Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: John Deere brings New Hampshire motor vehicle law challenge to High Court, (Mar 4, 2016)

By Greg Hammond, J.D.

Three farm and heavy equipment manufacturers are asking the U.S. Supreme Court to prevent the State of New Hampshire from enforcing a new state law that allegedly forces the manufacturers within the framework of the Automobile Dealer Bill of Rights, effectively nullifies the manufacturers’ existing dealership agreements, and criminalizes any actions taken under those contracts (Deere & Co. v. New Hampshire; Dkt. 15A-910).

Deere & Co., CNH America LLC, and AGCO Corp. manufacture various construction, yard, farm, garden, and industrial equipment and accessories. The three manufacturers claim that New Hampshire Senate Bill 126 repealed a state law regulating the equipment industry and effectively forced equipment manufacturers within the framework of the Automobile Dealer Bill of Rights by expanding the definition of “motor vehicle” to include the manufacturers’ products and accessories. As a result, the manufacturers claim that the law renders all agreements between the manufacturers and dealers “void as against public policy.” Continued business under the existing agreements allegedly would be considered a criminal misdemeanor.

The manufacturers originally challenged the new law in state court, arguing that it violates the Contract Clause of the U.S. Constitution. The trial court ruled against the manufacturers, and the New Hampshire Supreme Court affirmed.

The manufacturers are now requesting that the U.S. Supreme Court stay enforcement of the New Hampshire Supreme Court’s judgment, pending the filing and resolution of a petition for review before the High Court. They argue that the state court’s decision raises critical questions about the standard to apply in a Contract Clause analysis and that a stay is “urgently needed” so that the manufacturers may continue to do business in New Hampshire under their existing agreements without committing a criminal misdemeanor.

In particular, the manufacturers claim that a stay should be granted because there is a reasonable probability that the Court will grant the manufacturers’ petition for review and ultimately reverse the decision below. They argue: (1) the state court failed to analyze the degree to which the contracts have been impaired, as required under the federal Contract Clause analysis; (2) the state court held that the standard of review for whether legislation is reasonable and necessary to advance a significant and legitimate public purpose under the federal Contract Clause is “rational speculation,” followed by plenary deference to the legislature, which effectively removed all constitutional limits on the legitimate exercise of police power; (3) the New Hampshire court departed from federal authority when it found that the special-interest legislation at issue possesses a significant and legitimate public purpose consistent with the federal Contract Clause; and (4) the state court “mined the statute’s legislative history to support its conclusion that this private law was imbued with sufficient public purpose to survive a Contract Clause challenge.”

In addition, the manufacturers claim that they will suffer irreparable harm without a stay because the state law has the practical effect of terminating the manufacturers’ dealership agreements and “creating substantial uncertainty in the marketplace regarding the status of the relationship between existing equipment manufacturers and their dealers.” Moreover, the legislation purportedly criminalizes any action the manufacturers take under those contractual provisions while they await resolution of their petition for review.

Attorneys: Catherine E. Stetson (Hogan Lovells US LLP) and Kevin M. Fitzgerald (Nixon Peabody LLP) for Deere & Co., CNH America LLC, and AGCO Corp.

Companies: Deere & Co.; CNH America LLC; AGCO Corp.

News: FranchisingDistribution NewHampshireNews