Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ind. App.: Auto dealers had standing to pursue challenge to relocation of competing dealership, (Aug 17, 2015)

By Linda O’Brien, J.D., LL.M.

Three automobile dealerships had standing to challenge a manufacturer’s proposal to relocate an existing competing dealership before the state’s motor vehicle dealer licensing division, the Indiana Court of Appeals in Indianapolis has held. Thus, the trial court dismissal of the dealers’ declaratory judgment action was reversed (Andy Mohr West, Inc. v. Office of the Indiana Secretary of State, August 13, 2015, Najam, E.).

In September 2013, auto manufacturer Toyota notified existing licensed dealer Ed Martin Toyota of its intention to relocate the dealership from Anderson, Indiana to Fishers, Indiana, which had a population of over 100,000 people. Dealers Andy Mohr West, Butler Motors, and Tom Wood Toyota, who were also notified of the proposal, engaged in negotiation with Toyota to avoid relocation of the Ed Martin dealership. After the negotiations failed, the three dealers filed a declaratory judgment request with the state Auto Dealer Services Division, seeking a determination whether good cause existed for the relocation.

In February 2014, the Division found that dealers lacked standing to file a declaratory judgment action, since they were outside of the relevant market area — a six-mile radius around the proposed location. The trial court affirmed the Division’s judgment and the dealers appealed.

The appellate court determined that the Division’s interpretation of a new-motor-vehicle (NMV) dealer in the Indiana Dealer Services statute was inconsistent with the economic rationale of the legislative plan and misconstrued the statute to deny the dealers standing.

The Indiana Dealer Services statute provides a new motor vehicle (NMV) dealer “may bring a declaratory judgment action before the division to determine whether good cause exists for the establishing or relocating of a proposed NMV dealer.” The “relevant market area” is defined as “with respect to an NMV dealer who plans to relocate the dealer’s place of business in a county having a population of more than 100,000, the area within a radius of six miles of the intended site of the relocated dealer.” With respect to a proposed NMV dealer, the relevant market area is within a radius of ten miles of the intended site or the proposed or relocated dealer, the court explained.

The appellate court found the Division’s interpretation of “proposed NMV dealer” to mean only a newly created business, and not an existing, but relocating business, was contrary to the plain language of the statute. The provision clearly contemplates the relocation of a proposed NMV dealer. The Division’s narrow interpretation renders the provision meaningless since it would be impossible to challenge the relocation of a proposed NMV dealer as well as a determination whether the relocation was done with good cause. Thus, the proposed NMV dealer must mean a dealer that proposes to enter a market where that dealer is not already doing business.

The statute also expressly contemplates the relocation of an existing NMV dealer, since it instructs the Division on how to determine “whether good cause exists for establishing or relocating an additional NMV dealer” in the relevant market. The Division’s interpretation created an arbitrary and artificial distinction between a proposed, wholly new dealer and a proposed relocating dealer not present in the statute and disregarded the legislative intent underlying the statutory scheme, in the court’s view.

Furthermore, the Division’s interpretation of “in a county” to mean a relocation either within a county or into a county exceeding the population limit was also arbitrary. To give effect to the legislative intent, the term must mean “within” a county and not “into” a county. The legislature intended to give businesses established in a market with the greater protection of a ten mile radius relevant market area against an additional business entering that market, whether the proposed NMV dealer was a newly created dealer or a relocating dealer. Since the Division’s interpretation was contrary to law and therefore entitled to no deference, the trial court judgment must be reversed, the appellate court concluded.

Dissent. Judge Friedlander dissented, finding that the Division’s interpretation was reasonable and was entitled to deference since the agency was tasked with enforcing the statute. The language of the statute was imprecise and the Division reasonably interpreted that the applicable relevant market in the case was the six mile radius. Since the dealers did not dispute that they were outside of the six mile radius, the trial court judgment should have been affirmed.

The case is No. 49A02-1411-PL-812.

Attorneys: Geoffrey M. Grodner (Mallor Grodner LLP) for Andy Mohr West, Inc. Gregory F. Zoeller, Attorney General of Indiana, John C. Trimble (Lewis Wagner, LLP), and Steven A. McKelvey, Jr. (Nelson Mullins Riley & Scarborough LLP) for Office of the Indiana Secretary of State, Auto Dealer Services Division, and Carol Mihalik.

Companies: Andy Mohr West, Inc.; Butler Motors, Inc.; TW Toy, Inc.; Toyota Motor Sales, U.S.A.

Cases: FranchisingDistribution IndianaNews