Ford Motor Company v. Texas Dept. of Transportation

• Decision Date: 27 August 2001
• Docket Number: No. 00-50750,00-50750
• Parties: (5th Cir. 2001) FORD MOTOR COMPANY, a Delaware Corporation, Plaintiff - Appellant, v. TEXAS DEPARTMENT OF TRANSPORTATION, MOTOR VEHICLE DIVISION, ET AL., Defendants, BRETT BRAY, individually and as Director, Chief Executive and Administrative Officer of the Texas Department of Transportation, Motor Vehicle Division, Defendant - Appellee
• Court: U.S. Court of Appeals — Fifth Circuit

Page 493

264 F.3d 493 (5th Cir. 2001)

FORD MOTOR COMPANY, a Delaware Corporation, Plaintiff - Appellant, v. TEXAS DEPARTMENT OF TRANSPORTATION, MOTOR VEHICLE DIVISION, ET AL., Defendants, BRETT BRAY, individually and as Director, Chief Executive and Administrative Officer of the Texas Department of Transportation, Motor Vehicle Division, Defendant - Appellee.

No. 00-50750

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

August 27, 2001

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Appeal from the United States District Court for the Western District of Texas Before JONES, DEMOSS and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

This case involves Ford Motor Company's ("Ford") attempt to market preowned vehicles in Texas via their internet site known as The Showroom. On November 2, 1999, the Texas Motor Vehicle Division ("the State") filed an administrative complaint against Ford with the Texas Motor Vehicle Board. In the complaint, the State alleged that Ford violated the Texas Motor Vehicle Commission Code ("the Code"), Tex. Rev. Civ. Stat. art. 4413(36), §§ 4.01, .06(a)(3), (6) & 5.02C(c), as well as Tex. Transp. Code § 503.021, by selling used vehicles to Texas consumers without a dealer's license. Section 4.01(a) of the Code makes it unlawful to "engage in business as, serve in the capacity of, or act as a[n] [automobile] dealer . . . without first obtaining a license."¹ Ford is ineligible under Texas law to receive a license because § 5.02C(c) provides that:

(c) Except as provided by this section, a manufacturer or distributor may not directly or indirectly:

(1) own an interest in a dealer or dealership;

(2) operate or control a dealer or dealership; or

(3) act in the capacity of a dealer.

In response to the State's administrative complaint, Ford filed suit in federal court alleging that § 5.02C(c) violates Ford's rights under the United States Constitution. Specifically, (1) that § 5.02C(c) facially, or in practical effect, violates the dormant Commerce Clause;² (2) that § 5.02C(c), as applied to the Showroom, violates Ford's First Amendment right to free speech; (3) that § 5.02C(c) is unconstitutionally vague; (4) that the State's enforcement of § 5.02C(c) denied Ford equal protection under the law; and (5) that Ford was denied due process in the Enforcement Action brought pursuant to § 5.02C(c). The parties filed cross-motions for summary judgment. The district court granted the State's motion for summary judgment as to all of Ford's claims. Ford filed a timely appeal with this Court.

We review grants of summary judgment de novo, guided by the same Rule 56 standard as the district court. Fed.R.Civ.P. 56(c); Stults v. Conoco, Inc., 76 F.3d 651, 654 (5th Cir. 1996). Pursuant to Rule 56, a party may obtain summary judgment when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On cross-motions for summary judgment, we review each party's motion independently, viewing the evidence and inferences in the light most favorable to the nonmoving party. Taylor v. Gregg, 36 F.3d 453, 455 (5th Cir. 1994). Applying this standard, we find summary judgment appropriate against all of Ford's constitutional claims. Accordingly, the judgment of the district court is AFFIRMED.

Facts

Through the Showroom, located at www.fordpreowned.com., customers in Houston, Atlanta, Boston, Washington D.C., New York, and Newark are able to view an on-line selection of preowned Ford vehicles. The vehicles available through Ford's website were originally leased by a Ford dealer to a consumer, sold or leased by Ford to national car rental companies, or used as company service vehicles by Ford employees. Ford does not otherwise obtain used vehicles in order to re-sell them. Rather, the Showroom is Ford's attempt to create the most profitable market to re-sell these vehicles. Interested customers, after placing a $300 refundable deposit, may arrange to have a designated vehicle sent to a local dealer in order that they may test-drive it. Following their test-drive, the customer may then accept or decline to purchase the vehicle at the "no-haggle" price determined by Ford and listed on the website. Upon payment or financing approval, Ford transfers title to the dealer, who, in turn, transfers title to the customer.

