Intl Truck & Engine v. Bray

United States Court of Appeals
Fifth Circuit
F I L E D
Revised June 21, 2004
June 3, 2004
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 03-50479
INTERNATIONAL TRUCK AND ENGINE CORPORATION,
Plaintiff-Appellant,
versus
BRETT BRAY, In his official capacity as the Director of the Motor
Vehicle Division of the Texas Department of Transportation and
Chief Executive and Administrative Officer of the Motor Vehicle
Board of the Texas Department of Transportation,
Defendant-Appellee.
--------------------
Appeal from the United States District Court
for the Western District of Texas
--------------------
Before KING, Chief Judge, and BENAVIDES and CLEMENT, Circuit
Judges.
BENAVIDES, Circuit Judge:
Plaintiff-Appellant International Truck and Engine
Corporation, a manufacturer of medium- and heavy-duty trucks,
operates two used truck centers at which it sells trucks of the
kind it manufactures. Defendant-Appellee Brett Bray is Director of
the Motor Vehicle Division of the Texas Department of
Transportation, the agency responsible for regulating sales of
motor vehicles in Texas. Since 1999, the Director has maintained
that Texas law prohibits motor vehicle manufacturers like
International from owning, operating, controlling, or acting as
dealers of motor vehicles. See Tex. Occ. Code Ann. § 2301.476
(Vernon 2004). The Director has therefore refused to renew
International’s license to operate its used truck centers.
International contends that this refusal is unlawful. First,
International argues that section 2301.476(c) prohibits
manufacturers from acting as dealers of new vehicles, not from
acting as dealers of used vehicles. Alternatively, International
argues that if section 2301.476(c) applies to used vehicles, then
it violates the dormant Commerce Clause. The district court
granted summary judgment in favor of the Director. Because we
conclude that section 2301.476(c) prohibits International from
acting as a dealer of used vehicles and does not violate the
dormant Commerce Clause, we affirm the judgment of the district
court.
I.
Since 1995, the Texas Motor Vehicle Code has prohibited
manufacturers of motor vehicles from operating as dealers of new
motor vehicles. See Act of June 8, 1995, ch. 357, §§ 2, 18, 1995
Tex. Gen. Laws 2887, 2889, 2900 (codified at Tex. Rev. Civ. Stat.
Ann. art. 4413(36), § 5.02(a), (b)(25) (Vernon Supp. 1999) (amended
2
1999)). This provision did not affect International’s used truck
centers, which sold used trucks only.1
In 1999, the Texas Legislature extensively amended the Motor
Vehicle Code. See Act of June 18, 1999, ch. 1047, 1999 Tex. Gen.
Laws 3861. As amended, the Code included section 5.02C(c), which
provided that “a manufacturer or distributor may not directly or
indirectly: (1) own an interest in a dealer or dealership; (2)
operate or control a dealer or dealership; or (3) act in the
capacity of a dealer.” Id. § 14, 1999 Tex. Gen. Laws at 3875
(codified at Tex. Rev. Civ. Stat. Ann. art. 4413(36), § 5.02C(c)
(Vernon Supp. 2002) (repealed 2003)). The Motor Vehicle Division,
which was responsible for enforcing this provision of the Code,
interpreted section 5.02C(c) as prohibiting manufacturer control of
any dealer, not just dealers of new vehicles.
Section 5.02C(c) thus prohibited International from owning and
operating its used truck centers, and in 2000, the Motor Vehicle
Division announced that it would not renew International’s dealer
license. International then sued the Director in federal court for
declaratory and injunctive relief. International conceded that, as
written, section 5.02C(c) prohibited it from acting as a dealer of
1
Texas statutes do not use the term “used” to describe motor vehicles, but
they do define “new motor vehicle” as “a motor vehicle that has not been the
subject of a ‘retail sale’ regardless of the mileage of the vehicle,” Tex. Occ.
Code § 2301.002(24). The large majority of trucks at issue in this case are not
“new” under Texas law, so for ease of reference, we will call these trucks
“used.” We do not intend by our references to “new” and “used” to adjudicate
whether any vehicles are “new motor vehicles” under Texas law or to delineate by
implication the scope of section 2301.476(c).
3
used trucks. International, however, argued that section 5.02C(c)
was invalid because it violated the dormant Commerce Clause and the
Equal Protection Clause. The parties agreed that International
could continue to operate its used truck centers during the
pendency of the district court case and this appeal.
While International’s suit was pending in the district court,
we addressed a similar challenge to section 5.02C(c) in Ford Motor
Co. v. Texas Department of Transportation, 264 F.3d 493 (5th Cir.
2001). Ford wanted to sell “pre-owned” motor vehicles through a
website and alleged that section 5.02C(c) violated a number of
constitutional provisions, including the dormant Commerce Clause.
