5/8/15, husqvarna professional products, inc.'s redacted brief
TRANSCRIPT
THE STATE OF NEW HAMPSHIRE
SUPREME COURT
Case No. 2014-0575(Case No.2014-0315)
HUSQVARNA PROFESSIONAL PRODUCTS, INC.
PlaintifÊAPPellant,
STATE OF NE\il HAMPSHIRE
v
BRIEF OF APPELLANT
HUSQVARNA PROFESSIONAL PRODUCTS, INC.
On Appeal from the Merrimack County Superior Court (No.217-2014-CV-00166)
Michael A. Delaney, NH Bar No. 10504MoLANE GRAF RAULERSON &MIDDLETON, PROFESSIONAL ASS'N900 Elm Street, P. O. Box 326
Manchester, NH 03105(603) 62s-6464
Thomas J. Collin (admittedpro hac vice)
Jennifer S. Roach (admittedpro hac více)
THOMPSON HINE LLP3900 Key Center127 Pubic SquareCleveland, OH 44114(216) 566-ss00
Counsel þr Appellant Husqvarna Professíonal Products, Inc-
Oral argument requested. Mr. Collin will argue.
TABLE OF CO
QUESTIONS PRESENTED.......
STATUTE AND CONSTITUTIONAL PROVISIONS INVOLVED ...
Page
........1
........1
STATEMENT OF THE CASE
STATEMENT OF FACTS
Husqvama Manufactures Yard and Garden Equipment................. .......4
Husqvarna Distributes Products through Multiple Channels, including through
Independent Dealers
C. Key Provisions in Husqvarna's Dealer Agreements Would Be Unenforceable
if the Dealership Act Were Applied to Husqvarna............... .................6
D. Husqvama's Distribution Strategy Depends upon Strong Intrabrand
7
E. In Amending the Dealership Act, the Legislature Intended It to Apply Only to
Manufacturer-Dealer Relationships that Are Comparable to Those in the Auto
A.
B.
Industry.
1. Husqvarna Is Not a Manufacturer of Motor Vehicles. ............
2. The Legislature Was Concerned About Automobile Dealers and Farm
Equipment Dealers, and There Was No Testimony from Dealers inAny Other Industries.
F. Husqvarna's Relationships with its New Hampshire Dealers Are NotComparable to Those in the Auto Industry..........
1. Dealers Have Total Discretion Over Any Investment in Husqvarna
Products....
2. Husqvarna's Dealers Carry Competing Product Lines and May Switch
to Other Suppliers.
SUMMARY OF THE ARGUMENT
ARGUMENT....
I. The Trial Court Erred In Ruling That, As Applied To Dealer Contracts, The
Dealership Act Does Not Violate Husqvama's Rights Under The Contract
Clauses Of The New Hampshire Constitution Or The United States Constitution.....
A. The Dealership Act Substantially Impairs Husqvarna Contract Rights...........
1. The Right to Add a Dealer to Another Dealer's Marketing Area.
8
11
l2
.13
.14
(Ð
2. The Right to Terminate a Dealer Without Intervention of a State
Board.
J.
4.
5.
The Right to Sell Less Than a Full Product Line to a Dealer...
The Right to Set W'arranty Reimbursement Rates.
The Right to Amend a Dealer Agreement
Impairment'Was Not Foreseeable. ............
,,,,19
....20
....2r
....22
B. .22
II.
ilI.
C. As Applied to Husqvarna, the Dealership Act Is Not Reasonable and
Necessary to Serve an Important Public Purpose. ...24
1. The Legislature Did Not Consider any Facts about Yard and Garden
Equipment Dealers. .24
2. The State's Own Evidence Shows that Husqvarna's Relationships withDealers Are Not Comparable to Those in the Automobile Industry. ........25
3. Leveling the Playing Field Is Not an Important Public Purpose. ..............27
4. Protection of Dealers from Intrabrand Competition Is Not an Important
Public Purpose and Impairs Consumer Welfare. .....................28
The Trial Court Erred In Ruling That The Dealership Act Does Not ViolateHusqvarna's Rights Under The Equal Protection Clause Of The United States
Constitution, Amendment XIV, Section 1 . ............... .29
The Trial Court Erred In Ruling That, As Applied To Husqvarna, The Dealership
Act Does Not Violate Article 1, Section 8, Clause 3 Of The United States
Constitution, The Dormant Commerce Clause.
A. The Purpose of the Dealership Act Is Discriminatory............
B. The Effect of the Dealership Act Is Discriminatory...........
C. There Is No Countervailing Legitimate Local Purpose or Benefit.
The Trial Court Erred In Not Entering Judgment For Husqvarna On Count II OfIts Complaint, Alleging That The Dealership Act Violates The Federal ArbitrationAct And The Supremacy Clause Of The United States Constitution, Article 6,
..30
..3 1
..32
..JJ
IV
Clause 2...............
CONCLUSION..........
REQUEST FOR ORAL ARGUMENT..
RULE 16(3XÐ CERTTFTCATTON
ADDENDUM
JJ
34
35
35
Trial Court's August 6,2014 Order
(ii)
...1-r2
Text of Relevant Authorities 13-T7
(iii)
TABLE OF AUTHORITIES
Federal Cases
Alliance of Automobile Manufacturers v. Gwadoslqt,430 F.3d 30 (1st Cir. 2005).
Bacchus Imports, Ltd. v. Dias,468 U.S. 263 (re84)
Brown-Forman Distillers Corp. v. New York State Liquor Authority,476U.5. s73 (1986)
C & A Carbone, Inc. v. Town of Clarkstown,sl1 U.S. 383 (1994)
Chemical Waste Management, Inc. v. Hunt,s04 u.s. 334 (1992)
Cíty of Cleburne v. Cleburne Living Center, Inc.,473 U.S. 432 (r98s)
Colon Health Centers of America, LLC v. Hazel,733F.3d 535 (4th Cir.2013)
Department of Revenue v. Davis,ss3 u.s. 328 (2008)
Energy Reserves Group, Inc. v. Kansas Power & Light Co.,4s9 U.S. 400 (1983)
E quipment Manuføcturer s Ins titut e v. Jankl ow,300 F.3d 842 (9thCir.2002)
Exxon Corp. v. Eagerton,462U.5.176 (1983)
Generøl Leaseways, Inc. v. National Truck Leasing Ass'n,744F.2d s88 (7th Cir. 1984)
General Motors Corp. v. Romein,s03 u.s. t9r (1992)
Granholm v. Heald,s44 U.S. 460 (200s)
Page(s)
...30
.,,33
.21
.31
.-tJ
.30
...30
...32
.23,27
.28
(iv)
.16
Kendall-Jackson Wínery, Ltd. v. Branson,82 F. Supp.2d844 (N.D. I11.2000) ...........20
McDonald's Corp. v. Nelson,822 F . Supp. 597 (S.D. Iowa 1993) , aff'd sub nom. Holíday InnsFranchising,Inc. v. Branstad,29F.3d 383 (8th Cir.1994) 18,20,24
Palmer v. BRG of Georgia, Inc.,498 U.S. 46 (1990).. .................28
Oregon Waste Systems, Inc. v. Department of Envíronmental Quality,s11 U.S. e3 (ree4)..
Pepsico, Inc. v. Marion Pepsi-Cola Bottling Co.,2003 U.S. Dist. LEXIS 20060 (S.D. m. 2003)
Reed v. Reed,404 U.S. 7t (197L)..
Reliable Tractor, Inc. v. John Deere Construction & Forestry Co.,376F. App'x 938 (1lth Cir. 2010)
Wyomingv. Oklahoma,s02 u.s. 437 (t992)..
Yamaha Motor Corp. v. Jim's Motorcycle, Inc.,401 F.3d 560 (4th Cir. 2005)
State Cases
Linehan v. Rockingham County Commissioners,1s1 N.H. 276 (2004)
Lower Village Hydroelectríc Assocs. v. City of Claremont,147 N.H. 73 (200t)
31
,,.,.,27
29,30
.20
Pike v. Bruce Church, Inc.,397 U.S. r37 (1970) ...........31,33
.31
.....32,33
t4
...15, 16
New Hampshire Ass'n of Counties v. Støte of New Hampshire,1s8 N.H. 284 (2009) ................14
Opiníon of the Justices (Furlough),135 N.H. 62s (1992) ..15, 16,24
Tuttle v. New Hampshíre Medical Malpractíce Joint Underwriting Ass'n,ls9 N.H. 627 (2010)
(v)
.16,22,24
Constitutional Provisions
U.S. CONST. art.I. $ 8, cl. 3...
U.S. CONST. art. I, $ 10..........
U.S. CONST. art. VI, cl. 2......,
U.S. CONST. amend. XIV, $ 1
N.H. CONST. part I, art.23 .....
State Statutes
RSA 347-A:2(I)
RSA 347-A:2(IIXb)
RSA 347-A:3
RSA 3a7-A:3(I)
RSA 347-A
RSA 347-A:8
RSA 357-C
RSA 357-C:1(XXVII).
RSA 357-C:3(IIIXI)
RSA 3 s7-C:3(IIIXpX3)................
RSA 3s7-C:3(IIIXq)
RSA 357-C:5(ID
RSA 357-C:s(II)(b)(l)
RSA 357-C:6(III)
4,15, 16
4,30
4,33
4 29
.3, 15, 16
......,...2,23
l9
23
.........2,23
23
..............21,23
2,9,14,19,34
..................8, 9
2T
9
.............17,28
33
.20
.21
.21
.22
.............r9,20
RSA 357-C:7(IXd)
(vi)
t9
RSA 3s7-C:9(0.... 17,28
(vii)
OUESTIONS PRESENTED
1. Whether the Trial Court ened by ruling that, as applied to existing dealer
contracts of Husqvama Professional Products, Inc. ("Husqvama"), the motor vehicle dealer
statute, RSA 357-C, as amended by 5B-126, ("Dealership Act") does not violate Husqvarna's
rights under Part I, Article 23 of the New Hampshire Constitution or Article 1, Section 10 of the
United States Constitution?
HApp.3-8.'
2. Whether the Trial Court erred in ruling that application of the Dealership Act to
Husqvama does not violate its rights under the Equal Protection Clause of the United States
Constitution, Amendment XIV, Section l?
HApp.8-10
3. Whether the Trial Court erred in ruling that, as applied to Husqvarna, the
Dealership Act does not violate Article 1, Section 8, Clause 3 of the United States Constitution,
the Dormant Commerce Clause?
HApp. 10-11
4. V/hether the Trial Court erred in not entering judgment for Husqvarna on Count IIof its Complaint, alleging that the Dealership Act violates the Federal Arbitration Act and the
Supremacy Clause of the United States Constitution, Article 6, Clause 2,by prohibiting
arbitration of dealer disputes and requiring otherwise arbitrable disputes to be submitted to the
Motor Vehicle Industry Board?
HApp.8.
STATUTE AND CONSTITUTIONAL PROVISIONS INVOLVED
This case involves (1) the Dealership Act, RSA 357-C, as amended in20l3 by SB 126,
(2)Part I, Article 23 of the New Hampshire Constitution (Contract Clause), (3) Article 1, Section
l0 of the U.S. Constitution (Contract Clause), (4) Amendment XIV, Section 1 of the U.S.
Constitution (Equal Protection Clause), (5) Article 1, Section 8, Clause 3 of the U.S. Constitution
(Dormant Commerce Clause) and (6) Article 6, Clause 2 of the U.S. Constitution (Supremacy
t Husqvarna submits its own complete Appendix, to which it will refer as "HApp. _." The record citations for the
Questions Presented are to the Trial Court's August 6, 2014 Order granting the State's cross-motion for summaryjudgment and denying Husqvarna's motion for summary judgment.
Clause). Multiple sections of the Dealership Act are at issue, and the Act is reproduced in its
entirety in the Appendix at HApp. 880-926. Relevant excerpts are reproduced in the Addendum
to this Brief, and the constitutional provisions are also set out in the Addendum.
STATEMENT OF THE CASE
This case is about the damaging effects of legislation on a subject about which the
Legislature heard no testimony, received no evidence and otherwise had no information -- the
relationship between yard and garden equipment manufacturers and their New Hampshire
dealers. Extrapolation of the legislation ftom rules for regulation of an entirely different industry
- automobile manufacturers and their dealers - in a purported effort to "level the playing field"
between dealers and manufacturers is law-making in a vacuum. As applied to Husqvarna, the
legislation is arbitrary and irrational.
Husqvarna manufactures outdoor porwer equipment. It makes chainsaws, mowers,
trimmers, garden tractors and snow throwers and sells them in New Hampshire through more
than 40 independent dealers. Dealers handle multiple brands of products, including competitive
brands, and they are not required to make any financial investment to carry Husqvarna products
beyond purchase ofproducts for resale.
Prior to September 2013, the relationship between Husqvarna and its dealers was subject
to the terms of contracts and to New Hampshire's equipment dealer act, RSA 347-4,
("Equipment Dealer Act"). HApp. 866-79. The Equipment Dealer Act required, among other
things, that amanufacturer have cause for termination of a dealer agreement and that it
repurchase a dealer's inventory upon termination. RSA 347-A:2(I),347-A:3(I); HApp. 868-70.
