Fireside Nissan, Inc. v. Fanning, Civ. A. No. 92-0198B.

• Decision Date: 29 July 1993
• Docket Number: Civ. A. No. 92-0198B.
• Citation: 828 F. Supp. 989
• Parties: FIRESIDE NISSAN, INC. v. Daniel P. FANNING, Director of Department of Transportation, State of Rhode Island.
• Court: U.S. District Court — District of Rhode Island

828 F. Supp. 989

FIRESIDE NISSAN, INC. v. Daniel P. FANNING, Director of Department of Transportation, State of Rhode Island.

Civ. A. No. 92-0198B.

United States District Court, D. Rhode Island.

July 29, 1993.

COPYRIGHT MATERIAL OMITTED

Ronald W. Del Sesto, Updike, Kelly, Spellacy & Del Sesto, Providence, RI, for plaintiff.

J. Ryder Kenney, Legal Counsel to the Director, Providence, RI, for defendant Fanning, Director of Dept. of Transp.

Gerald C. De Maria, Lawrence McCarthy, Higgins Cavanaugh & Cooney, Providence, RI, for intervenor Nissan Motor Corp. in U.S.A.

John D. Biafore, Goldman & Biafore, Providence, RI, for intervenor Nissan of Smithfield, Inc.

OPINION

FRANCIS J. BOYLE, Senior District Judge.

This case involves the constitutionality of the provisions of Rhode Island's Motor Vehicle Code Act governing the establishment of new motor vehicle dealerships. Rhode Island General Laws, Section 31-5.1-4.2 requires a manufacturer to notify dealers "in the relevant market area" of its intention to establish an additional dealership. Existing retail dealers may then protest the action and the Rhode Island Department of Transportation is then required to hold a hearing after which the Department will determine if good cause has been established for not entering into an additional franchise. "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 § 31-5.1-1(J) (Supp.1992).

Nissan Motor Corporation in U.S.A. gave notice of its intent to establish a dealership in Smithfield, Rhode Island. Fireside Nissan, Inc. (Fireside) is located in North Attleboro, Massachusetts, approximately two miles from the Rhode Island border and within twenty miles of Smithfield, Rhode Island. Fireside sells new Nissan automobiles and used automobiles. In addition, Fireside provides service and parts for automobiles.

Fireside received notice of Nissan's intent to establish the new dealership and filed a protest with the Department. The parties have stipulated that at the hearing on the proposed dealership, the Department determined that, as an out-of-state dealer, Fireside could not present witnesses or evidence at the hearing.¹ After the hearing, the Department determined that good cause existed for the establishment of the Smithfield dealership. Fireside contends that its exclusion from the hearing is unconstitutional.

FACTS

The following facts are based on admissions submitted by the parties. On March 28, 1991, Nissan provided written notice, by certified mail, to Fireside of its intent to establish a new motor vehicle dealership in Smithfield, Rhode Island. On April 12, 1991, Fireside filed with the Department a protest to the establishment of the new motor vehicle dealership in Smithfield. In addition, Viking Pontiac-Cadillac-Nissan, Inc. of East Providence, Rhode Island (Viking), Ocean State Nissan, Inc. of Warwick, Rhode Island (Ocean State), and Knight's Garage, Inc. of West Warwick, Rhode Island (Knight) filed similar protests.

Thereafter, on October 21, 1991, the Department promulgated proposed "Rules and Regulations Regarding Dealers, Manufacturers and Rental Licenses." Section XI of the proposed rules and regulations provided:

Relevant Market Area as defined by these Rules pertains only to protesters in the State of Rhode Island. The Department may in its discretion allow a dealer from outside the State, and who is otherwise qualified, to be heard, in the form of a written or verbal statement on the issue before it. In no event will an out-of-state dealer be allowed to cross examine or place in evidence testimony or documents.

On November 4, 1991, Fireside submitted a written protest of the proposed rules. On December 12, 1991, at a public hearing regarding the proposed rules and regulations, Fireside objected to the proposed definition of relevant market area in that it excluded dealerships within the statutory twenty miles that were not located within Rhode Island. On January 23, 1992, the Department issued its final "Rules and Regulations on Dealers, Manufacturers and Rental Licenses" without adopting the proposed definition of relevant market area.

On February 13, 1992, Fireside received notice, by certified mail, that the Department was scheduling a hearing on Nissan's application for a dealer license for the Smithfield location on April 2, 1992 at 9:30 a.m. The location of the proposed dealership is within ten (10) miles of Fireside. At the April 2, 1992 hearing, Nissan moved to exclude Fireside because it was an out-of-state dealer. The Department, acting through the Rhode Island Dealer's License and Regulations Office, determined Fireside lacked standing and excluded Fireside from presenting witnesses or evidence at the hearing.

