Rimrock Chrysler, Inc. v. State, DA 15–0722.

Citation2016 MT 165,384 Mont. 76,375 P.3d 392
Decision Date12 July 2016
Docket NumberNo. DA 15–0722.,DA 15–0722.
PartiesRIMROCK CHRYSLER, INC., Petitioner and Appellant, and Chrysler Group, LLC, Franchisor, v. STATE of Montana, Department of Justice, Motor Vehicle Division, and Lithia Motors, Inc., and its wholly own subsidiary, Lithia of Billings, Inc., dba Lithia Chrysler Jeep Dodge of Billings, Respondent and Appellee.
CourtUnited States State Supreme Court of Montana

For Appellant: Rodd A. Hamman, Calton Hamman & Wolff, P.C., Billings, Montana, Robert C. Byerts, Bass Sox Mercer, Tallahassee, Florida.

For Appellee Lithia Motors: Paul N. Tranel, Bohyer, Erickson, Beaudette & Tranel, P.C., Missoula, Montana, Robert Y. Weller II, Kristen L. Baiardi, Abbott Nicholson, P.C., Detroit, Michigan.

For Franchisor Chrysler Group: Robert Sterup, Holland & Hart, LLP, Billings, Montana.

Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 Rimrock Chrysler, Inc., appeals the order of the Thirteenth Judicial District Court, Yellowstone County, denying Rimrock's motion to vacate an administrative proceeding and its motion to dismiss for lack of jurisdiction. We restate the issues on appeal as follows:

1. Whether the District Court erred by assuming subject matter jurisdiction to review Lithia Motors' administrative protest of New Chrysler's Notice of Intent to establish an additional Chrysler–Jeep dealership in Billings, Montana.
2. Whether the District Court erred by dismissing Rimrock's petition for judicial review on the grounds of mootness and lack of a justiciable controversy.

¶ 2 We affirm the District Court's order denying Rimrock's motion to dismiss and motion to vacate the administrative decision of the Montana Department of Justice, Motor Vehicle Division (Department). We reverse the District Court's order dismissing Rimrock's petition for judicial review and remand for further proceedings.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 3 Lithia Motors, Inc., acquired a Dodge franchise in Billings in 2003. At that time, Dodge was a division of Chrysler, LLC (Old Chrysler). In April 2009, Old Chrysler filed for bankruptcy. As part of the bankruptcy restructuring, Old Chrysler rejected 789 existing dealer agreements, including that of Rimrock in May 2009. Most of Old Chrysler's assets were sold to Chrysler Group, LLC (New Chrysler). In July 2009, New Chrysler awarded a Chrysler–Jeep franchise to Lithia to sell all of the Chrysler line in Billings.

¶ 4 Rimrock successfully pursued arbitration of its franchise termination under § 747 of the United States Consolidated Appropriations Act of 2010. Consolidated Appropriations Act of 2010, Pub. L. No. 117, § 747(d), 123 Stat. 3034, 3220 (2009). In June 2010, Rimrock was awarded the sole remedy provided in § 747, a “customary and usual letter of intent” to enter into a dealer agreement. Section 747(e), 123 Stat. at 3221. Thereafter, New Chrysler filed with the Department, as required by § 61–4–205(3), MCA

, a notice of intent to establish a Chrysler–Jeep dealership at Rimrock.

¶ 5 Soon after New Chrysler filed its notice of intent, Lithia filed an administrative protest pursuant to § 61–4–206(1), MCA

. Lithia's protest was based on Lithia being an existing franchise of the same line-make in the same community. See § 61–4–206(1), MCA. The Department appointed a hearing officer to conduct a contested case hearing pursuant to § 61–4–206(2), MCA. The hearing officer issued proposed findings of fact and conclusions of law sustaining Lithia's protest and concluding that New Chrysler was not authorized to establish an additional Chrysler–Jeep dealership at the Rimrock location. Both New Chrysler and Rimrock filed exceptions to the hearing officer's decision. Following oral argument, the Department issued a final decision adopting the hearing officer's proposed order.

¶ 6 Rimrock filed a petition for judicial review before the District Court pursuant to §§ 61–4–206(7)

and 2–4–702, MCA, requesting reversal of the Department's decision. New Chrysler did not join Rimrock's petition or file its own. Lithia filed a motion to dismiss Rimrock's petition based on New Chrysler's failure to request review. The court granted Lithia's motion on August 25, 2014, concluding that because New Chrysler had abandoned any interest in the proceeding, effective relief could not be rendered and the matter was moot. Rimrock appealed to this Court.

