Benson & Gold Chevrolet, Inc. v. Louisiana Motor Vehicle Commission

• Decision Date: 22 June 1981
• Docket Number: No. 81-CA-0286,81-CA-0286
• Parties: 1981-1 Trade Cases P 64,123 BENSON & GOLD CHEVROLET, INC. v. The LOUISIANA MOTOR VEHICLE COMMISSION et al.
• Court: Louisiana Supreme Court

Page 13

403 So.2d 13

1981-1 Trade Cases P 64,123

BENSON & GOLD CHEVROLET, INC. v. The LOUISIANA MOTOR VEHICLE COMMISSION et al.

No. 81-CA-0286.

Supreme Court of Louisiana.

June 22, 1981.

Rehearings Denied Sept. 18, 1981.

William J. Guste, Jr., Atty. Gen., Kendall L. Vick, John R. Flowers, Jr., Lois C. Davis, Asst. Attys. Gen., David R. M. Williams, Staff Atty., Edwin A. Stoutz, Jr., New Orleans, Oscar W. Boswell, II, Reggie, Harrington & Boswell, Crowley, for defendant-appellant.

Michael F. Little, William Wright, Jr., Jerome Reso, Jr., Monica T. Surrpenant, Baldwin & Haspel, New Orleans, for intervenor-appellant.

Herschel C. Adcock, Adcock, Dupree & Shows, Baton Rouge, for intervenor-appellee.

Russ M. Herman, Maury A. Herman, Herman & Herman, New Orleans, for plaintiff-appellee.

DIXON, Chief Justice.

The record in this case discloses the following facts:

Benson & Gold Chevrolet, Inc., a Louisiana corporation, purchased the assets of an existing Chevrolet dealership in November, 1978. The business location of the dealership was in downtown New Orleans, in Orleans Parish. At the same time, Benson & Gold entered into a conditional franchise agreement with the Chevrolet Division of General Motors Corporation. The franchise contract included an ancillary agreement requiring Benson & Gold to relocate its newly acquired business to a site "in the vicinity of the intersection of Williams Boulevard and 35th Street," which is in Jefferson Parish. Since at least 1974, Chevrolet had recommended that another Chevrolet dealership be added to this burgeoning area of metropolitan New Orleans; the opportunity to implement this recommendation was seized when Benson & Gold acquired its franchise. The relocation was required to be completed no later than October 31, 1980.

Benson & Gold was duly issued a license to operate an automobile dealership by the appropriate state agency, the Louisiana Motor Vehicle Commission (M.V.C.).

Subsequently, Benson & Gold began considering sites for the future relocation. An option to purchase property at 2800 Veterans Memorial Boulevard was obtained in October, 1979. Chevrolet approved the site. The M.V.C. was notified, and a meeting was held that year to determine whether Benson & Gold should be issued a new license to operate its business at the proposed site of relocation.

At this point it is pertinent to note that another Chevrolet dealership, Bryan Chevrolet, Inc., was already located at 8200 Airline Highway, within about 2.5 miles of Benson & Gold's proposed location. Bryan Chevrolet had been doing business in the same site for more than twenty years the only Chevrolet dealer on the East Bank of Jefferson Parish. James Bryan, the president and major shareholder of Bryan Chevrolet, objected to the establishment of another Chevrolet dealership within the immediate vicinity of his own business. Mr. Bryan is also a member of the M.V.C. He recused himself from the proceedings relating to Benson & Gold's application, although he continued to oppose the application through an intervention.

On January 11, 1980 the M.V.C. formally denied Benson & Gold's application for a new license at the proposed site in Jefferson Parish. The written notice of the denial indicated that the members of the M.V.C. had concluded that "it would not be in the public interest to license a new Chevrolet dealership in such close proximity to a presently existing Chevrolet dealership." The written notice goes on to state:

"The Commission determined that the licensing of two dealers to compete in sales and service of the same make motor vehicles in such close proximity to each other, and within the same general market area, is potentially destructive of (the) economic well being of both dealers and thus ultimately of the public interest and welfare, which requires the maintenance of healthy competition, productive of stable and long lasting automotive dealership businesses.

Additionally the Commission was not convinced that the existing Chevrolet dealer doing business in the community or territory concerned is not furnishing its manufacturer adequate representation."

Pursuant to R.S. 32:1256, Benson & Gold requested a hearing to review the M.V.C.'s denial of its application. The hearing was held in January and February of 1980, and concluded with a ratification and readoption of the initial denial.

