Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ind. Sup. Ct.: Auto dealers lacked standing to pursue challenge to relocation of competing dealership, (Jun 3, 2016)

By Linda O’Brien, J.D., LL.M.

Three automobile dealerships lacked standing to challenge an automobile manufacturer’s proposal to relocate an existing competing dealership before the state’s motor vehicle dealer licensing division, the Indiana Supreme Court has held. Thus, the trial court’s dismissal of the dealers’ declaratory judgment action was affirmed (Andy Mohr West, Inc. v. Office of the Indiana Secretary of State, June 2, 2016, Massa, M.).

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 action 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. In August 2015, the appellate court reversed the trial court’s dismissal of the dealers’ action, finding that the dealers had standing to challenge the proposed relocation. However, the Indian Supreme Court subsequently granted Toyota’s and the Division’s petition to transfer and vacated the decision of the appellate court.

The state supreme court determined that the trial court properly deferred to the Division’s reasonable interpretation of a new-motor-vehicle (NMV) dealer in the Indiana Dealer Services statute to deny the dealers standing. The statute provides that a dealer could formally protest the establishment or relocating of a proposed NMV dealer within a specified "relevant market area." The "relevant market area" is defined, 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, as the area within a radius of six miles of the intended site of the relocated dealer. With respect to a proposed NMV dealer or a relocation within a county of not more than 100,000 people, the relevant market area is a radius of ten miles of the intended site of the proposed or relocated dealer, the court explained.

The court first looked at the plain language of the statute to discern the legislative intent. In this case, the Division found that this case fit squarely within the first category of dealers who plan to relocate to a large county. The narrower six-mile radius was appropriate for an existing dealer that moves its operation within a large county. The construction was reasonable, since the threat of competition from an existing dealer was not as great as a wholly new dealership and larger counties could support multiple dealers.

The Division’s interpretation gave meaning to the words and structure of the statute and furthered the statute’s underlying purpose of balancing changing market dynamics with the need for fair competition. The statue reflects a legislative determination that relocating more than six miles from another dealership in a densely-populated area would not have such a negative effect on the market to allow existing dealers to stifle competition through the protest procedure. Since the Division’s interpretation was reasonable, the trial court order deferring to the Division’s exercise of subject matter expertise in dismissing the action for lack of standing must be affirmed, the court concluded.

The case is No. 49S02-1511-PL-668.

Attorneys: Geoffrey M. Grodner (Mallor Grodner LLP) for Andy Mohr West, Inc. Gregory F. Zoeller, Attorney General of Indiana, for the Office of the Indiana Secretary of State. John C. Trimble (Lewis Wagner, LLP), and Steven A. McKelvey, Jr. (Nelson Mullins Riley & Scarborough LLP) for Toyota Motor Sales, U.S.A.

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

Cases: FranchisingDistribution IndianaNews