Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—1st Cir.: Rhode Island Freightliner dealer loses appeal in dispute over Massachusetts Daimler dealer expansion, (Jul 8, 2026)

By Justin Marcus Smith, J.D.

The court affirmed summary judgment for Daimler Trucks North America on the basis that the Rhode Island Dealer Law violated the Dormant Commerce Clause.

The Rhode Island motor vehicle dealer law (the Dealer Law) violated the Dormant Commerce Clause to the extent it raised independent concerns about protectionism and risked imposing regulatory obligations inconsistent with those of other states, held U.S. Court of Appeals for the First Circuit, in affirming summary judgment for Daimler Trucks North America. The Dealer Law was distinguishable from a Maine law examined in earlier precedent. The Dealer Law neither dealt with harms caused exclusively inside the regulating state, nor was it limited to regulating transactions with a significant inherent connection to the regulating state and involving its own professional licensees. The connections here were insufficient, under existing precedent, to survive Daimler’s Dormant Commerce Clause challenge (Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC, No. 22-1913 (1st Cir. Jul. 6, 2026)).

Background. Like many states, Rhode Island limits a motor vehicle manufacturer’s ability to establish new dealerships near one of its existing in-state dealerships even if its franchise agreement with that existing dealership does not impose the same limitation. However, Rhode Island may be the only state that extends that limitation to new dealerships extraterritorially.

Rhode Island Truck Center, LLC (RITC) challenged Daimler Trucks North America’s (DTNA) grant of a Freightliner franchise in Raynham, Massachusetts, within RITC’s contractually defined “relevant market area,” on the ground that DTNA failed to provide the certified-mail notice required by R.I. Gen. Laws § 31-5.1-4.2(a). RITC sought the following relief from the Rhode Island Dealers’ Hearing Board (Board): (1) a finding and ruling that DTNA violated the notification requirement; (2) the remedy of removal of the new franchise; and (3) civil damages, costs, and attorneys’ fees.

The Board said it lacked jurisdiction over the protest. It held the Rhode Island Dealer Law (Dealer Law) did not apply to out-of-state conduct as a matter of state law and extraterritorial enforcement would violate the Dormant Commerce Clause.

After the Board dismissed the protest for lack of jurisdiction, RITC sought review by state judicial complaint, and Daimler removed to the Rhode Island federal court. Daimler filed a motion to dismiss, and the district court treated the parties’ filings as cross-motions for summary judgment.

The district court granted summary judgment to Daimler and denied summary judgment to RITC based on the extraterritorial limits placed on the Dealer Law under the Commerce Clause. Insofar as the Board would be required to adjudicate the RITC protest to regulate out-of-state firms, the district court said it did not have the authority to do so because, under the Dormant Commerce Clause, no state may force an out-of-state merchant to seek regulatory approval in one state before undertaking a transaction in another state.

RITC timely appealed. In the prior opinion on appeal, the First Circuit concluded it had subject matter jurisdiction because RITC raised a federal question. The court reasoned RITC could not successfully challenge the Board’s jurisdictional ruling without showing that the Dormant Commerce Clause permitted enforcement of the Dealer Law to redress Daimler’s establishment of the adjacent Massachusetts dealership. However, the First Circuit placed the RITC appeal of summary judgment for Daimler in abeyance to have the Rhode Island Supreme Court answer a certified question about the scope of the Dealer Law antecedent to questions about the Dormant Commerce Clause. The First Circuit needed to know whether the term “relevant market area” in the Dealer Law was extraterritorial.

The Rhode Island Supreme Court, in answering that certified question, held that under R.I. Gen. Laws § 31-5.1-1(13) a “relevant market area” is the greater of a 20-mile radius or the area defined in the franchise agreement. Moreover, because Rhode Island is only 37 miles wide, such an area may necessarily extend beyond state borders, so the Dealer Law notice obligation would apply extraterritorially (see Antitrust Law Daily, Jul. 31, 2025).

With extraterritoriality confirmed, the First Circuit turned to address the Dormant Commerce Clause issue. The First Circuit footnoted it was not confident that the Board’s contrary holding of non-extraterritoriality was entitled to deference. Applying de novo review, the First Circuit affirmed summary judgment for Daimler.

Jurisdiction. As a threshold matter, Daimler argued for deferral to the Board’s decision about the unconstitutional extraterritoriality of the Dealer Law; however, the First Circuit said it was not aware of any Rhode Island law or precedent requiring deference to a state agency determination about lack of jurisdiction to enforce an otherwise applicable state statute for reason of unconstitutionality.

Dormant Commerce Clause. The First Circuit concluded that controlling precedent meant enforcement of the Dealer Law would violate the Constitution. Modern Dormant Commerce Clause precedents rest on two primary principles. First, state regulations may not discriminate against interstate commerce in purpose or effect. Second, even a facially neutral state law may be struck down under Pike v Bruce Church, Inc., 397 U.S. 137, 142 (1970), if the burden on interstate commerce is clearly excessive in relation to putative local benefit (Pike balancing).

