Alliance of Automobile Manufacturers v. Gwadosky ( 2005 )

United States Court of Appeals
For the First Circuit
No. 05-1259
ALLIANCE OF AUTOMOBILE MANUFACTURERS,
Plaintiff, Appellant,
v.
DAN A. GWADOSKY, IN HIS OFFICIAL CAPACITY AS
SECRETARY OF STATE OF THE STATE OF MAINE, AND G. STEVEN ROWE, IN
HIS OFFICIAL CAPACITY AS ATTORNEY GENERAL OF THE STATE OF MAINE,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. John A. Woodcock, Jr., U.S. District Judge]
Before
Selya, Circuit Judge,
Coffin, Senior Circuit Judge,
and Howard, Circuit Judge.
Russell R. Eggert, with whom Andrew J. Pincus, William L.
Olsen, Mayer, Brown, Rowe & Maw LLP, Harold J. Friedman, Bruce
Hepler, and Friedman, Gaythwaite, Wolf & Leavitt were on brief, for
appellant.
Francis Ackerman, Assistant Attorney General, with whom Paul
Stern, Deputy Attorney General, was on brief, for appellees.
Bruce C. Gerrity, with whom Michael Kaplan and Preti,
Flaherty, Beliveau were on brief, for Maine Auto Dealers
Association, Inc., amicus curiae.
November 18, 2005
SELYA, Circuit Judge. This appeal is the latest chapter
in an epic struggle between motor vehicle manufacturers and their
dealers in the State of Maine. See Alliance of Auto. Mfrs. v.
Gwadosky, 304 F. Supp. 2d 104, 106-09 (D. Me. 2004) [Alliance I]
(discussing the historical antecedents). The controversy centers
on reimbursement for warranty work. Thirty years ago, the state
legislature intervened in this tug-of-war to ensure equity and to
prevent collateral damage to consumers. More recently, the
legislature amended the state regulatory scheme to prohibit
manufacturers from adding state-specific surcharges to wholesale
motor vehicle prices in order to recoup the costs of their
compliance with retail-rate reimbursement laws (such as the one
that the Maine legislature previously had enacted).
The Alliance of Automobile Manufacturers (the Alliance),
a national trade association whose members are BMW Group,
DaimlerChrysler Corp., Ford Motor Co., General Motors Corp., Mazda
North American Operations, Mitsubishi Motors North America, Inc.,
Porsche Cars North America, Inc., Toyota Motor North America, Inc.,
and Volkswagen of America, Inc., challenged the recoupment bar as,
among other things, a violation of both the Commerce and Contracts
Clauses of the United States Constitution. The district court
rejected that binary challenge. After careful consideration of the
claims asserted, we conclude that the Alliance has not made out a
genuine issue of material fact as to the existence of a
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constitutional violation. Consequently, we affirm the judgment
below.
I. BACKGROUND
The historic relationship between motor vehicle
manufacturers and dealers is not a particularly congenial one.
See, e.g., Gen. Motors Corp. v. Darling's, 324 F. Supp. 2d 257 (D.
Me. 2004), amended in part by 330 F. Supp. 2d 9 (D. Me. 2004);
Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 923 F. Supp. 665(D.N.J. 1996), aff'd, 134 F.3d 557 (3d Cir. 1998); Darling's v.
Ford Motor Co., 825 A.2d 344 (Me. 2003). The relationship
typically flows from a franchise agreement that, in addition to
other provisions, requires the dealer to perform warranty repairs
(without regard to whether the dealer sold the vehicle in question)
and sets out explicit rules for how the manufacturer will reimburse
the dealer for that work.
Predictably, warranty reimbursement rates have been a
source of considerable friction. The manufacturers have demanded
preferential pricing of warranty repairs as a sort of volume
discount. The dealers have argued that the discounted rate
structure not only reflects an excessive imbalance in market power,
but also forces them to increase the charges for non-warranty
repairs (a practice that effectively requires non-warranty
customers to subsidize warranty work).
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In 1975, the Maine legislature stepped into this
imbroglio and began to regulate the price of warranty repairs
within Maine's borders. See 1975 Me. Laws 1788 (codified as
amended at Me. Rev. Stat. Ann. tit. 10, § 1176) (mandating that
motor vehicle manufacturers compensate dealers "adequately and
fairly" for warranty repairs). In its most recent incarnation,
enacted in 1991, this provision requires that manufacturers
reimburse their Maine dealers for parts and labor at the retail
rates customarily charged to non-warranty customers. See Me. Rev.
Stat. Ann. tit. 10, § 1176.
In the usual motor vehicle franchise agreement, the
manufacturer reserves the right to set wholesale vehicle prices
unilaterally.1 Exercising this right, Ford Motor Co. responded to
Maine's amended version of section 1176 by adding a "warranty
parity surcharge" to the wholesale price of motor vehicles sold in
Maine. This surcharge was designed to recoup the incremental
expenses that resulted from retail-rate reimbursement.