The Legislature in SB 126 repealed the Equipment Dealer Act and amended the motor
vehicle dealership act, RSA 357-C, ("Dealership Act") to reach dealer-manufacturer
relationships that had been covered by the Equipment Dealer Act. HApp. 880-926. As relevant
2
to Husqvarna, it did so by amending the definition of "motor vehicle" to include "yard and
garden equipment." HApp. 881.
The Legislature justified moving equipment dealers into the Dealership Act because
relationships between dealers and manufacturers previously covered by the Equipment Dealer
Act are "identical" to those between automobile and truck dealers and their manufacturers:
The relationshíp between equipment dealers and manufacturers is ídentícal tothat of car/truck dealers: nearly duplicate one-sided, non-negotiable contracts and
an autocratic relationship. Equipment dealers also have business operations thatare nearly identical in all respects to carltruck/motorcycle etc. dealers.
HApp. 647 (italics added).2 There is no factual support for this legislative finding as applied to
Husqvarna. There were no facts before the Legislature to support classifying Husqvama's
dealers as "motor vehicle" dealers, and enlarging the scope of the Dealership Act to reach
Husqvarna dealers was arbitrary and irrational.
Independently of the arbitrary and irrational application of the Dealership Act to
Husqvama, application of the Act to Husqvarna's existing dealer contracts will substantially
impair vested contract rights, including Husqvama's rights to add a dealer to the marketing area
of another dealer, to terminate a dealer for good cause, to sell less than a full product line to a
dealer, to set warranty service reimbursement rates and to amend the dealer agreement.
Husqvarna filed an action on March 20,2014 in the Merrimack County Superior Court
against the State of New Hampshire , No. 2T7 -201 4-CV-00 1 66, seekin g a declaration that ( 1 )
application of the Dealership Act to existing dealer contracts would substantially impair contract
rights in violation of the Contract Clauses of the New Hampshire and U.S. Constitutions, (2)
application of the Dealership Act to Husqvarna would violate its rights under the Equal
Protection Clause of the U.S. Constitution and (3) the Dealership Act violates the Supremacy and
2 The text appears in the Statement of Intent accompanying the May 16, 2013 Majority Report of the House
Commerce and Consumer Affairs Committee.
J
Dormant Commerce Clauses of the U.S. Constitution. HApp. 34-68. Husqvama filed a motion
for summary judgment on April 25,2014 (HApp. 86-207), and the State filed a cross-motion for
summary judgment on May 16,2014 (HApp. 689-789).
The Superior Court granted the State's motion and denied Husqvarna's motion in an
August 6,2014 Order.3 HApp. l-12. Husqvarna filed a notice of appeal in this Court on
September 4,2014. By order of September 30, 2014, the Superior Court stayed application of
the Dealership Act to Husqvarna pending final disposition of this appeal. HApp. 13.
STA OF'F'ACTS
A. Husqvarna Manufactures Yard and Garden Equipment.
Husqvama is a Delaware corporation having its principal place of business in Charlotte,
North Carolina. HApp. 208 1[ 1 (Aff. of Jeffrey Dewosky).4 It is the successor in interest to
entities that are party to contracts with dealers in New Hampshire for the sale of outdoor power
equipment, including Husqvarna Professional Outdoor Products, Inc. and Husqvarna Forest &
Garden Company, a division of WCI Outdoor Power Products, Inc. HApp.209 n 4.
Husqvarna manufactures handheld forestry and handheld and wheeled lawn and garden
equipment, such as chainsaws, trimmers, brush cutters, edgers, snow throwers, mowers and
garden tractors, and it sells them under the Husqvarna@, PoulanPro@, Jonsered@, WeedEater@,
and Red Max@ brands (collectively, "Products"). HApp. 208(il 2. Itmarkets and sells all
brands throughout the United States. 1d.
3 The Superior Court agreed that the Dealership Act's prohibition of arbitration was a violation of the Supremacy
Clause (HApp. 8), but it declined to enter judgment for Husqvarna on any of the counts in its complaint, includingCount II, which alleged that this feature of the Dealership Act was unconstitutional (HApp. l2).4 The facts submitted by Husqvarna in the Superior Court are contained in three affidavits: (l) April 16, 2014affidavit of Jeffrey Dewosky (HApp. 208-310); (2) April 25,2014 supplemental afhdavit of Jeffrey Dewosky(HApp. 321-25); and (3) June 13, 2014 affidavit of Matthew Jarck (HApp.824-47).
4
Husqvarna Distributes Products through Multiple Channels. includingthroush Independent Dealers.
Husqvama distributes Products in New Hampshire through multiple channels. It sells
some types of Products directly to end-users, such as tree care and equipment rental companies.
HApp. 209 n3. It sells Products under various brands to independent dealers for resale to end-
users. Id. It sells a mix of Products to national retail chains and hardware cooperatives, such as
Lowe's, Sears Home Town Stores, Walmart, The Home Depot, Tractor Supply Company, ACE
and True Value Company, which offer them for sale in New Hampshire through their retail
outlets. Id. It sells some brands of Products to a wholesale distributor, Steven Willand, Inc.,
which resells them to independent dealers in New Hampshire. Id.s
Husqvarna has more than 40 authorized dealers for Products in New Hampshire, and
some have multiple store locations. HApp .210 n 9. Dealers are independent businesses, and
Husqvarna takes into account a number of factors in deciding whether to appoint a company as a
dealer. These include (a) the need for additional brand representation in a specific geographic
area, (b) the expertise of the company in selling and servicing equipment similar to Products, (c)
its financial strength and credit-worthiness, (d) the quality and experience of its employees in
selling and servicing equipment similar to Products and (e) its promise to use best efforts in
promoting and selling Products. HApp. 209 n 5. Husqvarna determines which brands it will
authonze a dealer to carry, depending upon market needs and the above criteria. Some dealers
handle only a single brand, while others carry multiple brands. HApp. 2I0n6.
Dealers have no assigned market area or territory, and Husqvarna believes that intrabrand
competition contributes to optimum market penetration. HApp. 2l0n 7. Husqvama does not
5 The Trial Court held that the Dealership Act, as amended, "does not apply to the sale of products by nationalaccounts; nor does it affect the plaintiff s agreement with Willand." HApp. 5.
B
5
restrict a dealer from handling competitive equipment, and it values a dealer's experience in
selling and servicing other manufacturers' equipment. Id.
C. Key Provisions in Husqvarna's Dealer Agreements \ilould Be Unenforceableif the Dealership Act Were Applied to Husqvarna.
Husqvama has written contracts with its dealers, and three standard forms are in use in
New Hampshire. HApp.210-11 !f 9. One form provides that either party may tetminate it on 30
days' notice, and it has no specified duration. HApp. 2I0-II ll9;251. A second form, which
began to be used in2007 ("2007 Contract"), provides for an initial term of two years, with
automatic renewal for successive one-year terms unless either party gives notice of nonrenewal
60 days prior to expiration of the initial term or any renewal term. HApp.2l0-ll 19;253-260.
Beginning in20l0, a form of agreement ("2010 Contract") was used differing in format from the
earlier agreements but having the same term and termination provision as the 2007 Contract.
HApp. 210-ll I 9; 262-67.
The following is a summary of Husqvarna's rights under the dealer agreements which are
inconsistent with one or more provisions of the Dealership Act:
The contracts do not grant a dealer a territory, and they aÍe explicitlynonexclusive. HApp. 216 n 2l; 253 258 $ 8; 262, 263 ç 6. The 2007 Contract
and 2010 Contract expressly permit Husqvama to add dealers to the market area
served by adealer. Id.
Husqvarna has discretion, under the2007 Contract and 2010 Contract, to appoint
dealers to handle less than a full line of Products under a brand. HApp. 220126;253;262.
Dealers can be terminated for failure to cure a material breach after reasonable
notice under the 2007 Contract and 2010 Contract, both of which also provide forimmediate termination under certain circumstances, including submission of false
or fraudulent claims for payment, discounts or warranty reimbursements. HApp.221n27;258$9;26a$9.
a
a
a
a Husqvarna's dealers are required to perform warranty service for Products, and
the 2007 Contract and 2010 Contract provide that Husqvarna will compensate a
6
dealer for service and parts in accordance with Husqvarna's established warrantypolicy, which it has discretion to change as needed. HApp. 222 n28; 253;257 ç7;262 $ 1(bX4).
o Husqvarna is permitted to amend certain provisions of the 2007 Contract and
2010 Contract in its discretion, such as terms and conditions of sale or warrantypolicy. HApp. 223n30;253;265 $ 14(e).6
If the Dealership Act were to apply to Husqvarna, these contract rights would be unenforceable.
HApp. 2t 6 11 2I ; 220 I 26; 221 \ 27 ; 222 I 28; 223 T 3 0.t
T1'rc2007 Contracts and 2010 Contracts have not been amended or modified in any way
for any dealer, and the parties have continued to perform after the initial two-year term and each
one-year renewal term, if any, under the same terms and conditions as during the initial two-year
term. HApp.2Il tf 1 1. The rights and obligations of the parties, as to each such contract, were
established at the time they were executed and have not since been changed in any respect. Id.
Husqvarna placed importance on all of the contractual provisions discussed above and relied
upon them in entering into the contracts. HApp. 215 n19.
D. Husqvarna's Distribution Strategv Depends upon Strong IntrabrandCompetition.
Husqvarna has determined that intrabrand competition provides dealers with an incentive
for promotion and sale of Products, leading to increased market penetration, improved service
6 The conflict between these contract clauses and SB 126 is shown in chart form at HApp. 857-58, an exhibitaccompanying Husqvarna's Memorandum in Support of its Objection to the State's Cross-Motion for SummaryJudgment.7 Husqrrarna also challenged the constitutionality of the Dealership Act to the extent that it would (1) limit itscontractual right to sell directly to end-users in New Hampshire and (2) interfere with its contracts with national
chain retail accounts by enabling dealers to protest the opening of store locations in New Hampshire at whichHusqvarna brands would be sold. As to l, the State took the position that the Dealership Act would not limitHusqvama's ability to sell directly to end-users, and the Superior Court ruled that such direct selling would not
conflict with the statute unless it were done "through ownership of a dealership or establishment of a companystore." August 6,2014 Order, HApp. 5. As to 2, counsel for the State acknowledged in the May 20,2014 hearing
before the Superior Court that the Dealership Act would not apply because "Lowes and Home Depot and the otherbig box stores . . . aren't equipment dealers under the definition. So an equipment dealer in New Hampshire doesn'thave the right under the statute to protest the opening of the Lowes or a Home Depot, . .. 35'/-C doesn't impactHusqvarna's big box agreements." (Tr. at 37:5-10.) The Superior Court held that "SB 126 does not apply to the
sale of products by national accounts." August 6,2014 Order, HApp. 5.
7
and more competitive pricing. HApp. 324n9. It is an important incentive because Husqvama's
dealers typically handle a wide range of hardware, lawn and garden and other goods; often carry
equipment competitive with Products; and have no required capital investment in the promotion
and sale of Products and no brand-specific investment other than the purchase of Products for
resale. HApp. 323117;324 fl 9. Husqvarna's dealer appointments are nonexclusive, and
Husqvarna expressly reserves the right in the 2007 Contract and 2010 Contract to add dealers to
amarket area. HApp.322l5;216ll2l;253,258 $ 8;262;263 ç 6.
E. In Amendins the Dealership Act. the Leeislature Intended It to Applv Onlvto Manufacturer-Dealer Relationships that Are Comparable to Those in theAuto Industry.
The State explained in its summary judgment brief in the Superior Court what the
Legislature intended in amending the Dealership Act: "SB 126 is intended only to govern
manufacturer-dealer relationships that are comparable to the auto industry." HApp. 696. The
legislative history confirms this intention.
1. Husqvarna Is Not a Manufacturer of Motor Vehicles.
Husqvama is not a manufacturer of motor vehicles. None of the Products is a "motor
vehicle" as defined in the first sentence of RSA 357-C:1(I): "every self-propelled vehicle
manufactured and designed primarily for use and operation on the public highways and required
to be registered and titled under the laws of New Hampshire." HApp. 2l2n 13. The handheld
goods Husqvarna manufactures, such as chainsaws, trimmers and blowers, do not satisfy the
definition,8 and none of its wheeled goods, such as mowers, garden tractors, tillers or snow
throwers, falls within the definition. HApp. 208'112;2I2\13;229-a9. These are not "motor
vehicles" under any common understanding of the term. The Legislature purported to sidestep
8ThesuperiorCourtheldin STIHL, Inc. v.Stateof NewHampshire,No.2IT-2013-CV-624 (MenimackCountyAug. 4, 2Ol4), that the Dealership Act, as amended, does not apply to "handheld outdoor power tools" such as
chainsaws. HApp. 32. The State's appeal of this ruling is pending before this Court, No. 20124-0619.
8
this linguistic obstacle by simply enlarging the definition of "motor vehicle" in RSA 357-C:1(I)
to include "equipment." The new text defines "equipment" to include"yatd and garden
equipment" and other types of equipment previously covered under the Equipment Dealer Act.
HApp.881.e
2. The Legislature Was Concerned About Automobile Dealers and FarmEquipment Dealers, and There Was No Testimony from Dealers inAny Other Industries.