Twenty-two dealers in the Houston metropolitan area joined the program by signing Dealer Participation Agreements. The Agreement prohibits dealers from selling the selected vehicle at any price other than that set by Ford or charging the customer any handling or documentary fees. The Agreement also prohibits the dealer from attempting to interest the customer in any of the dealer's inventory until after the customer has declined to purchase the Ford internet vehicle. These dealers were advised through a letter sent by Carol Kent, the Director of the Texas Department of Transportation, Enforcement Section, of Ford's alleged violation and that their participation in the program constituted aiding and abetting a violation of the Code. They were notified of potential administrative enforcement action if they did not discontinue their participation.

Discussion

Ford argues that § 5.02C(c) of the Code violates the dormant Commerce Clause because it discriminates against of out-of-state interests. Alternatively, Ford contends that § 5.02C(c) unconstitutionally burdens the flow of interstate commerce. The Commerce Clause provides that "[t]he Congress shall have Power . . . [t]o regulate Commerce . . . among the several States." Art. I, § 8, cl. 3. The Constitution thus specifically grants Congress power to regulate interstate commerce. If state regulation conflicts with federal law governing commerce, the Supremacy Clause mandates that the state law be invalidated. In matters not governed by federal legislation, "the Clause has long been understood to have a 'negative' aspect that denies the States the power unjustifiably to discriminate against or burden the interstate flow of articles of commerce." Oregon Waste Systems, Inc. v. Department of Environmental Quality, 511 U.S. 93, 98, 114 S.Ct. 1345, 1349 (1994).

In reviewing state regulations on interstate commerce under the dormant Commerce Clause, "the first step is to determine whether it 'regulates evenhandedly with only 'incidental' effects on interstate commerce, or discriminates against interstate commerce.'" Id. at 99 (quoting Hughes v. Oklahoma, 441 U.S. 322, 325-26, 99 S.Ct. 1727, 1731 (1979)). A statute discriminates against interstate commerce when it provides for "differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter." Id. "If a restriction on commerce is discriminatory, it is virtually per se invalid." Oregon Waste Sys., 511 U.S. at 99. On the other hand, nondiscriminatory regulations are analyzed under the balancing test established in Pike v. Bruce Church, Inc., whereby the regulation is valid unless "the burden imposed on such commerce is clearly excessive in relation to the putative local benefits." 397 U.S. 137, 142, 90 S.Ct. 844, 847 (1970). Because of the wide variation in scrutiny under the respective tests, this initial inquiry is often dispositive of the underlying issue. And while "there is no clear line separating the category of state regulation that is virtually per se invalid under the Commerce Clause, and the category subject to the Pike v. Bruce Church balancing approach," this case clearly falls on the Pike side of the equation. Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 579, 106 S.Ct. 2080, 2084 (1986).

The State's purpose for enacting the Code is set forth in § 1.02, which provides:

The distribution and sale of new motor vehicles in this State vitally affects the general economy of the State and the public interest and welfare of its citizens. It is the policy of this State and the purpose of this Act to exercise the State's police power to insure a sound system of distributing and selling new motor vehicles through licensing and regulating the manufacturers, distributors, and franchised dealers of those vehicles to provide for compliance with manufacturer's warranties, and to prevent frauds, unfair practices, discrimination, impositions, and other abuses of our citizens.

Specifically, with respect to the addition of § 5.02C(c), the legislative history indicates the legislature's intent to prevent manufacturers from utilizing their superior market position to compete against dealers in the retail car market. The legislature's concern was fueled by the recent opening of several dealerships owned by manufacturers and the perceived detriment to the public from vertical integration of the automobile market. Ford argues that this isolation of Texas' retail car market impermissibly discriminates against out-of-state interests and amounts to nothing more than economic protectionism.

Ford would have us interpret Oregon Waste Sys.'s basic definition of discrimination - "differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter" - to include all instances in which a law, in effect, burdens some out-of-state interest while benefitting some in-state interest. Certainly, a facially neutral statute may be discriminatory because of its effect. See Minnesota v. Clover Leaf Creamery Company, 449 U.S. 456, 471 n.15, 101 S.Ct. 715, (1981) ("A court may find a state law constitutes 'economic protectionism' on proof of either discriminatory effect, or of discriminatory purpose." (citations omitted)). However, beyond this point, Ford's expansive interpretation of discrimination is inconsistent with Supreme Court precedent including Oregon Waste...