Adjudicating a dealer challenge to the surcharge, we held
that nothing in Maine's motor vehicle franchise law prohibited it.
See Acadia Motors, Inc. v. Ford Motor Co., 44 F.3d 1050, 1055-57
(1st Cir. 1995); see also Acadia Motors, Inc. v. Ford Motor Co.,
1
General Motors' standard franchise agreement is
representative of the genre. It declares in pertinent part that
"[p]rices, destination charges, and other terms of sale applicable
to any Motor Vehicle may be changed at any time."
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799 A.2d 1228, 1231 (Me. 2002) (agreeing with this conclusion). In
2002, Ford set its surcharge at $500 per vehicle and collected more
than $3,600,000 in additional revenue from Maine dealers. No other
manufacturer has, as yet, followed suit.
Once again, the Maine legislature intervened. After
several failed attempts at crafting a solution, it passed
Legislative Document 1294. That document amended section 1176 by
providing in pertinent part that a motor vehicle manufacturer "may
not otherwise recover its cost for reimbursing a [dealer] for parts
and labor pursuant to this section." L.D. 1294 § 10, 121st Leg.,
1st Reg. Sess. (Me. 2003). For simplicity's sake, we refer
throughout this opinion to this proviso — section 10 of L.D. 1294
— as the "recoupment bar."
On September 4, 2003, the Alliance filed suit in Maine's
federal district court, challenging the recoupment bar as
unconstitutional under the Commerce, Contracts, and Takings
Clauses. It sought declaratory and injunctive relief and named as
defendants Dan A. Gwadosky, in his official capacity as Maine's
Secretary of State, and G. Steven Rowe, in his official capacity as
Maine's Attorney General (collectively, the State).
The district court allowed the Maine Auto Dealers
Association (MADA) a right to participate in the proceedings as an
amicus curiae. It proceeded to deny the Alliance's motion for a
preliminary injunction, finding that the Alliance had established
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neither a likelihood of success on the merits nor irreparable harm.
See Alliance I, 304 F. Supp. 2d at 117; see also Ross-Simons of
Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir. 1996)
(explicating the preliminary injunction standard). As to the
Commerce Clause challenge, the court concluded that the recoupment
bar did not reflect a discriminatory purpose, did not give rise to
a discriminatory effect, and did not have any forbidden
extraterritorial reach. See Alliance I, 304 F. Supp. 2d at 110-14.
The Contracts Clause challenge was impuissant, the court ruled,
because the recoupment bar "was within the reasonable expectations
of the parties." Id. at 116.
After limited discovery, the protagonists cross-moved for
summary judgment. The district court granted the State's motion
and denied the Alliance's motion, essentially for the reasons
elucidated in Alliance I. See Alliance of Auto. Mfrs. v. Gwadosky,
353 F. Supp. 2d 97, 99-100 (D. Me. 2005) [Alliance II]. Along the
way, the Alliance voluntarily dismissed the Takings Clause claim.2
II. ANALYSIS
On appeal, the Alliance reasserts its position that the
recoupment bar violates both the Commerce and Contracts Clauses.
2
The Alliance had challenged another provision of L.D. 1294 on
due process grounds. The district court rejected that claim when
it granted summary judgment for the State, see Alliance II, 353 F.
Supp. 2d at 108-09, and the Alliance does not contest that
determination.
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We first sketch the familiar summary judgment standard and then
deal sequentially with these assertions.
A. The Summary Judgment Standard.
A district court may enter summary judgment upon a
showing "that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of
law." Fed. R. Civ. P. 56(c). We review orders granting summary
judgment de novo; like the district court, we must scrutinize the
record in the light most favorable to the summary judgment loser
and draw all reasonable inferences therefrom to that party's
behoof. Houlton Citizens' Coal. v. Town of Houlton, 175 F.3d 178,
184 (1st Cir. 1999). This standard is not affected by the presence
of cross-motions for summary judgment. See Blackie v. Maine, 75
F.3d 716, 721 (1st Cir. 1996).
It is within this procedural framework that we assess the
Alliance's claims. Our review is not constrained by the lower
court's stated rationale; we may affirm the entry of summary
judgment on any ground supported by the record. See Houlton
Citizens' Coal., 175 F.3d at 184.
B. The Commerce Clause Claims.
The Constitution grants Congress the power "[t]o regulate
Commerce . . . among the several States." U.S. Const. art. I, § 8,
cl. 3. That grant embodies a negative aspect as well — the
"dormant Commerce Clause" — which "prevents state and local
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governments from impeding the free flow of goods from one state to
another." Houlton Citizens' Coal., 175 F.3d at 184. Put another
way, the dormant Commerce Clause "prohibits protectionist state
regulation designed to benefit in-state economic interests by
burdening out-of-state competitors." Grant's Dairy-Me., LLC v.