Senator Sanborn explained, in introducing SB 126 to the Senate, that it would
"consolidate equipment dealers" in RSA 357-C by repealing RSA 347-A, and he explained the
logic behind consolidation: "'We look [at] it as the fact if it's got wheels, tires and engines and
it's equipmentwhether it be a car or a tractor, the same type of provisions can exist." (Emphasis
added.)I0 Attention to cars and tractors was the unifying theme in the evidence heard by the
Legislature, and this focus exactly validates the State's position, quoted atpage 8 above, that SB
126 is intended only to govern manufacturer-dealer relationships "that aÍe comparable to the
auto índustry" (emphasis added).
Testimony from dealers, whether oral or written, came from automobile and farm
equipment dealers, and not from any dealers of yard and garden equipment. The only dealers or
dear er repres entat':'
ï ä,îÏïi "î ", "^ :, -
":,"" :
" " *'
"'
e RSR ¡SZ-C: I (I) defines "motor vehicle" as follows:
I. "Motor vehicle" means every selÊpropelled vehicle manufactured and designed
primarily for use and operation on the public highways and required to be registered and titledunder the laws of New Hampshire. Motor vehicle shall include equipment if sold by a motorvehicle dealer primarily engaged in the business of retail sales of equipment. Except for RSA357-C:3, I-b, and where otherwise specifically exempted from the provisions of this chapter,o'motor vehicle" shall include off highway recreational vehicles and snowmobiles. "Equipment"means farm and utility tractors, forestry equipment, industrial equipment, construction equipment,farm implements, farm machinery, yard and garden equipment, attachments, accessories, and
repair parts.
to HApp. 329, Statement of Senator Sanborn, Feb. 19,2013.
9
a
a
Farm equipment dealers for Massey Ferguson, Case, Case
IH and New Holland; and
SB 126 was drafted by the New Hampshire Automobile Dealers Association, and focus on the
interests of the Association's members was the stated purpose
Automobile dealers for Cadillac, Chevrolet, Chrysler,Dodge, Ford, Honda, Hyundai, Jeep, Kia, Lincoln,Mercedes, Nissan, VW. 1 I
The Bill that you have before you ... was written by dealers fordealers about the issues that impact their busines."..t'
. . . [T]here are problems that our members appr.oach us with. Wefiled this Bill to help solve those problems . . ..13
In weighing whether SB 126 served an important public pu{pose, the Superior Court
pointed in Deere & Company v. Støte of New Hampshire to the Legislature's consideration of
farm equipment manufacturers. It quoted from a statement by Representative Butler at a May
22,2013 hearing on the adverse effect of reduction in the number of local dealerships: 'ol-ocal
dealers will open their stores when a farmer needs a baler part on Sunday morning and rain is
forecast for Sunday afternoon. This is a true emergency for a farmer whose crop is at risk."la In
contrast, the Superior Court in Husqvørnø could point to nothing in the record to show whether
SB 126 served an important public pulpose as to yard and garden equipment dealers. See HApp.
7-8. It could not, because the subject of these dealers never came up in the Legislature.
ttHApp. 822. Alisting of all witnesses who testified in support of SB 126 in the Senate and House can be found at
HApp.822-23.t' HApp. 356, D. Bennett, New Hampshire Automobile Dealers Ass'n, Senate Commerce Committee, Hearing,
February 19,2013.t' HApp. 362, Pete McNamara, President of the New Hampshire Automobile Dealers Association, Senate
Commerce Committee, Hearing, February 19,2013.
'o HApp. 23, Deere &. Co. v. State of New Hampshire, No. 216-2013-CV-554 (Superior Ct., Merrimack County,April 15, 2014), appeal pending, No. 2014-0315 (N.H. Supreme Ct.).
10
F. Husovarna's Relationships with New Hamnshire l)ealers Are NotComnarable to Those in the Auto Industrv.
Husqvarna dealers have none of the attributes identified by the Legislature as making
automobile dealers vulnerable to manufacturer actions. Disparity of bargaining power caused
conditions prejudicial to automobile dealers, as well as farm equipment dealers, and SB 126 was
passed to "level the playing field" between dealers and manufacturers. HApp. 647 (Statement of
Intent). The conditions considered by the Legislature are summarized in the left-hand column in
the chart below. Husqvama dealers face none of these, as entries in the right-hand column show:
Key Attributes of AutomobileDealers as Identified by
Legislaturels
Corresponding Attributes ofHuiqvarna Dealersl6
Significant investment required inmanufacturer's brand
No significant investment inHusqvarna brand, dealer discretionwhat investment to make
A single supplier and no competitivelines
Multiple suppliers and competitivelines
Switching to another supplier is not anoption
No limitation on switching to anothersupplier
Mandatory investment in expensivefacility upgrades
No mandatory investment in facilityupgrades
Relevant quotations from legislative debate and hearings are collected in the chart submitted by
Husqvarna as Exhibit A to its Memorandum in Support of its Objection to the State's Cross-
Motion for Summary Judgment. HApp. 816-20. Attributes of Husqvarna dealers are described
below.
15 The record support for this listing of key attributes of automobile dealers can be found at HApp. 816-20, under the
column heading "Legislative Observations and Findings."ró The record support for this listing of Husqvarna dealer attributes can be found at HApp. 816-20, under the columnheading "Husqvarna's Relationship with Dealers."
11
1. Dealers Have Total Discretion Over Any Investment in HusqvarnaProducts.
Husqvama does not require a dealer to open ne,tr or additional facilities or otherwise
make any capital investment in connection with selling and servicing Products. HApp. 2ß n15
It does not require any upfront payment for the right to become an authorized dealer. Id. The
dealer decides whether to purchase promotional and marketing materials and what is a
reasonable inventory of equipment and parts. ,Id. Husqvarna requires dealers to employ
personnel who are trained in the service and repair of forestry equipment or yard and garden
equipment, but knowledge about service and repair of Products is readily transferable to the
service and repair of similar equipment manufactured by Husqvarna's competitors. Id. A
dealer's only brand-specific financial investment in handling a line or lines of Products is the
purchase of Products for resale. ,Id.
2. Husqvarna's Dealers Carry Competing Product Lines and MaySwitch to Other Suppliers.
Dealers typically sell a wide range of tools, equipment and other products sourced from
multiple manufacturers, and Products comprise a small segment of the average dealer's overall
business. HApp. 2Il-12 fl 12. Many dealers, like Barn Store of New England,LLC, are
hardware retailers that stock a mix of gardening supplies, paint and paint supplies, plumbing
supplies, electrical supplies, carpentry tools and supplies and other products. Id. Other dealers,
like Greenlands Equipment Corporation, are outdoor power equipment retailers that stock
mowers, blowers, chainsaws, edgers, trimmers, snow throwers and related accessories. 1d.
The goods offered by Husqvarna to dealers are all comparatively inexpensive in relation
to automobiles or agricultural and construction equipment. HApp. 2121113. Even the highest-
priced goods -- €.g., garden tractors and riding mowers -- sell for only a fraction of the price of
an automobile or a unit of motonzed agricultural or construction equipment. Id.
t2
Many Husqvarna dealers carry brands competitive with Products. HApp. 2l2n14.
Husqvarna seeks to maintain a cooperative relationship with its independent dealers. HApp.
212-13 fT 14. A dealer is free under each of the forms of contract in use in New Hampshire to
give notice of termination at any time, and Husqvarna understands that a dealer can readily turn
to other manufacturers, such as Toro, Deere, Kubota, Modern Tool and Die Company (MTD),
Echo or Stihl, for the supply of yard and garden equipment if it becomes dissatisfied with
Husqvarna's performance or product offerings. 1d.
Since Husqvarna's equipment will, in the usual case, account for a comparatively small
part of a dealer's total sales revenue, termination by Husqvarna of a dealer agreement will have
no significant impact on a dealer's business and pose no threat to its continued viability. HApp.
2I3 1[ 14;825-27 1J 8-l 1. Annual purchases from Husqvarna by the average New Hampshire
dealer total less than $200,000. HApp. 213 n 15.
SUMMARY OF THE ARGUMENT
In the State's own words, SB 126 is intended only to govern "manufacturer-dealer
relationships that are comparable to the auto industry'' (HApp. 696), and Husqvarna's
relationships with its dealers are not. They have none of the features the Legislature was seeking
to address as it considered automobile dealers and farm equipment dealers.
Application of the Dealership Act to Husqvarna will substantially impair its contracts
with dealers, all of which were bargained for and entered into in reliance upon prior law,
including the Equipment Dealer Act, and the impairment could not have been foreseen.
Retroactive application of the Dealership Act to Husqvama's contracts is not reasonable or
necessary to serve an important public purpose, and application would impair its contract rights
in violation of the New Hampshire and U.S. Constitutions.
13
The Dealership Act would, if applied to Husqvarna, deprive it of equal protection of the
law in violation of the U.S. Constitution by classiffing it as a manufacturer of motor vehicles and
its dealers as motor vehicle dealers. In the face of a legislative record that is completely silent on
manufacturer-dealer relationships in the yard and garden equipment industry, such a
classification is both arbitrary and irrational.
The Dealership Act violates the Dormant Commerce Clause because it unduly burdens
interstate commerce. It does so by discriminating in purpose and effect against out-of-state
manufacturers in favor of New Hampshire dealers without serving a legitimate local purpose and
while imposing a burden on interstate commerce in excess of any putative local benefits.
RSA 357-C also violates the Federal Arbitration Act and the Supremacy Clause of the
United States Constitution to the extent it would permit or require otherwise arbitrable disputes
to be submitted to the Motor Vehicle Industry Board (ooBoard") at the initiative of a dealer.
ARGUMENT
In reviewingatnal court's interpretation of a statute and its constitutionality, this Court
conducts de novo review. 8.g., New Hømpshíre Ass'n of Counties v. Støte of New Hampshire,
158 N.H. 284,288 (2009); Linehan v. Rockingham County Commissioners, 151 N.H. 276,278
(2004). This Court's review of the Trial Court's August 6,2014 Order is, thus, de novo.
I. The Trial Court Erred In Ruling That, As Applied To Dealer Contracts, TheDealership Act Does Not Violate Husqvarna's Rights Under The Contract Clauses
Of The New Hampshire Constitution Or The United States Constitution.
The New Hampshire Constitution and the United States Constitution prohibit retroactive
application of any law that would cause a substantial impairment of contract rights without a
significant and legitimate offsetting public purpose. The Dealership Act, if applied to
Husqvarna's contracts with its New Hampshire dealers, would render unenforceable key
provisions in the contracts. Impairment of vested contract rights would be substantial, and the
l4
State can make no showing that retroactive application to Husqvarna could be justified as
reasonable and necessary to serve an important public purpose.
Part I, Article 23 of the New Hampshire Constitution provides that "retrospective laws
are highly injurious, oppressive, and unjust. No such laws, therefore, should be made, either for
the decision of civil causes, or the punishment of offenses." In determining whether a
retrospective law impermissibly impairs contractual rights, the threshold inquiry is whether the
law operates as a "substantial impairment" of the rights. 8.g., Lower Village Hydroelectric
Assocs. v. City of Claremont,l4T N.H. 73, 77 (2001). If a law substantially impairs contract
rights, "a balancing of the police power and the rights protected by the contract clauses must be
performed, and ... [the] law ... may pass constitutional muster only if it is reasonable and
necessary to serve an important public purpose." Opinion of the Justices (Furlough), 135 N.H.
625,630 (1992).
A similar analysis has been formulated by the United States Supreme Court. Article I,
Section 10 of the U.S. Constitution provides that "[n]o State shall . . . pass any . . . law impairing
the Obligation of Contracts," and the Court has formulated a three-part test to determine whether
application of a state statute results in an unconstitutional impairment of a contract: (1) whether
the state law has, o'in fact, operated as a substantial impairment of a contractual relationship"; (2)
whether the state has a oosignificant and legitimate public purpose behind the regulation" such as
"remedying of a broad and general social or economic problem"; and (3) whether adjustment of
the rights and responsibilities of contracting parties is based upon reasonable conditions and is of
a character appropriate to the public purpose justifuing the legislation's adoption. Energy
Reserves Group, Inc. v. Kansas Power & Light Co.,459 U.S. 400, 410-12 (1983).
15
We will not separately analyze Husqvarna's Contract Clause claims under the New
Hampshire and U.S. Constitutions. The opinions of this Court make it clear that there is no
material difference in analysis under either Constitution. See, e.g., Tuttle v. New Hampshíre
Medical Malpractíce Joint Underwritíng Ass'n, I59 N.H. 627, 640-48 (2010); Opinion of the
Justices,135 N.H. at 630 ("We therefore understand article I, section 10 fof the U.S.
Constitution] and part I, article 23 fof the New Hampshire Constitution] to offer equivalent
protections where a law impairs a contract, or where a law abrogates an earlier statute that is
itself a contract.").
A. The Dealership Act Substantiallv Impairs Husqvarna Contract Rishts.
The threshold inquiry in any Contract Clause case is whether legislation operates as a substantial
impairment of a contractual relationship. E.S. Tuttle,159 N.H. at 641. The inquiry has three
components: whether there is a contractual relationship, whether a change in the law impairs the
relationship and whether the impairment is substantial. Id., quoting Lower Víllage Hydroelectric
Assocs.,147 N.H. at77; accord, e.g., General Motors Corp. v. Romein,503 U.S. 181, 186
(1992). There is no dispute that the first two prongs of the impairment test are met: Husqvarna
has contracts with its dealers, and application of the Dealership Act to the contracts would void
key provisions. HApp. 210-211 lffl 9- 1 0; 21 5-226 ffi 20-22, 26, 28-32; 250-269.
