Fireside Nissan, Inc. v. Fanning

• Decision Date: 09 March 1994
• Docket Number: No. 93-1977,93-1977
• Parties: FIRESIDE NISSAN, INC., Plaintiff-Appellant, v. Daniel P. FANNING, Director, Department of Transportation For State of Rhode Island, et al., Defendants-Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 206

30 F.3d 206

63 USLW 2088

FIRESIDE NISSAN, INC., Plaintiff-Appellant, v. Daniel P. FANNING, Director, Department of Transportation

For State of Rhode Island, et al., Defendants-Appellees.

No. 93-1977.

United States Court of Appeals, First Circuit.

Heard March 9, 1994.

Decided July 20, 1994.

Ronald W. Del Sesto, with whom Peter P.D. Leach and Updike, Kelly, Spellacy & Del Sesto, Providence, RI, were on brief, for appellant.

John J. Igliozzi, Office of Legal Counsel, Rhode Island Dept. of Transp., Providence, RI, for appellee Dept. of Transp. for State of Rhode Island.

Gerald C. DeMaria, with whom Lawrence P. McCarthy III, Patrick B. Landers and Higgins, Cavanagh & Cooney, Providence, RI, were on brief, for appellee Nissan Motor Corp. in U.S.A.

John D. Biafore, with whom Goldman & Biafore, Providence, RI, was on brief, for appellee Nissan of Smithfield, Inc.

Before TORRUELLA and BOUDIN, Circuit Judges, and COFFIN, Senior Circuit Judge.

TORRUELLA, Circuit Judge.

Rhode Island's automobile dealership law allows existing dealers within a twenty-mile radius of a proposed new dealership to protest the establishment of the new dealership. The issue raised by this appeal concerns situations in which, by reason of a proposed new dealership in proximity to the state border, a part of that twenty-mile radius falls outside of Rhode Island. State officials have taken the position that within the twenty-mile area surrounding a proposed new dealership, only the dealers who are located inside Rhode Island's borders are covered by Rhode Island law and thus are entitled to protest the establishment of the new dealership. A Massachusetts car dealer who is located within the twenty-mile radius of a proposed dealership, but in Massachusetts, claims that this interpretation of Rhode Island law runs afoul of the Commerce Clause because it burdens and discriminates against interstate commerce. Because Rhode Island is merely applying its law to those subject to its jurisdiction and regulation, rather than extraterritorially, and because it neither burdens nor discriminates against interstate commerce in the process, we agree with Rhode Island and affirm.

I. BACKGROUND

Plaintiff-appellant Fireside Nissan, Inc. ("Fireside"), a Massachusetts automobile dealer, brought this action against the Rhode Island Department of Transportation ("RIDOT") after RIDOT excluded Fireside from participating in hearings regarding a proposed Nissan dealership in Rhode Island. Fireside claimed that RIDOT's application of Rhode Island's new dealership law to exclude Fireside merely because it was not located in Rhode Island was unconstitutional.

Rhode Island General Laws, Section 31-5.1-4.2 ¹ sets out certain procedural requirements for establishing a new automobile dealership in the state. First, a manufacturer desiring an additional dealership must notify dealers "in the relevant market area" of its intentions. R.I.Gen.Laws Sec. 31-5.1-4.2(a). "Relevant market area" is defined as "the area within a radius of twenty (20) miles around an existing dealer or the area of responsibility defined in the franchise, whichever is greater." R.I.Gen.Laws Sec. 31-5.1-1(J). Existing retail dealers in the "relevant market area" may then protest the establishment of the new dealership in which case RIDOT must hold a hearing to determine if "there is good cause for not permitting" the additional franchise. R.I.Gen.Laws Sec. 31-5.1-4.2(a). The statute does not explicitly state whether or not the dealers who may protest the establishment of a dealership in the "relevant market area" must be located in Rhode Island or be a licensed Rhode Island dealership. ²

In March of 1991, Nissan Motor Corporation in U.S.A. ("Nissan USA"), gave notice to RIDOT, Fireside, and other Nissan dealers of its intention to establish a dealership in Smithfield, Rhode Island. Fireside, which sells and services Nissan automobiles, is located in North Attleboro, Massachusetts, approximately two miles from the Rhode Island border and within twenty miles of Smithfield. Fireside is therefore squarely within the "relevant market area" of the Smithfield dealership. Fireside is not a licensed automobile dealer in Rhode Island but instead holds a Massachusetts dealership license.

In response to Nissan USA's notice, Fireside filed a protest with RIDOT on April 12, 1991. Three Rhode Island dealers of Nissan automobiles, who were also within the "relevant market area," filed protests with RIDOT as well. On February 13, 1992, RIDOT issued a notice to Fireside and the other dealers stating that it was scheduling a hearing regarding the Smithfield dealership on April 2, 1992.