Id. at 498. International submitted a brief as an amicus curiae in
support of Ford. We rejected Ford’s and International’s arguments
and held that Texas could constitutionally prohibit manufacturers
from controlling dealers. Id. at 499-505.
International subsequently amended its complaint.
International maintained its constitutional challenges and also
argued that, as interpreted in Ford, section 5.02C(c) did not bar
manufacturers from controlling dealers of used vehicles.
International then sought partial summary judgment on its statutory
claim only. The Director answered International’s amended
complaint and sought summary judgment on International’s statutory
and constitutional claims.
4
The district court granted summary judgment to the Director.
The court determined that statements in Ford purporting to limit
section 5.02C(c) to sales of new vehicles were non-binding dicta
and construed section 5.02C(c) to prohibit manufacturer control of
all motor vehicle dealers. The court also ruled that section
5.02C(c) violated neither the Commerce Clause nor the Equal
Protection Clause. International appealed.2
While this appeal was pending, a nonsubstantive recodification
passed by the Legislature in 2001 became effective. See Act
effective June 1, 2003, ch. 1421, §§ 5, 13, 2001 Tex. Gen. Laws
4570, 4954, 5020. This recodification repealed section 5.02C(c) of
the Motor Vehicle Code and enacted an identical provision as
section 2301.476(c) of the Occupations Code. Id. The parties have
clarified that International is challenging section 2301.476, the
current version of Texas’s ban on manufacturer control of dealers.
Therefore, this appeal raises two questions: whether section
2301.476(c) bars manufacturers from owning, operating, or acting as
dealers of used vehicles and, if so, whether section 2301.476(c)
violates the dormant Commerce Clause.3 We review de novo the
2
On appeal, International has abandoned its claim under the Equal Protection
Clause.
3
In one heading in its appellate brief, International purports to have
advanced a “Procedural-Due-Process Claim.” International has not supported this
heading with any arguments or authorities pertaining to procedural due process,
so we treat International’s argument about the meaning of section 2301.476(c) as
presenting a question of statutory interpretation, not a question of
constitutional law.
5
district court’s grant of summary judgment. See New Orleans
Assets, L.L.C. v. Woodward, 363 F.3d 372, 374 (5th Cir. 2004).4
II.
We first address whether section 2301.476(c) bars
manufacturers from owning, operating, controlling or acting as
dealers of used vehicles. International, relying principally on
our treatment of section 5.02C(c) in Ford, argues that “dealer”
refers only to a dealer of new motor vehicles. Therefore,
International argues, section 2301.476(c) does not prohibit it from
acting as a dealer of used trucks. The Director maintains that
section 2301.476(c) bars a manufacturer from owning, operating, or
acting as a dealer of any vehicles whether new or used. We
conclude that Ford’s treatment of section 5.02C(c) does not bind us
and that section 2301.476(c) applies to dealers of new and used
motor vehicles.
A.
4
We have jurisdiction to consider this controversy. The Director, relying
on Fleet Bank, National Association v. Burke, 160 F.3d 883 (2d Cir. 1998), argues
that International’s constitutional claims are insufficient to invoke federal
question jurisdiction under the well-pleaded complaint rule. Fleet Bank is
inapposite. The Second Circuit carefully limited its holding in Fleet Bank to
the context of preemption. Id. at 889. Preemption, standing alone, creates a
federal defense but not a federal question. Id. International’s dormant
Commerce Clause challenge, in contrast, raises a federal question.
In a cursory reference at the beginning of his brief, the Director also
claims sovereign immunity from International’s suit. The Director waived
sovereign immunity. A state “cannot simultaneously proceed past the motion and
answer stage to the merits and hold back an immunity defense.” Neinast v. Texas,
217 F.3d 275, 279 (5th Cir. 2000). By seeking summary judgment on the merits
before raising sovereign immunity, the Director did exactly that.
6
We begin by determining whether Ford’s treatment of
2301.476(c)’s predecessor, section 5.02C(c) of the Motor Vehicle
Code, controls our interpretation of section 2301.476(c). In Ford,
we stated twice that section 5.02C(c) of the Motor Vehicle Code
applied only to dealers of new motor vehicles. 264 F.3d at 504
n.5, 508-09. The district court treated these statements as non-
binding dicta, but International argues that they are binding
interpretations of Texas law.
The first passage relied upon by International appears in
Ford’s discussion of the dormant Commerce Clause. Id. at 499-505.
Ford had argued that section 5.02C(c) did not further Texas’s
purported interest in reducing manufacturer leverage over dealers
because Ford did not enjoy a superior position in the market for
the “pre-owned vehicles” it sought to sell. Id. at 503-04. In the
course of rejecting this argument, we commented in a footnote that
“[t]he Code only prohibits a manufacturer from selling ‘new motor
vehicles’--motor vehicles which have not been the subject of a
prior retail sale.” Id. at 504 n.5.