¶ 7 In the meantime, New Chrysler had named Rimrock as a defendant in a declaratory judgment action in federal court in Detroit, Michigan.1 Rimrock moved to dismiss itself from the Michigan litigation on the ground that resolution of the issues in the Montana administrative proceeding would “conclusively resolve the issues concerning Rimrock.” Rimrock and New Chrysler entered into a settlement agreement in the Michigan case on May 6, 2011. The Settlement Agreement provided for the dismissal with prejudice of New Chrysler's claims against Rimrock and of all defenses, claims, and counterclaims that could have been raised by Rimrock. It provided further that “Rimrock unequivocally states that it will not assert any argument, in any forum or proceeding, that § 747 generally preempts Montana state dealer laws or, in particular, precludes a protest of the establishment of Rimrock pursuant to the Arbitration Order.” As provided in the Settlement Agreement, Rimrock and New Chrysler stipulated to dismiss the federal litigation with prejudice, and the Michigan federal court dismissed Rimrock from the litigation on May 10, 2011.2

¶ 8 Before this Court issued a decision in Rimrock's first appeal, the Sixth Circuit Court of Appeals ruled in the Michigan case that § 747 preempted state regulation of new dealerships issued under dealership protest laws in Michigan and Nevada. Chrysler Group LLC v. Fox Hills Motor Sales, Inc., 776 F.3d 411, 423–24 (6th Cir.2015)

. The Sixth Circuit held:

Michigan's and Nevada's state dealer protest laws, in particular, frustrate Congress's purpose in enacting § 747 because they permit state officials to delay and possibly ify the effect of federal arbitration. Congress intended the federal arbitration to determine whether there is good cause for a terminated dealer to be added to New Chrysler's dealer networks. To that end, Congress placed within the discretion of the arbitrator the decision of “whether the franchise agreement at issue is to be renewed, continued, assigned or assumed by the covered manufacturer.” § 747(d). State dealer protest laws create a process by which a state official subsequently and independently determines whether there is good cause for the new dealerships to have a sales and service agreement. This second, parallel determination of good cause impermissibly grants state officials the power to review the federal arbitral decisions.

Chrysler Group LLC, 776 F.3d at 424

. This Court dismissed Rimrock's appeal without prejudice and remanded it to the District Court to consider the Sixth Circuit's decision and to rule upon issues of subject matter jurisdiction, federal preemption of state law, and whether § 61–4–206(1)(b), MCA, added by the Legislature in 2013, had any effect on the case. Rimrock Chrysler, Inc. v. Mont. Dep't of Justice, Motor Vehicle Div., No. DA 14–0590, Or. (Mont., June 9, 2015).

¶ 9 On remand, Rimrock filed a motion to vacate the administrative proceeding and dismiss on the ground that § 747 preempted Montana dealer protest laws and deprived the State of Montana of subject matter jurisdiction to hear the administrative claim. New Chrysler and Lithia filed briefs in opposition, arguing that the Sixth Circuit's decision was mistaken and that Rimrock had waived its preemption arguments. The District Court denied Rimrock's motion and dismissed the appeal on the basis of its August 2014 order. The court concluded that it had subject matter jurisdiction over the action and that Rimrock had expressly agreed to adjudicate its dispute in the Montana administrative forum. The court held that although § 747 may preempt Montana law in very “narrow, and unique circumstance[s] going forward, it did “not affect the outcome already reached” in this case, and § 61–4–206(1)(b), MCA

, was not applicable. Rimrock appeals.

STANDARDS OF REVIEW

¶ 10 We review de novo a district court's determination regarding its subject matter jurisdiction. Comm'r of Political Practices for Mont. v. Bannan, 2015 MT 220, ¶ 7, 380 Mont. 194, 354 P.3d 601

. A district court's decision to grant or deny a motion to dismiss for lack of subject matter jurisdiction is a question of law that we review for correctness. Interstate Explorations, LLC v. Morgen Farm & Ranch, Inc., 2016 MT 20, ¶ 6, 382 Mont. 136, 364 P.3d 1267 (citing Pickett v. Cortese, 2014 MT 166, ¶ 11, 375 Mont. 320, 328 P.3d 660 ).

¶ 11 Mootness is a question of a law that we review de novo. Alexander v. Bozeman Motors, Inc.,

2012 MT 301, ¶ 20, 367 Mont. 401, 291 P.3d 1120.

DISCUSSION

¶ 12 1. Whether the District Court erred by assuming subject matter jurisdiction to review Lithia's administrative protest of New Chrysler's Notice of Intent to establish an additional Chrysler–Jeep dealership in Billings, Montana.

¶ 13 In 2008, the federal government sought to address the problems affecting the auto industry through the Automotive Industry Financing Program (AIFP), a component of the Troubled Asset Relief Program (TARP). Old Chrysler received a $4 billion loan through TARP in exchange for a security interest in all of Old Chrysler's assets, to be held by the United States Treasury. Chrysler Group LLC, 776 F.3d at 415

(citing In re Chrysler LLC, 405 B.R. 84, 89–90 (Bankr.S.D.N.Y.2009) ). After Old Chrysler and General Motors filed for bankruptcy, resulting in the termination of a significant number of local dealerships across the United States, Congress sought to protect the interests of the rejected auto dealers by enacting § 747 of the Consolidated Appropriations Act of 2010. Chrysler Group LLC, 776 F.3d at 417–18. Section 747 was intended to ...

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