The third prong -- substantiality -- is also met. The Dealership Act will "dramatically
reduce, if not eliminate," Husqvarna's "rights to . . . fundamental contractual benefit[sf." Tuttle
159 N.H. at 651. Retroactive application of the Dealership Act would substantially impair
Husqvarna's bargained-for contract rights by voiding material and substantive provisions relating
to dealer location, nonexclusivity, selling less than a full product line to a dealer, terminating or
not renewing dealer agreements,warranty claim administration and contract amendment. The
l6
Trial Court held, erroneously, that there was no substantial impairment, because changes
embodied in SB 126 were simply "refinements" in existing law. HApp.7,8.
1. The Right to Add a Dealer to Another Dealer's Marketing Area.
Husqvarna's contracts are nonexclusive, and Husqvarna may therefore add a dealer to the
market area served by another dealer. HApp. 216-217 l2I;258 $ 8; 263 $ 6. Husqvarna's
ability to appoint additional dealers is crucial to commercial success and optimum market
penetration, and Husqvarna retains the right under its contracts to determine the number of
dealers needed for effective representation of Products in a given market area. HApp.2I7 122.
Under the Dealership Act, the Board - not Husqvarna- would decide whether addition of
a dealer to a market area were warranted. RSA 357-C:3(III)(I) provides that a manufacturer may
not add a dealer to the trade area of an existing dealer except in accordance with the provisions
of chapter 357-C. HApp. 889.17 If Husqvarna sought to appoint or relocate a dealer to an
existing dealer's relevant market aÍea - in order to respond, for example, to changing consumer
demands, intensified interbrand competition or dealer underperforrnance -- it must first notify the
incumbent dealer. RSA 357-C:9(I); HApp.9l4. The dealer may then challenge the proposed
change by filing a protest with the Board. Id. The Board will not permit the addition or
relocation if it finds that there is good cause for not permitting the additional dealership. Id. ltis
the manufacturer's burden to prove good cause to establish an additional dealership (id.), and this
requirement creates what is effectively a statutory presumption of dealer exclusivity.
If a protest were initiated, Husqvarna could be delayed for months in implementing
needed change, even if the Board were eventually to approve the change. HApp. 32317. In
't RSA 357-C:3(IIIXI) provides as follows:
It shall be deemed an unfair method of competition and unfair and deceptive practice for any: . . .
Manufacturer . . . to: Grant a competitive franchise in the relevant market area previously granted
to another franchise other than in accordance with the provisions of this chapter; . . .
t7
addition to delay, Husqvarna would incur increased costs from engaging counsel to represent it
before the Board and from diverting management and other resources to respond to the protest.
HApp. 324 n 8. Husqvarna could lose profits and market share to competitors able to take
advantage of sales opportunities in the market area of the protesting dealer during the months
needed for administrative review. Id. Its vulnerability in this situation would be compounded
by the factthat a dealer representing both Husqvarna and a competitor may seek to block
appointment of a new dealer not to prevent enhanced intrabrand competition but, instead, to
shield its other brands from strengthened Husqvama competition. HApp. 3n n 7 ; 32a \ 9 .
By burdening, obstructing or precluding the exercise of the contractual right to add or
relocate a dealer to another dealer's market area, the Dealership Act overrides Husqvarna's
explicitly nonexclusive dealer contracts. HApp. 216-18 ll'11 21 , 22, 24; 322-24 TT 5, 7. It would
effectively confer exclusivity on each dealer within its relevant market area, nulliff Husqvama's
explicitly nonexclusive agreements, override its discretion to authorize others to compete with
dealers selling Products and re-write bargained-for contracts. Id.
The right to appoint additional dealers is a material term, relied upon by Husqvarna at the
time of contracting. HApp. 215I 19;2181124. The Dealership Act would substantially impair
theright. See, e.g., McDonald's Corp.v. Nelson,822F. Supp. 597,602,606 (S.D. Iowa 1993)
(holding that aprovision in Iowa Franchise Act giving a franchisee the right to compensation in
the event a franchisor were to open another outlet in close proximity substantially impaired
McDonald's existing contracts, which granted a franchisee no exclusivity or other territorial
rights), aff'd sub nom. Holiday Inns Franchisíng, Inc. v. Branstad,29F.3d 383 (8th Cir.1994).
18
The Right to Terminate a Dealer Without Intervention of a State
Board.
Husqvama may terminate a dealer for failure to perform its obligations. HApp. 22I n
27;258 59;264 $ 9. The Dealership Act would interject the Board into the termination decision
and subject Husqvarna's exercise of this contractual right to oversight by an agency of the State.
HApp. 22I n27. A dealer objecting to a notice of termination or nonrenewal may file a protest
with the Board, and RSA 357-C:7 provides a procedure for consideration of the protest. HApp.
.,
908
Immediate termination is not possible under RSA 357-C. Husqvarna's2007 and 2010
Contracts provide that they may be terminated for failure by a dealer to cure a material breach
after reasonable notice, and they provide for immediate termination under certain circumstances,
including, for example, submission of a false or fraudulent claim for payment, discount or
warranty reimbursement. HApp.22l n21;258-59,264. The Equipment Dealer Act, repealed by
SB 126, recognized intentional and material misrepresentation as to a dealer's financial status as
a ground for immediate termination. RSA 347-A:2(IlXb); HApp. 868.
Under the Dealership Act, even if a dealer were to submit a false or fraudulent claim for
payment, Husqvarna must, in order to terminate, cancel or not renew its contract, (a) provide
statutory notice; (b) act in good faith; (c) have good cause for termination, cancellation, or
nonrenewal; and (d) obtain a finding from the Board that "there is good cause for cancellation,
termination, failure to renew, or refusal to continue any franchise relationship" upon protest by
the dealer. RSA 357-C:7(I)(d); HApp. 908.
Husqvarna assigned importance to the foregoing termination provisions and relied upon
them when it entered into its contracts with dealers. HApp. 221-221127. Application of
RSA 357-C:7 would substantially impair these contract rights by delaying termination and
T9
subjecting a termination decision to review by the Board, thereby preventing Husqvama from
timely and effectively managing relationships with dealers that have failed to perform, refused to
perform or, in performing, did so by means of false or fraudulent submissions. Id. A statute
such as this that restricts a party's right to terminate a contract in accordance with its terms
causes substantial impairment of the contract. 8.g., Reliable Tractor, Inc. v. John Deere
Construction & Forestry Co.,376 F. App'x 938,942 (11th Cir. 2010) (holding unconstitutional
the retroactive application of a Maryland statute that "effected a change in law that impaired an
existing contractual relationship -- it limited a contractual right to terminate the dealer
agreements"); McDonald's Corp.,822 F. Supp. at 606 (impairment of provisions of Holiday
Inn contracts with franchisees as to grounds for termination); Kendall-Jackson Winery, Ltd. v.
Branson,82 F. Supp .2d 844,873 (N.D. m. 2000) (impairment of provision permitting at-will
termination of wine distributor).
3. The Right to Sell Less Than a Full Product Line to a Dealer.
Husqvarna has the right to grant adealer less than a full line of Products under a brand. It
may, for example, authorize a dealer to sell and service handheld but not wheeled equipment.
HApp. 220-21126;253;262. Husqvarna relied upon this right when entering into its dealer
contracts, íd., andthe right is important to Husqvarna in order to optimize market penetration, to
align dealer qualifications with respect to safety and performance requirements for given models
within a brand, to enhance brand equity or to achieve other marketing goals, id.
RSA 357-C:3(IIIXq) makes it an unfair method of competition and unfair and deceptive
practice not to make all models of a "line make" available to all dealers. HApp. 890.18 Under
't RSA 357-G:3(IIIX{ provides as follows
It shall be deemed an unfair method of competition and unfair and deceptive practice for any: . . .
Manufacturer . . . to: Fail or refuse to sell or offer to sell to all motor vehicle franchisees of a line
20
RSA 357-C:1(XXVII), the term "line make" includes any and all equipment offered for sale
under the same brand name. HApp. 884. The Dealership Act would substantially impair
Husqvarna's existing contract rights by eliminating its discretion to control which of its Products
a dealer may sell. HApp. 220-21n26.
4. The Right to Set Warranty Reimbursement Rates.
Husqvarna's dealer contracts require that a dealer perform warranty service for Products
and provide that Husqvarna will compensate a dealer for service and parts in accordance with its
established warranty policy. HApp. 222-23 128;253;257 ç 7;262 $ 1(bX4). Husqvarna retains
discretion to establish reimbursement and other terms and conditions and to change them as
needed. 1d. These contract provisions are consistent with the requirements of the now-repealed
Equipment Dealer Act, which required that amanufacturer process a warranty claim within 30
days. RSA 347-A:8; HApp. 876.
RSA 357-C:5(II) would override Husqvarna's contracts to require that retail labor rates
and product prices apply to all warranty claims and that those rates and prices be calculated in
accordance with RSA 357-C:5(IIXbXl). HApp. 898. No longer would Husqvarna be able to set
the rate of reimbursement for parts and labor for warranty service. HApp. 222 n28; 253;257 ç
7; 262 $ I (bX4). The Dealership Act would impose a statutory reimbursement regimen and void
Husqvarna's existing contract rights on this subject. HApp. 222n28. Legislation mandating
warranty reimbursement rates may substantially impair existing contracts when, as here, the
regulation is unforeseeable. 8.g., Alliance of Automobile Manufacturers v. Gwadoslq),430F.3d
make, all models manufactured for that line make, or requiring a dealer to pay any extra fee,
execute a separate franchise agreement, purchase unreasonable advertising displays or othermaterials, or relocate, expand, improve, remodel, renovate, recondition, or alter the dealer' s
existing facilities, or provide exclusive facilities as a prerequisite to receiving a model or series ofvehicles.
2T
30,42 (1st Cir. 2005) (observing that dealer contracts executed prior to enactment of Maine's
motor vehicle dealer statute in 1975 were substantially impaired by subsequent legislation
regulating warranty reimbursement).
5. The Right to Amend a Dealer Agreement.
Husqvarna has the right to amend certain contract provisions in its discretion, such as
terms and conditions of sale and warranty policy, and to amend all other provisions in a writing
signed by the parties. HApp. 2n n30;253;265 $ la(e). rJ/hen it entered into its dealer
contracts, Husqvarna relied upon the right to amend them as needed to meet changing conditions
and demands of the marketplace. HApp. 2231130. RSA 357-C:6(III), however, makes any
amendment of a dealer contract subject to (a) retroactive application of the Dealership Act to the
amended contract and (b) voiding of any and all provisions in the contract that are inconsistent
with the Dealership Act. HApp.904. The Dealership Act exacts a price for exercise of the right
to amend that has the legal and practical effect of nullifying the right altogether.
B. Impairment \ilas Not Foreseeable.
This Court noted in Tuttle that contract impairment may not be substantial if "further
regulation might be foreseeable" in an industry. 159 N.H. at 650. The Trial Court, following the
analysis in its April 15,2014 ruling on summary judgment motions in Deere & Co. v. State of
New Hampshíre (HApp. 14-27), held that the contract impairments resulting from SB 126 were
all foreseeable. HApp. 8.
Application of the Dealership Act to Husqvarna was not foreseeable. Many states
regulate yard and garden equipment manufacturers under statutes similar to the Equipment
Dealer Act, but there was no regulation anywhere in the country that would have alerted
Husqvarna to the possibility that New Hampshire's motor vehicle dealer statute would be
extended to reach yard and garden equipment dealers. New Hampshire is the only state with a
22
motor vehicle dealer statute that defines "motor vehicle" to include yard and garden equipment
and the only state with a statute subjecting manufacturer-dealer relationships in this industry to
regulatory oversight from an administrative board.le
The Equipment Dealer Act (HApp.866-79) gave no hint that Husqvarna could at some
point become subject to regulatory burdens imposed on automobile and truck manufacturers by
the Dealership Act. Like many statutes regulating the relationship between manufacturers of
yard and garden equipment and their dealers, this statute required cause for termination of a
dealer agreement (RSA 3a7-A:2(I)), a fixed notice period (id.) and repurchase of inventory upon
termination (RSA 347-A:3); limited a manufacturer's exercise of discretion in reviewing a
request to transfer ownership of the dealership (RSA 347-A:6); and imposed time limits for
processing a dealer's claim for reimbursement for warranty service parts and labor (RSA 347-
A:8). Against this legislative backdrop, Husqvarna could not have foreseen legislation that
would:
Restrict its ability to add a dealer to a market;
Subject its decision to terminate a dealership or add a dealer to another dealer's
market to review and potential veto by a governmental board;
Prohibit it from offering a dealer less than the full product line for a brand;
Mandate the reimbursement it provides dealers for warranty claims; and
Conditíon amendment of a dealer agreement upon Husqvarna's acquiescence inthis regulatory scheme.
Amendment of the Dealership Act to reach yard and garden equipment could not, thus,
have been foreseen. Far less drastic amendments to dealer and franchisee protection statutes
have been found to have been unforeseeable. See, e.g., Equipment Manuføcturers Instítute v.
le A listing of statutes potentially applicable to dealers of forestry and yard and garden equipment appears at HApp.
