Yamaha Motor Corp., U.S.A. v. Riney, 93-2197

• Citation: 21 F.3d 793
• Decision Date: 06 May 1994
• Docket Number: No. 93-2197,93-2197
• Parties: YAMAHA MOTOR CORPORATION, U.S.A., Appellant, v. Tony RINEY; Steve Landers; Emmett Jones; Jack Caldwell; William Gandy; Leah Leonard, Appellees, Cycle Center, Inc., Intervenor.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 793

21 F.3d 793

YAMAHA MOTOR CORPORATION, U.S.A., Appellant, v. Tony RINEY; Steve Landers; Emmett Jones; Jack Caldwell;

William Gandy; Leah Leonard, Appellees,

Cycle Center, Inc., Intervenor.

No. 93-2197.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 16, 1993.

Decided April 7, 1994.

Rehearing Denied May 6, 1994.

Marshall S. Ney, Little Rock, AR, argued (Bryon Freeland, on the brief), for appellant.

Dinah M. Dale, Asst. Atty. Gen., Little Rock, AR, argued (Thomas S. Gay, Sr. Asst. Atty. Gen., on the brief), for appellees.

Before MAGILL and BEAM, Circuit Judges, and VAN SICKLE, ^* Senior District Judge.

MAGILL, Circuit Judge.

The Yamaha Motor Corporation (Yamaha) appeals the district court's order abstaining from, and dismissing without prejudice, Yamaha's 42 U.S.C. Sec. 1983 claim against six members of the Arkansas Motor Vehicle Commission (the Commission). Because we find that the district court erred when it abstained from exercising its jurisdiction over this action, we reverse and remand to the district court for further proceedings.

I. BACKGROUND

In 1986, Cycle Center, Inc., (Cycle Center) entered into a dealer agreement (the Agreement) with Yamaha. That Agreement, which furnished the terms of Yamaha's reimbursement obligation to Cycle Center for warranty work, provided the catalyst for this action. In 1992, Cycle Center complained to the Commission that Yamaha's reimbursement terms, memorialized in the Agreement, violated the provisions of the Arkansas Motor Vehicle Commission Act ¹ (the Act). Following a hearing, the Commission, voting six to two, found that Yamaha failed to comply with the Act. Yamaha then filed suit in federal district court, contending that the Commission's vote violated its constitutional rights and requested that the district court grant injunctive and declaratory relief.

Under the terms of the Agreement, Cycle Center was entitled to either ten or fifteen percent over dealer cost for parts replaced pursuant to the warranty policy. The Act, originally passed in 1975, ² was amended in 1991, ³ adding the emphasized language.

On satisfactory proof that any manufacturer ... has unfairly and without due regard to the equities of the parties or to the detriment of the public welfare failed to properly fulfill any warranty agreement or to adequately and fairly compensate any of its motor vehicle dealers for labor, parts, compensation for parts for two wheeled vehicles must be at the manufacturer's suggested retail price, or incidental expenses incurred by the dealer with regard to factory warranty agreements performed by the dealer.

Ark.Code Ann. Sec. 23-112-308(a)(10) (emphasis added).

The language emphasized above formed the basis for Cycle Center's complaint to the Commission. Cycle Center argued before the Commission that Yamaha had violated the terms of Sec. 23-112-308(a)(10) by compensating it at less than the manufacturer's suggested retail price (MSRP). Yamaha contended that the Act's 1991 amendment, requiring that warranty parts be compensated at the MSRP, did not apply to its relationship with Cycle Center because the parties had a preexisting contractual agreement. Citing Chrysler Motors Corp. v. Thomas Auto. Co. ⁴ for the premise that the Act was not to be applied retroactively, 939 F.2d 538, 540 (8th Cir.1991), Yamaha argued to the Commission that the only issue in contention was legal and the legal issue--application of the Act to a preexisting contract--had been judicially resolved.

Cycle Center contended at the July 29, 1992 hearing that the Agreement had been modified after 1991 and hence, Yamaha must comply with the Act. Essentially, Cycle Center argued that the annual updated price lists distributed by Yamaha to its dealers comprised a yearly modification of its Agreement with Yamaha.

The Commission's counsel, senior assistant attorney general Thomas Gay, discussing the retroactivity of a law, stated, "[t]he test is what the law says. If there is some ambiguity in what the law says, then you determine what the legislature's intent was in construing and interpreting that particular statute." Appellant's App. at 360. Attorney Gay also counseled that,

in Arkansas, statutes are presumed to apply prospectively only, from the date they are enacted forward, not retroactively. And to have a statute apply retroactively, that meaning going back and apply [sic] to a contract that already exists at the time the law takes place, takes effect, there has to be some language in the statute itself to show that that's what the legislature intended.

