BMW of North America, Inc. v. New Motor Vehicle Bd.

• Decision Date: 18 December 1984
• Citation: 209 Cal.Rptr. 50,162 Cal.App.3d 980
• Court: California Court of Appeals Court of Appeals
• Parties: BMW OF NORTH AMERICA, INC., Plaintiff and Appellant, v. NEW MOTOR VEHICLE BOARD, Defendant and Respondent, HAL WATKINS CHEVROLET, INC., doing business as Hal Watkins Imports, Real Party in Interest and Respondent. Civ. 23195.

Page 50

209 Cal.Rptr. 50

162 Cal.App.3d 980

BMW OF NORTH AMERICA, INC., Plaintiff and Appellant, v. NEW MOTOR VEHICLE BOARD, Defendant and Respondent, HAL WATKINS CHEVROLET, INC., doing business as Hal Watkins Imports, Real Party in Interest and Respondent.

Civ. 23195.

Court of Appeal, Third District, California.

Dec. 18, 1984.

Hearing Denied March 13, 1985.

[162 Cal.App.3d 983] Lewis, D'Amato, Brisbois & Bisgaard and Roy M. Brisbois, Los Angeles, Weil, Gotshal & Manges and Salem Katsh, Michael A. Epstein and Bryan R. Dunlap, New York City, for plaintiff and appellant.

Center for Public Interest Law, Gene Erbin, Los Angeles, and Elizabeth A. Mulroy, San Diego, McCuthchen, Black, Verleger & Shea, Howard J. Privett, Franklin H. Wilson and Michael M. Johnson, Los Angeles, amicus curiae in behalf of plaintiff and appellant.

John K. Van de Kamp, Atty. Gen., N. Eugene Hill, Asst. Atty. Gen., Harold W. Teasdale and Gordon Zane, Deputy Attys. Gen., for defendant and respondent.

[162 Cal.App.3d 984] Crow, Lytle, Gilwee, Donoghue, Adler & Weninger, Richard E. Crow and James R. McCall, Sacramento, amicus curiae in behalf of defendant and respondent.

Pilot & Spar, A. Albert Spar, Michael J. Flanagan and June Spar, Los Angeles, for real party in interest and respondent.

SPARKS, Associate Justice.

In this appeal we consider the statutory restrictions on the modification of automobile dealer franchises under the New Motor Vehicle Board Act. (Veh.Code, § 3000 et seq.) BMW of North America, Inc. petitioned for a writ of administrative mandate pursuant to Code of Civil Procedure section 1094.5, directing the respondent New Motor Vehicle Board of the State of California to vacate its decision allowing the protest of the establishment of a new dealer filed by real party in interest Hal Watkins Chevrolet, Inc., and to enter a new decision denying the protest. The trial court denied the petition and BMW appeals. BMW contends that the composition of the Board is unconstitutional, that the Board lacks jurisdiction over the Watkins protest, and that the Board's interpretation of the relevant statutory provisions is constitutionally impermissible. We need not consider the constitutional questions raised because we conclude that as a matter of law the Board acted in excess of its jurisdiction in allowing the Watkins protest. We therefore reverse the judgment and remand to the trial court with directions to issue a writ of mandate.

FACTS

Hal Watkins is the sole shareholder of Hal Sales, Inc. Hal Sales, Inc., in turn owns the majority of the stock in Hal Watkins Chevrolet, Inc. In 1974 Hal Watkins applied to become a franchised dealer for BMW automobiles. At that time Hoffman Motors Corporation was the North American importer of BMW automobiles. Hoffman accepted the application and entered into a franchise agreement with Watkins. Since that time two inconsequential changes have occurred. First, Hoffman Motors Corporation has been succeeded by plaintiff BMW of North America as the BMW importer for North America. Second, although the application was on behalf of Hal Sales, Inc., the actual franchise agreement is held on behalf of Hal Watkins Chevrolet, Inc.

The franchise agreements under which Watkins and BMW have operated have been limited term contracts of one year with provision for renewal and [162 Cal.App.3d 985] extension by BMW unless it acts to terminate the agreement in accordance with the contract provisions. Each succeeding agreement has an annual effective date of January 1. Each of the succeeding agreements contained a clause of which the 1982 agreement is typical: "BMWNA hereby appoints Dealer [Watkins] as a retail dealer of BMW Products and grants Dealer the nonexclusive right to buy BMW Products, all in accordance with, and subject to, the provisions of this Agreement. Dealer accepts such appointment and agrees to be bound by all of the terms and conditions of the Agreement. Dealer recognizes and agrees that its appointment as a Dealer in BMW Products does not confer upon it the exclusive right to deal in BMW Products in any specific geographic area. Nothing contained in the Agreement shall limit, or be construed to limit, the geographical area within which, or the persons to whom, Dealer may sell BMW Products. BMWNA reserves the right to grant or confer rights and privileges covering the sale and servicing of BMW Products upon such other Dealers selected and approved by BMWNA, whether located in Dealer's geographic area or elsewhere, as BMWNA, in its sole discretion, shall deem necessary or appropriate." The agreements have further provided: "No representative of BMWNA shall have authority to waive any of the provisions of the Agreement or to make any amendment or modification of or any other change in, addition to, or deletion of any portion of the Agreement ... or which renews or extends the Agreement; unless such waiver, amendment, modification, change, addition, deletion, or agreement is made in writing and signed by BMWNA and Dealer as set forth in Article H of this Dealer Agreement."