Comm'r of Me. Dep't of Agric., Food & Rural Res., 232 F.3d 8, 18
(1st Cir. 2000).
The type of inquiry needed to determine whether a state
law transgresses the Commerce Clause varies depending upon the
nature of the law at issue. A state statute that purports to
regulate commerce occurring wholly beyond the boundaries of the
enacting state outstrips the limits of the enacting state's
constitutional authority and, therefore, is per se invalid. Pharm.
Research & Mfrs. of Am. v. Concannon, 249 F.3d 66, 79 (1st Cir.
2001), aff'd sub nom. Pharm. Research & Mfrs. of Am. v. Walsh, 538
U.S. 644 (2003). A state statute that has no direct
extraterritorial reach but that discriminates against interstate
commerce on its face, in purpose, or in effect receives a form of
strict scrutiny so rigorous that it is usually fatal. This amounts
to a "virtually per se invalid rule," id. at 79 (citing Or. Waste
Sys., Inc. v. Dep't of Envtl. Quality, 511 U.S. 93, 99 (1994)),
under which such a statute is invalid unless it advances a
legitimate local purpose that cannot be served by reasonable non-
discriminatory means, see id. at 79, 83. A state statute that
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"regulates evenhandedly and has only incidental effects on
interstate commerce" engenders a lower level of scrutiny. Id. at
80. That analysis entails resort to the balancing test limned in
Pike v. Bruce Church, Inc., 397 U.S. 137 (1970): "Where the statute
regulates evenhandedly to effectuate a legitimate local public
interest, and its effects on interstate commerce are only
incidental, it will be upheld unless the burden imposed on such
commerce is clearly excessive in relation to the putative local
benefits." Id. at 142.
The Alliance urges that Maine's recoupment bar violates
the dormant Commerce Clause in three ways: (i) it was enacted on
the wings of a discriminatory purpose, (ii) it has a discriminatory
effect, and (iii) it has an impermissible extraterritorial reach
that causes consequences beyond Maine's borders. None of these
claims corresponds with the third tier of the analytic framework
set out above. In all events, the Alliance has expressly waived
any theory of liability premised on the Pike balancing test;
instead, it has gambled on its theory that the recoupment bar
triggers strict scrutiny (and, thus, is per se invalid). See
Alliance I, 304 F. Supp. 2d at 114; see also United States v.
Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (explaining that arguments
not seasonably made are deemed abandoned). Accordingly, we leave
Pike to one side.
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In the pages that follow, we deal separately with each of
the three arguments actually made by the Alliance. Throughout, we
keep in mind "[t]he elementary rule . . . that every reasonable
construction must be resorted to . . . in order to save a statute
from unconstitutionality." Hooper v. California, 155 U.S. 648, 657
(1895).
1. Discriminatory Purpose. "The core purpose of the
dormant Commerce Clause is to prevent states and their political
subdivisions from promulgating protectionist policies." Houlton
Citizens Coal., 175 F.3d at 188. "A finding that state legislation
constitutes 'economic protectionism' may be made on the basis of
either discriminatory purpose or discriminatory effect." Bacchus
Imps., Ltd. v. Dias, 468 U.S. 263, 270 (1984) (citations omitted).3
The Alliance notes that there are no warranty parity surcharges in
neighboring New Hampshire and argues, in part, that discriminatory
purpose mars the recoupment bar because the Maine legislature
passed the law to deprive New Hampshire motor vehicle dealers of
3
While courts routinely recite this test, see, e.g., Chem.
Waste Mgmt., Inc. v. Hunt, 504 U.S. 334, 344 n.6 (1992); Int'l
Truck & Engine Corp. v. Bray, 372 F.3d 717, 725 (5th Cir. 2004);
Chambers Med. Techs. of S.C., Inc. v. Bryant, 52 F.3d 1252, 1256
(4th Cir. 1995); Old Coach Dev. Corp. v. Tanzman, 881 F.2d 1227,
1231 (3d Cir. 1989), there is some reason to question whether a
showing of discriminatory purpose alone will invariably suffice to
support a finding of constitutional invalidity under the dormant
Commerce Clause. See Kathleen M. Sullivan & Gerald Gunther,
Constitutional Law 275 (15th ed. 2004) (recognizing the analytical
difficulty that arises because "a law motivated wholly by
protectionist intent might fail to produce significant
discriminatory effects").
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the competitive advantage derived from paying lower wholesale
prices than their Maine counterparts for new cars.
