Yamaha Motor Corp., USA v. Quillian

• Decision Date: 01 November 2002
• Docket Number: Record No. 021232.
• Citation: 264 Va. 656,571 S.E.2d 122
• Court: Virginia Supreme Court
• Parties: YAMAHA MOTOR CORPORATION, U.S.A. v. Asbury W. QUILLIAN, In his Capacity as the Commissioner of the Department of Motor Vehicles, et al.

571 S.E.2d 122

264 Va. 656

YAMAHA MOTOR CORPORATION, U.S.A. v.Asbury W. QUILLIAN, In his Capacity as the Commissioner of the Department of Motor Vehicles, et al.

Record No. 021232.

Supreme Court of Virginia.

November 1, 2002.

David P. Murray, Washington, DC, (Kevin M. Miller, Dale City; J. William Boland; Robert M. Tyler, Richmond; Willkie, Farr & Gallagher, Washington, DC; McGuireWoods, Richmond, on briefs), for plaintiff.

Walter A. Marston, Jr.; Jeffrey A. Spencer, Asst. Atty. Gen. (George E. Kostel; Kevin R. McNally; Jerry W. Kilgore, Atty. Gen.; Reed Smith, on brief), for defendants.

Amicus Curiae: Harley-Davidson Motor Company(James J. Briody, Vienna; Nicholas T. Christakos; Sutherland, Asbill & Brennan, Washington, DC, on briefs), in support of plaintiff.

Present: CARRICO, C.J., HASSELL, KEENAN, KOONTZ, and LEMONS, JJ., and COMPTON and STEPHENSON, S.JJ.

Opinion by Senior Justice ROSCOE B. STEPHENSON, JR.

Pursuant to Article VI, Section 1 of the Constitution of VirginiaandRule 5:42, the United States District Court for the Eastern District of Virginia(the Federal Court), by its order entered May 17, 2002, certified four questions of law to this Court.By order entered June 12, 2002, we accepted the certified questions.

I

On July 25, 2001, Yamaha Motor Corporation, U.S.A. (Yamaha) instituted an action in the Federal Court, pursuant to 42 U.S.C. § 1983, against Asbury W. Quillian, the Commissioner of the Virginia Department of Motor Vehicles(the Commissioner), and Jim's Motorcycle, Inc., d/b/a Atlas Honda/Yamaha (Atlas).In its action, Yamaha challenged the second paragraph of Code§ 46.2-1993.67(5), which places restrictions on motorcycle manufacturers and distributors who wish to establish new franchise dealers in the Commonwealth (the Second Paragraph).Yamaha alleged that the Commissioner's interpretation and enforcement of the Second Paragraph "unduly interferes with [its] rights to engage in interstate commerce, restrains the establishment of new businesses and employment opportunities in Virginia, and deprives Virginia consumers of the benefits of lawful intrabrand competition."Accordingly, Yamaha asked the Federal Court to (1) declare that the Second Paragraph violates Article I, Section 8, Clause 3 of the Constitution of the United States, the socalled "dormant" Commerce Clause; (2) enjoin the Commissioner from enforcing the provisions of the Second Paragraph; and (3) enjoin Atlas from protesting the establishment of a Yamaha motorcycle dealership in Russell County.

The Federal Court determined that resolution of Yamaha's constitutional challenge depends upon the proper interpretation of the Second Paragraph.Accordingly, the Federal Court certified the following questions of law:

"1.Whether the Second Paragraph grants to every existing Virginia franchised dealer of a line-make of motorcycles the right to receive forty-five days' advance notice of, and to protest, the establishment of any new or additional motorcycle dealer franchise of the same line-make in any county, city or town of Virginia, thereby placing on the manufacturer the burden of proving, in a formal evidentiary hearing, `inadequate representation' of its line-make of motorcycles throughout the Commonwealth before it may proceed to establish that dealership?

"2.Whether the Commissioner was correct in interpreting the Second Paragraph in a manner such that only those protesting franchised dealers who make a preliminary showing that they actually are representing, `in a not insubstantial way,' the line-make of motorcycles in the `county, city or town' where the proposed new or additional dealer would be located will qualify for a formal evidentiary hearing in which the manufacturer would bear the burden of proving `inadequate representation' of that line-make, by the protesting franchised dealer, in that `county, city or town?'

"3.Whether the Second Paragraph should be interpreted to make the advance notice and protest rights granted therein applicable to only existing franchised dealers of a line-make of motorcycles which are located in the same `county, city or town' in which a proposed new or additional motorcycle dealer franchise of the same line-make would be established, and to limit the burden on the manufacturer to proving `inadequate representation' of its line-make merely in that `county, city or town?'

