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Deere & Co. v. State

Supreme Court of New Hampshire

December 29, 2015

DEERE & COMPANY & a.
v.
THE STATE OF NEW HAMPSHIRE KUBOTA TRACTOR CORPORATION
v.
THE STATE OF NEW HAMPSHIRE HUSQVARNA PROFESSIONAL PRODUCTS, INC.
v.
THE STATE OF NEW HAMPSHIRE

Merrimack

Argued: September 10, 2015

Nixon Peabody LLP, of Manchester (Kevin M. Fitzgerald, Gordon J. MacDonald, and Anthony J. Galdieri on the brief, and Mr. MacDonald orally), for petitioners Deere & Company, CNH America LLC, and AGCO Corporation.

CullenCollimore, pllc, of Nashua (Brian J.S. Cullen and Shelagh C.N. Michaud on the brief, and Mr. Cullen orally), for petitioner Kubota Tractor Corporation.

McLane Middleton, Professional Association, of Manchester (Michael A. Delaney on the brief), and Thompson Hine LLP, of Cleveland, Ohio (Thomas J. Collin and Jennifer S. Roach on the brief, and Mr. Collin orally), for petitioner Husqvarna Professional Products, Inc.

Joseph A. Foster, attorney general (Francis C. Fredericks, assistant attorney general, on the brief and orally), for the respondent, the State of New Hampshire.

Holmes Law Offices PLLC, of Concord (Gregory A. Holmes on the brief and orally), for the intervenor, Frost Farm Service, Inc.

Douglas, Leonard & Garvey, P.C., of Concord (Jason R.L. Major and Charles G. Douglas, III on the brief), for Association of Equipment Manufacturers, as amicus curiae.

Upton & Hatfield, LLP, of Portsmouth (Russell F. Hilliard on the brief), for Northeast Equipment Dealers Association, and Peter J. McNamara, of Concord, by brief, for New Hampshire Automobile Dealers Association, as amici curiae.

Kelly Law PLLC, of Nashua (James D. Kelly on the brief), and Kelley Drye and Warren, of Washington, D.C. (William Guerry and Shaun Gehan on the brief), for Outdoor Power Equipment Institute, as amicus curiae.

DALIANIS, C.J.

In these consolidated appeals, the petitioners, Deere & Company (Deere), CNH America LLC (CNH), AGCO Corporation (AGCO), Kubota Tractor Corporation (Kubota), and Husqvarna Professional Products, Inc. (Husqvarna), appeal orders of the Superior Court (Smukler, J.) granting summary judgment to the respondent, the State of New Hampshire, on the petitioners' constitutional challenges to Senate Bill (SB) 126. We affirm in part, vacate in part, and remand.

I. Brief Factual Summary

The pertinent facts follow. SB 126, enacted in 2013, amended RSA chapter 357-C to define "motor vehicle" as including "equipment, " which "means farm and utility tractors, forestry equipment, industrial equipment, construction equipment, farm implements, farm machinery, yard and garden equipment, attachments, accessories, and repair parts." Laws 2013, 130:1 (quotations omitted); see RSA 357-C:1, I (Supp. 2015); see also STIHL, Inc. v. State of N.H., 168 N.H. ___ (decided Oct. 27, 2015) (concluding that the statutory definition of motor vehicle, as amended by SB 126, pertains to equipment that is analogous to automobiles, that is, equipment with an engine, wheels, and a transmission). Because of this amendment, manufacturers, distributors, and dealers of such equipment are, for the first time, subject to the New Hampshire Motor Vehicle Franchise Act, RSA chapter 357-C. See STIHL, Inc., 168 N.H. at ___; see also RSA ch. 357-C (2009 & Supp. 2015).

Like its federal counterpart and similar state statutes, RSA chapter 357-C, "the so-called 'dealer bill of rights, '" STIHL, Inc., 168 N.H. at ___, was enacted "to protect retail car dealers from perceived abusive and oppressive acts by the manufacturers." New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 101 (1978) (discussing such laws in general), see id. at 100-01 n.4 (quoting Congressional report that gave rise to the federal legislation); see also Roberts v. General Motors Corp., 138 N.H. 532, 536 (1994). As first enacted in 1981, RSA chapter 357-C provided motor vehicle dealers certain protections from the actions of manufacturers. See Laws 1981, ch. 477; see also STIHL, Inc., 168 N.H. at ___. Over time, the legislature increased the level of regulation by, for instance, creating the New Hampshire Motor Vehicle Industry Board (Board) to enforce the statute, see Laws 1996, 263:8, and expanding the definition of motor vehicle to include off highway recreational vehicles, see Laws 2002, 215:4, and snowmobiles, see Laws 2007, 372:3. See STIHL, Inc., 168 N.H. at ___.

