Alliance of Auto. Mfrs. v. Gwadosky

• Citation: 430 F.3d 30
• Decision Date: 18 November 2005
• Docket Number: No. 05-1259.,05-1259.
• Parties: ALLIANCE OF AUTOMOBILE MANUFACTURERS, Plaintiff, Appellant, v. Dan A. GWADOSKY, in his Official Capacity as Secretary of State of the State of Maine, and G. Steven Rowe, in his Official Capacity as Attorney General of the State of Maine, Defendants, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

430 F.3d 30

ALLIANCE OF AUTOMOBILE MANUFACTURERS, Plaintiff, Appellant, v. Dan A. GWADOSKY, in his Official Capacity as Secretary of State of the State of Maine, and G. Steven Rowe, in his Official Capacity as Attorney General of the State of Maine, Defendants, Appellees.

No. 05-1259.

United States Court of Appeals, First Circuit.

Heard September 13, 2005.

Decided November 18, 2005.

COPYRIGHT MATERIAL OMITTED

Russell R. Eggert, with whom Andrew J. Pincus, William L. Olsen, Mayer, Brown, Rowe & Maw LLP, Harold J. Friedman, Bruce Hepler, and Friedman, Gaythwaite, Wolf & Leavitt were on brief, for appellant.

Francis Ackerman, Assistant Attorney General, with whom Paul Stern, Deputy Attorney General, was on brief, for appellees.

Bruce C. Gerrity, with whom Michael Kaplan and Preti, Flaherty, Beliveau were on brief, for Maine Auto Dealers Association, Inc., amicus curiae.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and HOWARD, Circuit Judge.

SELYA, Circuit Judge.

This appeal is the latest chapter in an epic struggle between motor vehicle manufacturers and their dealers in the State of Maine. See Alliance of Auto. Mfrs. v. Gwadosky, 304 F.Supp.2d 104, 106-09 (D.Me.2004) [Alliance I] (discussing the historical antecedents). The controversy centers on reimbursement for warranty work. Thirty years ago, the state legislature intervened in this tug-of-war to ensure equity and to prevent collateral damage to consumers. More recently, the legislature amended the state regulatory scheme to prohibit manufacturers from adding state-specific surcharges to wholesale motor vehicle prices in order to recoup the costs of their compliance with retail-rate reimbursement laws (such as the one that the Maine legislature previously had enacted).

The Alliance of Automobile Manufacturers (the Alliance), a national trade association whose members are BMW Group, DaimlerChrysler Corp., Ford Motor Co., General Motors Corp., Mazda North American Operations, Mitsubishi Motors North America, Inc., Porsche Cars North America, Inc., Toyota Motor North America, Inc., and Volkswagen of America, Inc., challenged the recoupment bar as, among other things, a violation of both the Commerce and Contracts Clauses of the United States Constitution. The district court rejected that binary challenge. After careful consideration of the claims asserted, we conclude that the Alliance has not made out a genuine issue of material fact as to the existence of a constitutional violation. Consequently, we affirm the judgment below.

I. BACKGROUND

The historic relationship between motor vehicle manufacturers and dealers is not a particularly congenial one. See, e.g., Gen. Motors Corp. v. Darling's, 324 F.Supp.2d 257 (D.Me.2004), amended in part by 330 F.Supp.2d 9 (D.Me.2004); Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 923 F.Supp. 665 (D.N.J.1996), aff'd, 134 F.3d 557 (3d Cir.1998); Darling's v. Ford Motor Co., 825 A.2d 344 (Me.2003). The relationship typically flows from a franchise agreement that, in addition to other provisions, requires the dealer to perform warranty repairs (without regard to whether the dealer sold the vehicle in question) and sets out explicit rules for how the manufacturer will reimburse the dealer for that work.

Predictably, warranty reimbursement rates have been a source of considerable friction. The manufacturers have demanded preferential pricing of warranty repairs as a sort of volume discount. The dealers have argued that the discounted rate structure not only reflects an excessive imbalance in market power, but also forces them to increase the charges for non-warranty repairs (a practice that effectively requires non-warranty customers to subsidize warranty work).

In 1975, the Maine legislature stepped into this imbroglio and began to regulate the price of warranty repairs within Maine's borders. See 1975 Me. Laws 1788 (codified as amended at Me.Rev.Stat. Ann. tit. 10, § 1176) (mandating that motor vehicle manufacturers compensate dealers "adequately and fairly" for warranty repairs). In its most recent incarnation, enacted in 1991, this provision requires that manufacturers reimburse their Maine dealers for parts and labor at the retail rates customarily charged to non-warranty customers. See Me.Rev.Stat. Ann. tit. 10, § 1176.

In the usual motor vehicle franchise agreement, the manufacturer reserves the right to set wholesale vehicle prices unilaterally.¹ Exercising this right, Ford Motor Co. responded to Maine's amended version of section 1176 by adding a "warranty parity surcharge" to the wholesale price of motor vehicles sold in Maine. This surcharge was designed to recoup the incremental expenses that resulted from retail-rate reimbursement.

