Chrysler Corp. v. Kolosso Auto Sales, Inc., No. 97-3879

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: Before POSNER, Chief Judge, and ROVNER and DIANE P. WOOD; POSNER
• Citation: 148 F.3d 892
• Parties: CHRYSLER CORPORATION, Plaintiff-Appellant, v. KOLOSSO AUTO SALES, INC., Defendant-Appellee.
• Decision Date: 18 September 1998
• Docket Number: No. 97-3879

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148 F.3d 892 CHRYSLER CORPORATION, Plaintiff-Appellant,
v.
KOLOSSO AUTO SALES, INC., Defendant-Appellee. No. 97-3879. United States Court of Appeals,
Seventh Circuit. Argued April 24, 1998.
Decided July 23, 1998.
Rehearing and Suggestion for Rehearing En Banc Denied Sept. 18, 1998.

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Before POSNER, Chief Judge, and ROVNER and DIANE P. WOOD, Circuit Judges.

POSNER, Chief Judge.

A clause in Chrysler's franchise contract with one of its dealers, Kolosso Auto Sales, forbids Kolosso to change the location of the dealership from the address in Appleton, Wisconsin specified in the contract unless it gets Chrysler's written permission. The contract was made in 1988, at a time when the Wisconsin Motor Vehicle Dealers Law, Wis. Stat. § 218.01, did not expressly limit an auto manufacturer's right to include such a provision in a dealership contract. But in 1993 the legislature enacted and made applicable to existing as well as to new contracts an amendment to the Motor Vehicle Dealers Law that entitles a dealer to challenge a manufacturer's refusal to permit him to move his dealership. Wis. Stat. § 218.01(3x). Such a challenge requires the state administrative agency that administers the law to determine whether there is "good cause" for the move. In making this determination the agency may consider any relevant factor including:

a. The reasons for the proposed action.

b. The ... reasons for not approving the proposed action.

c. The degree to which the inability to undertake the proposed action will have a substantial and adverse effect upon the motor vehicle dealer's investment or return on investment.

d. Whether the proposed action is in the public interest.

e. The degree to which the proposed action will interfere with the orderly and profitable distribution of products by the [manufacturer].

f. The impact of the proposed action on other motor vehicle dealers.

Wis. Stat. § 218.01(3x)(c).

In 1995, Kolosso informed Chrysler that it wanted to move the dealership to another address in Appleton in order to enable it to consolidate the service facilities of its Chrysler dealership with the service facilities of a Toyota dealership that it owned at that address. Chrysler refused to authorize the move. Kolosso filed a challenge with the state agency. Chrysler responded with the present suit, which seeks to enjoin Kolosso from moving and to declare section 218.01(3x) invalid under the clause of the U.S. Constitution that forbids a state to impair the obligation of contracts. Art. I, § 10, cl. 1. The district court rejected the constitutional claim and granted summary judgment for the dealer.

The administrative proceeding has been stayed pending the outcome of Chrysler's appeal, rather than this appeal being stayed pending the outcome of the administrative procedure. This sequencing does not violate principles of abstention or of exhaustion of remedies. Chrysler claims that forcing it to undergo the ordeal of an administrative proceeding would itself impair its rights under the dealership contract, which gave Chrysler a unilateral, unreviewable right to insist that the dealer stay at the location specified in the contract. Against the cost and uncertainty of the administrative process, the administrative procedure and judicial review of it obviously provide no remedy, so neither abstention nor exhaustion is required. McCarthy v. Madigan, 503 U.S. 140, 147, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992); Planned Parenthood of Dutchess-Ulster, Inc. v. Steinhaus, 60 F.3d 122, 126 (2d Cir.1995); Privitera v. California Board of Medical Quality Assurance, 926 F.2d 890, 895-96 (9th Cir.1991).

If the contracts clause of the Constitution were read literally, Chrysler would win hands down. It had a contract that obligated the dealer to stay put if Chrysler wanted him to, and the state relieved the dealer of the obligation. Not completely, for it was (and is) possible that Chrysler would persuade the agency that administers the dealership law that it has good cause to forbid this dealer to relocate. But as every employer and employee knows, there is a big difference between having a right (to terminate an employee, or in this case to control a

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dealer's location) and having a right that depends on showing that there is good cause for its exercise. If the Wisconsin legislature all of a sudden provided that no "at will" contract of employment could be terminated by the employer without good cause, and made the new law applicable to existing employment contracts, this would be a nontrivial impairment of contractual entitlements.

It has been a long time, however, since the contracts clause was interpreted literally. Compare Ogden v. Saunders, 25 U.S. (12 Wheat.) 213, 223-24, 6 L.Ed. 606 (1827), and United States ex rel. Von Hoffman v. Quincy, 4 Wall. 535, 71 U.S. 535, 550-53, 18 L.Ed. 403 (1866), with Antoni v. Greenhow, 107 U.S. 769, 775, 2 S.Ct. 91, 27 L.Ed. 468 (1883), and Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 428, 54 S.Ct. 231, 78 L.Ed. 413 (1934). The concern that appears to have animated the progressive relaxation of the clause is that a literal interpretation, like a literal interpretation of other unqualified clauses in the Constitution--notably the free-speech clause, with its flat statement that Congress shall make no law abridging freedom of speech or of the press--might disable government from dealing with emergencies. See id. at 425-28, 54 S.Ct. 231. An example is the acute shortage of housing in New York City during World War I, which led the state to enact a law, upheld by the Supreme Court against challenge under the contracts clause, extending residential leases in the City beyond their contractually specified expiration date. Marcus Brown Holding Co. v. Feldman, 256 U.S. 170, 41 S.Ct. 465, 65 L.Ed. 877 (1921) (Holmes, J.).

Concern about the paralyzing effect of the literal interpretation may be misplaced, or at least exaggerated. The state in the Marcus Brown case could have used its eminent-domain power to extend the leases; and this example shows that the consequences of a literal interpretation of the contracts clause would not be so apocalyptic as those of a literal interpretation of the First Amendment. But they would not be trivial, fiscal issues to one side. The literal interpretation would impede governmental efforts to regulate for the future, by grandfathering economic rights that would give their holders a competitive advantage over new firms. Chrysler is seeking a degree of freedom of action in dealing with its dealers that is denied to automobile manufacturers that having made their dealership contracts after the relocation amendment went into effect cannot seek relief under the contracts clause. We must not exaggerate the benefit to Chrysler, since eventually its contracts will be renegotiated. But neither should we take completely seriously Chrysler's expression of...