RSA chapter 357-C regulates, among other things, a manufacturer's delivery and warranty obligations and termination of dealership agreements. See RSA 357-C:4 (2009), :5, :7 (Supp. 2015). RSA chapter 357-C also defines unfair methods of competition and deceptive practices. See RSA 357-C:3 (Supp. 2015). Violation of any provision of RSA chapter 357-C constitutes a misdemeanor. See RSA 357-C:15 (2009).

Among other safeguards, RSA chapter 357-C "protects the equities of existing dealers by prohibiting" motor vehicle "manufacturers from adding dealerships to the market areas of its existing franchisees where the effect of such intrabrand competition would be injurious to the existing franchisees and to the public interest." New Motor Vehicle Bd. of Cal., 439 U.S. at 101 (describing California Automobile Franchise Act, a law similar to RSA chapter 357-C); see RSA 357-C:9 (Supp. 2015). To enforce this prohibition, RSA chapter 357-C requires a motor vehicle manufacturer that seeks to establish a new motor vehicle dealership or relocate an existing new motor vehicle dealership "within a relevant market area where the same line make is then represented, " to give written notice of such intention to the Board and to "each new motor vehicle dealer of such line make in the relevant market area." RSA 357-C:9, I; see New Motor Vehicle Bd. of Cal., 439 U.S. at 103 (describing California Automobile Franchise Act). RSA chapter 357-C defines the "[r]elevant market area" as "any area within the town or city where the motor vehicle dealer maintains his place of business or the area, if any, set forth in a franchise or agreement, whichever is larger." RSA 357-C:1, XXI (2009). If a new motor vehicle dealership protests to the Board within a statutorily-defined period of time, the Board then holds a hearing to determine whether there is "good cause, " as statutorily-defined, for "not permitting such new motor vehicle dealership." RSA 357-C:9, I; see RSA 357-C:9, II, III. Among the factors to consider when determining whether "good cause" exists are: (1) "[a]ny effect on the retail new motor vehicle business and the consuming public in the relevant market area, " RSA 357-C:9, II(b); (2) whether establishing an additional new dealership "is injurious or beneficial to the public welfare, " RSA 357-C:9, II(c); and (3) whether establishing an additional dealership "would increase competition, and therefore be in the public interest, " RSA 357-C:9, II(e).

As the legislature expanded RSA chapter 357-C, it also enacted RSA chapter 347–A, a similar but less comprehensive regulatory scheme providing protections to equipment dealers. STIHL, Inc., 168 N.H. at ___; see Laws 1995, ch. 210. RSA chapter 347-A regulated: (1) the termination of dealer agreements; (2) a supplier's duty upon termination of such an agreement; (3) the terms for repurchasing inventory upon termination of such an agreement and exceptions thereto; (4) a dealer's right to transfer its business; (5) warranty obligations; and (6) the obligation of a successor in interest. See RSA 347-A:2-:6, :8, :11 (2009) (repealed 2013). Unlike RSA chapter 357-C, RSA chapter 347-A did not include an administrative enforcement mechanism, provide for criminal penalties, impose statutory limits upon the ability of a manufacturer to establish or relocate a dealership, or specify the methods of competition and practices that were deemed unfair and deceptive. See RSA ch. 347-A (2009) (repealed 2013).

When the legislature, through SB 126, amended the definition of "motor vehicle" in RSA chapter 357-C to bring certain equipment manufacturers and dealers within the aegis of that chapter, it also repealed RSA chapter 347-A. STIHL, Inc., 168 N.H. at ___; see Laws 2013, ch. 130. SB 126 became effective in September 2013. Laws 2013, 130:19.

In August 2013, Deere, CNH, and AGCO, collectively referred to as the Deere petitioners, sued the State for declaratory and injunctive relief related to SB 126. The Deere petitioners manufacture agricultural, construction, forestry, industrial, lawn, and garden equipment, including commercial mowers, wheel loaders, backhoes, and agricultural tractors. Their complaint alleges that: (1) retroactive application of SB 126 substantially impairs their existing dealership agreements in violation of the State and Federal Contract Clauses; and (2) SB 126 violates the Supremacy Clause of the Federal Constitution because it voids or otherwise renders unenforceable mandatory binding arbitration clauses in existing dealership agreements, thereby conflicting with the Federal Arbitration Act (FAA). Thereafter, the Deere petitioners obtained a court order that preliminarily enjoined the State "from including farm and equipment manufacturers within the definition of motor vehicles" in RSA chapter 357-C "as provided for under SB 126." In October 2013, the trial court granted intervenor status to Frost Farm Service, Inc., an equipment dealer and franchisee of AGCO.

