Superior Court of Massachusetts, Suffolk, Business Litigation Session
STATE ROAD AUTO SALES, INC.
MASSACHUSETTS DIVISION OF BANKS
MEMORANDUM AND ORDER DENYING PLAINTIFFâS MOTION FOR A
Kenneth W. Salinger, Justice of the Superior Court
Road Auto Sales, Inc. seeks a preliminary injunction that
would bar the Massachusetts Division of Banks from completing
an ongoing adjudicatory hearing. The Division brought
administrative charges asserting that State Road violated
G.L.c. 255B, which governs retail installment sales of motor
vehicles, by acting as a "motor vehicle sales finance
company" without a license and by entering into illegal
motor vehicle installment sales with individual consumers.
The Legislature authorized the Commissioner of Banks to
implement and enforce c. 255B.
Road is entitled to contest those charges through an
evidentiary proceeding before a Division hearing officer.
State Road argues that the Divisionâs administrative charges
and adjudicatory proceeding are barred by State Roadâs recent
settlement of a class action brought on behalf of consumers
who entered into motor vehicle leases with State Road that
were in effect after October 21, 2013, and were signed before
January 1, 2016. More specifically, State Road argues that
the order approving the class action settlement deprived the
Division of subject matter jurisdiction to decide the pending
administrative charges and, in the alternative, that the
prior settlement has collateral estoppel or issue preclusive
effect that would bar the Division from exercising its
jurisdiction over State Road.
Court concludes that State Road is not entitled to
preliminary injunctive relief because it has failed to
exhaust its administrative remedies and therefore is not
likely to succeed on the merits of its claims. Cf.
Fordyce v. Town of Hanover, 457 Mass. 248, 266
(2010) (vacating preliminary injunction because plaintiffs
were "unlikely to succeed on the merits").
Division of Banks has already began an enforcement action
against State Road, those adjudicatory proceedings are still
pending, and the determination of whether the Division can
prosecute and decide the administrative charges turns on
disputed issues of fact and not pure issues of law.
these circumstances, State Road must exhaust its
administrative remedies at the Division before seeking to
challenge the Divisionâs exercise of jurisdiction over State
Road in court. See Wilczewski v. Commissioner of the
Dept. of Envtl. Quality Engâg, 404 Mass. 787, 793-94
(1989) (affirming dismissal of challenge to agencyâs
jurisdiction in pending matter); Gill v. Board of Reg. of
Psychologists, 399 Mass. 724, 728 (1987) (ordering
dismissal of action); East Chop Tennis Club v.
Massachusetts Commân Against Discrim., 364 Mass. 444,
451 (1973) (vacating decree entered by Superior Court and
ordering dismissal of action); Reliance Ins. Co. v.
Commissioner of Ins., 31 Mass.App.Ct. 581, 585 (1991)
(affirming dismissal of action). "Where the contention
is that the [agency] is acting beyond its jurisdiction, the
[agency] should have an opportunity to ascertain the facts
and decide the question for itself ..."
Wilczewski, 404 Mass. at 793, quoting Saint
Lukeâs Hospital v. Labor Relations Commân, 320 Mass.
467, 470 (1946). And if a party to an administrative
proceeding fails to contest the agencyâs assertion of
authority, it may not then raise the issue in court. See,
e.g., Conservation Commission of Falmouth v.
Pacheco, 49 Mass.App.Ct. 737, 741 (2000).
State Road be aggrieved by any final order issued by the
Division, it would be entitled to judicial review under
G.L.c. 30A, § 14. In the meantime, however, this action
"is premature" and the Court cannot
"appropriately entertain it." Wilczewski,
404 Mass. at 793.
Court concludes that the same exhaustion requirement applies
to State Roadâs assertion that the Divisionâs adjudicatory
proceeding is barred by principles of issue preclusion or
collateral estoppel, rather than by lack of subject matter
jurisdiction. Exhaustion of administrative remedies is
required where a decision over which an agency has
jurisdiction will require the exercise of discretion. See,
e.g., Temple Emanuel of Newton v. Massachusetts Commân
Against Discrim., 463 Mass. 472, 480 (2012);
Ciszewski v. Industrial Acc. Bd., 367 Mass. 135, 141
(1975). Issue preclusion is an equitable doctrine, and
"equitable considerations may permit less stringent
application of the normal rules of issue preclusion."
Mercurio v. Smith, 24 Mass.App.Ct. 329, 332 (1987).
One discretionary exception may apply where "[t]here is
a clear and convincing need for a new determination of the
issue" either "because of the potential adverse
impact of the determination on the public interest or the
interests of persons not themselves parties in the initial
action" or "because it was not sufficiently
foreseeable at the time of the initial action that the issue
would arise in the context of a subsequent action."
York Ford, Inc. v. Building Inspector and Zoning Admâr of
Saugus, 38 Mass.App.Ct. 938, 842 n.10 (1995), quoting
Restatement (Second) of Judgments, § 28(5) (1982);
accord E.N. v. E.S., 67 Mass.App.Ct. 182, 197 n.26
(2006) (dictum) (where "a substantial public
interest" is at stake, issue may be relitigated in
second proceeding) (quoting Restatement (Second) of Judgments
§ 12(2), comment c, at 119 (1982)). Since whether to
apply issue preclusion in the circumstances of this case will
involve the exercise of discretion, State Roadâs assertions
of issue preclusion must be decided by the Division in the
not a case in which it would be futile for State Road to
exhaust its administrative remedies because it is clear as a
matter of law that the Division lacks the power or authority
to adjudicate the pending administrative charges. Cf.
Temple Emanuel and Ciszweski, supra.
is no merit to State Roadâs assertion that the court order
approving a prior class action settlement by State Road has
deprived the Division of jurisdiction to pursue the pending
administrative charges. State Road relies on a provision in
the "Final Approval Order and Final Judgment" that
was entered by Judge Sanders in September 2017 in the case of
Grant v. State Road Auto Sales, Inc.,
1484CV03292-BLS2. State Road argues that the Division lacks
any jurisdiction over State Road or its business practices
because the court retained exclusive jurisdiction over any
defense in any action based on the Grant settlement,
and State Road is asserting such a defense against the
Divisionâs administrative charges. That is incorrect.
the Grant order actually provides is that "the
Court retains exclusive jurisdiction over the parties and
each Settlement Class Member for any suit, action,
proceeding, or dispute relating to this Order or the
Settlement Agreement," including but not limited to any
"proceeding by any Settlement Class Member in which
provisions of the Settlement Agreement are asserted as a
provision does not apply here. The Division was not a party
to the Grant litigation. Nor was it a member of the
Settlement Class. Nor does the Division now stand in the
shoes of the Settlement Class Members. The Division, as
representative of the Commissioner of Banks, is a public
entity with independent statutory authority to enforce c.
255B. As a result, when the Division exercises its
enforcement authority it is not subrogated to the rights of
individual consumers or otherwise standing in their shoes.
of these reasons, the claims asserted by State Road in this
action are really defenses that State Road must first raise
before the Division. This action is barred by the requirement
that State Road must first exhaust its administrative
remedies. Since State Road therefore is unlikely to succeed