At the hearing, Nissan USA moved to exclude Fireside because it was an out-of state dealer. RIDOT, acting through the Rhode Island Dealer's License and Regulations Office, determined that Fireside lacked standing to participate in the hearing and excluded Fireside from presenting witnesses or evidence at the hearing. The three Rhode Island dealers did participate at the hearing and presented evidence on their own behalf.

Fireside was prepared to present evidence at the hearing showing that 48% of Fireside's sales and 45% of its service business went to Rhode Island residents. In addition, Fireside would have established that 100% of its cable television advertising and 75% of its print advertising is done in Rhode Island.

After the hearing, RIDOT determined that good cause existed for the establishment of the Smithfield dealership. According to R.I.Gen.Laws Sec. 31-5.1-4.2(b), RIDOT must base its determination of "good cause" on the "existing circumstances, including, but not limited to:"

(1) Permanency of the investment of the existing new motor vehicle dealer(s) in the community;

(2) Whether the new motor vehicle dealers of the same line make in that relevant market area are providing adequate consumer care ... which shall include the adequacy of motor vehicle sales and service facilities, equipment, supply of motor vehicle parts, and qualified service personnel;

(3) Whether there is reasonable evidence that after the granting of the new motor vehicle dealership, that [sic] the market would support all of the dealerships of that line make in the relevant market area;

(4) Consequently, whether it is injurious to the public welfare for an additional new motor vehicle dealership to be established.

R.I.Gen.Laws Sec. 31-5.1-4.2(b).

Upon consideration of these factors, RIDOT found cause to issue a license to the Smithfield dealership, which is now known as Nissan of Smithfield, Inc. ("Smithfield Nissan").

Fireside commenced this action on April 9, 1992, naming Daniel Fanning, Director of RIDOT as the defendant. Fireside sought a declaration that RIDOT's interpretation of Section 31-5.1-4.2 as excluding Fireside from the new dealership hearing violated the Commerce Clause, the Privileges and Immunities Clause, the Due Process Clause and the Equal Protection Clause of the United States Constitution. Fireside also sought an injunction restraining RIDOT from precluding Fireside from participating in future hearings as well as a temporary restraining order and a preliminary injunction enjoining RIDOT from granting a dealership license to Smithfield Nissan. Nissan USA and Smithfield Nissan intervened in the action.

The district court denied Fireside's requested relief. The court found that the exclusion of Fireside from the dealership hearings did not violate the Commerce Clause or otherwise violate Fireside's constitutional rights. As a result, Fireside could not show the irreparable harm or the likelihood of success on the merits necessary for the granting of a preliminary injunction. The court also denied Fireside's request for a declaratory judgment and a permanent injunction and entered a final judgment in favor of RIDOT, Nissan USA, and Smithfield Nissan, 828 F.Supp. 989.

II. ANALYSIS

Fireside's right to its requested relief, including the preliminary and permanent injunctions and the declaratory judgment, depends primarily on whether the exclusion of Fireside from RIDOT's new dealership hearings violates the Constitution. Before the court will grant a preliminary injunction, Fireside must establish, among other things, that it faces a likelihood of success on the merits and that it will suffer irreparable harm if the injunction is not issued. Planned Parenthood League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981). Fireside alleges that it will suffer irreparable injury from RIDOT's violation of Fireside's constitutional rights. See National People's Action v. Village of Wilmette, 914 F.2d 1008, 1013 (7th Cir.1990), cert. denied, 499 U.S. 921, 111 S.Ct. 1311, 113 L.Ed.2d 245 (1991) (finding constitutional violation sufficient to establish irreparable injury); Mitchell v. Cuomo, 748 F.2d 804, 806 (2d Cir.1984) (same). Likewise, the merits of the permanent injunction and the declaratory judgment also turn on the constitutionality of RIDOT's actions. Because we uphold the district court's finding that RIDOT did not violate the Commerce Clause or any of Fireside's constitutional rights, we affirm the final judgment in favor of the defendants.

As a preliminary matter, we find it beneficial to our constitutional inquiry to clarify the nature and purpose of the Rhode Island new dealership statute, R.I.Gen.Laws Sec. 31-5.1-4.2. Title 31 of Rhode Island General Laws governs state regulation of motor and other vehicles. Chapter 5.1 of that title regulates business practices among motor vehicle manufacturers, dealers and distributors. The provision covering the establishment of new automobile dealerships, R.I.Gen.Laws Sec. 31-5.1-4.2, is designed to protect existing dealers and consumers from the detrimental effects of aggressive franchising practices by the automobile manufacturers whose efforts to establish excessive competing franchises are considered to be potentially "injurious to the public welfare" if not properly...