R.I. Truck Ctr. v. Daimler Trucks N. Am., LLC

92 F.4th 330

RHODE ISLAND TRUCK CENTER, LLC, Plaintiff, Appellant, v. DAIMLER TRUCKS NORTH AMERICA, LLC, Defendant, Appellee.

No. 22-1913

United States Court of Appeals, First Circuit

February 9, 2024

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND [Hon. John J. McConnell, Jr., U.S. District Judge]

Edward J. Sackman, with whom Hilary Holmes Rheaume and Bernstein, Shur, Sawyer & Nelson, P.A. were on brief, for appellant.

Nathan D. Imfeld, with whom Roberta F. Howell and Foley & Lardner LLP were on brief, for appellee.

Before Barron, Chief Judge, Howard and Gelpí, Circuit Judges.

BARRON, Chief Judge.

This appeal concerns a Rhode Island truck dealer's challenge to a grant of summary judgment to an out-of-state truck manufacturer on two of the dealer's claims. The claims allege that a Rhode Island state agency erred in ruling that it lacked jurisdiction to grant relief to the dealer for the manufacturer's alleged violations of a Rhode Island law that regulates motor-vehicle dealers and manufacturers. The agency based its ruling on its determination that it "lacks the authority to apply the provisions of the Rhode Island dealer law in an extraterritorial manner and therefore cannot prohibit [the manufacturer] from establishing or moving a dealership outside the boundaries of the state." The U.S. District Court for the District of Rhode Island granted summary judgment to the manufacturer on the dealer's claims. R.I. Truck Ctr., LLC v. Daimler Trucks N. Am., LLC, 642 F. Supp. 3d 218, 225 (D.R.I. 2022).

We begin by addressing a question of first impression concerning our subject-matter jurisdiction. We then conclude that, to resolve the dealer's challenge to the summary-judgment ruling on one of the dealer's two claims that are on appeal, we must certify to the Rhode Island Supreme Court a question about the Rhode Island dealer law's extraterritorial application. However, we affirm the District Court's grant of summary judgment on the other claim.

I.

The Rhode Island truck dealer is Rhode Island Truck Center, LLC ("RITC"). The out-of-state manufacturer is Daimler Trucks North America, LLC ("Daimler"), which is based in Oregon. The state agency is the Rhode Island Motor Vehicle Dealers License and Hearing Board ("Board"). The underlying Rhode Island law is Rhode Island General Laws sections 31-5.1-1 to 31-5.1-21 ("Dealer Law").

This appeal concerns two of the claims in RITC's suit against Daimler. Those claims pertain to two portions of a "protest" that RITC brought to the Board in 2022 in which RITC alleged that Daimler had violated the Dealer Law.¹ See R.I. Gen. Laws § 31-5.1-4.2(a) (providing protest procedures). After describing those portions of the protest -- and the Board's ruling dismissing them -- we will trace the procedural developments that led to this appeal.

A.

RITC alleged in the first portion of the protest relevant to this appeal that Daimler violated the Dealer Law in connection with a franchise that RITC had with Daimler to sell Daimler's Freightliner line of trucks. For ease of reference, we shall refer to this portion of the protest (and the underlying allegations of Daimler's wrongdoing) as the "Freightliner Claim."

The Freightliner Claim is premised in part on the provision in § 31-5.1-4.2(a) of the Dealer Law that states that, when a "manufacturer seeks to enter into a franchise establishing an additional new motor vehicle dealership . . . within or into a relevant market area where the same line or make is then represented," the manufacturer must give notice of that intention to "each new motor vehicle dealer in the same line or make in the relevant market area." Id. "Relevant market area" is defined elsewhere in the Dealer Law as "the area within a radius of twenty (20) miles around an existing dealer or the area of responsibility defined in the franchise, whichever is greater." Id. § 31-5.1-1(13).

RITC alleged in this part of the Freightliner Claim that, although Daimler had already given RITC a franchise to sell Daimler's Freightliner trucks, Daimler "never provided RITC with notice that it intended to appoint a Freightliner dealership within RITC's ['area of responsibility' and thus its 'relevant market area']." That Freightliner dealership was Advantage Truck Group Raynham ("ATG Raynham"). RITC then went on to allege that, "[a]s a result, [Daimler] failed to comply with the statutory notice requirements under R.I. Gen. Laws § 31-5.1-4.2(a)[.]"

RITC alleged in support of this latter allegation that ATG Raynham was operating in RITC's "relevant market area" even though ATG Raynham was doing business in Bristol County, Massachusetts -- and so beyond the borders of Rhode Island. That was so, RITC alleged, because ATG Raynham was operating inside RITC's "area of responsibility," which RITC alleged "included Bristol County in the Commonwealth of Massachusetts."