To support its claim of discriminatory purpose, the
Alliance points to three bodies of evidence:
C Statements contained in the Report of
the Commission to Study the Most
Effective Method of Providing Retail
Rate Reimbursement for Parts and Labor
(the Retail Rate Commission Report), a
study commissioned by the Maine
legislature and published in December
of 2000. Specifically, some Commission
members "note[d] . . . the unfair
advantage . . . to New Hampshire
dealers who [were] not subject to the
surcharge." Moreover, "[the majority
of the Commission] argue[d] that Maine
dealers and consumers should not have
to pay more than other buyers in other
parts of the country." These
statements were made while
recommending, among other things, the
enactment of a cost-recovery
prohibition should negotiations between
manufacturers and dealers fail to yield
a compromise solution.
C The legislative process that led to
passage of the recoupment bar.
Specifically, the Maine legislature
enacted L.D. 1294 only after the
relevant legislative committee twice
passed compromise legislation that did
not include a cost-recovery
prohibition. The first compromise
bill, resulting from manufacturer-
dealer negotiations, died after MADA
withdrew its support. See Comm. Amend.
"___" to L.D. 322, 120th Leg., 1st Reg.
Sess. (Me. 2001). The same committee
also deleted the recoupment-bar
language contained in a second (MADA-
drafted) bill (L.D. 1294), see Majority
Rep. for L.D. 1294, 121st Leg., 1st
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Reg. Sess., at 1 (Me. 2003), but
restored it after MADA mounted an
intense lobbying campaign. The
legislature ultimately enacted that
version of the bill into law. See 2003
Me. Laws 1067 (codified at Me. Rev.
Stat. Ann. tit. 10, § 1176).
C Materials generated in the course of
MADA's lobbying campaign, and, more
specifically, the statements of one
dealer, John Darling (of the several
statements that the Alliance cites,
only one is attributable to a dealer
other than Darling). 4 In
communications with members of the
legislature, Darling lobbied in favor
of the recoupment bar by emphasizing
the price disparity between Maine and
New Hampshire and the competition among
dealers in the two states. His
statements include: "[Maine dealers]
don't want cars to cost $500 more in
Maine than they do in New Hampshire,"
"[the cost-recovery prohibition]
eliminates the current price disparity
between Maine dealers and surrounding
states," and "surcharges must be
curtailed as they are forcing Maine
consumers to buy out-of-state where
Ford dealers don't pay a $500
surcharge."
At the outset, we brush aside the questions raised below
regarding the Alliance's standing to challenge the law on Commerce
Clause grounds. A trade association's standing may derive from its
members' standing. See Friends of the Earth, Inc. v. Laidlaw
4
Although Darling was also a member of the Retail Rate
Commission, he did not make any of the cited statements in that
capacity. Rather, he spoke as a Maine dealer and a member of
MADA's board of directors, years after the Commission had concluded
its business.
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Envtl. Servs. (TOC), Inc., 528 U.S. 167, 181 (2000) (limning
requirements for derivative standing). Ford, a member of the
Alliance, has suffered concrete pecuniary injury from the
recoupment bar. That injury is enough to ground the Alliance's
standing to sue even though the Alliance is not a member of the
out-of-state class against whom the recoupment bar ostensibly
discriminates. See Bacchus Imps., 468 U.S. at 267 (holding that
in-state liquor wholesalers had standing to challenge a Hawaii law
that allegedly burdened out-of-state liquor producers because the
wholesalers suffered economic injury); see also Gen. Motors Corp.
v. Tracy, 519 U.S. 278, 286 (1997).
Having confirmed the Alliance's standing, we turn to the
merits of the claim. The Alliance, as the party challenging the
validity of the recoupment bar, bears the burden of demonstrating
that the statute was animated by a discriminatory purpose. See
Hughes v. Oklahoma, 441 U.S. 322, 336 (1979). Notwithstanding the
generosity inherent in our standard of review — we must assay the
facts in the light most flattering to the party against whom
summary judgment has been granted, Houlton Citizens' Coal., 175
F.3d at 184 — the Alliance has failed to carry this burden.
The most debilitating weakness in this argument results
from the fact that the Alliance loses sight of the forest while
searching for trees. The purpose of a statute, like its meaning,
must be discerned from the statute as a whole. Thus, context is a
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critically important interpretive tool. See Edwards v. Aguillard,
482 U.S. 578, 594 (1987) ("The plain meaning of the statute's
words, enlightened by their context and the contemporaneous
legislative history, can control the determination of legislative
purpose."). The Alliance's strained attempt to piece together
isolated bits of evidence ignores the larger context in which the
recoupment bar rests. An assessment of that larger context makes
manifest the evident purpose of the recoupment bar.
