy and
Yamaha are “completely to blame for Yamaha’s comparatively low
market share.” She concluded that Yamaha’s failure to offer incentive
programs comparable to its competitors affected sales in the Phoenix
market, as did its failure to allocate sufficient “popular vehicles” to the
market.

¶20           The ALJ also considered the sizeable capital and manpower
investments YSA and Apache have made in promoting, selling, and
servicing the Yamaha brand. See A.R.S. § 28-4457(E)(2). Yamaha does not
challenge the ALJ’s findings or conclusions regarding this factor,
including her determination YSA and Apache “rely heavily on sales of
Yamaha products” and “spend time advertising the brand . . . and training
their employees on how to use its products.” The ALJ clearly found that
this statutory factor favors existing franchisees, not Yamaha.

¶21           The ALJ additionally analyzed the adequacy of current
franchisees’ “consumer care,” A.R.S. § 28-4457(E)(3), concluding “the
existing dealers are providing adequate facilities and customer service in
the Phoenix area.” She found Yamaha’s evidence about YSA’s purported
failure to comply with obligations under the franchise agreement to be
incredible.   Yamaha recites some of the contradictory evidence it
presented at hearing regarding consumer care but does not raise a specific
challenge to the ALJ’s analysis of this factor.

¶22           Finally, the ALJ addressed the likely effect the proposed
dealership would have on “the retail motor vehicle business and the
consuming public.” A.R.S. § 28-4457(E)(5). After noting and discussing
the conflicting evidence on this point, the ALJ concluded that, “increasing
the competition amongst the dealers is more likely to result in a loss of


                                     10
                         YAMAHA v. ADOT et al.
                          Decision of the Court

sales for the existing dealers than an increase at this time.” Such an effect,
she ruled, “would have a negative effect on the retail motor business, and
would not be in the public interest.” Although the evidence on this point
was conflicting, there is substantial evidence in the record that supports
the ALJ’s conclusion.

                              CONCLUSION

¶23          The ALJ correctly interpreted and applied the statutory
factors and other existing circumstances. Substantial evidence supports
her conclusion that Yamaha failed to establish good cause for the
proposed new dealership. We therefore affirm the judgment of the
superior court. We deny Yamaha’s request for an award of attorneys’ fees
against ADOT under A.R.S. § 12-348. Yamaha is not the prevailing party,
and ADOT is a nominal party in these proceedings. See A.R.S. § 12-
348(H)(4); MVC Constr. v. Treadway, 182 Ariz. 615, 618, 898 P.2d 993, 996
(App. 1995). We deny YSA’s fee request based on ARCAP 25 because
Yamaha’s appeal was not frivolous. Upon compliance with ARCAP 21,
though, YSA is entitled to recover its appellate costs.




                                  :gsh




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