Id. at 361. ⁵

Commissioner Jones, President of the Arkansas Motorcycle Dealer's Association and a Harley Davidson dealer, advocated applying the 1991 amendment to Yamaha. He stated Where this winds up in court as far as somebody with a higher pay rate than I, somebody with a black robe on to decide what is amended and what is not amended, the law is very clear as passed by the legislature that says retail on parts. So, if it's something that pertained to law, we are not lawyers, that's for lawyers to argue, for the court to decide what, in fact, is correct.

Id. at 365-66. After further discussion, primarily led by Commissioner Jones, Commissioner Whitson ⁶ stated, "I think we would be remiss as a Commission to go against our legal counsel in what we see in front of us that the law was not written with retroactive language." Id. at 369.

The Commission appeared to understand that in order to apply the Act retroactively, it must find that the Agreement had been substantially changed after the 1991 amendment. Cf. Woodhaven Homes v. Kennedy Sheet Metal, 304 Ark. 415, 803 S.W.2d 508, 510 (1991) ("[A] statute will not be given a retroactive application when it takes away a vested right unless such be the 'unequivocal and inflexible import of the terms and the manifest intention of the legislature.' ") (citation omitted). Commissioner Jones, however, encouraged abdication of that responsibility. He stated, "there is a possibility that the contracts ... has [sic] been amended. We don't know that. We can't make that judgment here, because this is not a court of law." Appellant's App. at 374. Attorney Gay corrected Commissioner Jones, stating, "[t]he facts as presented in this case are for you to decide subject to appeal by the court." Id. "The issue is for the Commission to decide whether these various amendments change this contract so that there is a new underlying agreement." Id. at 375. Nevertheless, without deciding whether the Agreement had been modified after the 1991 amendment was added, six of the eight Commissioners decided that Yamaha had violated Sec. 23-112-308. While discussing the appropriate penalty to be imposed upon Yamaha, Commissioner Jones made a motion to "[s]uspend [Yamaha] from the state of Arkansas." Id. at 381. That motion died due to lack of a second vote, and instead, the Commission voted to fine Yamaha pending compliance with the Act.

On September 8, 1992, Yamaha filed suit in federal district court, naming the six Commissioners who determined that Yamaha had violated the Act, and requesting the court to grant either a temporary restraining order, preliminary injunction, or a permanent injunction preventing entry of the Commission's Order to fine Yamaha (the Order). On September 16, 1992, the Commission held a public meeting allowing argument regarding the Commission's Order. At that time, Cycle Center, now represented by Stephen Bilheimer, ⁷ Commissioner Jones' nephew, and Yamaha both appeared before the Commission arguing the retroactivity issue once again. During that meeting, the Commission voted to memorialize its Order from July 29, 1992. ⁸

Sometime between the July 29, 1992 hearing and the September 16, 1992 meeting, a group of motorcycle dealers, including Commissioner Jones, met to discuss the implications of the Cycle Center-Yamaha dispute. Id. at 422. These dealers ultimately decided to aid Cycle Center financially in its legal dispute. Id. at 418. Although Commissioner Jones maintains that he did not financially contribute to the legal fund, in his capacity as the President of the Arkansas Motorcycle Dealer's Association, he did serve as a conduit for the accumulated monies. Id. at 416-19. After collecting monies for Cycle Center's ⁹ legal fund, Commissioner Jones signed the legal retainer checks for Bilheimer in his capacity as President of the Arkansas Motorcycle Dealer's Association. Id. at 414-15.

The district court set trial for May 10, 1993; however, on May 3, 1993, the district court entered an order abstaining from, and dismissing without prejudice, this action. The district court found that abstention was warranted by Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 102 S.Ct. 2515, 73 L.Ed.2d 116 (1982). After considering Middlesex 's three-factor test enumerating the prerequisites for abstention, the district court found that there was an ongoing state proceeding, an important state interest, the ability to raise constitutional issues in the state forum, and no bad faith or bias on the part of the defendants. Yamaha timely appealed.

II. DISCUSSION

A federal court's obligation to adjudicate claims within its jurisdiction is "virtually unflagging." Deakins v. Monaghan, 484 U.S. 193, 203, 108 S.Ct. 523, 530, 98 L.Ed.2d 529 (1988). Nevertheless, there is a class of cases in which it is typical, as opposed to exceptional, to withhold the authorized equitable relief from a claimant because of undue interference with state proceedings. Younger v. Harris, 401 U.S. 37, 45, 91 S.Ct. 746, 751, 27 L.Ed.2d 669 (1971). Younger abstention applies to those cases where because of notions of comity and federalism, a federal court will abstain from exercising its jurisdiction over an action for injunctive relief. Id. at 43-44, 91 S.Ct. at 750. Here, the district court abstained based upon Middlesex, a Supreme Court case applying the Younger doctrine...