Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ohio App.: Vehicle dealer entitled to declaratory judgment in relocation dispute within market area, (Jun 16, 2014)

By Edward L. Puzzo, J.D.

An Ohio state trial court did not abuse its discretion in finding that a Nissan dealer, seeking to relocate with the same market area as a competing Nissan dealer, was not required to exhaust administrative remedies before the Ohio Motor Vehicle Dealer’s Board and was entitled to a declaratory judgment that would determine relocation procedures, the Ohio Eighth District Court of Appeals in Cleveland has ruled (M6 Motors, Inc. v. Nissan of North Olmsted, LLC, June 12, 2014, McCormack, T.).

Background. Nissan manufacturer (Nissan) approved the sale of an existing dealer franchise to Middleburg Heights Nissan (Middleburg Heights). Middleburg Heights then notified another Nissan dealer in the same market, North Olmsted Nissan (North Olmsted), that it was seeking approval from Nissan to relocate to a site 7.43 miles from North Olmsted.

Upon learning of Middleburg Heights' plan to relocate, North Olmsted filed an administrative protest against Nissan with the Ohio Motor Vehicle Dealers Board. Nissan argued that North Olmsted had no standing to protest the move when the new location was "further" from the complaining party than the previous location. However, the hearing examiner found that North Olmsted did have standing. The examiner also found that the definition of "further" was an issue of fact not ripe for review at that point.

Due to the delay caused by the administrative proceeding, Middleburg Heights withdrew its request to Nissan to relocate to the initial site (the protest site) and sought approval instead to relocate to a second site (the proposed site) 7.61 miles from the North Olmsted dealer. Nissan, however, refused to approve this move, citing an anticipated administrative appeal by North Olmsted.

Middleburg Heights then sought a declaratory judgment, asking the trial court to determine (a) that the statutory definition of the term "further" was a straight-line measurement, not a road-distance measurement; and (b) that the proposed site it sought to move to was further from North Olmsted than its current site. North Olmsted moved to dismiss, alleging that Middleburg Heights had failed to exhaust it administrative remedies, and that Nissan was a necessary party. The trial court ruled that the administrative board did not have jurisdiction over this dispute and that Nissan was not a necessary party. The court then ruled that the straight-line method of measurement was the appropriate measurement, and that Middleburg Heights' proposed site was further from North Olmsted than its existing site. North Olmsted appealed.

Standing. North Olmsted argued that the declaratory judgment in favor of Middleburg Heights should be void. It argued that Middleburg Heights did not have standing, because Nissan had disapproved its proposed move, making the dispute not a present dispute but only a possible controversy in the future.

The court explained that the state statute set forth notification procedures a motor vehicle franchisor must follow when seeking to relocate an existing dealership within the same market area as an existing dealership offering the same line-make. The notification procedures did not apply, however, when the proposed move was "further" from the competing dealership than the current location.

Nissan denied Middleburg Heights' request to relocate to the proposed site, the court stated, due to North Olmsted's threat to protest any relocation and the unsettled matter of whether the proposed relocation site was "further" from North Olmsted than Middleburg Heights' existing location. Thus, Middleburg Heights was effectively prevented from relocating. This meant that the controversy was an actual controversy presently occurring, the court ruled. The controversy was not whether Middleburg Heights might relocate; it was the statutory definition of the term "further." Without the timely resolution of this issue, Middleburg Heights could not seek approval from Nissan and was effectively prevented from relocating, the court continued. Middleburg Heights would have no remedy without a declaratory judgment, the appellate court ruled. Also, contrary to North Olmsted's assertion, Nissan is not a necessary party. Middleburg Heights was not seeking any relief from Nissan, nor did Nissan have any legally protectable interest in the court's interpretation of the statute.

The appellate court explained that, under Ohio's Declaratory Judgment Act, a party must show that (1) a real controversy existed between the parties; (2) the controversy was justiciable; and (3) speedy relief was necessary to preserve the rights of the parties. In light of the foregoing, the court ruled that the trial court did not abuse its discretion in finding that a real and justiciable controversy existed which would be effectively resolved by the quick and conclusive relief obtained through a declaratory judgment.

Exhaustion of administrative remedies. North Olmsted also claimed that the trial court should have dismissed the declaratory judgment action because Middleburg Heights failed to exhaust its administrative remedies. The appellate court ruled otherwise, finding that the administrative proceeding was concerned with the protest relocation site, not the currently proposed relocation site. In addition, the Motor Vehicle Dealers Board had jurisdiction over relocation disputes between dealers and manufacturers, not disputes between dealers, the court explained. The court ruled that Middleburg Heights did not fail to exhaust its administrative remedies, because it had no administrative remedy, concerning the definition of the term "further," available to it through the Board.

Distance measurement. North Olmsted argued that the term "further" should be measured by the distance traveled, or "road miles." Middleburg Heights argued that the term should be measured by straight-line distance, or "as the crow flies."

The court noted that courts in other cases generally used the straight-line distance measurement. That was the method used in the context of a residency restriction, a non-competition agreement, and another relocation protest. The dealer statute itself did not define the word "further," but if the legislature had intended to require the use of road miles for measurement, it would have used a phrase more explicitly indicating that intent, the court opined. In addition, other terms in the statute, such as "relevant market area," were defined using a straight-line approach. Therefore, the court ruled, the straight-line approach to measurement was the proper approach to use. Using this method, the court ruled, the trial court had correctly concluded that Middleburg Heights' proposed relocation site was "further" from North Olmsted's location than its current site.

The case is Civil Action No. 100684, 2014-Ohio-2537.

Attorneys: Robert A. Poklar, Shawn W. Maestle and Matthew C. Miller (Weston Hurd, LLP) and Christopher M. Devito (Morganstern MacAdams & Devito Co.) for Nissan of North Olmsted, LLC. James B. Niehaus and Gregory R. Farkas (Frantz Ward LLP) for M6 Motors, Inc.

Companies: M6 Motors, Inc.; Nissan of North Olmsted, LLC.

Cases: FranchisingDistribution OhioNews