In this matter, the district court appeared to rely on an arguably distinct principle rooted in the extraterritoriality branch of the Dormant Commerce Clause under National Pork Producers Council v. Ross (Pork Producers), 598 U.S. 356, 371 (2023). Daimler asked the First Circuit to affirm on that basis, and the court allowed supplemental briefing about Pork Producers.

Based on that briefing, the court agreed with RITC that Pork Producers called some of the District Court’s jurisdictional reasoning into question. Specifically, Pork Producers did not support a rule that state laws affecting out-of-state conduct are per se invalid under the Dormant Commerce Clause. Pork Producers dealt instead with the prevention of purposeful discrimination against out-of-state economic interests. That case also rejected any notion that precedent could support forbidding enforcement of state laws that have the practical effect of controlling commerce extraterritorially. The First Circuit opined there is no such “broad-form principle.” In any event, the district court did not rest its Dormant Commerce Clause ruling merely on the “practical effects” on an out-of-state transaction. Instead, the district court concluded the Dealer Law called for direct regulation of a Massachusetts franchise by requiring Daimler to seek regulatory approval in Rhode Island.

RITC did not dispute direct regulation on the instant alleged facts, with reason, based on Edgar v. MITE Corp., 457 U.S. 624, and discussion of the Edgar precedent in Pork Producers. The plurality in Edgar concluded that a disputed Illinois statute directly regulated; however, “blue sky” laws the Supreme Court previously upheld against Dormant Commerce Clause challenges ultimately only pertained to required filing of securities information outside the regulating state if such securities would be disposed within the state. In that sense, those laws only regulated transactions occurring within the regulating states.

Like the Illinois takeover statute in Edgar, enforcement of the Dealer Law to stop a franchise-manufacturer from consummating interstate transactions not only applied to those within the state, it also applied to those living in other states and disconnected. However, the First Circuit distinguished here that the Dealer Law provision was not like the blue-sky laws discussed in Edgar, as the latter were triggered only by in-state transactions. Pork Producers reserved as to whether a state law affecting transactions by those with no connection to the regulating state would be per se invalid under the Dormant Commerce Clause. Pork Producers acknowledged that Edgar ultimately invalidated the Illinois law pursuant to Pike balancing, not due to extraterritorial reach.

The instant court continued that it did not understand Pork Producers to resolve how to address the Dealer Law regulating out-of-state transactions. This was significant because the district court and the parties both recognized that the First Circuit did address such a challenge in IMS Health, and the First Circuit saw no reason not to apply that holding. See IMS Health Inc. v. Mills, 616 F.3d 7 (1st Cir. 2010), vacated on other grounds sub nom., IMS Health, Inc. v. Schneider, 564 U.S. 1051 (2011).

The district court in this matter reasoned that, unlike in IMS Health, the Dealer Law harm did not occur exclusively in Rhode Island. The complaint assumed underlying conduct in Massachusetts, hence the district court concluded there was enough out-of-state activity to merit scrutiny of Rhode Island’s ability to regulate the parties’ interactions.

RITC argued for reversal on the basis that IMS Health was indistinguishable from the instant case. RITC contended the Dealer Law did not purposefully discriminate against out-of-state interests because it was even-handed and intended to prevent in-state harms. However, the First Circuit ultimately agreed with Daimler because termination of the Massachusetts dealer franchise did not exhibit the characteristics the court found in IMS Health.

First, the Dealer Law differed from the Maine law in IMS Health because RITC wanted to stop its direct competitor from doing business in the same Massachusetts county as RITC. The Dealer Law also gave Rhode Island dealers the ability to block the appointment of a competing dealer in another state without giving the same out-of-state dealer a reciprocal right in Rhode Island. The Dealer Law smacked of protectionism.

Second, the Dealer Law also differed from the Maine law because it did not regulate exclusively against in-state harms; it would directly prevent vehicle sales across the border in Massachusetts. The Dealer Law was also partly intended to protect consumers. Moreover, the Dealer Law, as enforced against Daimler, would affect transactions without a significant inherent connection to Rhode Island. In contrast, the Maine statute in IMS Health targeted only transactions that started and ended in Maine.

Last, the First Circuit found a risk of imposing inconsistent regulatory obligations on other states. Daimler might be at odds with Massachusetts law and face a termination claim from the Massachusetts dealer were it to terminate that dealer. A Board order forcing Daimler to terminate would subject Daimler to inconsistent regulation.

RITC contended Daimler caused the whole dispute by failing to provide notice about the Massachusetts dealer, but the court said it had already rejected a similar Dormant Commerce Clause challenge.

The Case is No. 22-1913.

Judge: Barron, D.

Attorneys: Stephen D. Nelson (Adler Pollock & Sheehan PC) for Rhode Island Truck Center, LLC. Christian F. Capizzo (Partridge Snow & Hahn LLP) for Daimler Trucks North America, LLC.

Companies: Rhode Island Truck Center, LLC; Daimler Trucks North America, LLC

MainStory: TopStory FranchisingDistribution MaineNews MassachusettsNews NewHampshireNews PuertoRicoNews RhodeIslandNews GCNNews