The recoupment bar is fully integrated into Maine's motor
vehicle franchise law. See Me. Rev. Ann. Stat. tit. 10, §§ 1171 to
1190-A. It comprises one sentence of one section of that
intricately constructed law — a section that has been on the books,
in one form or another, for three decades. See id. § 1176. The
rationale for the motor vehicle franchise law can be found within
the four corners of the statute itself: its purpose is "to prevent
frauds, impositions and other abuses against residents and to
protect and preserve the economy, the investments of residents, the
public safety and the transportation system of the State." Id. §
1182. Although the legislature adopted this policy in 1997 (before
the recoupment bar was even a gleam in its sponsors' eyes), its
spirit permeates the statutory scheme and reflects the core purpose
of section 1176 (which, of course, had been on the books for over
twenty years when the policy statement was adopted).
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Seen in this light, it is readily apparent that the
overriding legislative objective behind section 1176 was to prevent
an unfair price differential between warranty and non-warranty
repair work — a differential that the Maine legislature reasonably
viewed as detrimental to consumers and motor vehicle dealers alike.
Ford's counter — the imposition of the warranty parity surcharge —
thwarted this purpose and revealed the existence of a loophole in
the retail-rate reimbursement provision. The recoupment bar was a
device designed to plug that loophole and restore the structural
integrity of section 1176's warranty-reimbursement scheme.
Read in its entirety, the Retail Rate Commission Report
confirms this understanding. In the opening sections of that
document, the Commission reiterated the root purposes of section
1176: "to protect retail customers" and "to protect Maine
automobile dealers from the superior bargaining position of the
national manufacturers." The Commission deemed "[t]he current
surcharge practices of the manufacturers" as "contrary to the
intent of the statute" and premised its consideration of the cost-
recovery question on that assumption. Against this background, the
Commission's occasional references to the surcharge's competitive
impact on Maine motor vehicle dealers are best understood as
efforts to highlight a concrete manifestation of the harm
attributable to the surcharge, not as statements of legislative
purpose.
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The presence of other, less direct evidence reinforces
this view. In this regard, the most salient fact is that the
recoupment bar is closely tailored to achieve the legislative
purpose stated in section 1182. Cf. Hunt v. Wash. State Apple
Adver. Comm'n, 432 U.S. 333, 352 (1977) (finding it "somewhat
suspect" that the means chosen to effectuate the challenged
regulation's "ostensible . . . purpose" were relatively
ineffective). The recoupment bar plugs the loophole that Ford was
exploiting with perfect precision and ensures that manufacturers,
not dealers or consumers, will bear the true cost of retail-rate
reimbursement.
The Alliance urges us to look past this larger context
based on the tenet that "[l]ess deference to . . . legislative
judgment is due . . . where the local regulation bears
disproportionately on out-of-state residents and businesses."
Kassel v. Consol. Freightways Corp., 450 U.S. 662, 675-76 (1981).
That tenet is inapposite here. The Kassel Court's exhortation to
look beyond legislative judgments is predicated on the existence of
a threshold condition: the statute must bear disproportionately on
out-of-state interests. As we soon discuss, see infra Part
II(B)(2)-(3), the recoupment bar does not possess so invidious an
impact.
At any rate, the legislative process evidence upon which
the Alliance relies is indeterminate. As a general rule, statutory
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interpretation cannot safely be made to rest upon inferences drawn
from intermediate legislative maneuvers. See Trailmobile Co. v.
Whirls, 331 U.S. 40, 61 (1947). In this instance, such reliance
would be especially problematic because there are countless reasons
why the state legislature may have altered its position.
Where, as here, a party presents circumstantial evidence
of an allegedly discriminatory purpose in support of a dormant
Commerce Clause argument, it is that party's responsibility to show
the relationship between the proffered evidence and the challenged
statute. See E. Ky. Res. v. Fiscal Court, 127 F.3d 532, 543 (6th
Cir. 1997). While statements by a law's private-sector proponents
sometimes can shed light on its purpose, see, e.g., S.D. Farm
Bureau v. Hazeltine, 340 F.3d 583, 594-95 (8th Cir. 2003), the
correspondence of a single lobbyist has little (if any) probative
value in demonstrating the objectives of the legislative body as a
whole. See, e.g., Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1048
(D.C. Cir. 1997). This is particularly so when, as in this case,
far stronger statements of intent can be gleaned from official
legislative sources. See Garcia v. United States, 469 U.S. 70, 76
(1984) (eschewing reliance on the comments of a single legislator
and emphasizing that "the authoritative source for finding the
Legislature's intent lies in the Committee Reports on the bill").
None of this is to say that the legislature was blind to
the plight of Maine's motor vehicle dealers. The record makes
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pellucid, however, that if a potential discriminatory purpose was
lurking in the background, that purpose was, at most, incidental to
the primary purposes that we have identified. Incidental purpose,
like incidental effect, cannot suffice to trigger strict scrutiny
under the dormant Commerce Clause. Cf. Pike, 397 U.S. at 142(adhering to a lower level of scrutiny when "effects on interstate
commerce are only incidental").