The proposed new dealership is within a twenty-mile radius of Viking, Ocean State and Knight. Viking, Ocean State and Knight, all located within the state of Rhode Island, were allowed to participate at the hearing and to present evidence. On April 9, 1992, the Department announced that Nissan had established that good cause existed for the establishment of the Smithfield dealership. On April 21, 1992, the Department issued an amended decision with the same conclusion.

On April 9, 1992, Fireside commenced this action in this court naming Daniel Fanning, Director of the Department of Transportation as the defendant. Fireside requests, a declaratory judgment finding the Department's interpretation of Section 31-5.1-4.2 excluding Fireside from the hearing violates the commerce clause, the privileges and immunities clause, due process and equal protection of the Fourteenth Amendment. Fireside also seeks a permanent injunction restraining the Department from interpreting Section 31-5.1-4.2 to preclude Fireside from participating in any proceeding before the Department concerning any application to establish a new motor vehicle dealership in the State of Rhode Island that is within Fireside's market area. In addition, Fireside seeks a temporary restraining order and a preliminary injunction enjoining the defendant from acting on the application of Nissan of Smithfield, Inc. During the course of the proceedings, Nissan Motor Corporation in U.S.A. and Nissan of Smithfield, Inc. moved to intervene. On June 16, 1992, both motions to intervene were granted.

At the outset, Defendant-Intervenor Nissan questions whether this case is properly before this court. To support its contention, Nissan raises several procedural impediments. Nissan's arguments are not persuasive.

First, Nissan argues that Fireside has failed to exhaust its administrative remedies, therefore its complaint should be dismissed. This contention fails. The Supreme Court has stated that

if, ... an administrative proceeding might leave no remnant of the constitutional question the administrative remedy plainly should be pursued. But where the only question is whether it is constitutional to fasten the administrative procedure onto the litigant, the administrative agency may be defied and judicial relief sought as the only effective way of protecting the asserted constitutional right.

Public Utilities Comm'n v. United States, 355 U.S. 534, 539-540, 78 S.Ct. 446, 450-451, 2 L.Ed.2d 470 (1958). Fireside has raised constitutional issues concerning the Department's interpretation and application of a state statute. Further review by the Department will not resolve the constitutional issues raised by Fireside. Therefore, Fireside need not exhaust its administrative remedies.

Next, Nissan argues, that before filing the present action, Fireside had filed claims in Providence Superior Court. Fireside's original state court complaint sought to have the proposed Rule XI declared null and void. After the Department adopted its rules and regulations, Fireside supplemented its complaint. In its supplemental complaint, Fireside requested that the court interpret the Department's rules to determine if Fireside would be eligible to protest such a proposed dealership and enjoin the Department from conducting hearings until it adopted rules in conformity with Rhode Island's Administrative Procedures Act, R.I.G.L. § 42-35. After filing its complaint in this court, Fireside again amended its state court complaint. In its amended complaint, Fireside requested that the court declare the Department's actions excluding Fireside from the April 2, 1993 hearing unlawful because, inter alia, they violated state law; that the Department's actions adopting its rules be declared void; that the Department's actions barring Fireside from presenting evidence be declared unlawful; that the license issued by the Department be declared void and be revoked; that the Department be permanently enjoined from excluding Fireside from participating in hearings that involve proposed dealerships within Fireside's relevant market area and that Fireside be awarded costs. Because of this pending state action, Nissan contends that this court should abstain on the basis of the Younger abstention doctrine.

Under Younger, a federal district court should abstain from ruling whenever federal claims have been or could be presented in ongoing state judicial proceedings that concern important state interests and substantive proceedings on the merits have not yet taken place in the federal court. Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229, 237-238, 104 S.Ct. 2321, 2328, 81 L.Ed.2d 186 (1984). The Younger rule "is designed to `permit state courts to try state cases free from interference by federal courts,' particularly where the party to the federal case may fully litigate his claim before the state court." Hicks v. Miranda, 422 U.S. 332, 349, 95 S.Ct. 2281, 2292, 45 L.Ed.2d 223 (1975) (quoting Younger v. Harris, 401 U.S. 37, 43, 91 S.Ct. 746, 750, 27 L.Ed.2d 669 (1971)).

Abstention is not appropriate. The Supreme Court has...