This statement is dictum and, as such, does not bind us. See
Gochicoa v. Johnson, 238 F.3d 278, 286 n.11 (5th Cir. 2000). A
statement is dictum if it “could have been deleted without
seriously impairing the analytical foundations of the holding” and
“being peripheral, may not have received the full and careful
consideration of the court that uttered it.” Id. (quoting In re
7
Cajun Elec. Power Coop., Inc., 109 F.3d 248, 256 (5th Cir. 1997)).
A statement is not dictum if it is necessary to the result or
constitutes an explication of the governing rules of law. Id.
Our commentary in the footnote at issue was not necessary to
the resolution of Ford’s dormant Commerce Clause challenge and we
did not rely on it in rejecting that challenge. Moreover, this
statement was not an explication of the law governing our analysis,
but commentary on a quirk in the Texas statutes. Therefore, the
first passage relied upon by International is dictum, and we may
disregard it.
The second passage relied upon by International appears in
Ford’s discussion of vagueness. See 264 F.3d at 507-10. Ford
claimed that it had no fair notice of what conduct constituted
“operating or controlling a dealer” or “acting in the capacity of
a dealer” under Texas law. Id. at 507. We addressed this claim by
explaining section 5.02C(c). We began with the premise that “[t]he
Motor Vehicle Code provides that for purposes of [section] 5.02,
‘dealer’ means ‘franchised dealer’” and therefore reasoned that “in
deciding whether [section] 5.02C(c) provides a comprehensible
standard for ‘acting in the capacity of a dealer,’ this Court must
first look to the definition of a franchised dealer.” Id. We then
8
observed that franchised dealers are dealers of new motor vehicles.
Id.5
Whether this section of Ford’s analysis represents dictum is
a close question. Ford’s equation of dealer and franchised dealer
was not strictly necessary to its conclusion that section 5.02C(c)
was not vague. Rather, the crux of Ford’s vagueness analysis is
that “[t]he phrase ‘in the capacity of a dealer’ is naturally read
to include those activities performed by a licensed dealer,” and
that “[t]he Code defines exactly what activities are performed by
a dealer--buying, selling, or exchanging motor vehicles.” Id. at
510. This analysis did not hinge on whether vehicles are new or
used. Nevertheless, the Ford panel’s explanation of the challenged
statute was not mere commentary but was arguably part of Ford’s
explication of governing law. See Gochicoa, 238 F.3d at 286 n.11.
In essence, Ford reasoned that section 5.02C(c) was not vague
because it had a particular meaning, albeit a meaning section
5.02C(c) may not have had.
We need not resolve this question, however, because even were
this second passage not dicta, it still would not bind us. A prior
5
Texas law provides for several different types of dealers. See Tex. Occ.
Code Ann. § 2301.002(7), (16), (25) (Vernon 2004); Tex. Transp. Code Ann. §
503.001(4) (Vernon Supp. 2004). A franchised dealer buys, sells, and exchanges
new motor vehicles. Tex. Occ. Code Ann. § 2301.002(16); Tex. Transp. Code §
503.001(8). “Nonfranchised” dealers include wholesale motor vehicle dealers and
independent motor vehicle dealers. Tex. Occ. Code Ann. § 2301.002(25).
Wholesale motor vehicle dealers sell motor vehicles to other dealers or to
certain foreign dealers. Tex. Transp. Code Ann. § 503.001(16). Independent
motor vehicle dealers are all other dealers. Id. § 503.001(9). International
fits in this residual category, so it holds an independent dealer’s license.
9
panel opinion’s interpretation of state law binds us no less firmly
than a prior panel interpretation of federal law would. Am. Int’l
Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 270 n.4
(5th Cir. 2003). When we interpret state law, however, we are also
bound to apply the law as the state’s highest court would. FDIC v.
Abraham, 137 F.3d 264, 267-68 (5th Cir. 1998). To balance these
obligations, we recognize that we need not follow a prior panel
opinion when a subsequent state court decision or statutory
amendment shows that a prior panel decision was clearly wrong. Id.
at 269.
A subsequent statutory amendment undermines the passage in
question. In 2001, the Legislature passed a recodification of
section 5.02C(c) that became effective in 2003. See Act effective
June 1, 2003, ch. 1421 §§ 5, 13, 2001 Tex. Gen. Laws 4570, 4954,
5020. As part of this recodification, the Legislature repealed
article 4413(36) of the Motor Vehicle Code, including section
5.02C(c), and replaced it with chapter 2301 of the Occupations
Code. Id. §§ 5, 13, 2001 Tex. Gen. Laws at 4954, 5020.