2. Discriminatory Effect. We turn next to the
Alliance's attempt to demonstrate that the recoupment bar has a
discriminatory effect. The Alliance posits that the recoupment bar
manifests this pernicious effect in two ways: first, it eliminates
the competitive advantage of New Hampshire dealers vis-à-vis Maine
dealers; and second, it exports the cost of retail-rate
reimbursement nationally to out-of-state dealers. The problem here
is practical, not conceptual. After combing the record, we
conclude that the Alliance has not put forth sufficient evidence to
survive summary judgment with respect to either such effect.
To support its assertion that the recoupment bar has an
advantage-stripping effect on New Hampshire dealers, the Alliance
relies on one central piece of evidence — a stipulation that
"[t]here is some competition between motor vehicle dealers in Maine
and motor vehicle dealers in other states." That stipulation,
however, bears only a tangential relationship to the Alliance's
theories of discriminatory effect. While the Alliance visualizes
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the recoupment bar as "an effort to stem the tide of customers
deciding to purchase motor vehicles in New Hampshire rather than
Maine," Appellant's Br. at 25,5 the stipulation supplies no proof
of a cross-border "tide." There is likewise no evidence of how
Ford's implementation of a warranty parity surcharge may (or may
not) have affected interstate competition, nor is there any
evidence of the recoupment bar's supposed interference with the
competitive process. For all that the record discloses, we could
just as easily surmise that any success that New Hampshire dealers
may have had in luring Maine customers was premised on, say, better
service, a willingness to accept lower profit margins, more
convenient locations, or New Hampshire's eschewal of a general
statewide sales tax.
To be sure, the Alliance endeavors to bolster the
stipulation by reiterating the same amalgam of Retail Rate
Commission and lobbyist statements on which it relied in its
assertion of discriminatory purpose. For good measure, it adds the
observation of a Ford official that state-specific pricing actions
"may put [dealers] at a cost disadvantage . . . vis-[à]-vis dealers
in bordering states." These augmentations add nothing of substance
to the Alliance's claim. At best, they reflect generalizations,
5
All citations to the appellant's brief refer to the version
filed under seal.
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unsupported by either statistical analysis or concrete facts, about
the competitive position of Maine dealers.6
As to its contention that the recoupment bar "effectively
require[s] that all dealers nationwide fund the additional
manufacturer payments associated with warranty repairs in Maine,"
Appellant's Br. at 35, the Alliance once again relies on a single
piece of evidence: this time, the insistence of a General Motors'
plenipotentiary that her company cannot absorb costs, but, as a
commercial entity, must account for them somehow (such as through
national price adjustments).7 But this statement is a waif in the
wilderness. The Alliance adduced no evidence of national vehicle
pricing, and nothing in the record illuminates wholesale vehicle
6
In their briefs and at oral argument, the parties devoted
much time and energy to New Hampshire's retail-rate reimbursement
law. N.H. Rev. Stat. Ann. § 357-C:5(II)(b). Although that statute
is similar to Maine's retail-rate reimbursement law, manufacturers
have continued to pay for warranty work at discounted rates.
Against this background, the State argued that New Hampshire's
requirement is mandatory and that the Alliance, by flouting that
requirement, improperly fabricated the competitive advantage that
it claims Maine law destroys. The Alliance demurs; it interprets
New Hampshire's statute as optional, and insists that New Hampshire
dealers are simply not submitting claims for retail rates. We need
not resolve these conflicting accounts because the Alliance has not
presented enough evidence of discriminatory effect to warrant
further inquiry into the requirements of New Hampshire law.
7
It seems odd to rely on General Motors for concrete evidence
of the recoupment bar's effects, given that General Motors has
never imposed a warranty parity surcharge in Maine. To compound
the oddity, the record contains a statement from a representative
of Ford that cost absorption is in fact an option and, moreover, an
option to which Ford has resorted in the past. Because of the
overall paucity of proof, however, we need not explore these
curiosities.
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prices in Maine, New Hampshire, or elsewhere. By like token, there
is not a shred of evidence that speaks reliably to trends in
pricing after Maine's enactment of either its retail-rate
reimbursement law or the recoupment bar. Finally, the record fails
to provide a definitive statement of retail-rate reimbursement
costs incurred by manufacturers in Maine for which they allegedly
must account.
The proponent of a dormant Commerce Clause claim bears
the burden of proof as to discrimination. See Hughes, 441 U.S. at
336. To block summary judgment, the party having the burden of
proof on a critical issue must present evidence on that issue that
is "significantly probative," not "merely colorable." Cadle Co. v.
Hayes, 116 F.3d 957, 960 (1st Cir. 1997) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986)). The Alliance
has not satisfied that requirement here; it has offered only
prognostications woven from the gossamer strands of speculation and
surmise, unaccompanied by any significantly probative evidence of
either advantage-stripping or cost-exportation. That is inadequate
to make out a genuine issue of material fact.8 See Medina-Munoz v.