Adjudicating a dealer challenge to the surcharge, we held that nothing in Maine's motor vehicle franchise law prohibited it. See Acadia Motors, Inc. v. Ford Motor Co., 44 F.3d 1050, 1055-57 (1st Cir.1995); see also Acadia Motors, Inc. v. Ford Motor Co., 799 A.2d 1228, 1231 (Me.2002) (agreeing with this conclusion). In 2002, Ford set its surcharge at $500 per vehicle and collected more than $3,600,000 in additional revenue from Maine dealers. No other manufacturer has, as yet, followed suit.

Once again, the Maine legislature intervened. After several failed attempts at crafting a solution, it passed Legislative Document 1294. That document amended section 1176 by providing in pertinent part that a motor vehicle manufacturer "may not otherwise recover its cost for reimbursing a [dealer] for parts and labor pursuant to this section." L.D. 1294 § 10, 121st Leg., 1st Reg. Sess. (Me.2003). For simplicity's sake, we refer throughout this opinion to this proviso — section 10 of L.D. 1294 — as the "recoupment bar."

On September 4, 2003, the Alliance filed suit in Maine's federal district court, challenging the recoupment bar as unconstitutional under the Commerce, Contracts, and Takings Clauses. It sought declaratory and injunctive relief and named as defendants Dan A. Gwadosky, in his official capacity as Maine's Secretary of State, and G. Steven Rowe, in his official capacity as Maine's Attorney General (collectively, the State).

The district court allowed the Maine Auto Dealers Association (MADA) a right to participate in the proceedings as an amicus curiae. It proceeded to deny the Alliance's motion for a preliminary injunction, finding that the Alliance had established neither a likelihood of success on the merits nor irreparable harm. See Alliance I, 304 F.Supp.2d at 117; see also Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir.1996) (explicating the preliminary injunction standard). As to the Commerce Clause challenge, the court concluded that the recoupment bar did not reflect a discriminatory purpose, did not give rise to a discriminatory effect, and did not have any forbidden extraterritorial reach. See Alliance I, 304 F.Supp.2d at 110-14. The Contracts Clause challenge was impuissant, the court ruled, because the recoupment bar "was within the reasonable expectations of the parties." Id. at 116.

After limited discovery, the protagonists cross-moved for summary judgment. The district court granted the State's motion and denied the Alliance's motion, essentially for the reasons elucidated in Alliance I. See Alliance of Auto. Mfrs. v. Gwadosky, 353 F.Supp.2d 97, 99-100 (D.Me.2005) [Alliance II]. Along the way, the Alliance voluntarily dismissed the Takings Clause claim.²

II. ANALYSIS

On appeal, the Alliance reasserts its position that the recoupment bar violates both the Commerce and Contracts Clauses. We first sketch the familiar summary judgment standard and then deal sequentially with these assertions.

A. The Summary Judgment Standard.

A district court may enter summary judgment upon a showing "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We review orders granting summary judgment de novo; like the district court, we must scrutinize the record in the light most favorable to the summary judgment loser and draw all reasonable inferences therefrom to that party's behoof. Houlton Citizens' Coal. v. Town of Houlton, 175 F.3d 178, 184 (1st Cir.1999). This standard is not affected by the presence of cross-motions for summary judgment. See Blackie v. Maine, 75 F.3d 716, 721 (1st Cir.1996).

It is within this procedural framework that we assess the Alliance's claims. Our review is not constrained by the lower court's stated rationale; we may affirm the entry of summary judgment on any ground supported by the record. See Houlton Citizens' Coal., 175 F.3d at 184.

B. The Commerce Clause Claims.

The Constitution grants Congress the power "[t]o regulate Commerce ... among the several States." U.S. Const. art. I, § 8, cl. 3. That grant embodies a negative aspect as well — the "dormant Commerce Clause" — which "prevents state and local governments from impeding the free flow of goods from one state to another." Houlton Citizens' Coal., 175 F.3d at 184. Put another way, the dormant Commerce Clause "prohibits protectionist state regulation designed to benefit in-state economic interests by burdening out-of-state competitors." Grant's Dairy-Maine, LLC v. Comm'r of Me. Dep't of Agric., Food & Rural Res., 232 F.3d 8, 18 (1st Cir.2000).

The type of inquiry needed to determine whether a state law transgresses the Commerce Clause varies depending upon the nature of the law at issue. A state statute that purports to regulate commerce occurring wholly beyond the boundaries of the enacting state outstrips the limits of the enacting state's constitutional authority and, therefore, is per se invalid. Pharm. Research & Mfrs. of Am. v. Concannon, 249 F.3d 66, 79 (1st Cir.2001), aff'd sub nom. Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 123 S.Ct. 1855, 155 L.Ed.2d 889 (2003). A state statute that has no direct extraterritorial reach but...