American Motors Sales Corp. v. Runke

• Decision Date: 10 May 1983
• Docket Number: No. 82-5263,82-5263
• Citation: 708 F.2d 202
• Parties: AMERICAN MOTORS SALES CORPORATION, Plaintiff-Appellee, v. James F. RUNKE, Commissioner, Bureau of Vehicle Regulation, and Bureau of Vehicle Regulation, Department of Transportation, and Department of Transportation, Commonwealth of Kentucky, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 202

708 F.2d 202

AMERICAN MOTORS SALES CORPORATION, Plaintiff-Appellee, v. James F. RUNKE, Commissioner, Bureau of Vehicle Regulation and Bureau of Vehicle Regulation, Department of Transportation, and Department of Transportation Commonwealth of Kentucky, Defendants-Appellants.

No. 82-5263.

United States Court of Appeals Sixth Circuit.

Argued Jan. 17, 1983.

Decided May 10, 1983.

Gary L. Dailey, Office of Gen. Counsel, Dept. of Transp., Dandridge Walton, (argued), Frankfort, Ky., for defendants-appellants.

Edward H. Stopher (argued), Robert E. Stopher, Boehl, Stopher, Graves & Deindoerfer, Louisville, Ky., for plaintiff-appellee.

Before KEITH, KENNEDY and WELLFORD, Circuit Judges.

CORNELIA G. KENNEDY, Circuit Judge.

Defendant Runke, Commissioner of the Bureau of Vehicle Regulation of the Kentucky Department of Transportation, appeals an order of the District Court granting a preliminary injunction prohibiting the enforcement of provisions of the Kentucky Automobile Marketing Act, Ky.Rev.Stat.Ann. Secs. 190.010-190.080, 190.990 (Baldwin 1982) ¹ against the American Motors Sales Corporation. We affirm the District Court's judgment but remand with directions to modify the injunctive relief granted.

The appellee, American Motor Sales Corporation (American), ² is licensed under Kentucky law to distribute American Motors, Jeep and Renault vehicles, parts and accessories to thirty-two dealers in Kentucky. American has, since as early as 1973, promoted sales to dealers in Kentucky by offering "incentive" programs such as sales contests, rebates and wholesale price reductions. On January 22, 1982, in response to a complaint by Gambrel & Madon Motor Company, Inc., ³ the appellant Runke issued a notice of a hearing before the Kentucky Department of Transportation, Bureau of Motor Vehicle Registration. This notice ordered American to "show cause" why its license to distribute vehicles, parts and accessories in Kentucky should not be revoked for violations of the state's Automobile Marketing Act, Ky.Rev.Stat. Sec. 190.040.

This hearing was postponed until March 29, 1982. In the interim American filed this action on March 22, 1982 seeking injunctive relief and a declaratory judgment that the Kentucky statute was unconstitutional under the Supremacy and Commerce Clauses of the United States Constitution. After an adversary hearing on March 23, the District Court issued a temporary restraining order enjoining the defendants from conducting any hearing "or other proceeding" or otherwise attempting to enforce Ky.Rev.Stat. Secs. 190.010-190.080 or Ky.Rev.Stat. Sec. 190.990. The court subsequently held a full hearing on the issues raised and granted the preliminary injunction now appealed.

Runke raises three issues on appeal: (1) whether the injunction was prohibited under the Anti-Injunction Act, 28 U.S.C. Sec. 2283 (1976); (2) whether the District Court abused its discretion in issuing the preliminary injunction; and (3) whether the District Court abused its discretion in refusing to abstain under the Pullman or Younger doctrines. ⁴

The Anti-Injunction Statute

Appellant Runke urges that the Anti-Injunction Act, 28 U.S.C. Sec. 2283 (1976), prohibits the District Court from enjoining the state administrative hearing at which the Kentucky act was to be enforced. This jurisdictional challenge is without merit. Section 2283 by its terms only prohibits federal courts from enjoining state court proceedings. ⁵ At least two courts including the Sixth Circuit have expressly stated that this prohibition does not extend to state administrative proceedings. Taylor v. Kentucky State Bar Association, 424 F.2d 478, 482 (6th Cir.1970); Engleman v. Cahn, 425 F.2d 954, 958 (2d Cir.1969) cert. denied, 397 U.S. 1009, 90 S.Ct. 1238, 25 L.Ed.2d 422 (1970). See also Erdmann v. Stevens, 458 F.2d 1205, 1213 n. 3 (2d Cir.1972) (concurring opinion); Cabot Corp. v. Public Service Comm'n of W.Va., 332 F.Supp. 370, 373 (S.D.W.Va.1971). ⁶