R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990)
(explaining that "conclusory allegations, improbable inferences,
8
Because the Alliance has failed in its proof, we need not
decide whether its legal theories of discriminatory effect, if
adequately supported by probative evidence, would suffice to
trigger strict scrutiny.
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and unsupported speculation" are entitled to no weight in the
summary judgment calculus).
3. Extraterritorial Reach. The Alliance's final
Commerce Clause claim is that the recoupment bar has an
exterritorial reach that produces a constitutional infirmity. This
claim rests on the premise that the recoupment bar has the
impermissible "practical effect of tying the wholesale price of
motor vehicles in Maine to the wholesale price of identical motor
vehicles outside of Maine" by making "the wholesale price of motor
vehicles in Maine the minimum wholesale price in the 49 other
states." Appellant's Br. at 39-40. Despite this bold declaration,
the Alliance adduced no probative evidence of price-tying below.
On appeal, it rehashes yet again the same evidence that it offered
in connection with discriminatory purpose and adds one weapon to
its armamentarium — the suggestion of a Commission member that
Maine "should move into law that manufacturers may not charge a
different price to Maine dealers."
These statements (all of which were made well before the
legislature acted) tell us nothing about either the recoupment
bar's reach or its actual effect on national pricing. Furthermore,
the record reflects, and the Alliance itself acknowledges, that
manufacturers add state-specific surcharges to motor vehicle
wholesale prices for a wide variety of reasons (e.g., some
manufacturers impose a California-specific surcharge to recover
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costs associated with that state's environmental regulations).
This potential still exists for motor vehicles sold in Maine;
nothing in Maine law prevents automobile manufacturers from
adjusting their wholesale prices based on transportation costs,
labor costs, or the like. There is only one limitation:
manufacturers cannot use surcharges to recover warranty-
reimbursement costs (and, thus, to frustrate the purpose of Maine's
retail-rate reimbursement statute). Like the elephant in the
parlor, the implications of this conclusion are too obvious to
ignore. The recoupment bar does not transform Maine prices into
national minimum prices because automobile manufacturers retain the
ability to adjust those prices for any reason save one.
On this sparse record, our extraterritorial-reach inquiry
is short and to the point. The inference that the Alliance would
have us draw is simply too much of a stretch. In view of this
shortcoming and because the Alliance has not provided any other,
more reliable proof of the price-tying allegedly associated with
the recoupment bar, the lower court did not err in entering summary
judgment on the extraterritorial reach claim. See Fed. R. Civ. P.
56(c). Consequently, there is no cause to engage the Alliance's
legal theory.
C. The Contracts Clause Claim.
The Alliance also attacks the recoupment bar on a second
front. It argues that Maine, in derogation of the Contracts
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Clause, has trespassed on manufacturers' franchise agreements by
eliminating components of the manufacturers' pricing discretion.
The Contracts Clause declares that: "No State shall . .
. pass any . . . Law impairing the Obligation of Contracts . . . ."
U.S. Const. art. I, § 10, cl. 1. Though seemingly absolute in its
prohibition, the Contracts Clause "must be accommodated to the
inherent police power of the State 'to safeguard the vital interest
of its people.'" Energy Reserves Group, Inc. v. Kan. Power & Light
Co., 459 U.S. 400, 410 (1983) (quoting Home Bldg. & Loan Ass'n v.
Blaisdell, 290 U.S. 398, 434 (1934)).
To determine whether the Contracts Clause is implicated,
a reviewing court first must ask "whether the state law has, in
fact, operated as a substantial impairment of a contractual
relationship." Allied Structural Steel Co. v. Spannaus, 438 U.S.
234, 244 (1978). This inquiry elicits an affirmative answer only
if "a contractual relationship exists, that relationship is
impaired by a change in the law, and the resultant impairment is
substantial." Houlton Citizens' Coal., 175 F.3d at 190. The first
two of these three factors are often easily satisfied, and this
case falls into that pattern: automobile manufacturers typically
have franchise agreements with dealers that reserve the right to
set wholesale motor vehicle prices unilaterally, see supra note 1,
and the recoupment bar now restricts their ability to exercise that
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right. The question of substantial impairment is, therefore,
dispositive.
The parties' reasonable expectations are central to the
issue of substantiality. In that regard, it is especially
important whether or not the parties have been operating in a
regulated industry. Energy Reserves, 459 U.S. at 413; Houlton
Citizens' Coal., 175 F.3d at 190. Maine has heavily regulated the
manufacturer-dealer franchise relationship, including warranty
reimbursement rates, since 1975. See 1975 Me. Laws 1732-39
(codified as amended at Me. Rev. Stat. Ann. tit. 10, §§ 1171 to
1190-A); see also Alliance I, 304 F. Supp. 2d at 115. The
recoupment bar — a necessary means to effectuate the State's
warranty reimbursement policy — was a foreseeable addition to that
regulatory regime. It was, therefore, permissible under the
Contracts Clause. After all, if the Contracts Clause allows a
State to dictate the price of warranty repairs in the first
instance, it perforce allows the State to require that the
manufacturer, rather than the dealer or the consumer, absorb the
true cost of those repairs. Cf. Exxon Corp. v. Eagerton, 462 U.S.