165-7r
23
Janklow,300 F.3d 842,857-59 (8th Cir.2002) (holding that amendments to good cause
provisions of South Dakota agricultural equipment dealer statute were not foreseeable even
though dealer relationships had been regulated since 1951); McDonald's Corp.,822F. Supp. at
607-08 (holding that enactment of Iowa franchise statute of general application could not have
been foreseen even though dealer protection statutes had been enacted for specific industries).
C. As Annlied to Husqvarna. the D Act Is Not Reasonable andNecessarv to Serve an Important Public Purpose.
A retroactive law that substantially impairs an existing contract can withstand scrutiny
under the Contract Clause only if the law is "reasonable and necessary to accomplish the stated
public purpose." Tuttle,l59 N.H. at 645. Once it is established that legislation substantially
impairs a contract, as the Dealership Act does here, a court must conduct a "balancing of the
police power and the rights protected by the contract clauses . . ., and a bill or law which
substantially impairs a contractual obligation may pass constitutional muster only if it is
'reasonable and necessary to serve an important public purpose."' Opinion of the Justices,l35
N.H. at 634 (citation omitted). As applied to Husqvama, the Dealership Act serves no such
pu{pose. There is a complete failure of purpose on multiple grounds, none of which was
addressed by the Trial Court.
1. The Legistature Did Not Consider any Facts about Yard and GardenEquipment Dealers.
The Legislature gave no consideration to the relationship between manufacturers of yard
and garden equipment and their dealers. Since these dealers are a subject of SB 126, one would
expect that the legislative record would contain some mention of them. It does not. The
24
Legislature was focused solely upon dealer relationships in which "[m]anufacturers hold all the
cards,"20 and the automotive industry was the principal subject.
Husqvarna dealers have none of the characteristics identified by the Legislature as
making automobile dealers vulnerable to manufacturer actions and in response to which it passed
SB 126. See pages 11-13 supra. The only dealers or dealer representatives whom Senate and
House committees heard testify in support of SB 126 were, as noted at pages 9-10, automobile
dealers, the New Hampshire Automobile Dealers Association and farm equipment dealers.
The ostensible justification for repealing the Equipment Dealer Act and sweeping all
manufacturers within its coverage into the Dealership Act is the Legislature's finding, quoted at
page 3 above, that the relationship between automobile dealers and manufacturers is identical to
that between equipment dealers and manufacturers.2l This conclusion might be supportable if
the word "agricultural" or "farm" were used to modify "equipment dealers." There is no basis,
however, for any such finding as to a manufacturer of yard and garden equipment like
Husqvarna. Against this evidentiary vacuum, subjecting Husqvarna to the Dealership Act is
neither reasonable nor necessary to accomplish the law's stated public purpose - "to level the
playing field for NH businesses and ensure consumersf'] interests are safeguarded as well."
HApp. 647 (Statement of lntent).
2. The State's Own Evidence Shows that Husqvarnaos Relationshipswith Dealers Are Not Comparable to Those in the AutomobileIndustry.
Unable to point to anything in the legislative record that would justify application of the
Dealership Act to Husqvama, the State, in support of its cross-motion for summary judgment
'o HApp. 502, statement of Sen. Bradley at April 16,2013 hearing of the House Commerce and Consumer AffairsCommittee.tt HApp. 647-48, Statement of Intent in the Majority Report of the House Commerce and Consumer AffairsCommittee.
25
(HApp. 689-789), offered an affidavit from Brad Chappell (HApp.739-42), one of the owners of
Chappell Tractor Sales Inc. It did so in an effort to demonstrate that the relationship between
Husqvarna and its dealers is the same as that between manufacturers and dealers in the
automobile industry. The affidavit backfired. The facts of Chappell Tractor graphically display
why there is no ratíonal basis for application of SB 126 to Husqvarna dealers.
Here are the facts about Chappell Tractor. Husqvarna is one of 17 brands of equipment
that Chappell Tractor handles, and Husqvarna likely accounts for less than lo/o of the dealer's
annual revenue. HApp. 827 n 11 (Aff. of Matthew Jarck). The homepage of Chappell Tractor's
website prominently features equipment from Kubota, Stihl, Hyundai, Link-Belt, New Holland,
Mahindra and other brands but contains no mention of Husqvarna. HApp.825-26 fl 8. Chappell
Tractor carries equipment directly competitive with Husqvama from "names you can trust like
Kubota,'Woods, Mahindra, New Holland, Stihl, Hyundai." HApp. 826n9;832-33. In each
category of equipment where Chappell Tractor's website lists Husqvarna products, it shows
multiple other suppliers of competitive equipment. HApp. 825-26 T1[8, 9. Chappell's claim that
he could not switch to another supplier without suffering hardship is simply not credible, given
the multitude of suppliers in each equipment category. HApp. 741I15. If Husqvafna
discontinued selling lawn mowers, for example, Chappell Tractor could make up any lost
revenue by selling additional mowers sourced from any one of the other 8 companies from which
it currently buys lawn mowers competitive with those from Husqvarna. HApp. 826-27 nl0.
Chappell's affidavit refutes the State's position and confirms -- by omitting any facts
about manufacturer abuses or dealer vulnerability that animated the Legislature -- that
Husqvama's relationship with its dealers bears no resemblance to those in the automobile
industry. See page ll supra. Accounting for lo/o percent or less of Chappell Tractor's annual
26
revenue, Husqvarna is not in a position to take advantage of the dealer through, as the Statement
of Intent stresses, o'one-sided, non-negotiable contracts and an autocratic relationship" (HApp.
647), and termination of the dealership by Husqvarna would likely have no discernible impact on
Chappell Tractor's business operations, HApp. 826 T 10.
3. Leveling the Playing Field Is Not an Important Public Purpose.
The State may pass laws to protect the private interests of local businesses, but doing so
does not satisfy the public purpose needed for application of a statute retroactively. The
Legislature's interest in protecting motor vehicle dealers by passage of SB 126 is highlighted in
the Statement of Intent: "The current law and SB 126, seel<s to continue to level the playingfi.eld
þr NH businesses and ensure that consumers interests are safeguarded as well." HApp.647
(emphasis added). One of SB 126's co-sponsors, Senator Bradley, described the need to "make
sure that we have a level playingf.eld." HApp. 502 (emphasis added).
Leveling the playing field between contracting parties is not a public purpose that can
justify substantial impairment of contracts between the parties, however. 8.g., Equipment
Manufacturers Institute v. Janklow, 300 F.3d 842,861 (8th Cir. 2002) ("leveling the playing
field between contracting parties is expressly prohibited as a significant and legitimate public
interest" (footnote omitted)); Pepsíco,Inc. v. Marion Pepsi-Cola Bottlíng Co.,2003 U.S. Dist.
LEXIS 20060, at*20 (S.D. nl. 2003) ("In spite of the general proclamations in the Act that it is
for the public good, careful analysis of the Act's provisions leads to only one conclusion: it
serves the private interest to one party in a contractual relationship by attempting to level the
playing field, and it does nothing to promote the greater good of society.")
Application of the Dealership Act to the relationship between Husqvama and its dealers
would not, in any event, further the dubious public purpose of "leveling the playing field." To
argue that extending the Dealership Act to the relationship between Husqvama and its dealers
27
was reasonable and necessary to achieve its stated public purpose assumes that the Legislature
even considered the industry in which Husqvarna operates and the channels through which it
distributes its products. It did not.
4. Protection of Dealers from Intrabrand Competition Is Not anImportant Pubtic Purpose and Impairs Consumer \ilelfare.
When the Dealership Act's effect on Husqvama's contractual right to add a dealer to the
market area of another dealer is considered, the absence of any important public purpose
becomes all the more conspicuous. As discussed at pages 17-18 above, RSA 357-C:3(IIIXI)
would prohibit Husqvarna from exercising this right except in accordance with procedures that
permit a protest to be filed with the Board by an incumbent dealer. The Dealership Act both
voids Husqvarna's contract rights and shields dealers from intrabrand competition.
There were no facts before the Legislature to suggest that Husqvarna's policy of strong
intrabrand competition is injurious to dealers, and there were none to suggest that the policy
serves any purpose other than to strengthen Husqvarna's ability to compete against
manufacturers of other brands. The subject of intrabrand competition in the market for yard and
garden equipment never came up.
The practical effect of RSA 357-C:3(III)(I) and 357-C:9(I) is to implement a scheme of
territorial allocation, insulating dealers from intrabrand competition that Husqvarna may deem
essential for meaningful competition against other brands.22 Allocation may not be the result of
explicit agreement among dealers, but the Dealership Act facilitates it. If Husqvarna loses the
ability to control intrabrand competition among its dealers in order to strengthen interbrand
22 Allocation of territories between or among competitors has long been a concem of the antitrust laws. See,e.g.,
Palmer v. BRG of Georgia, Inc., 498 U.S. 46, 49-50 (1990); General Leaseways, Inc. v. Nationql Truck Leøsing
Ass'n,744 F.2d 588, 595 (7th Cir. 1984).
28
competition, consumers will suffer by paying higher prices, receiving reduced service levels and
experiencing curtailed access to Products. HApp. 321-25.
II. The Trial Court Erred In Ruling That The Dealership Act Does Not ViolateHusqvarnans Rights Under The Equal Protection Clause Of The United States
Constitution, Amendment XIV, Section 1.
The Trial Court erred in concluding that the Legislature had a rational basis for
classifying yard and garden equipment as "motor vehicles" and Husqvarna dealers as "motor
vehicle dealers" subject to the burdensome regulatory regime of the Dealership Act. HApp. 8-
10. It is not treatment different from other manufacturers of this equipment that violates
Husqvarna's constitutional rights. It is the arbitrary and irrational classification of Husqvarna as
a manufacturer of "motor vehicles" that deprives Husqvarna of equal protection.
The Equal Protection Clause provides that "[n]o State shall . . . deny to any person within
its jurisdiction the equal protection of the laws." U.S. Const., Amend. XIV, $ 1. To meet the
minimum standards imposed by the Equal Protection Clause, states must have a "reasonable, not
alrbitrarf'basis to classify groups of persons based on a "fair and substantial relation to the
object of the legislation, so that all persons similarly circumstanced shall be treated alike." Reed
v. Reed,404 U.S. 7I,76 (1971). Classification of yard and garden equipment as'omotor
vehicles" can be upheld only if the Legislature could have reasonably concluded that the
classification would promote a legitimate state purpose. Exxon Corp. v. Eagerton, 462U.5. 176,
1e5 (1983).
The classification bears no rational relationship, however, to the purpose of the
Dealership Act - protection of the substantial investments made by, and unequal bargaining
power of motor vehicle dealers. As shown above at pages 11-13 and24-25, Husqvarna's
29
dealers have none of the disadvantages or burdens that the Legislature was purporting to address
in SB 126.23
Defining "motor vehicle" to include yard and garden equipment and thereby subjecting
Husqvarna to the pervasive regulatory scheme developed over decades for protection of
automobile dealers creates a "classification whose relationship to an asserted goal is so
attenuated as to render the distinction arbitrary or irrational." City of Cleburne v. Cleburne
Living Center, lnc.,473 tJ.S. 432,446 (1985). The evidentiary vacuum in which the Legislature
acted makes the classification irrational, and inclusion of Husqvama and its dealers in the
Dealership Act lacks any "fair and substantial relation to the object of the legislation" that would
otherwise shield it from challenge under the Equal Protection Clause. Reed,404 U.S at76.
III. The Trial Court Erred In Ruting Thato As Applied To Husqvarna, The DealershipAct Does Not Violate Article 1, Section 8, Clause 3 Of The United StatesConstitution, The Dormant Commerce Clause.
The Trial Court erred in concluding that the Dealership Act does not violate the Dormant
Commerce Clause. HApp. 10-11. The Act imposes an undue burden on interstate commerce,
and it is therefore invalid under the Commerce Clause of the U.S. Constitution, which provides
that "Congress shall have Power [to] regulate Commerce famong] the several States." U.S.
Const. Art. I. $ 8, cl. 3. The Commerce Clause prohibits state legislation that burdens interstate
commerce even in the absence of express Congressional action (the "Dormant Commerce
Clause"). See C & A Carbone, Inc. v. Town of Clarlrstown,5ll U.S. 383, 389-90 (1994). The
Dormant Commerce Clause limits economic protectionism, i.e., regulatory measures designed to
benefit in-state economic interests by burdening out-of-state competitors. 8.g., Department of
Revenue v. Davis,553 U.S. 328,337-38 (2008). State regulations that directly discriminate by
23 The differences between Husqvarna dealers and automobile dealers are charted in HApp. 860-65, which includesquotations from the legislative record.
30
treating in-state and out-of-state economic interests differently, benefitting the former and
burdening the latter, are presumed unconstitutional. Oregon Waste Systems, Inc. v. Department
of Environmental Quality,sl l U.S. 93,99 (1994). Regulations that indirectly affect interstate
commerce are only valid where the state's interest is legitimate and the burden on interstate
commerce does not clearly exceed the local benefits. 8.g., Brown-Forman Distillers Corp. v.
New York State Líquor Authoríty,476U.5. 573,579 (1986).
