300 F.3d 842 (8th Cir. 2002), 01-2062, Equipment Mfrs. Institute v. Janklow

Docket Nº:01-2062.
Citation:300 F.3d 842
Party Name:EQUIPMENT MANUFACTURERS INSTITUTE, AGCO Corporation, Case Corporation, Deere & Company, New Holland North America, Inc., Plaintiffs/Appellants, v. William J. JANKLOW, Governor of the State of South Dakota, in his Official Capacity, and Mark W. Barnett, Attorney General of the State of South Dakota, in his Official Capacity, Defendants/Appellees, Pa
Case Date:August 06, 2002
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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300 F.3d 842 (8th Cir. 2002)

EQUIPMENT MANUFACTURERS INSTITUTE, AGCO Corporation, Case Corporation, Deere & Company, New Holland North America, Inc., Plaintiffs/Appellants,

v.

William J. JANKLOW, Governor of the State of South Dakota, in his Official Capacity, and Mark W. Barnett, Attorney General of the State of South Dakota, in his Official Capacity, Defendants/Appellees,

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Farm Equipment Association of Minnesota and South Dakota, Intervenor Defendant/Appellee.

No. 01-2062.

United States Court of Appeals, Eighth Circuit

August 6, 2002

Submitted: Nov. 15, 2001.

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David M. Kroeger, argued, Chicago, IL, for appellant.

Michael Garner, argued, Minneapolis, MN, for appellees, Farm Equipment Association, etc.

Jeffrey P. Hallem, AAG, argued, Pierre, S.D. for appellees Mark W. Barnett and William J. Janklow.

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Before BYE and BEAM, Circuit Judges, and GOLDBERG,1 Judge.

GOLDBERG, Judge.

Plaintiffs-Appellants Equipment Manufacturers Institute ("EMI"), AGCO Corporation ("AGCO"), Case Corporation ("Case"), Deere & Company ("John Deere"), and New Holland North America, Inc. ("New Holland") (collectively the "Manufacturers"), filed a declaratory judgment action, through a complaint dated August 16, 1999, alleging that portions of the Act entitled "An Act to provide certain restrictions for dealership contracts for machinery" (the "Act") (1) violate the Contract Clauses of the United States and South Dakota Constitutions because they impair pre-existing dealership contracts; (2) are preempted by the Federal Arbitration Act; (3) are unconstitutionally vague in the use of the term "community"; and (4) otherwise violate substantive due process. The Manufacturers filed a motion for summary judgment on April 28, 2000. Defendants-Appellees, the Governor and Attorney General of South Dakota (the "State"), subsequently filed a cross-motion for summary judgment. The Farm Equipment Association of Minnesota and South Dakota ("FEA") intervened as a defendant in this action.

On March 30, 2001, the district court granted partial summary judgment in favor of the Manufacturers on their Contract Clause claim, ruling that the Act's restrictions on establishing new dealerships violated the Contract Clause. Equip. Mfrs. Inst. v. Janklow, 136 F.Supp.2d. 991 (D.S.D.2001). The district court also granted partial summary judgment in favor of the State on the remaining part of the Contract Clause claim, holding that the Act's restrictions on dealership termination were simply a "fine tuning" of preexisting South Dakota law. The district court further granted summary judgment in favor of the Manufacturers on their preemption claim, and summary judgment in favor of the State on the void for vagueness and substantive due process claims, holding that the record established that the Act had been adopted to protect farmers, and that the Act bore a real and substantial relationship to the protection of farmers.

The Manufacturers appeal the district court's grant of partial summary judgment in favor of the State on the Contract Clause claim, and grant of summary judgment in favor of the State on the substantive due process claim.

We conclude that the district court erred in determining as a matter of law that the restrictions on dealership termination of South Dakota Codified Laws § 37-5-14, 1999 S.D. Laws Ch. 200, § 2 ("Section 2"), do not violate the Contract Clause. This Court finds that as a matter of law, Section 2 is a substantial impairment on pre-existing contractual relationships, and that there is no legitimate and significant public purpose. As a result, Section 2 is an unconstitutional burden on pre-existing dealership agreements under the Contract Clause. The grant of partial summary judgment in favor of the State by the district court is reversed, and the Manufacturers' motion for summary judgment is granted. Ordinarily, an order denying summary judgment (which by implication occurred here) may not be appealed until completion of the case below. However, in certain instances, we may exercise jurisdiction over "pendent" issues:

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[A] pendent appellate claim can be regarded as inextricably intertwined with a properly reviewable claim on collateral appeal only if the pendent claim is coterminous with, or subsumed in, the claim before the court on an interlocutory appeal-that is, when the appellate resolution of the collateral appeal necessarily resolves the pendent claim as well.