The Legislature intended this recodification to be
nonsubstantive. Id. § 14, 2001 Tex. Gen. Laws at 5020. In most
cases, that intent would confirm that a prior panel’s prediction of
state law was correct. In this unique instance, however, the
nonsubstantive nature of the recodification leads us to precisely
10
the opposite conclusion.6 We stated in Ford that “[t]he Motor
Vehicle Code provides that for purposes of [section] 5.02, ‘dealer’
means ‘franchised dealer.’” 264 F.3d at 508. The only plausible
basis for this statement was old section 5.02(a), which provided:
“In this section, ‘dealer’ means ‘franchised dealer.’” Tex. Rev.
Civ. Stat. Ann. art. 4413(36), § 5.02(a) (Vernon 2002) (repealed
2003) (emphasis added). We then assumed that the equation of
“dealer” and “franchised dealer” in old section 5.02(a) applied to
old section 5.02C. See Ford, 264 F.3d at 508.
Subsequent legislation, however, clarifies that section
5.02(a) applied only within section 5.02 and that section 5.02C was
a separate section. The recodification eliminated old section
5.02(a), and the subsections to which section 5.02(a) had applied
were modified to clarify that they apply only to franchised
dealers. See Act effective June 1, 2003, §§ 5, 13, 2001 Tex. Gen.
6
The Texas Supreme Court confronted the meaning of a purportedly
nonsubstantive recodification in Fleming Foods of Texas, Inc. v. Rylander, 6
S.W.3d 278 (Tex. 1999). In that case, the Legislature directed that a statute
be recodified without substantive changes, but the plain text of the recodified
statute bore a meaning different from its predecessor. Id. 280-81. Despite the
fact that the Legislature had intended that the recodification be nonsubstantive,
the court held that the plain text of the recodified statute controlled. Id. at
286. In particular, the court emphasized the importance of Texas’s citizens
being able to rely upon the plain text of a current law rather than having to
examine legislative and statutory history. Id. 284-85.
Fleming Foods does not control this case because the text of section
2301.476(c) does not unequivocally demonstrate that the recodification was, in
actuality, substantive. See id. at 286. Rather, it is precisely the
nonsubstantive nature of the recodification that proves our prior interpretation
was in error. We note with interest, however, the Texas Supreme Court’s
adherence to the text of the recodified statute in roughly analogous
circumstances. We also echo the Texas Supreme Court’s concern that citizens be
able to rely on the plain text of the current Code.
11
Laws at 4439, 4947-53, 5020. Compare Tex. Occ. Code Ann. §§
2301.251, 2301.451-.471 (Vernon 2004), with Tex. Rev. Civ. Stat.
Ann. art. 4413(36), § 5.02(b)(1)-(27). In contrast, when section
2301.476(c) replaced section 5.02C(c), the new provision was not
modified to demonstrate its application to franchised dealers only.
See Act effective June 1, 2003, § 5, 2001 Tex. Gen. Laws at 4954.
Compare Tex. Occ. Code Ann. § 2301.476(c), with Tex. Rev. Civ.
Stat. Ann. art. 4413(36), § 5.02C(c). If Ford were correct, the
wording of section 5.02C(c) would likewise have been changed. As
the Occupations Code stands, however, the basis for Ford’s equation
of “dealers” and “franchised dealers” has evaporated. Therefore,
Ford’s understanding of section 5.02C(c) does not control our
interpretation of section 2301.476(c).7
B.
We thus turn to the meaning of section 2301.476(c) as
currently codified. Applying Texas principles of statutory
interpretation, see Tonkawa Tribe v. Richards, 75 F.3d 1039, 1046
(5th Cir. 1996), we hold that the term “dealer” in section
2301.476(c) extends to all dealers, not just dealers of new
vehicles.
7
Our understanding of section 2301.476(c) does not undermine Ford’s holding
that section 5.02C(c) was not vague. Now, as in Ford, Texas statutes delineate
what conduct is prohibited by defining what activities constitute acting as a
dealer. See Ford, 264 F.3d at 410.
12
First, when a statute defines a term, Texas courts must
construe that term according to its statutory definition. Tex.
Gov’t Code Ann. § 311.011(b) (Vernon 1998); Tex. Dep’t of Transp.
v. Needham, 82 S.W.3d 314, 318 (Tex. 2002). In chapter 2301 of the
Texas Occupations Code, the term dealer means “a person who holds
a general distinguishing number,” i.e, a dealer’s license. Tex.
Occ. Code Ann. § 2301.002(7), (17). All dealers must hold general
distinguishing numbers whether the vehicles they sell are new or
not. See Tex. Transp. Code §§ 503.021, 503.029 (Vernon 1999). In
fact, International filed this suit to retain the general
distinguishing number it needs to operate its used truck centers.
Therefore, the term “dealer” encompasses all dealers, including
International.
