Elio Motors, Inc. v. La. Motor Vehicle Comm'n

• Decision Date: 27 March 2019
• Docket Number: NO. 18-CA-545,18-CA-545
• Citation: 268 So.3d 1132
• Parties: ELIO MOTORS, INC. v. LOUISIANA MOTOR VEHICLE COMMISSION
• Court: Court of Appeal of Louisiana — District of US

268 So.3d 1132

ELIO MOTORS, INC.

v.LOUISIANA MOTOR VEHICLE COMMISSION

NO. 18-CA-545

Court of Appeal of Louisiana, Fifth Circuit.

March 27, 2019

COUNSEL FOR PLAINTIFF/APPELLANT, ELIO MOTORS, INC. C. William Bradley, Jr. Dwight C. Paulsen, IIINatalie J. TaylorL. David Adams

COUNSEL FOR DEFENDANT/APPELLEE-2ND APPELLANT, LOUISIANA MOTOR VEHICLE COMMISSION Adrian F. LaPeyronnie, III

Panel composed of Judges Susan M. Chehardy, Fredericka Homberg Wicker, and John J. Molaison, Jr.

MOLAISON, J.

This appeal arises from an administrative proceeding before the Louisiana Motor Vehicle Commission ("the Commission"), which found that Elio Motors, Inc. was engaged in manufacturing recreational products and offering to sell them directly to consumers for over four years without a manufacturer's or a dealer's license and imposed civil penalties for the violations, including a $ 545,000 fine. La. R.S. 32:1251, et seq.

Elio sought judicial review of the Commission's decision in the district court, which affirmed the findings of violations and reduced the penalties. We affirm the findings of violations, reverse the district court's reduction of penalties and reinstate the penalties imposed by the Commission.

SUMMARY OF STANDARD OF REVIEW, KEY ISSUES AND EVIDENCE

Proceedings before the Commission are governed by the Louisiana Administrative Procedure Act, La. R.S. 49:950, et seq.¹ Pursuant to the standard of review set forth in Section 964(G), as discussed more fully below, we conduct an independent review of the record to determine whether the findings of statutory violations are factually and legally supported and whether the agency exceeded its authority or acted without a rational basis in imposing penalties.

Elio's vehicle, known as "the Elio," is an enclosed, three-wheeled passenger vehicle that is a cross between an automobile and a motorcycle. It is undisputed that the vehicle is a recreational product, as defined in the licensing law.² The dispute centers on whether Elio is a "manufacturer" or a "dealer" within the meaning of the licensing law.

The law defines a manufacturer as one who "fabricates, manufactures, or assembles" recreational products and a dealer as one who "buys, sells, ... offers, or attempts to negotiate a sale or exchange of an interest in recreational products and who is engaged wholly or in part in the business of buying and selling recreational products in the state of Louisiana." La. R.S. 32:1252(24), (46)(a). The statutory wording indicates that the activities for which licensing is required must occur in the present tense.

As set forth in more detail below, the licensing law is designed to promote public safety and to protect members of the public from physical or financial harm resulting from the distribution and sale of motor vehicles and recreational products by those who do business in this state. The statutes are penal in nature and must be strictly construed, but the statutory definitions are very general and contain very little specificity as to what types of activities are either included in or excluded from their scope. The statutes must be interpreted based on the generally prevailing meaning of their terms and on common sense. They should not be interpreted in a way that makes them ineffective or meaningless.

The Commission invoked the hearing after Elio leased space in the former General Motors manufacturing plant in Shreveport and collected almost $ 28 million in cash, in the form of refundable and non-refundable online reservations for its vehicle, over a four-year period without being licensed as a recreational products manufacturer or dealer. As of the hearing date, Elio had solicited and received more than 65,000 reservations and had not produced any vehicles for sale. While taking these reservations, Elio built at least one test vehicle and engaged other companies to produce prototype vehicles and a customized prototype engine, which Elio used for marketing and testing purposes.

Elio contends it will seek the appropriate Louisiana licenses in the future but claims it is not currently subject to the licensing requirements for recreational products manufacturers or dealers because the design of its vehicle has not been finalized and it has not yet produced any vehicles for sale or sold a vehicle. Elio claims the online reservation payments are for a "spot in line" to possibly purchase a vehicle at a later date, at a price to be agreed on in the future, rather than deposits toward the sale of a vehicle. Elio also asserts that it does not have a sufficient connection to Louisiana to support the imposition of penalties.