176, 194 (1983) (holding that a State that regulates the price of
a commodity may require the sellers to "absorb a tax increase
themselves rather than pass it through to their consumers").
It follows inexorably, as night follows day, that the
recoupment bar did not substantially impair franchise agreements
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entered after 1975. Those franchise agreements were executed with
the knowledge and expectation of pervasive state regulation.
As to franchise agreements entered before 1975 — the
record reveals no fewer than six that fit into that taxonomy — our
inquiry continues. As to those agreements, we ask "whether the
impairment, albeit substantial, is reasonable and necessary to
fulfill an important public purpose." McGrath v. R.I. Ret. Bd., 88
F.3d 12, 16 (1st Cir. 1996). The public purpose requirement
ensures that the State is exercising its police power and not
catering to special interests. See Energy Reserves, 459 U.S. at
412.
As we have said, Maine's legislature passed the
recoupment bar as a consumer- and dealer-protection measure to plug
a loophole in, and better effectuate the goals of, the state's
retail-rate reimbursement law. See supra Part II(B)(1). That
rationale brings the recoupment bar squarely within the category of
remedies to generalized social or economic problems that constitute
legitimate subjects for legislation, notwithstanding the
imperatives of the Contracts Clause. See Energy Reserves, 459 U.S.
at 411-12; see also Greenwood Trust Co. v. Massachusetts, 971 F.2d
818, 828 (1st Cir. 1992) (describing "consumer protection" as a
"subject[] over which the states have traditionally exercised their
police powers").
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The Alliance tries to parry this thrust by characterizing
the recoupment bar as a direct adjustment of manufacturers' and
dealers' contractual rights. That characterization elevates hope
over reason. In each of the cases on which the Alliance relies,
the reviewing court found no credible evidence of a legitimate
public purpose. See Equip. Mfrs. Inst. v. Janklow, 300 F.3d 842,
860-61 (8th Cir. 2002) (noting that "both the State and the
[defendant] concede that the Act's purpose is to level the playing
field between manufacturers and dealers" and that there was no
evidence of any significant public purpose); McDonald's Corp. v.
Nelson, 822 F. Supp. 597, 608-09 (S.D. Iowa 1993) (pointing out
that "the articulated overall purpose of the Act is specifically to
adjust the balance of power between the contracting parties" and
that the Act implicated no broad societal interest). As we already
have explained, Maine's recoupment bar aspires to protect consumers
as well as dealers. Its purpose is much broader than a simple
reallocation of existing contractual rights and, thus, that purpose
qualifies as significant, legitimate, and public. See Energy
Reserves, 459 U.S. at 411-12 & n.13.
When, as in this instance, the State is not a party to a
contract, courts ordinarily defer, within broad limits, to the
legislature's judgment about the reasonableness and necessity of a
particular measure. See id. at 412-13. Given the recoupment bar's
evident purpose and the legislature's careful tailoring of it to
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fit that purpose, we are constrained to follow that praxis here.
We hold, therefore, that the recoupment bar passes muster under the
Contracts Clause as to both pre-1975 and post-1975 franchise
agreements.
III. CONCLUSION
Refined to bare essence, this appeal involves a policy
decision by the Maine legislature to prevent motor vehicle
manufacturers from imposing compulsory discounts on dealers who
perform warranty repairs. In the case of a particular
manufacturer, that policy decision was negated by a warranty parity
surcharge added to the wholesale price of all vehicles sold to
Maine dealers. The legislature countered by enacting the
recoupment bar as a means of plugging the loophole and restoring
the structural integrity of its original policy. The Alliance
strives to characterize this wholly Maine sequence of events as a
deprivation of an out-of-state competitive advantage, a cost-
exporting scheme, or a price-tying mechanism. To advance such a
characterization is tantamount to saying that when a State resolves
to prevent or correct a practice pursued by a manufacturer, which
it reasonably has determined is contrary to its declared public
policy, it must force its own citizens rather than the errant
manufacturer to bear the cost. The Constitution does not require
so Kafkaesque a scenario. Thus, we hold that the Alliance's
Commerce Clause claims are without merit.
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The Alliance's attempt to dress this case in the raiment
of a Contracts Clause violation fares no better. Maine heavily
regulates franchise agreements between motor vehicle manufacturers
and dealers, and the recoupment bar does not impermissibly impinge
upon those agreements.
We need go no further. The upshot is that the district
court's grant of summary judgment in favor of the State was
entirely correct.
Affirmed.
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