A statute that discriminates against interstate commerce in its purpose or in practical
effect is per se invalid unless the state shows that the statute serves a legitimate local purpose and
that the purpose could not be served equally well by available nondiscriminatory means. Eg.,
Wyoming v. Oklahoma,502 U.S. 437, 454-55 (1992). A statute that regulates even-handedly
may nonetheless violate the Dormant Commerce Clause if the burden imposed on interstate
commerce is clearly excessive in relation to putative local benefits. Píke v. Bruce Clturch, Inc.,
397 U.S. 137, 142 (1970). Without a legitimate purpose or local benefit, let alone a benefit that
outweighs the countervailing discriminatory impact on out-of-state manufacturers, the
Dealership Act violates the Dormant Commerce Clause and should be declared unconstitutional.
A. The Purpose of the Dealership Act Is Discriminatory.
Protection of local businesses from out-of-state manufacturers was the Legislature's
objective in passing SB 126, which "seeks to continue to level the playing field for NH
businesses Testimony in support of SB 126,whichwas drafted by the New Hampshire
Automobile Dealers Association,2s makes clear that the purpose of SB 126 Is protection of New
'o HApp. 647, Statement of Intent, Majority Report, House Commerce and Consumer Affairs Committee, May 16,
2013.
" Seepagel0supra.
31
Hampshire businesses : 'olt's them vs. out-of-state manuføcturers."26 A sponsor of SB 126,
Senator Sanborn, commented, in introducing the legislation, that "New Hampshire businesses
should have the right to do business with New Hampshire businesses."2T Affected
manufacturers, like Husqvarna, are overwhelmingly located outside of New Hampshire, and the
impact of the Dealership Act falls heavily and disproportionately on out-of-state businesses.
HApp. 321-22 '1h[I-3, 5.
B. The Effect of the Dealership Act Is Discriminatory.
The Dealership Act is also discriminatory in effect because it insulates in-state dealers
from intrabrand competition while Husqvarna must pursue a lengthy administrative process,
subject to hearings and findings by the Board, if it seeks to appoint or relocate additional dealers
to respond to interbrand competition, as shown at pages l7-18 above. Establishment of this tlpe
of burdensome and expensive administrative process has been recognized as a means by which
protective legislation violates the Dormant Commerce Clause. See, e.g., Colon Health Centers
of America, LLC v. Hazel,733 F.3d 535, 544-45 (4th Cir. 2013); Yamahø Motor Corp. v. Jim's
Motorcycle, Inc.,40l F.3d 560,571-72 (4th Cir. 2005) (noting that it is more burdensome for
motorcycle manufacturers to do business in Virginia because dealers can protest new
dealerships, and that manufacturers will focus their efforts on expansion in other states, thereby
reducing intrabrand and interbrand competition.) No other state subjects to regulatory second-
guessing exercise by Husqvama of its contractual right to add a dealer to another dealer's trade
area. HApp. 321-24T1[ l-3, 5-9 165-71.
The burden imposed by the Dealership Act is substantial and predominantly impacts out-
of-state interests by entrenching local dealers, raising entry barriers and impairing Husqvarna's
26 HApp. 503, Chris Williams, Nashua Chamber of Commerce, House Commerce and Consumer AffairsCommittee, Public Hearing, April 16, 2013 (emphasis added).
" HApp. 331, Statement of Senator Sanborn, Feb. 19, 2013.
32
ability to control intrabrand competition in New Hampshire. This kind of regulatory scheme
favoring local businesses violates the Commerce Clause. See, e.g., Yamaha Motor Corp.,40l
F.3d at 573-74 (applying Pikebalancing inquiry and holding that Virginia statute giving
motorcycle dealers the ability to protest a new dealership in the state violates the dormant
Commerce Clause).
C. There Is No Countervailing Legitimate Local Purpose or Benefit.
The State cannot show that the foregoing "discrimination is demonstrably justified."
Granholm v. Heald,544 U.S. 460,492 (2005) (quoting Chemical Waste Management, Inc. v.
Hunt,504 U.S. 334,344 (1992)); see also Bacchus Imports, Ltd. v. Dias, 468 U.S. 263,270
(1984) (okhere simple economic protectionism is effected by state legislation, a stricter rule of
invalidity has been erected.") The State has not articulated a legitimate public interest in
economically favoring New Hampshire dealers over out-oÊstate manufacturers. Dealers of yard
and garden equipment are not situated similarly to motor vehicle dealers, and the State has not
shown that the same economic protectionism should apply equally to both groups. The resulting
anticompetitive burden from the Dealership Act outweighs any asserted local purpose, and the
burden on interstate commerc e is, a þrtiori, excessive in relation to any putative local benefits.
IV. The Trial Court Erred In Not Entering Judgment For Husqvarna On Count II OfIts Complainto Alleging That The Dealership Act Violates The Federal ArbitrationAct And The Supremacy Clause Of The United States Constitution, Article 6o
Clause 2.
The Superior Court erred by not entering judgment in favor of Husqvarna on Count II of
its Complaint and by not declaring that all Husqvama dealer disputes must be submitted to
arbitration. Husqvarna's 2007 Contracts and 2010 Contracts require disputes arising from the
relationship to be submitted to arbitration and provide that arbitration is to be the sole dispute
resolution mechanism for the parties. HApp. 224-25 T 31. RSA 357-C:3(IIIXpX¡) declares it an
JJ
unfair method of competition and unfair and deceptive practice to require that disputes be
submitted to arbitration. The Superior Court agreed that the "provisions in SB 126 prohibiting
arbitration are void under the Supremacy Clause and must be severed from the other provisions
of RSA 357-C.' HApp. 8. The court did not, however, address Husqvarna's request for a
declaration that arbitration, if provided for in the contract between Husqvarna and its dealer, is
the sole dispute resolution mechanism and that dealers disputing action by Husqvarna may not
bypass it and file a protest with the Board under any provisions of the Dealership Act. HApp.
194-96 (Memorandum in Support of Objection to State's Cross-Motion for Summary Judgment,
at 3-5).
In order to foreclose any uncertainty as to the effect of the Superior Court's Order on
Husqvarna's arbitration rights protected by the Federal Arbitration Act, Husqvarna urges this
Court, if it were to decline to hold the Dealership Act unconstitutional, to reverse the Order,
grant Husqvarna's motion for summary judgment on Count II of its Complaint and hold thaf a
dealer with an agreement containing an arbitration clause such as that in the 2007 Contract or
2010 Contract may not resort to the Board for resolution of any dispute arising under or in
connection with the dealer relationship.
CONCLUSION
The Court should reverse the Trial Court's August 6,2014 Order (HApp. 1-12) and hold
that the Dealership Act, as applied to Husqvarna, is unconstitutional in violation of the Contract
Clauses of the New Hampshire and United States Constitutions, the Equal Protection Clause of
the United States Constitution and the Dormant Commerce Clause of the United States
Constitution. If the Court determines to affirm the Order on these constitutional grounds,
Husqvarna requests that the Court declare that any terms of the Act providing for resolution of
34
dealer protests by the Board are void as to any Husqvarna dealer with a contract having an
arbitration clause because in conflict with the Arbitration Act.
REOUEST FOR O AI, ARGIIMENT
Husqvarna believes that oral argument is necessary and will be helpful to the Court in
deciding this case, and it requests 15 minutes of oral argument. Attomey Thomas J. Collin will
argue for Husqvarna.
RULE 16(3I(il CERTIFICATION
Husqvarna hereby certifies that the written appealed decision of the Trial Court is
appended to this Brief.
Respectfully submitted,
By its attorneys,
Dated: May 8, 2015 MoLANE GRAF RAULERSON &MIDDLETON, FES S'N
By:Michael A. ,NH900 Elm Street, P. OManchester, NH 03105(603) 62s-6464
Thomas J. CollinJennifer S. RoachTHOMPSON HINE LLP3900 Key CenterI27 Pvbic SquareCleveland, OH 44114(216) s66-5s00
and
35
CERTIFICATE OF' SERVICE
I hereby certify that I served the foregoing brief by mailing two copies thereof by firstclass mail, postage prepaid, to each counsel of record.
ADI)EI{DUM
THE STATE OF'NE\M HAMPSHIRE
MERRIMACK SS. SUPERIOR COURT
Husqvarna Professional Products, Inc.
v,
The State of New Hampshire
No, 14-CV-166
ORDER
The plaintiff, Husqvarna Professional Products, Inc. ("Husqvarna"), brought this action
against the defendant, the State of New Hampshire (the "state"), challenging the constitutionality
of Senate Bill 126 1';SB 126"¡, which adds farm, forestry, and industuial equipment to the RSA
357-Cdefinition of motor vêhicle. Befo¡e the court are the parties' cross-motions for summary
judgment. The plaintiffasserts that the reûoactive applic'ation of SB 126 unconstitutionally im-
pairs its sonhacts in violation.of article I, section 10 of the United States Constitution and part 1,
article 23 of the New Hampshire Constitution, The plaintifffrrther argues SB 126 prohibits arbi-
tration in violation of the Supremacy Clause, abridges the plaintiffls equal protection rights, vio-
Iates the. Domrant Commerce Clause, and violates federal and state antitrust laws. The defendant
takes a contrary position, The court hearcl argument on May 20, 2014. Because the state hæ sat-
isfied its burden of shou'ing that it is entitled to judgment as a matter of law on the undisputed
facts, the plaintiff s motion for summary judgment is DENIED and the defendant's motion for
summary judgment is GRANTED.
In ruling on cross-motions for summary judgment, the court "consider[s] the evidence in
the light most favorable to each parby in its capacþ as the nonmoving party and, if no genuine
issue of material faot exists, [the court] determineis] whether the moving parfy is entitled to
a
judgment as amatter of laril," N.H. Ass'n of Countiesv, State,158 N.H. 284,287*88 (2009).In
order to defeat summary judgment, the non-moving party "must put forth contradictory evidence
under oath, 'suffrcient .., to indicate that a genuine issue of fact exists so that the party should
havetheopportuníty.toprovethefaotathial,..."'Philtipsi.Verax,138N.H,240,243 (1994)
(citation and quotations omitted), A'fact is material if it affects the outcome of the litigation un-
der the applicable substantive ?aw. Palmer v. Nan Kìng Rest,, Inc,,I47N.I-I. 681, 653 (2002).In
considering a party's motion for summary judgment, the court considers the evidence, and all
inferences properly drawn from it, in the light most favorable to the nonmoving pat$. Sintros v.
Hamon,l48 N.H. 478,480 Q}}z).Mindful of this standard, the court sets forth the undisputed
facts below.
The plaintiffmanufactures forestry and lawn and garden equipment, The equipment in-
cludes chainsaws, mowers, trimmers, gar{entragtors, and snow throwers ('þoducts"). The
plaintiffdishibutes the products to New Hampshire through multiple channels, selling them to
wholesaler Steven S¡illand, Inc. ("Iüilland"), independent dealers, national retailers, and directly
to some users, such as foee care and equipment iental companies. The plaintiff has more than 40
authorized independent dealcrs.in New Hampshire, some of which have muþIe store locations.
The ptaintiff also has supply agreements with a number of na;ional accounts that sell products
through over 90 retail stores in New Hampshire. The relationship befween the plaintiff and the
varióus dealers is govemed by dealer contracts.
On June 25, 2013, Govemor Hassan signed SB 126 into law, Before SB 126, RSA 347-A
governed the conhacts. The purpose of RSA 347-Awas to protect equiptrent dealers. SB 126
amended the terms "motor vehicle" and "¡notor vehicle deâler" under RSA 357-C:1, I and
VIII(a) to include 'ofarm and utility tractors, forestry equipment, industrial equipment, farm im-
)
-J-
plements, farm machinery, yæd and garden equipment, attachments, accessories and repair
paxts.', SB 126 did not "grandfather" existing contracts. Consequentþ, the plaintiffs contracts
are no longer subject ro RSA 347-A_.Ïheyare no\¡/ govemed by RSA 357-C.
In response, the plaintiffinitiated the instant action seeking.declaratory relief, a prelimi'
nary injunction, and permanent injunctive relief. The plaintiffmakes fou¡ claimò: (1) SB 126 vn'
constitutionally impairs the plaintifPs contracts in violation of the state and federal constitutions;
(2) SB 126 prohibits arbitration in violation of the Supremacy Clause of the United States Con'
stitution; (3) SB 126 abridges the plaintifPs equal protection rights under the United States Con-
stitution; and (4) SB 126 violates the Dormært Cornmerce Clause of the United States Constitu-
tion. Additionally, in its objection to the defendant's summary judgment motio4 the plaintiff as-
serts an antitrustviolation. The defendant objects, The state atgues that SB 126 does not uncon-
sïitutionally impair the plaintiff s conhacts, does not violate the plaintiff s equal protection
rights, and. does not violate tlie Dormant Commerce Clause. The state also asserts that tlre plain-
tiff s antitrust argument wæ noi properly raised,l The court will address the parties' arguments
in turn.
Theplaintiff first asserts that SB 126 unconstitutionally impairs iìs existing contracts,
contrary to the state and federal constitutions, The analfiical framework for assessing a constinr-
tional challenge to legislative action is well established. "Whether or not a statute is constitution-
al is a question of law, ..," Alçi.ns y. Sec'y of State,154 NH. 67,70 (2006). o'The parly challeng-
.ing a statute's constitutionality bears the burden of proof." State v, Pierce,l52 N.H. 7g0,7g1,
(2005), Acoordingly, o'fhe constitutionality of an- act passed by the coordinate branch of the gov-
ernment is to be presumed," Opinion of the Justíces, 118 N,H, 582, 584 (197S) (quotation omit-
I The state does acknowledge this court's recent ruling that the SB f26 provisions prohibiting arbitration are voÍd
under the Supremacy Clauss and must be severed from the other provisions of RSA 357 -Q. See Deere & Co. et al, v,
Støte of New Hampshíre, Merrimaok County Suporior Ct. No. 13-CV-554 (Order of April 15,2014).