Second, Texas courts must interpret statutory terms
consistently. See Needham, 82 S.W.3d at 318. If “dealer” meant
only “a dealer of new vehicles” for purposes of section
2301.476(c), then a “dealer” in section 2301.476(c) would be
different from a “dealer” in other parts of the Occupations and
Transportation Codes. See Tex. Occ. Code Ann. § 2301.002(7), (17);
Tex. Transp. Code Ann. § 503.002(4) (Vernon Supp. 2004). To remain
consistent throughout the Occupations and Transportation Codes,
“dealer” must include dealers of used vehicles.
Third, Texas courts avoid interpreting statutory language as
superfluous. Tex. Gov’t Code Ann. § 311.021(2) (Vernon 1998); Bd.
13
of Adjustment v. Wende, 92 S.W.3d 424, 432 (Tex. 2002). Courts
“must attempt to give effect to every word and phrase if it is
reasonable to do so.” Abrams v. Jones, 35 S.W.3d 620, 625 (Tex.
2000). Several provisions within section 2301.476 refer to
“franchised dealers.” E.g., Tex. Occ. Code Ann. § 2301.476(d),
(f), (g). Were we to equate “dealer” with “franchised dealer” in
section 2301.476, these references to franchised dealers would
become superfluous.
International asserts that our construction of section
2301.476(c) creates a strange loophole. Section 2301.476(c)
prohibits a manufacturer from owning, operating, or controlling an
interest in a “dealer or dealership.” In chapter 2301 of the
Occupations Code, the term “dealership” means “the physical
premises and business facilities on which a franchised dealer
operates his business.” Tex. Occ. Code Ann. § 2301.002(8)
(emphasis added). Thus, the term “dealership” applies only to
“franchised dealers,” i.e., dealers of “new motor vehicles.” See
id. § 2301.002(16)(B). Because “dealer” does not apply to dealers
of new vehicles only, section 2301.476(c)(1) apparently prohibits
a manufacturer from owning an interest in a used car dealer, but
not from owning an interest in that dealer’s premises and business
facilities.8 Texas courts may consider the consequences of a
8
We note this possible loophole only as part of our analysis of the term
“dealer” and do not intend to enunciate a binding interpretation of section
2301.476(c)(1).
14
particular construction, Tex. Gov’t Code Ann. 311.023(5) (Vernon
1998), and will not adhere to a literal interpretation that is
“patently absurd.” City of Amarillo v. Martin, 971 S.W.2d 426, 428
n.1 (Tex. 1998). Although our reading leaves a loophole, that
reading is not patently absurd. Therefore, we may not depart from
the meaning of “dealer” as defined by the statute.
International also argues that the legislative and statutory
history of section 2301.476(c) indicates that it applies to new
cars only. In particular, International emphasizes that section
2301.476(c)’s pre-1999 predecessor applied to dealers of new cars
only. See Tex. Rev. Civ. Stat. Ann. art. 4413(36), §§ 1.03(15),
5.02(a), (b)(25) (Vernon Supp. 1999) (amended 1999). International
argues that the 1999 Legislature never intended to change the
meaning of these provisions. Under Texas principles of statutory
interpretation, however, “prior law and legislative history cannot
be used to alter or disregard the express terms of a code provision
when its meaning is clear from the code when considered in its
entirety.” Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278,
284 (Tex. 1999); see also Logan v. State, 89 S.W.3d 619, 627 (Tex.
Crim. App. 2002). The Occupations Code clearly defines dealer, and
we may not depart from that definition.
Therefore, the term “dealer” in section 2301.476(c) is not
limited to dealers of new vehicles. Section 2301.476(c) bars
15
International from owning, operating, or acting as a dealer of used
trucks.
III.
We turn next to International’s argument that if section
2301.476(c) bars International from acting as a dealer of used
trucks, then that provision violates the dormant Commerce Clause,
U.S. Const. art. I, § 8, cl. 3. The dormant Commerce Clause, also
known as the negative Commerce Clause, prohibits states from
engaging in economic protectionism. See Dickerson v. Bailey, 336
F.3d 388, 395 (5th Cir. 2003). International argues that section
2301.476(c) is the type of economic protectionism forbidden by the
dormant Commerce Clause. The Director insists that section
2301.476(c) is legitimate economic regulation with only incidental
and nondiscriminatory effects on commerce. We agree with the
Director.
To evaluate whether a state statute comports with the dormant
Commerce Clause, we begin by asking whether the statute
impermissibly discriminates against interstate commerce or
regulates evenhandedly with only incidental effects on interstate
commerce. Ford, 264 F.3d at 499. If the statute impermissibly
discriminates, then it is valid only if the state “can demonstrate,
under rigorous scrutiny, that it has no other means to advance a
legitimate local interest.” C & A Carbone, Inc. v. Town of
Clarkstown, N.Y., 511 U.S. 383, 392 (1994). If the statute does
16
not impermissibly discriminate, then the statute is valid unless
the burden imposed on interstate commerce is “clearly excessive” in
relation to the putative local benefits. Pike v. Bruce Church,
Inc., 397 U.S. 137, 142 (1970).