Watkins opened Hal Watkins' BMW in Camarillo, in Ventura County. From time to time BMW had inquiries from other dealers, particularly Paul Rusnak, concerning the possibility of opening a franchise in the Thousand Oaks-Westlake area of Ventura County. Eventually, after a market study of the region, BMW determined to appoint Rusnak as a BMW dealer in the Thousand Oaks-Westlake area. Rusnak was to open his dealership in late 1982 or early 1983. Rusnak's franchise was to be located 15.2 miles from Watkins' Camarillo facility, and 16.2 miles from the next closest dealership in Canoga Park, Los Angeles County. BMW and Rusnak signed a letter of intent and Rusnak began preparations for the opening of his franchise.

Watkins filed a protest with the New Motor Vehicle Board, alleging that the appointment of Rusnak as a BMW dealer in Ventura County constituted a modification of his franchise agreement. After a lengthy administrative hearing the Administrative Law Judge prepared a proposed decision in which he concluded that the appointment of Rusnak constituted a modification of Watkins' franchise agreement and that there was not good cause for the modification. In particular the Administrative Law Judge found that BMW [162 Cal.App.3d 986] failed to prove: (1) the amount of business transacted by Watkins is inadequate as compared to the business available; (2) the investment made and obligations incurred by Watkins was not substantial; (3) Watkin's investment was not permanent; (4) it would be beneficial to the public welfare for the franchise to be modified; (5) Watkins

does not have adequate sales and service facilities or is not rendering adequate services; (6) Watkins failed to fulfill warranty obligations; and (7) Watkins failed to comply with the terms of the franchise. On January 12, 1983, the New Motor Vehicle Board adopted the proposed decision as its decision in the matter. This writ proceeding followed

DISCUSSION

In 1967 the Legislature established the New Car Dealers Policy and Appeals Board to hear appeals of new car dealer licensing decisions of the Department of Motor Vehicles. (See Veh.Code, § 3000 et seq., added by Stats.1967, ch. 1397, § 2, p. 3261 et seq.) At that time the duties of the Board were similar to those of other occupational licensing boards, and, as is common with such other boards, the Legislature mandated that four of the nine members be new car dealers. (Stats.1967, ch. 1397, § 2, pp. 3261-3262.) In 1973 the Legislature changed the name of the Board to the New Motor Vehicle Board, and added sections 3060 to 3069 to the Vehicle Code. (Stats.1973, ch. 996, § 16, pp. 1967-1971.) Among other things, those sections empower the Board to determine whether there is good cause for the termination, refusal to renew or continue, or the modification of an existing franchise agreement (Veh.Code, § 3060), and whether there is good cause not to relocate or establish a motor vehicle dealership in a relevant market area (Veh.Code, § 3062). In American Motors Sales Corp. v. New Motor Vehicle Bd. (1977) 69 Cal.App.3d 983, at pages 987 to 992, 138 Cal.Rptr. 594, this court held that the requirement that four of the nine board members be new car dealers created a slanted adjudicatory tribunal and thus denied the manufacturer litigants procedural due process of law.

In reaction to the decision in American Motors, the Legislature amended Vehicle Code sections 3050 and 3066 to provide that the new car dealer members of the Board could not participate in, deliberate on, hear or consider, or decide any matter involving a dispute between a manufacturer and a dealer. (Stats.1977, ch. 278, §§ 2-3, pp. 1171-1173.) In 1979 the Legislature enacted urgency legislation to provide that the new motor vehicle dealer members of the Board "may participate in, hear, and comment or advise other members upon, but may not decide," any dispute between a dealer and a manufacturer. (Stats.1979, ch. 340, §§ 1-2, pp. 1206-1207.) The stated urgency for the legislation was so that the "educated and needed advise of New Motor Vehicle Board members who are themselves new motor vehicle dealers may be utilized in the decision making process of the board ..." (Stats.1979, ch. 340, § 3, p. 1207.)

After the trial court's decision in this case, the Court of Appeal for the First District held in Chevrolet Motor Division v. New Motor Vehicle Bd. (1983) 146 Cal.App.3d 533, at page 541, 194 Cal.Rptr. 270, that the mere fact the new motor vehicle dealer members of the board do not technically decide the issues does not cure the constitutional problem of submitting disputes to a biased tribunal, and hence the statutory procedure remains constitutionally defective. In Nissan Motor Corp. v. New Motor Vehicle Bd. (1984) 153 Cal.App.3d 109, at page 115, 202 Cal.Rptr. 1, another division of the same court agreed with the holding in Chevrolet Motor Division.

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