Kincade v. City of Blue Springs, 64 F.3d 389, 394 (8th Cir. 1995) (quoting Moore v. City of Wynnewood, 57 F.3d 924, 930 (10th Cir. 1995)). In reviewing the district court's grant of summary judgment to the State, we have resolved in the Manufacturer's favor every issue raised by its motion for partial summary judgment. Accordingly, we invoke our pendent jurisdiction and grant the Manufacturer's motion. Because we grant summary judgment in favor of the Manufacturers on the Contract Clause claim, we do not address the Manufacturers' substantive due process claim regarding pre-existing dealership contracts. We affirm the district court's disposition of the Manufacturers' substantive due process claims regarding future dealership contracts.

I. BACKGROUND

Plaintiff-Appellant EMI is a trade association consisting of 141 manufacturers of agricultural, construction, forestry, materials handling, and utility equipment. Many of EMI's members enter into individual contractual relationships with dealers whom they have determined are qualified to market and service their machinery to consumers in specified markets. Plaintiffs-Appellants AGCO, Case, John Deere, and New Holland are manufacturers of agricultural equipment, and members of EMI. The relationships between the manufacturers and dealers are governed by dealership agreements, which establish the respective rights and duties of each party and the essential structure of the business relationship between them.

Sections 37-5-1, 37-5-2, and 37-5-3 of the South Dakota Codified Laws, in force since 1951, make it a Class 1 misdemeanor for a manufacturer "to coerce or attempt to coerce" a dealer to take certain actions, or to cancel a dealership agreement "unfairly, without due regard to the equities of the dealer and without just provocation." S.D. Codified Laws §§ 37-5-1 to 3 (2001), 1951 S.D. Laws Ch. 262, § 1. These protections were augmented by the passage of the Act, which took effect on July 1, 1999.2 S.D. Codified Laws §§ 37-5-13 to 15 (2001), 1999 S.D. Laws Ch. 200. Section 2 sets forth five circumstances that do not constitute cause for termination of a dealership contract.

The following circumstances are not cause for the termination or discontinuance of a dealership contract, nor for entering into a dealership contract for the establishment of an additional dealership in a community for the same line-make:

(1) The change of executive management or ownership of the dealer, unless the manufacturer can show that the change would be detrimental to the representation or reputation of the manufacturer's product;

(2) Refusal by the dealer to purchase or accept delivery of any machinery, parts, accessories, or any other commodity

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or service not ordered by the dealer unless such machinery, parts, accessories, or other commodity or service is necessary for the operation of machinery commonly sold in the dealer's area of responsibility;

(3) The sole fact that the manufacturer desires further penetration of the market;

(4) The fact that the dealer owns, has an investment in, participates in the management of, or holds a dealership contract for the sale of another line-make of machinery, or that the dealer has established another line-make of machinery in the same dealership facilities as those of the manufacturer, if the dealer maintains a reasonable line of credit for each line-make of machinery; or

(5) Refusal by the dealer to participate in any national advertising campaign or contest or purchase any promotional materials, display devices, or display decoration or materials which are at the expense of the dealer.

S.D. Codified Laws § 37-5-14, 1999 S.D. Laws Ch. 200, § 2.

AGCO, Case, John Deere, New Holland, Komatsu America International Company ("Komatsu"), and Gehl Company ("Gehl"), manufacturers of machinery as defined by the Act, SDCL § 37-5-13(4), 1999 S.D. Laws Ch. 200, § 1, are active members of EMI.3 EMI member companies have "dealership contracts" with South Dakota "dealers," as those terms are defined by the Act. S.D. Codified Laws §§ 37-5-13(1), (2), 1999 S.D. Laws Ch. 200, § 1. Each of the aforementioned EMI members has dealership agreements with dealers in South Dakota; specifically, AGCO has 59, Case has 33, Deere has 24, New Holland has 22, Gehl has 10, and Komatsu has one dealer located in South Dakota. See Appellants' Separate Appendix ("Appellants' App.") 76, 99, 121, 139, 185, 206. Each of the manufacturers reports that a substantial number of their relationships with South Dakota dealers are governed by dealership agreements in existence before July 1, 1999, the effective date of the Act ("pre-existing dealership agreements"). Id. at 76, 99, 121,139, 185, 207.

II. DISCUSSION

This Court reviews the district court's grant of summary judgment de novo, and applies the same standards as did the district court. Wildman v. Marshalltown Sch. Dist, 249 F.3d 768, 771 (8th Cir. 2001); Educational Employees Credit Union v. Mut. Guar. Corp., 50 F.3d 1432, 1436 (8th Cir. 1995). Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a ruling in its favor as a matter of law. Fed.R.Civ.P. 56(c); Jensen v. Toco John's Int'l,...

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