The Deere petitioners and the State subsequently filed cross-motions for summary judgment. In April 2014, the trial court granted the State's motion and denied the Deere petitioners' motion, concluding that the Deere petitioners had "not sustained their burden of showing that SB 126 unconstitutionally impairs existing contracts." The court observed that the Deere petitioners had identified "ten substantial SB 126 impairments, " but that "[n]ot all of the [identified] impairments . . . apply to each of the contracts in question." Ultimately, the court concluded that, although including the Deere petitioners "within the purview of RSA [chapter] 357-C has created added requirements by which [they] must act, such additions represent refinements in the law, " and do not constitute substantial impairments of their existing contracts. For example, the court observed, although RSA chapter 357-C requires that a dealership agreement may not be terminated except upon "good cause, " RSA chapter 347-A contained a similar mandate. RSA 357-C:7, I(c); see RSA 347-A:2, I. Under RSA chapter 347-A, a dealership agreement could not be terminated "without cause" and "cause" was defined as "failure by an equipment dealer to comply with requirements imposed upon the equipment dealer by the dealer agreement, " provided that those requirements were not substantially different from those imposed upon other similarly situated dealers. Id.

The trial court further concluded that, even if SB 126 substantially impaired the Deere petitioners' existing contracts, their contract clause claim failed because SB 126 serves the legitimate and significant public purpose of safeguarding consumer interests and "constitutes broad-based economic legislation that is directed to meet a societal need." However, the court agreed with the Deere petitioners that, as applied to equipment manufacturers, portions of RSA 357-C:3, III(p)(3) and RSA 357-C:6, III violate the Supremacy Clause because they conflict with, and are preempted by, the FAA. Nonetheless, the court rejected their argument that those provisions are so integral to RSA chapter 357-C that they are not severable. The Deere petitioners appeal the trial court's decision. The trial court stayed its summary judgment order pending the instant appeal.

Shortly before the court ruled upon the summary judgment motions in the Deere action, Husqvarna brought its own action challenging the constitutionality of SB 126. Husqvarna manufactures forestry, lawn and garden equipment, including mowers, garden tractors, and snow throwers, which it sells through more than 40 independent dealers in New Hampshire. In addition to alleging counts for unconstitutional impairment of contract and violation of the Supremacy Clause, Husqvarna alleges that SB 126 violates the Equal Protection and dormant Commerce Clauses of the Federal Constitution.

Thereafter, Husqvarna and the State filed cross-motions for summary judgment. In August 2014, the trial court granted the State's motion and denied Husqvarna's motion. Husqvarna appeals the trial court's order. The trial court stayed application of SB 126 to Husqvarna pending final disposition of this appeal.

In April 2014, Kubota brought its own action against the State, alleging a single count - that SB 126 substantially impairs its existing dealer agreements in New Hampshire in violation of the State and Federal Contract Clauses. Kubota describes itself as "a long standing distributor of construction, farm, and lawn equipment." In June 2014, Kubota and the State filed a joint motion for a final order asking the trial court to confirm that the final order it had entered in the Deere action applied to Kubota. The trial court granted the motion and stayed application of the Deere order to Kubota pending the resolution of Kubota's appeal.

II. Analysis

On appeal, all petitioners argue that SB 126 violates the State and Federal Contract Clauses. See N.H. CONST. pt. I, art. 23; U.S. CONST. art. I, § 10, cl. 1. The Deere petitioners and Husqvarna assert that SB 126 also offends the Supremacy Clause. See U.S. CONST. art. 6, cl. 2. Finally, Husqvarna contends that SB 126 violates the federal Equal Protection Clause, see U.S. CONST. amend. XIV, and the dormant Commerce Clause, see U.S. CONST. art. I, § 8, cl. 3. We first address the petitioners' claims under the State and Federal Contract Clauses and then address claims arising only under the Federal Constitution. "Throughout, we keep in mind the elementary rule that every reasonable construction must be resorted to in order to save a statute from unconstitutionality." Alliance of Auto. Mfrs. v. Gwadosky, 430 F.3d 30, 35 (1st Cir. 2005) (quotation, brackets, and ellipses omitted). We confine our analysis to the questions raised on appeal and do not otherwise opine upon the wisdom and reasonableness of the legislature's decision to ...


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