A.
Section 2301.476(c) does not impermissibly discriminate
against interstate commerce. In this context, discrimination means
“differential treatment of in-state and out-of-state economic
interests that benefits the former and burdens the latter.” Or.
Waste Sys., Inc. v. Dep’t of Envtl. Quality, 511 U.S. 93, 99
(1994). A court may find discrimination based on evidence of
discriminatory effect or discriminatory purpose. Bacchus Imports,
Ltd. v. Dias, 468 U.S. 263, 270 (1984).
As Ford makes clear, however, discrimination does not include
all instances in which a state law burdens some out-of-state
interest while benefitting some in-state interest. 264 F.3d at
500; see also Tex. Manufactured Hous. Ass’n v. City of Nederland,
101 F.3d 1095, 1102 (5th Cir. 1996)(“[T]he mere fact that a statute
has the effect of benefitting a local industry while burdening a
separate interstate industry does not in itself establish that the
statute is discriminatory.”). Rather, a state statute
impermissibly discriminates “only when a [s]tate discriminates
17
among similarly situated in-state and out-of-state interests.”
Ford, 264 F.3d at 500.9
Section 2301.476 does not discriminate between similarly
situated in-state and out-of-state interests. In Ford, the
plaintiff manufacturer failed to show that section 5.02C(c) was
discriminatory in purpose or effect. 264 F.3d at 502. We found
nothing in the legislative history to suggest that the Texas
Legislature intended to discriminate between similarly situated
interests. Id. at 500. Furthermore, we found no evidence of
discriminatory effect. Id. at 500-02. Section 5.02C(c) did not
discriminate against manufacturers based on out-of-state status;
motor vehicle manufacturers, whether Texas-based or not, could not
own, operate, control, or act as a dealer. Id. at 502. Nor did
section 5.02C(c) discriminate against dealers based on out-of-state
status; any non-manufacturer, whether Texas-based or not, could
9
Ford’s understanding of discrimination rests squarely on Exxon Corp. v.
Governor of Maryland, 437 U.S. 117 (1978), in which the Court evaluated a
Maryland law that prohibited producers and refiners of petroleum products from
operating retail service stations. The Court rejected Exxon’s claim that,
because Maryland had no in-state petroleum producers and refiners, the law
discriminated against out-of-state interests. Id. at 125. That the law affected
only out-of-state interests did not tend to prove impermissible discrimination.
Id. at 125-26. The law at issue did not discriminate between in-state and out-
of-state refiners or between in-state and out-of-state service stations. Id.
In contrast, the Court has found impermissible discrimination when a state
statute discriminates between similarly-situated interests. See, e.g., Or.
Waste, 511 U.S. at 100 (discrimination between in-state and out-of-state waste);
Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 42 (1980) (discrimination among
similarly-situated financial conglomerates according to their contacts with the
state); Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 351-52 (1977)
(benefit to in-state apple growers and dealers at the expense of out-of-state
apple growers and dealers).
18
receive a dealer license. Id. This rationale applies with equal
force to section 2301.476(c).
International characterizes Ford’s holding as a failure of
summary judgment proof and claims that the improved summary
judgment record in this case raises issues that the record in Ford
did not. Like Ford, however, International has failed to create
any genuine question that Texas law impermissibly discriminates
between similarly situated in-state and out-of-state interests.
First, International emphasizes that the practical effect of
section 2301.476(c) falls primarily on out-of-state companies.
That all or most affected businesses are located out-of-state does
not tend to prove that a statute is discriminatory. See Exxon, 437
U.S. at 126; Ford, 264 F.3d at 502. Thus, the record that
International has purportedly enhanced supports a proposition we
have already dismissed as irrelevant.
International also relies heavily on an exception to section
2301.476(c) added by the Legislature in 1997. See Act of May 22,
1997, ch. 639, § 36, 1997 Tex. Gen. Laws 2158, 2007. That
exception provides that a person who held both a motor home
manufacturer’s license and a motor home dealer’s license on June 7,
1995,10 may continue to hold both licenses and operate as a
10
June 7, 1995 was the day before the effective date of Texas’s first ban on
manufacturers operating as dealers. See Act of June 8, 1995, ch. 357, §§ 2, 18,
1995 Tex. Gen. Laws 2887, 2889, 2900 (codified as amended at Tex. Rev. Civ. Stat.
Ann. art. 4413(36), § 5.02(a), (b)(25) (Vernon Supp. 1999) (amended 1999)).
19
manufacturer and as a dealer of motor homes but of no other type of
vehicle. Tex. Occ. Code Ann. § 2301.476(h) (formerly codified at
Tex. Rev. Civ. Stat. Ann. art. 4413(36), § 5.02C(h) (Vernon Supp.
2002)). The legislative history suggests that a state legislator
crafted this exemption to allow a particular manufacturer, located
in his district, to continue acting as a dealer. See, e.g., Sen.