Benson & Gold appealed the M.V.C.'s decision to the district court for a trial de novo of the issues, as authorized by R.S. 32:1256(E). Bryan Chevrolet intervened, contending that the M.V.C. had decided the matter correctly. Trial began in June, 1980, and lasted more than twenty days. At the conclusion of the trial, judgment was rendered in favor of Benson & Gold. The trial court's reasons for judgment contain the following conclusions: (1) the M.V.C. misapplied the pertinent law governing relocations of licensed dealerships; (2) R.S. 32:1254(E) is unconstitutional, in that it arbitrarily and discriminatorily requires a new license to be issued when a dealership is moved from one parish to another, but does not require a new license when relocations are made within the same parish; (3) the regulatory scheme which the M.V.C. administers, R.S. 32:1251 et seq., is violative of the Sherman Anti-Trust Act (15 U.S.C. § 1 et seq.) in that it is a "restraint of trade" not within the "state action exemption;" and (4) the composition of the M.V.C., as governed by R.S. 32:1253(A), violates the equal protection and due process clauses of the federal and state constitutions.

Because portions of two state statutes were declared unconstitutional by the trial court, an appeal was taken directly to this court under the authority of Article 5, § 5(D)(1) of the Louisiana Constitution of 1974. Since this is an appeal from an adjudication by an administrative agency, the provisions of Louisiana's Administrative Procedure Act are applicable. See R.S. 49:951 et seq.

On appeal, the M.V.C. argues that the trial court's decision was wrong in every respect. Before considering the issues, however, a review of the legislative background is appropriate.

Legislative Background

Chapter 6 of Title 32 of the Louisiana Revised Statutes, entitled "Distribution and Sale of Motor Vehicles" and comprised of §§ 1251-59, was originally enacted in 1954. Acts 1954, No. 350, § 1. The legislation was drafted in response to a growing concern, nationwide, over automobile dealers' vulnerability to unfair practices perpetrated by automobile manufacturers. Automobile dealers were thought to be the "economic dependents of the company whose cars they sell," subject to unscrupulous practices by automobile producers. Ford Motor Co. v. United States, 335 U.S. 303, 323, 69 S.Ct. 93, 103, 93 L.Ed. 24, 38 (1948) (Black, J., dissenting). By 1957 at least nineteen states had enacted statutes attempting to regulate the manufacturer-dealer relationship. Brown & Conwill, "Automobile Manufacturer-Dealer Legislation," 57 Colum.L.Rev. 219 (1957). Federal legislation was also enacted at that time. See 15 U.S.C. §§ 1221-25. Federal lawmakers recognized that legislation was required "to remedy the manifest disparity in the ability of franchised dealers of automotive vehicles to bargain with their manufacturers." 1956 U.S. Code Cong. & Ad. News 4596, 4597. See also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 99 S.Ct. 403, 58 L.Ed.2d 361 (1978).

Although the legislative history of Louisiana's statutory scheme has not been documented, there is little doubt that Louisiana lawmakers were prompted by the same considerations that motivated lawmakers in other states to pass legislation protecting automobile dealers from unfair and oppressive practices of manufacturers. Simply stated, the purpose of the law was "to furnish the dealer with some protection against unfair treatment by the manufacturer." Forest Home Dodge, Inc. v. Karns, 29 Wis.2d 78, 85, 138 N.W.2d 214, 218 (1965). The legislative purpose of providing automobile dealers with some safeguards in their transactions with automobile manufacturers is clearly evidenced by the regulatory scheme itself. R.S. 32:1251, a declaration of public policy, is a reflection of the legislative concern:

"The legislature finds and declares that the distribution and sale of motor vehicles in the state of Louisiana vitally affects the general economy of the state and the public interest and the public welfare and that in order to promote the public interest and the public welfare, and in the exercise of its police power, it is necessary to regulate and to license motor vehicle manufacturers, distributors, and dealers doing business in Louisiana, in order to prevent frauds, impositions, and other abuses upon its citizens, and avoid undue control of the independent motor vehicle dealer by the motor vehicle manufacturing and distributive organizations and foster and keep alive vigorous and healthy competition, by prohibiting unfair practices by which fair and honest competition is destroyed or prevented, and to protect the public against the creation or perpetuation of monopolies and practices detrimental to the public welfare, to prevent the practice of requiring the buying of special features, appliances and equipment not desired or requested by the purchaser, to prevent false and misleading advertising, to prevent unfair practices by motor vehicle dealers, manufacturers and distributing organizations, to promote the public safety and prevent disruption of the system of distribution of motor vehicles to the public and prevent deterioration of facilities for servicing motor vehicles and keeping same safe and properly functioning, and prevent bankrupting of motor vehicle dealers, who might otherwise be caused to fail because of such unfair practices and competition, thereby resulting in unemployment, disruption of leases, and nonpayment of taxes and loans, and contribute to an inevitable train of undesirable consequences,...