RITC also alleged in its Freightliner Claim that Daimler violated § 31-5.1-4.2(a) in another way by establishing the ATG Raynham dealership. Here, RITC alleged that the violation resulted because Daimler did not have "good cause" to establish that dealership. RITC relied for this allegation on the parts of § 31-5.1-4.2(a) that state that, "[w]ithin thirty (30) days of receiving notice" of the manufacturer's "intention to establish an additional dealership," "any affected new motor vehicle dealership may file with the department a protest to the establishing . . . of the new motor vehicle dealership" and that, "[w]hen a protest is filed, the [Department of Revenue] shall inform the manufacturer that . . . the manufacturer shall not establish . . . the proposed new motor vehicle dealership . . . until the department has held a hearing, nor until the department has determined that there is good cause for not permitting the new motor vehicle dealership." Id. § 31-5.1-4.2(a) (emphasis added).²

RITC alleged that Daimler did not have the requisite "good cause" in part because RITC "meets or exceeds [Daimler's] standards for customer care, sales, service facilities, supply of parts and qualified service personnel" and "the market of Bristol County, Massachusetts does not and cannot support two (2) Freightliner dealerships, nor has [Daimler] ever represented to RITC that there was a need for a second Freightliner dealership within Bristol County, Massachusetts." RITC further alleged that Daimler lacked the requisite "good cause" because in establishing the dealership Daimler "was principally motivated by non-economic considerations when it appointed [ATG Raynham] as a Freightliner dealer within RITC's ['area of responsibility' and thus 'relevant market area']."

RITC requested various forms of relief from the Board in connection with the Freightliner Claim. Specifically, RITC sought: (1) a "finding and ruling that [Daimler] violated R.I. Gen. Laws § 31-5.1-4.2(a) by adding a Freightliner franchise to RITC's relevant market area without providing the requisite statutory notice and allowing RITC to protest"; (2) a "finding and ruling that [Daimler's] violation of R.I. Gen. Laws § 31-5.1-4.2(a) must be remedied by [Daimler] removing the new and unauthorized Freightliner franchise within RITC's relevant market area"; and (3) civil damages, costs, and attorneys' fees.

RITC alleged in the second portion of the protest relevant to this appeal that Daimler violated the Dealer Law in connection with a franchise that RITC unsuccessfully sought from Daimler to sell Daimler's Western Star line of trucks. This portion of the protest alleged that Daimler violated § 31-5.1-4(a) of the Dealer Law, which prohibits "any manufacturer or motor vehicle dealer" from "engag[ing] in any action that is arbitrary, in bad faith, or unconscionable and that causes damage to any of the parties involved or to the public." R.I. Gen. Laws § 31-5.1-4(a). We shall refer to this portion of RITC's protest as its "Western Star Claim."

In the Western Star Claim, RITC alleged that Daimler had "denied RITC's application for a Western Star franchise in bad faith because it already intended to grant [ATG Raynham] -- not RITC -- a Western Star franchise." RITC further alleged in support of its allegation of Daimler's violation that Daimler had denied RITC's application for that franchise on the basis that "RITC allegedly did not have adequate service capacity . . . and . . . needed to move to a new . . . location before it would be granted a Western Star franchise," that RITC then "started the process to move . . . to obtain a Western Star franchise," and that Daimler later told RITC that it "intended to appoint a Western Star dealer in Bristol County, Massachusetts[,]" with ATG Raynham. For relief, RITC sought a "finding and ruling that [Daimler's] conduct has been arbitrary, in bad faith and unconscionable," a "finding and ruling that [Daimler] unreasonably prevented RITC from obtaining a Western Star dealership," and an award of civil damages, costs, and attorneys' fees.

The Board dismissed both the Freightliner Claim and the Western Star Claim. The Board began its analysis by reasoning as follows:

The Commerce Clause of the United States Constitution precludes the application of a state statute to commerce that takes place wholly outside the State's borders, whether or not the commerce has effects within the State. Edgar v. MITE Corp., 457 U.S. 624, 642-643 [102 S.Ct. 2629, 73 L.Ed.2d 269] (1982). A state statute that "may adversely affect interstate commerce by subjecting activities to inconsistent regulations" may be considered invalid under the Commerce Clause. Morley-Murphy Co. [v]. Zenith Elecs. Corp., 142 F.3d 373, 379 (7th Cir. 1998) (citing CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69, 88 [107 S.Ct. 1637, 95 L.Ed.2d 67] (1987)). Any attempt to apply Rhode Island's dealership, distribution and franchise law in an extraterritorial manner would certainly run afoul of the Commerce Clause.

The Board then went on to address two federal court precedents...