State Affairs Comm. Subcomm. on Infrastructure: Senate Bill 1250,
76th Leg., Reg. Sess. 42-43 (Tex. 1999) (statement of Sen. Nixon).
This provision and its origins were before us in Ford, but
International claims to have tendered new evidence showing that
only one manufacturer--a Texas manufacturer--qualifies for the
exemption.11
Neither the apparent purpose of 2301.476(h) nor its practical
effect supports International’s contention that this narrow
grandfather clause is designed to benefit in-state manufacturers as
a class at the expense of out-of-state manufacturers as a class.
Section 2301.476(h) applies only to motor home manufacturers, and
only to those motor home manufacturers who also held a dealer
license on June 7, 1995. Thus, with respect to manufacturers who
did not hold a dealer license on June 7, 1995, section 2301.476
does not discriminate. No such manufacturer, whether in-state or
11
International repeatedly insists that section 2301.476(h) “facially”
discriminates against out-of-state manufacturers. Section 2301.476(h), however,
nowhere mentions Texas or out-of-state manufacturers. Therefore, we understand
International to argue that the purportedly discriminatory effect of 2301.476(h)
is evidence of its protectionist purpose.
20
out-of-state, can now qualify for a dealer license. With respect
to manufacturers who did hold a dealer license on June 7, 1995,
International might succeed in raising an inference of
discrimination, albeit a weak one, if it could show that section
2301.476(h) exempted all Texas manufacturer-dealers but no out-of-
state manufacturer-dealers. The record, however, does not even
suggest that much. The record does not include a list of all
manufacturers who held a dealer license on June 7, 1995. Hence, we
cannot deduce that only a Texas manufacturer qualifies for the
exception. Furthermore, at least one Texas manufacturer has
previously acted as a dealer and therefore could potentially have
held a dealer license on June 7, 1995, but still not qualify for
section 2301.476(h) because it is not a manufacturer and dealer of
motor homes. The burden of section 2301.476(c) could fall on both
in-state and out-of-state manufacturers just as one would expect
from a non-discriminatory statute.
B.
Because section 2301.476(c) is not discriminatory, we apply
the Pike balancing test, which asks whether a challenged statute
imposes a burden on interstate commerce that is “clearly excessive”
in relation to the statute’s putative local benefits. See Pike,
397 U.S. at 142. International has failed to demonstrate any
burden, much less a burden clearly excessive in relation to the
21
state’s legitimate interests. Therefore, section 2301.476(c)
passes the Pike balancing test.
1.
International has not demonstrated any burden on interstate
commerce. A statute imposes a burden when it inhibits the flow of
goods interstate. See Ford, 264 F.3d at 503. In Ford, we found no
evidence to suggest that section 5.02C(c) inhibited the flow of
passenger vehicles interstate, id., and International offers no
credible reason why the situation would be different for medium-
and heavy-duty trucks, whether new or used.
International seeks to establish a burden by claiming that
closing its used truck centers will inhibit the flow of new medium-
and heavy-duty trucks into Texas. According to International, its
used truck centers drive up demand for new trucks by accepting
trade-ins. Ending this practice, claims International, will
suppress demand for new trucks and thereby reduce the supply of new
trucks coming into Texas.
The fact that a regulation causes some business to shift from
one supplier to another does not mean that the regulation burdens
commerce; the dormant Commerce Clause “protects the interstate
market, not particular interstate firms.” Exxon, 437 U.S. at 127-
28. Purchasers of medium- and heavy-duty trucks will simply turn
to new trucks manufactured by International’s competitors.
22
Even assuming that but for section 2301.476, International and
its competitors could all stimulate demand for new trucks by
accepting trade-ins, we would still find no burden actionable under
the Commerce Clause. The Supreme Court has “rejected the ‘notion
that the Commerce Clause protects the particular structure or
methods of operation in a . . . market.’” CTS Corp. v. Dynamics
Corp. of Am., 481 U.S. 69, 93-94 (1987) (quoting Exxon, 437 U.S. at
127). Whenever a state regulates competition in a market, that
regulation may drive the market from its former equilibrium and
thereby affect the quantity sold. See Ford, 264 F.3d at 512
(Jones, J., concurring). Such effects, however, speak to the
wisdom of the statute, not to its constitutionality under the
dormant Commerce Clause. Exxon, 437 U.S. at 128. Therefore,
International has failed to demonstrate any burden on interstate
commerce.12
2.
12
International seeks to avoid the implications of Exxon and Ford by
differentiating the market for used medium- and heavy-duty trucks from the
markets at issue in those cases. In particular, International claims (1) that
the market for used large trucks is a secondary rather than primary market; (2)
that the market for used large trucks is primarily interstate rather than
primarily intrastate; and (3) that unlike the used large truck market, the
markets for passenger vehicles are dominated by a few large manufacturer-
producers. International catalogues these purported distinctions without
providing any explanation of their relevance, and we perceive none.