"4.If none of the three aforementioned interpretations of the Second Paragraph is correct, what is the correct interpretation of the statute?"

II

Code§ 46.2-1993.67(5), a part of the Motor Vehicle Code, contains two paragraphs.Pursuant to the first paragraph, an existing motorcycle dealer has the right to protest the establishment of a new dealership of the same line-make of motorcycles within its "relevant market area," which is defined, in Code§ 46.2-1993, as 7-, 10-, 15-, or 20-mile radii around the existing dealer's location, depending on population densities (the First Paragraph).The First Paragraph further provides that no new dealership may be established "unless the Commissioner has determined, if requested by a dealer of the same line-make in the relevant market area. . ., and after a hearing on the matter, that there is reasonable evidence that after the grant of the new franchise, the market will support all of the dealers in that line-make in the relevant market area."

The Second Paragraph, enacted subsequent to the First Paragraph in 1997, provides, in pertinent part, as follows:

No new or additional motorcycle dealer franchise shall be established in any county, city or town unless the manufacturer. . . gives advance notice to any existing franchised dealers of the same line-make.The notice shall be in writing and sent by certified mail, return receipt requested, at least forty-five days prior to the establishment of the new or additional franchise.Any existing franchise dealer may file a protest within thirty days of the date the notice is received.The burden of proof in establishing inadequate representation of such line-make motorcycles shall be on the manufacturer. . . .

Yamaha seeks to establish a new motorcycle dealer franchise at Rosedale, which is located in Russell County.The proposed new dealer is a dealer of Suzuki-brand motorcycles and desires to add Yamaha-brand motorcycles to its product line.

Atlas is located in the City of Bristol and has been representing Yamaha in far Southwest Virginia for many years.In addition to Atlas, there is one other Yamaha dealer in Southwest Virginia, located in the Town of Wytheville.

At various times, Yamaha has expressed the view that Atlas' target market encompasses the area within a 30-mile radius of its location in Bristol.Most of Russell County and all or portions of more than a dozen other counties, cities, and towns are located within that 30-mile radius.

In 1999, Atlas, to better serve its target market, expanded its dealership by 14,500 square feet, at a cost of approximately $345,000, and hired additional personnel.Yamaha proposed to establish the new dealer in Russell County about the time Atlas was completing its expansion.

In compliance with the Second Paragraph, Yamaha gave notice of the proposed new dealer to Atlas and to Yamaha's 25 other existing Virginia dealers.Atlas then sent a letter of protest to the Commissioner.

Yamaha challenged Atlas' standing to protest the establishment of the new dealer, arguing that Atlas did not fall within the "relevant market area," as defined by the First Paragraph.Yamaha asserted that the Second Paragraph should be read to restrict protest rights to those existing dealers of the Yamaha brand located in the same city, county, or town as the proposed new dealer.

The Commissioner rejected Yamaha's assertion and determined that Atlas met the threshold standing requirement.The Commissioner further determined, however, that Atlas, in order to obtain a formal evidentiary hearing, must show a substantial level of sales activity in Russell County.

The Commissioner determined, based on sales data submitted by Atlas and Yamaha, that Atlas had made a sufficient showing that it is actually representing Yamaha in Russell County and, therefore, is entitled to a formal hearing.In so deciding, the Commissioner stated, in pertinent part, the following:

Although the language is not as artfully drawn as might have been desirable, it is clear that the primary objective of [the Second Paragraph] was to afford added protection to motorcycle dealers, above and beyond the relevant market area protection provided by [the First] Paragraph.. . .It is not entirely clear why such additional protection was provided only in the motorcycle dealer provisions and not in the motor vehicle dealer provisions (Va. Code § 46.2-1569), but presumably the 10, 15 and 20 mile limits on the definition of relevant market area applicable to both motorcycles and motor vehicles (compareVa.Code § 46.2-1500 to § 46.2-1993) might be considered less meaningful geographic limits for motorcycle dealers because there are far fewer franchised motorcycle dealers than motor vehicle dealers in Virginia.. . .Hence, it would be rational to assume that motorcycle dealers may need a larger sales territory in order to survive and that the 10, 15 and 20 mile limits for relevant market area protections are less appropriate for motorcycle dealers.

The Commissioner also determined that the Second Paragraph requires a motorcycle manufacturer to give at least forty-five days' notice of a proposed new dealer to every existing dealer of the same line-make in Virginia and that each existing dealer has an unqualified right to file a protest.However, the Commissioner reasoned that,

[i]f the existing dealer sells no motorcycles in that county, city or town, then there is no need to hold a formal evidentiary hearing to determine that the dealer is inadequately representing the franchisor there.No representation at all by the dealer,

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