J
-4-
ted). "A statute will not be construed to be unconstitutional where it is susceptible to a const¡uc-
tion rendering it constitutional." Cìty of Claremont v. Truell,126 N.H. 30, 39 (1985).
"In this case ,., there is no question of statutory interpretation. The effdcts of the legisla-
tion are obvious and acknowledged. If those effects infringe on constitutionally protected rights,"
[the court] cannot avoid [its] obiigation to say so," Tuttle v. N.H. Med. lt[øIpractice Joint Under-
writtngAssoc.,75gN,H,627,640(2010), cirsngAllianceofAmericanlnsurersv.Chu,5?I
N,E.zd 672,678 (N.Y, 1991).
Part 1, article 23 of the New Hampshire Constitutíon states: "Retrospective laws æe high-
ly injurious, oppressive, and unjust. No such laws, therefore, should be made, either for the deci-
sion of civil causes, or the punisbment of offenses." While this section does not reference exist-
ing conhacts, its "proscription duplicates the proteotions found in the contract clause of the Unit-
ed States Constitution," State v. Fournter,158 N.H. 2I4,221(2009). Thus, "article I, section 10
[of the federal constitution] and part I, article 23 [of the state constitution] .. . offer equivalent
protections where a lawimpairs a contract, or where a law abrogates an earlier statute that is it-
self a contact...." Tt4ttle,l59 N.H. at 641.
. Contact Clause anaiysis in New Hampshire requires a threshold inquiry as towhether the legislation operates as a substantial impairment of a contraotualrelationship. This inquiry has ttrree components: whether there is a contracfualrelationship, whether a change in law impairs that conhactual relationship, andwhethe¡ the impairment is substantial, If the legislation substarrtially impairs thecontract, a balancing of the police pov/er and the rights protected by the contractclauses must be performed, and .. , [the] Iaw .. , may pass constitutional musteronly if it ís reasonable and necessary to serye an important public purpose,
Id. (citations and quotations omitted).
Here, there is no dispute that the plaintiff has contuactual relationships with its dealers or
that SB 126 isintended to apply retroactively. Additionally, the defendant asserts that SB 126
does not impact the plaintiff s ability to sell directiy to customers in the tade area of the dealer,
4
5
does not affeot the sales of products by national accounts, and does not prohibit the plãintiff s
agreement with Witland or impose any new obligations on the V/illand agreement. Def.'s Mem.
Supp. Summ . L at 6-7. The court agrees that SB 126 does not affect the plaintifPs right to sell to
customers in a dealer's trade area, including selling to direct accounts, except to the extent that
the plaintiff seeks to compete with a dealer through ownership of a dealership or establishment
of a factory store, The court also agrees that SB 1 26 doeé not apply to the sale of products by na-
tional accounts; nor.does it affect the plaintifPs agreement with Willand,
The remaining issue is rvhether the plaintifPs independent contracts are substantially im-
paired. "Although the United States Supreme Court has provided little specific guidance as to
what corutitutes a 'substantial' conhact impairment, total destruction of conhactual expectations
is not necessary for a finding of subst¿ntial impairment." Tuttle,159 N.I{, at 649 (citation omit-
ted).
The severity of an irnpairment of contractual obiigations can be measured by thefactors that reflect the high value the Framers plaoed on the protection of privatecontracts. Contacts enable individuals to order their personal and business affairsaccording to their particular needs and interests, Once ananged, those rights andobligations are binding under the law, and the pafies are entitled to rely on them.
Qpinion of thc Justices (Furlough), 135 N.H. 625,633 (1992), quottng Allied Structural Steel
Co. v. Spannaus,438 U.S. 234, 245 (1978)
The severity of the impairrnent measures the height of the hurdle the state
legisiation must clear. Minimal alteration of contractual obligations may end theinquiry at its first stage. Severe impairment, on the other hand, will push theinquiry to a careful examination of the nature and purpose of the state legislation,
Allìed Sn"uctural Steel,438 U.S. at245.
To evaluate whether a law substantially impairs a contract, the court examines "(1) the
nature of the contact and the affected contractual tenns; (2) the degree to which the parties rea-
sonably relied upon those terms at the time they formed the conhact; and (3) the prâctical ef[ect
5
6-
tlre challenged law would havp upon parlies." Tuttle,l59 N.H. at 668 (Dalianis and Duggan, JJ,,
dissenting), cit\ng Lower Vitlage Hydroelectríc Assocs, t, City of Claremont,I4T N,H, 73,77
(2001). "In determining whether cóntract impairment is substantial, some courts look to whether
the subjeoïmatter of the contract has been the focus of heavy state regulation." Id. at 650."If so,
firrther regulation might be foreseeable and;thus, any change to the contract caused by such reg-
ulation would not necessarily constitute a substantial impairment,".Id. "However, standing alone,
'a history ofregulation is never a sufñcient condition for rejeoting a challenge based on the con-
tracts clause."' Id.,citing and quoting Chrysler Corp, v, Kolosso Sales,Inc,,l48 F.3d 892, 895
(7th Cir. 1998), cert, denied, 525 U.S. Il77 (1999),
Applying these standards, the court concludes that SB 126 does not substantially impair
the plaintiff s existing contacts. In its b¡ief, the plaintiffidentifies eleven substantial SB 126 im-
pairrnents. Six of these impâirments are essentially the same as tlose alleged in Deere &. Co.:
RSA 357,C would prevent the plaintifffrom exercising its conhactual right to add
a dealer tb another dealer's market a¡ea.
RSA 357-C:7 would prevent the plaintiff from exercising its right to terminate a
dealer contract for the dealer's failure to perform its obiigations unless the MotorVehicle Industry Board finds that therè is good cause for termination.
RSA 357-C:3, III (q) would prevent the plaintiff from exercising its conhactual
right to limit a dealer to handling less than the full product line under a brand, Forexample, offering a dealer bandheld products only when there arc also wheeledproducts sold under the brand.
RSA 357-C:3, III (a) would prevent the plaintifTfrom exercising ifs conhactualright to deciine to accept an order for any reason and would limit the grounds forrefusai to acts of God and other circumstances beyond the plaintifPs controi,
RSA 375-C:5 wouid prevent the ptaintiff from exercising its contactual right todetennine the rate of dealer reimbursement for parts and labor for warranty ser-
vice.
RSA 357-C:3, III (pX3) would prevent the piaintifffrom exercising its contractual
right to binding arbitation of dealer contract disputes.
1
2.
J
4.
5
6
6
n
In Deere & Co., the court interpreted the language of SB 1 26 in an almost identical factual sce-
nario as the instant case. The court determined that SB 126 did not violate the plaintiffs' consti-
tutional rights, While acknowledging that inciuding 'the plaintiffs within the purview of RSA
357-C has createá added requirçrnents by which the plaintiffs must act," the court established
that "such additions represent refinements in the law," Id.T\e court also determined that SB 126
"serves a legitimate and significant public puipose." Id. Revíew of the plaintifPs contracts in this
I
case does not disturb the Deere & Co. analysis. As a result, the plaintiff s six aliegations of sub-
stantial impairment referenced above do not support a claim of unconstitutionality,
In the instant case, the plaintiff asserts five additional alleged impairments
RSA 357-C would prevent the plaintifffrom exercising its contactual right to sell
directly to end-users in a dealer's market aroa.
RSA 357-C wquld subject the sale of próduc* by national accounts to regulationunder RSA 357-C.
RSA 357-C rvould substantially i-pair contracts in all of the plaintiffs distoibu-
tion'channels, including those with Willand.
RSA 357-C:(i, iII would prevent.the,plaintiff from exercising its right to amend'dealer contraüts except for inclusion of language in the amendment expressly ac-
cepting retrd¿rctive application of RSA 357-C.
RSA 357-C lrould substantially impair many ofher provisions in its contraots,such as the atrílity to audit a dealer's waffanty claims; it would impose risk of loss
upon the plaiffiifffor canier-related damage; il rvould impose requirements to ob-tain approval from the Motor Vehicle industry Board; and it would require theplaintiffto give 180 {ays' notice if the termination of a contract was due to thediscontinuance of the sale of a produot line or change in distribution system,
The plaintiffhæ not sustained its burden of showing that fhese five additionai alleged imparr-
ments are substantial. SB i26 does not prevent the plaintifffrom selling to direct accounts nor
does it regulate the sale of products.by national accounts. Thus, the plaintiffs claim with respect
to first th¡ee of these five alleged irnpairments lacks merit, Further, application of SB 126 does
not affect the plaintifPs contract with Willand, Th¡rs, tïere can be no substantial impairment.
2.
J
'1
5
7
8-
This leavès the final two alleged impairments. Because the plaintiff was previously sub-
ject to regulation under RSA 347-L,the assignment of equiFment to RSA 357-C does not repre-
.sent an unregulated industry unexpectedly facing régulation. The plaintiffs contracts we¡e sub-
ject to a stalutory scheme that regulated the behavior of the manufacturers and dealers, and added
requirements are "tefinemenfs in the la'w." See Deere& Co., No. t3-CV-554' Moreover, RSA
357 -C:6,III does not prevent the plaintiff from amendiqg dealer contracts as it contends it does,
The statute merely acknowledges that RSA 357-Cis the law. The plaintiffs remaining alleged
impairments are likewise foreseeable and do not merit a deviation from the oourt's holding in
Deere & Co. G1enthese considerations, the court concludes that SB 126 does not substantially
impair the plaintifPs existing contracts.
The plaintiffnext argues that SB 126 violates the Federal Arbitration Act ("FAA") by
prohibiting arbitration in violation of the Supremacy Clause of the United States Constitution.
Both parties recognize the effect of the decisionin Deçre & Co,, in which the court held that
provisions in SB 126 prohibiting arbihation are void under the Supremacy Clause and must be.:
severed fromthe other provisions of R$A 357-9,4s a result, "those provisions ttrat copflict with
the FAA are considered invalid, leaving the rest of the statutory scheme íntact." Id.
The plaintifPs next argument is that SB 126 violates its equal protection rights by classi-
fying the.plaintiff as a manufacturer of "motor vehicles," thereby subjecting it tö a burdensome
regulatory scheme. In response, the defendant asserts that the plaintiff is not treated differently
than simila¡ly situated foresty and yard and garden equipment manufacturers. The defendant
further argues that the legislature had a rational basis for regulating the plaintiffs contracts in the
same manner as automobile and other equipment manufacturers.
8
9
"The Equal Protection Clause of the Fourteenth Amendment commands rhat no State
.shall 'deny to any person within its jurisdiction the equal protection of the laws,' which is essen-
tially a direction that all persons similæly situated should be heated alike," City of Cleburne v,
Cleburne Living C¡r.,473lJ,5, 432,439 (1985) (citation omitted).
In areas of social and economic polioy, a stahrtory classification that neither
proceeds along suspect lines nor inûinges firndamental constitutional rigbts must
be upheld against [an] equal protection challenge ifthere is any reasonably
conceivable state offacts that could provide a rational basis for the classification.
FC.C v. Beach Commc'ns, 508 U,S. 307, 313 (1993). The party ohallenging the rationality of the
legislative classification bears üle burden ofproof. Id, ar.315,
Here, the plaintiff fails to allege that it is treated differently than other manufachrers in
its class. By statutory definition, all forestry and yard and garden equipment manufacturets, such
as the plaintiff, that manufacture motorized, ground-supported equipment are subjectfo RSA
357-C. Moreover, the couf ís persuaded by the defenda¡t's argument that the legislature had a
rational basis for regulating the plaintiffs dealership agreements in the same fashion as automo-
bile and other equipment manufactuers. In enacting SB 126, the legislature determined that
ï[t]he relationship between equipment dealers and manufacturers is identical to that of carltn¡ck
dealers." Def.'s Exh. E at2,Inparticular, SB 126 was aimed at goveming the "one-sided, non-
negotiable contracts and an autocratic relationship,".ld. Thus, the goai of enacting SB t26 \ryas to
protect dealers and consumers from manufacturers using superior leverage, 'While there are ob-
vious differences between yard and garden equipment and automobiles, the legislature's decision
that RSA 357-C should regùlate various indushies was based on tbe actual business relationship
between the manufaoturer and dealer, not the product that is'soid. Thus, the legislature had ara-
tional basis for its decision. ,S¿¿ CÌty of C|eburne,473U.S. at 440 ("When social or economic
legislation is at issug, the Equal Protection (ilause allows the states wide latitude, and the consti'
9
-10-
tution presumes that even improvident decisions will eventually be rectified by the democratic
ptooesses.") (citations omitted). As a result, SB 126 does not violate the plainliff s equal protec-
tion rights,
The plaintiff next argues that SB 126 violates the Dormant Commerce Clause of the
United States Constitution by discriminating against manufacturers selling to end users i:r New
Hampshire and insulating dealers from competition, ln response, the defendant asserts that SB
126 does not haye a discriminato{y pwpose or effect.
The Dormant Commerce Clause "prohibits protectionist state regulation designed to ben-
efit þ-state economic interests by burdening out-of-state competitor s." Alliance of Auto. lulfrs, v,
Gwadosþ,430 F.3d 30, 35 (1st Cir, 2ò0Ð (citation and quotations omitted). "'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 e4cessive in relation to the putative local benefits." .id (citation and quotations omitted).