The evidence presented at the hearing, when viewed in its entirety, does not support Elio's claims. The evidence shows that, while soliciting and accepting online reservation payments in amounts ranging from $ 100 to $ 1,000 and listing a specific targeted base price for the vehicle, most recently $ 7,450, Elio has:

• Identified the online payments as "customer deposits" for the reservation of "an Elio vehicle";

• Described the online reservations as "pre-orders," "pre-production sales," and "binding purchase commitments";

• Offered a "locked in price" to non-refundable reservation holders who met certain conditions;

• Reported to the Securities and Exchange Commission that 88 percent of all reservation holders had received a "locked in price";

• Used as its toll-free telephone number, 844-BUY-ELIO;

• Described itself as a manufacturer on its website and in press releases;• Leased space in the former General Motors manufacturing plant in Shreveport and mentioned its affiliation with the plant in numerous public communications, including the online reservations program and other fundraising and marketing efforts;

• Applied for a federal Advanced Technology Vehicles Manufacturing loan, available to manufacturers who re-equip, expand or establish manufacturing facilities in the United States that produce fuel-efficient advanced technology vehicles (ATVs) or qualifying components, or who perform engineering integration in the U.S. for ATVs or qualifying components;

• Announced the formation of engineering and supplier partnerships with other companies who would work with Elio to produce its vehicle;

• Engaged other companies to build, for Elio and at its direction, prototype vehicles and a customized prototype engine used by Elio to promote its vehicle at auto shows, on other tours around the country, and online; and

• Built at least one test vehicle under the direction of an Elio employee who had "taken countless vehicle programs through the manufacturing process for other automakers."

A more detailed discussion of the evidence appears below. Elio did, at times, say and do things that would suggest it does not fit within the statutory definitions at issue, but the overwhelming weight of the evidence places Elio within the scope of the definitions and substantiates Elio's ties to Louisiana.

REGULATORY SCHEME

In order to provide some context for our discussion of the issues presented, we first consider the purpose and scope of the Commission's regulatory authority, as set forth in the Louisiana Motor Vehicle Commission Law. The legislature's Declaration of Public Policy appears in La. R.S. 32:1251, which states in relevant part that the law was enacted based on the legislature's findings that

the distribution and sale of motor vehicles and recreational products in the state of Louisiana vitally affects the general economy of the state, 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 those persons enumerated in R.S. 32:1254 and doing business in Louisiana in order to prevent frauds, impositions, and other abuses upon its citizens , ... and to protect the public against the creation or perpetuation of monopolies and practices detrimental to the public welfare, ... to prevent unfair practices by said licensees, to promote the public safety and prevent disruption of the system of distribution of motor vehicles and recreational products to the public and prevent deterioration of facilities for servicing motor vehicles and keeping same safe and properly functioning[.] ...³

(Emphasis added.)

The scope of the Motor Vehicle Commission's authority includes evaluating the financial standing and business integrity of all license applicants and holders, as well as their ability to properly conduct business, the effect of licensing on the applicant's business and the consuming public, and "such other pertinent information consistent with the safeguarding of the public interest and public welfare." La. R.S. 32:1254(C)(2), (C)(8), (D)(1), (D)(5), (E)(1), (E)(8). See and compare Louisiana Motor Vehicle Commission v. Wheeling Frenchman , 235 La. 332, 103 So.2d 464, 466-67, 469 (1958) and Benson & Gold Chevrolet, Inc. v. Louisiana Motor Vehicle Commission , 403 So.2d 13, 18 (La. 1981).

FACTS AND PROCEDURAL BACKGROUND

The evidence introduced at the hearing shows that Elio Motors is an Arizona corporation authorized to do business in Louisiana and has publicly described itself as a "start-up vehicle manufacturer." In 2013, Elio announced that it had leased space in the former General Motors plant in Shreveport and would use the plant to produce a low-cost, high mileage, three-wheeled enclosed passenger vehicle called "the Elio," with two front wheels, one rear wheel, a driver's seat in front and a passenger seat in the rear.⁴ The Elio has many of the same features as traditional passenger cars but is designed to be smaller and lighter, with an estimated fuel efficiency of 84 miles per gallon and a target retail price of $ 7,450. We refer to the Elio vehicle as "the vehicle" to avoid confusion with the company name and the name of its founder and CEO, Paul Elio.

Elio has expressed its commitment to build the vehicle in America, with American workers. Elio listed the...