Runke argues, however, that in United States v. Ohio, 614 F.2d 101, 104 (6th Cir.1979), a panel of this Circuit established that the distinction between state judicial and administrative proceedings is without legal significance under the federal anti-injunction statutes. We disagree. First, United States v. Ohio, did not involve Sec. 2283 but rather the Anti-Tax Injunction Statute, 28 U.S.C. Sec. 1341 (1976). Although both statutes reflect congressional disapproval of federal judicial inference with state judiciaries, they do so in different ways. Section 2283 by its terms only prohibits federal courts from enjoining state court proceedings. Section 1341 on the other hand restricts the district courts from enjoining or restraining the "assessment, levy or collection" of any state tax where a "plain, speedy and efficient remedy" is available in the state courts. ⁷ Since the assessment, levy or collection of state taxes is almost always undertaken administratively Sec. 1341 clearly contemplates a ban on injunctions against state administrative tax proceedings so long as an adequate state court remedy exists. See Rosewell v. LaSalle National Bank, 450 U.S. 503, 512, 101 S.Ct. 1221, 1228, 67 L.Ed.2d 464 (1981); Tully v. Griffin, Inc., 429 U.S. 68, 73, 97 S.Ct. 219, 222, 50 L.Ed.2d 227 (1976). Second, the Court in United States v. Ohio actually refused to consider Sec. 1341, since it was first raised as a defense on appeal. Rather, the Court rested its decision and distinction between administrative and judicial proceedings on the Pullman and Younger abstention doctrines. 614 F.2d at 103-104. Third, in the context of abstention the Court found no distinction between a state court and the particular administrative body sought to be enjoined because that administrative body was well suited to adjudicating the issues of state law involved. The State of Ohio had specifically designated this body, the tax appeals board, to adjudicate state tax law disputes including constitutional questions. The present case in contrast, involves a primarily executive administrative proceeding. Runke's reliance on United States v. Ohio is, therefore, misplaced.

Abuse of Discretion in Granting the Preliminary Injunction

The standard of review on appeal from a preliminary injunction is whether the District Court abused its discretion. Adams v. Federal Express Corporation, 547 F.2d 319, 322 (6th Cir.1976), cert. denied, 431 U.S. 915, 97 S.Ct. 2177, 53 L.Ed.2d 225 (1977). There are four factors to be considered in determining whether the grant of a preliminary injunction was an abuse of discretion: (a) Substantial likelihood of success on the merits; (b) likelihood of irreparable injury; (c) absence of substantial harm to other parties; and (d) protection of the public's interest. Mason County Medical Association v. Knebel, 563 F.2d 256, 261 (6th Cir.1977).

In this case the District Court did not abuse its discretion in granting the preliminary injunction. American demonstrated a substantial likelihood of success on the merits in that the Kentucky act enjoined establishes a prohibition which irreconcilably conflicts with provisions in a federal act governing the same area of conduct. The federal Automobile Dealers' Day in Court Act, 15 U.S.C. Sec. 1221(e), expressly authorizes "recommendation, endorsement, exposition, persuasion, urging or argument" by a distributor of motor vehicles. ⁸ The section of the Kentucky statute challenged by American prohibits the sale in Kentucky ⁹ of any vehicle, parts or accessories by a manufacturer or distributor who:

(m) Being a manufacturer of motor vehicles, factory branch, distributor, field representative, officer, agent or any representative whatsoever of such motor vehicle manufacturer or factory branch, who has induced or coerced or attempted to induce or coerce any automobile dealer to accept delivery of any motor vehicle or vehicles, parts or accessories therefor, or any other commodities which shall not have been ordered by said dealer;

(n) Being a manufacturer of motor vehicles, factory branch, distributor, field representative, officer, agent, or any representative whatsoever of such motor vehicle manufacturer or factory branch, who has attempted to induce or coerce or has induced or coerced, any automobile dealer to enter into any agreement with such manufacturer, factory branch or representative thereof, or to do any other act unfair to said dealer, by threatening to cancel any franchise existing between such manufacturer, factory branch or representative thereof and said dealer

As the District Court recognized, the conflict between these statutes arises over the use of the term "induce" in the Kentucky act. The federal act would allow "persuasion" while the state act prohibits "inducements." Yet, these terms are synonymous. The District Court found that this conflict presents a substantial likelihood that the Kentucky statute would be deemed unconstitutional on the merits under the Supremacy Clause. ¹⁰

In response to this conclusion Runke argues that no actual conflict exists between the state and federal provisions. Runke points out that the state statute only prohibits a distributor from inducing a dealer to accept delivery of unordered merchandise. Section 1221(e) of the federal act, Runke urges, merely specifies acts which do not "per se" constitute bad faith by a distributor. Under this reasoning Kentucky's prohibition against inducing acceptance of delivery of unordered merchandise is a narrow category of behavior which falls outside the federal act's more general proviso. Insofar as the "inducements" covered by the Kentucky act are concerned, Runke is correct; only inducements to accept delivery of unordered merchandise are prohibited by the statute's terms and not inducements in general. Moreover, it is true that unsolicited shipments and attempts to force acceptance of unordered merchandise is a distributor practice probably prohibited under the federal act. See ...