Tbe parly uss..tiog a Dormant Commerce Clause claim bears ihe burden of proving the chal-
lenged statute discriminates against interstate commerce in purpose or effect. See Hughes v, Olv
lahoma,44l U.S,322,336(lg7g).Whenaplaintiffmeetstlieburdenofdemonstratingdiscrimi-
nation against commerce, "the burden falls on the State to justify it both in terms of the local
beqefits flowing from the statnte and the unavailability of nondiscriminatory altematives ade-
quate to preserye the local interests at stake." -Id. (citation and quotations omitted),
Herg, the plaintiffhæ not sustained its burden of showing a discriminatory porpor.. ih"
First Cirsuit addressed a similar issue nAlliance of Auto, À[frs.The couf determined that
Maine's motor vehicle dealer act, designed "to protect retail customers and to protect Maine au-
tomobile dealers from the superior bargaining position of the national manufacturers," did not¡
l0
- 11-
have a discriminatory purpose, Alliance of ,4uto. lrlfrs.,430 F.3d at 39, Likewise, RSA 357-C,
which, as noted above, the legislature designed to protect dealers and consumers, is distinct ûom
a iaw designed to place New Hampshire businesses at a competitive advantage over out of state
businesses.
Fu¡thermòre, RSA 357-C is not discriminatory in effect, "A state law is discriminatory in
effect when, in practice, it affects similarly situated entities in a marlcet by imposing dispropor-
tionate burdens on out-of-state interests and conferring advantages upon in-state interests."
Famìly lTlinemakers of Cal. v, Jenkins, 592 r- ,3d 1, 10 (l st Cir. 201 0), "Plaintiffs must present
evidence as to v/hy the law cliscriminates in practicé." Id. at 11. "[T]he party having the burden
of proof on a critical iszue must present evidence on that issue that is 'significantly probative,'
not 'merely colorable. "'I lliønce of Auto. Ã[frs,,430 F.3d at 40, Here, the plaintiff has not satis'
fied that requirement. The evidence introduced by the plaintiff does not demonstate that RSA
357 -C disproportionately burdens non-New Hampshire businesses, The plaintiff has failed to
provide "any significantly probative evidence,"'which "is inadequate to make out a genuine issue
of material fa ct," See ìd. at 41.4s a result, the couf cannot conclude that SB 126 violates the
Dormant Commerce Clause.
Finatly, the plaintiff argues that SB 126 violates federal and state antitrust laws. In re-
sponse, the defendant argues that this claim is improperly raised as the plaintiff did not raisç the
issue in its complaint or summary judgment memorandum and asserted it for the first time in its
objection to the defendant's cross motion for summary judgrnent, The'court agrees with the de-
fendant. "Ordinarily, a plaintiffoannot assert new claims in response to a motion for summary
judgrnent that were not alleged i:r the complaint." McCarthy v, Yïe:athervøne Seafoods,No. 10-
cv-395-JD,2011U.S.Dist.LÐilS59015, at*11-12(D.N.H.June1,2011)(citationomitted);
1l
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see also Evans v, Taco Bell Corp. ,No, 04-CV- I 03-JD, 2005 U, S. Dist, LEXIS 20997 , at *37
(D.N.H: Sept. 23, 2005) ('. .. courts have consistently ruled tbat it is inappropriate to raise new
claims for the first time in opposition to summary judgment."j(citation omitted). As a result, the
timing of the plaintiffs antitrust argument is improper. i
Based on the foregoing, the court concludes that SB 126 does not impair the plaintifPs
existing contracts in violation of part 1, article 23 of the New Hampshire Constitution. Addition-
ally, the court oonoludes that article I, section 10 of the.United St¿tes Constitution provides no
additional Conlract Clawe protection. Finally, SB 126 does not violate the plaintiff s equal pro-
tection rights or the Dormant Commerce Clause. Accordingly, the plaintifPs motion for sum-
mary judgment is DENIED a¡dthe defendant's motion for summary judgment is GRANTED,
So ORDERED.
Date: .A.ugust 612014M.
PRESIDING JUSTICE
t2
TEXT OF RELEVANT AUTHORITIES
U.S. CONST. art..I, $ I, cl.3
The Çongress shall have power to . . . regulate commerce with foreign nations, and arnong the
several states, and with the Indian tribes;
U.S. CONST. art. I, $ 10
No state shall enter into any fteaty, alliance, or confederation; grant letters of marque and
reprisal; coin money; emit bills of creclit; make anything but gold and silver coin a tender in
payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of
contracts, or grant any title of nobility.
U.S. CONST. art. VI, cl.2
This Constitution, and the laws of the United States which shall be made in pursuance thereof;
and all treaties made, or which shall be made, under the authority of the United States, shall be
the supreme law of the land; and the judges in every state shall be bound thereby, anything in the
Constitution or laws of any State to the contrary notwithstanding.
U.S. CONST. amend. XIV, $ I
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are
citizens of the United States and of the state wherein they reside. No state shall make or enforce
any law which shall abridge the privileges or immunities of citizens of the United States; nor
shall any state deprive any person of life, liberty, or property, without due process of law; nor
deny to any person within its jurisdiction the equal protection of the laws.
N.H. CONST. part l, art.23
Retrospective laws are highly injurious, opptessive, and unjust. No such laws, therefore, should
be made, either for the decision of civil causes, or the punishment of offenses'
l3
357-C:1. DefTnitions.
For the purpose ofthis chapter only:
L "Motor vehicle" means every self-propelled vehicle manufactured and designed primæily
for use and opera-tion on the public highways and required to be registered and titled under the
laws of New Hampshire. Motor vehicle shall include equipment if sold by a motor vehicle dealer
primarily engaged in the business of retail sales of equipment. Except for RSA 357-C:3, I-b, and
where otherwise specifically exempted from the provisions of this chapter, "motor vehicle" shall
include off highway recreational vehicles and snowmobiles. "Equipment" means farm and utility
tractors, forestry equipment, industrial equipment, construction equipment, farm implements,
farm machinery, yard and garden equipment, attachments, accessories, and repair parts.
rF t ,t(
XXVII, "Line make" means motor vehicles that are offered for sale, lease, or distribution
under a common name, trademark, service mark, or brand name of the franchisor or
manufacturer of the motor vehicle.
357-C:3. Prohibited Conduct.
It shall be deemed an unfair method of competition and unfair and deceptive practice for any:
rft ,f ¡ß
III. Manufacturer; dishibutor; distributor branch or division; factory branch or division; or
any agent thereofto:
* ¡& {r
(l) Grant a competitive franchise in the relevant market area previously granted to another
franchise other than in acsordance with the provisions of this chapter;
+ + rl
(p) Require a motor vehicle franchisee to agree to a term or condition in a franchise, or in
any lease related to the operation of the franchise or agreement ancillary or collateral to a
franchise, as a condition to the offer, grant, or renewal of the franchise, lease, or agreement,
which:
* ,t( *
(3) Requires that disputes between the motor vehicle franchisor and motor vehicle
franchisee be submitted to arbit¡ation or to any other binding alternate dispute resolution
14
procedure; provided, however, that any franchise, lease, or agreement may authorize the
submission of a dispute to arbitration or to binding alternate dispute resolution if the motor
vehicle franchisor and motor vehicle franchisee voluntarily agree to submit the dispute to
arbitration or binding alternate dispute resolution at the time the dispute arises;
(q) Fail or refuse to sell or offer to sell to all motor vehicle franchisees of a line make,
all models manufactured for that line make, or requiring a dealer to pay any extra fee, execute a
separate franchise agreement, purchase unreasonable advertising displays or other materials, or
relocate, expand, improve, remodel, renovate, recondition, or alter the dealer's existing facilities,
or provide exclusive facilities as a prerequisite to receiving a model or series of vehicles.
However, a manufacturer may require reasonable improvements to the existing facility that are
necessary to service special or unique features of a specific model or line. The failure to deliver
any such motor vehicle shall not be considered a violation of this subparagraph if the failure is
due to a lack of manufacturing capacity, a strike or labor difficulty, a shortage of materials, a
freight embargo, or other cause over which the franchisor has no control.
357-C:5. Warranty Obligations, Transportation Damage and Indemnification.
II. If any franchisor shall require or permit flanchisees to perfbrm services or provide parts in
satisfaction of a warranty issued by the franchisor:
*
,t
rft *
,ß¡fi
(bX1) In no event shall a schedule of compensation for parts, work, and service in
connection with warranty services fail to include reasonable compensation for diagnostic work,
as well as parts, repair service and labor under the warranty or maintenance plan, extended
warranty, certified preowned warranty or a service contract, issued by the manufacturer or
distributor or its common entity. Time allowances for the diagnosis and performance of warranty
work and service shall be reasonable and adequate for the work to be perfbrmed. In no event
shall any manufacturer, component manufacturer, or distributor pay its dealers an amount of
money for warranty work that is less than that charged by the dealer to the retail oustomers of the
dealer for non-warranty work of like kind. In accordance with RSA 382-A:2-329,the
manufacturer shall reimburse the franchisee for any parts so provided at the retail rate
customarily charged by that franchisee for the same parts when not provided in satisfaction of a
warranty and computed under this subparagraph, No claim which has been approved and paid by
the manufacturer or distributor may be charged back to the dealer unless it can be shown that the
claim was false or fraudulent, that the repairs were not properly made or were unnecessary to
correct the defective condition, or that the dealer failed to reasonably substantiate that the claim
was in accordance with the written requirements of the manufacturer or distributor in effect at
15
the time the claim arose. A manufacturer or distributor shall not deny a claim solely based on a
dealer's incidental failure to comply with a specifrc claim processing requirement, or a clerical
enor, or other administrative technicality
357-C:6. Agreements Governed.
tr ,r *
III. Every new selling agreement or amendment made to such agreement belween a motor
vehicle dealer and a manufacturer or distributor shall include, and if omitted, shall be presumed
to include, the following language: "If any provision herein contravenes the valid laws or
regulations of the state of New I-Iampshire, such provision shall be deemed to be modified to
conform to such laws or regulations; or if any provision herein, including arbitration provisions,
denies or purports to deny access to the procedutes, forums, or remedies provided for by such
laws or regulations, such provision shall be void and unenforceable; and all other terms and
provisions of this agreement shall remain in full force and effect."
357-C:7, Limitations on Cancellations, Terminations and Nonrcncwals.
I. Notwithstanding the terms, provisions, or conditions of any agreement or franchise, and
notwithstanding the terms or provision to any waiver, no manufacturer, distributot, or branch or
division thereof shall cancel, terminate, fail to renew, or refuse to continue any franchise
relationship with a new motor vehiole dealer unless:
(a) The manufasturer, distributor, or branch or division thereof has satisfred the notice
requirement of paragraph V;
(b) 'fhe manufacturer, distributor, or btanch or division thereof has acted in good faith;
(c) The manufacturer, distributor, or branch or division thereof has'good cause for the
cancellation, termination, noffenewal, or noncontinuance; and
(dxl) The New Hampshire motor vehicle industry board finds after a hearing and aller
ruling on any motion to reconsider that is timely filed in accordance with RSA 357-C:12,Y11,
that there is good cause for cancellation, termination, failure to renew, or refusal to continue any
franchise relationship. The new motor vehicle dealer may file a protest with the board within 45
days after receiving the 90-day notice. A copy of the protest shall be served by the new motor
vehicle dealer on the manufacturer, distributor, or branch or division thereof. When a protest is
filed under this section, the lranchise agreement shall remain in full force and effect and the
franchisee shall retain all rights and remedies pursuant to the terms and conditions of such
t6
franchise agreement, including, but not limited to, the right to sell or transfer such franchisee's
ownership interest prior to a frnal determination by the board and any appeal; or
(2) The manufacturer, distributor, or branch or division thereof has received the witten
consent of the new motor vehicle dealer; or
(3) The appropriate period for filing a protest has expired.
357-C:9. Limitations on Establishing or Relocating Dealerships.
L In the event that a manufacturer, distributor, or branch or division thereof seeks to enter into
. a franchise establishing an additional new motor vehicle dealership or relocating an existing new
motor vehicle dealership within a relevant mæket area where the same line make is then
represented, the manufacturer, distributor, or branch or division thereof shall first give written
notice to the New Ilampshire motor vehicle industry board and each new motor vehicle dealer of
such line make in the relevant market area of the intention to establish an additional dealership or
to relocate an existing dealership within that market area. Within 45 days of receiving such
notice or within 45 days after the end of any appeal procedure provided by the manufacturet,
distributor, or branch or division thereof, any such new motor vehicle dealership may file a
protest with the New Hampshire motor vehicle industry board to the establishing or relooating of
the new motor vehicle dealership, A copy shall be served on the manufacturer, distributor, or
branch or division thereof within the 45-day period, When such protest is filed, the manufacturer,
distributor, or branch or division thereof may not establish or relocate the proposed new motor
vehicle dealership until the board has held a hearing, nor thereafter if the board determines that
there is good cause for not permitting such new motor vehicle dealership. For purposes of this
pangraph,the reopening in a relevant market area of a new motor vehicle dealership that has not
been in operation for one year or more shall be deemed the establishment of an additional new
motor vehicle dealership.
t7