International also emphasizes that, unlike the markets for passenger vehicles and
gasoline, the market for used large trucks involves products that are themselves
instruments of interstate commerce. This distinction is spurious, as it is hard
to imagine products more closely tied to interstate commerce than passenger
vehicles and gasoline.
23
Even if section 2301.476(c) created some minimal burden on
interstate commerce, that burden would not be clearly excessive as
compared to the putative local benefits. In assessing a statute’s
putative local benefits, we cannot “second-guess the empirical
judgments of lawmakers concerning the utility of legislation.”
CTS, 481 U.S. at 92 (quoting Kassel v. Consol. Freightways Corp.,
450 U.S. 662, 679 (1981) (Brennan, J., concurring)). Rather, we
credit a putative local benefit “so long as an examination of the
evidence before or available to the lawmaker indicates that the
regulation is not wholly irrational in light of its purposes.”
Ford, 264 F.3d at 504 (quoting Kassel, 450 U.S. at 680-81).
Thus, in Ford, we declared that Texas’s purpose for passing
section 2301.476(c)’s predecessor--“to prevent vertically
integrated companies from taking advantage of their market
position” and “to prevent frauds, unfair practices, discrimination,
impositions, and other abuses of [its] citizens”--are legitimate
state interests. Ford, 264 F.3d at 503 (quoting Lewis, 447 U.S. at
43). We also held that a reasonable legislator could have believed
section 2301.476(c)’s predecessor would further those legitimate
interests. Id. at 504. Although International maintains that the
Legislature had no credible evidence to believe that manufacturers
could use their disproportionate market power to the disadvantage
of dealers, we may not now revisit Ford’s conclusion that the
24
Legislature did not act irrationally in banning manufacturer
control of dealers.13
International, however, also focuses more specifically on
whether section 2301.476(c) furthers this interest in the market
for used trucks. According to International, its status as a
manufacturer gives it no special leverage over dealers because,
whereas manufacturers control the supply of new vehicles, they
cannot control the supply of used vehicles. In our view, however,
a reasonable legislator could easily have believed that a ban on
manufacturers acting as dealers of used cars would further Texas’s
legitimate interests. The testimony heard by the Legislature in
1999 did not differentiate between dealers of new and used
vehicles, so a legislator could reasonably have concluded that
manufacturers could unfairly compete with dealers no matter what
type of vehicles the dealer sold. See generally Tex. Leg.’s House
Comm. on Transp.: H.B. 3092, 76th Leg., Reg. Sess.(Tex. 1999); Sen.
State Affairs Comm. Subcomm. on Infrastructure: Senate Bill 1250,
76th Leg., Reg. Sess. (Tex. 1999); House Research Organization,
13
Regardless, International mischaracterizes the legislative history. Before
the Legislature passed section 2301.476(c)’s predecessor, committees in both
chambers heard expert testimony that manufacturers enjoyed a great deal of
leverage over dealers and could use that leverage unfairly. See Tex. Leg.’s
House Comm. on Transp.: H.B. 3092, 76th Leg., Reg. Sess. 14-15, 21-22 (Tex. 1999)
(statement of Mr. Gene Fondren, President, Tex. Auto. Dealers Ass’n); Sen. State
Affairs Comm. Subcomm. on Infrastructure: Senate Bill 1250, 76th Leg., Reg. Sess.
57-61 (Tex. 1999) (statement of Mr. Gene Fondren). See generally House Research
Organization, Bill Analysis of H.B. 3092, 76th Leg., Reg. Sess., at 4, 6 (Tex.
1999). This testimony came from a witness that International regards as biased,
but we do not sit in judgment of the Legislature’s determinations of credibility.
See CTS, 481 U.S. at 92.
25
Bill Analysis of H.B. 3092, 76th Leg., Reg. Sess., at 4, 6 (Tex.
1999).
International’s own operations confirm the reasonableness of
this conclusion. According to International, its used truck
centers are designed to help dealers of its new trucks by driving
up demand. At oral argument, counsel for International described
the relationship between the used truck centers and the new truck
dealerships as “symbiotic.” International may wield its power over
dealers beneficently, but it no doubt wields power. Thus, a
legislator could reasonably have believed that a ban on
manufacturers acting as dealers of used cars would further Texas’s
legitimate interests. That reasonable belief is enough to confirm
that section 2301.476(c) has at least putative local benefits.
Thus, International has failed to raise a genuine issue of
material fact as to whether the burden on commerce supposedly
created by section 2301.476(c) is clearly excessive in relation to
the putative local benefit.
IV.
The district court correctly granted summary judgment to the
Director. Section 2301.476(c) prohibits International from
operating as a dealer of used trucks and does not violate the
Commerce Clause.
AFFIRMED.
26