New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978)

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Author: Justice Blackmun

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New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978)

MR. JUSTICE BLACKMUN, with whom MR. JUSTICE POWELL joins, concurring in the result.

I agree with the Court when it concludes (a) that the District Court rightly refused to abstain under the rule of Railroad Comm’n v. Pullman Co., 312 U.S. 496 (1941); (b) that the appellees’ delegation-of-power argument is unmeritorious; and (c) that the appellees’ antitrust claims are also without merit.

We are concerned here, basically, only with the issue of the facial constitutionality of certain provisions of the California Automobile Franchise Act, Cal.Veh. Code Ann. §§ 3062, 3063 (West Supp. 1978); we are not confronted with any issue of constitutionality of the Act as applied.

It seems to me that we should recognize forthrightly the fact that California, under its Act, accords the manufacturer and the would-be franchisee no process at all prior to telling them not to franchise at will. This utter absence of process would indicate that the State’s action is free from attack on procedural due process grounds only if the manufacturer and the franchisee possess no liberty or property interest protected under the Fourteenth Amendment. Indeed, that is the way I would analyze the case.

Meyer v. Nebraska, 262 U.S. 390, 399 (1923), of course, defined "liberty" to include "the right . . . to engage in any of the common occupations of life." The California statute, however, does not deprive anyone of any realistic freedom to become an automobile dealer or to grant a franchise; it simply regulates the location of franchises to sell certain makes of cars in certain geographical areas. The absence of regulation by California prior to the Act’s adoption in 1973 surely, in itself, created no liberty interest susceptible of later deprivation. And the abstract expectation of a new franchise does not qualify as a property interest.

I regard this litigation as not focusing on procedural due process at all. Instead, it centers essentially on a claim of substantive due process. Appellees have conceded that California may legitimately regulate automobile franchises and that the State may legitimately provide a hearing as part of its regulatory scheme. The only issue, then, is whether California may declare that the status quo is to be maintained pending a hearing. In my view; California’s declaration to this effect is no more than a necessary incident of its power to regulate at all. Maintenance of the status quo pending final agency action is common in many regulatory contexts. The situation here, for example, is not dissimilar to the widely adopted routine of withholding the effectiveness of announced increases in utility rates until specified conditions have been fulfilled. In asserting a right to franchise at will and a right to franchise without delay, appellees are essentially asserting a right to be free from state economic regulation. But any claim the appellees may have to be free from state economic regulation is foreclosed by the substantive due process cases, such as Ferguson v. Skrupa, 372 U.S. 726 (1963), which the Court cites.

To summarize: for me, the appellees have demonstrated the presence of no liberty or property interest; having none, they have no claim to procedural safeguards; and their claim to be free from state economic regulation is foreclosed by the substantive due process cases. Perhaps this is what the Court is saying in its opinion. I am, however, somewhat unsure of that. I prefer to recognize the facts head on; when one does, the answer, it seems to me, is inevitable, and immediately forthcoming.

1. These efforts were also reflected in the Miller-Tydings Fair Trade Act, which was enacted by Congress in 1937 as an amendment to § 1 of the Sherman Act. 50 Stat. 693, 15 U.S.C. § 1. See generally Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 390-395.

2. See Exxon Corp. v. Governor of Maryland, 437 U.S. 117 (1978).

3. The statutes currently in force are collected in the opinion of the Court. Ante at 101 n. 5. These statutes were passed essentially in three waves, the first in the late 1930’s, the second in the mid-1950’s, and the third in the late 1960’s and early 1970’s. The first two waves resulted in statutes regulating the contractual relationships between dealers and manufacturers, and were primarily designed to equalize the bargaining power of the two groups. The third wave not only extended this well established type of statute into additional States, but also resulted in the passage of provisions, such as the one involved in this case, relating to the opening of new franchises. See generally C. Hewitt, Automobile Franchise Agreements 165-167 (1955); Macaulay, Law and Society -- Changing a Continuing Relationship Between a Large Corporation and those who deal with it: Automobile Manufacturers, their Dealers, and the Legal System, 1965 Wis.L.Rev. 483, 513-521; Note, 70 Harv.L.Rev. 1239, 1243-1246 (1957); Comment, 56 Iowa L.Rev. 1060 (1971).

4. By the same token, the legislative judgment that manufacturers have greater bargaining power than dealers and may have sometimes used it abusively by threatening to overload dealers’ markets with intrabrand competitors does not provide a justification for a statutory procedure that deprives all manufacturers and all new dealers of their liberty and property without due process.

5. Cal.Veh.Code Ann. § 11700 (West Supp. 1978).

6. §§ 3060, 3061, 3064, and 3065 (Supp. 1978).

7. Cf. Haw.Rev.Stat. § 437-28(b)(22)(b) (1976); W.Va.Code § 4717-5(i)(2) (Supp. 1978) .

8. Cf. Fla.Stat. § 320.642 (1977); Ga.Code § 84-6610(f)(8) (Supp. 1977); Iowa Code § 322A.4 (1977); S.D.Comp.Laws Ann. §§ 32-6A-3, 32-6A-4 (1976); Tenn.Code Ann. § 59-1714(c)(20) (Supp. 1978); Wis.Stat.Ann. § 218.01(3)(f) (1957).

The Court cites Forest Home Dodge, Inc. v. Karns, 29 Wis.2d 78, 138 N.W.2d 214 (1965), as reflective of the purposes served by statutes such as the one at issue here. Ante at 102 n. 7. However, the Wisconsin statute involved in the Forest Home decision is considerably different from the California statute and the purposes of the former should not be uncritically imported into the latter. The Court is similarly mistaken in its characterization of the California statute as one, like Wisconsin’s, that "require[s] businesses to secure regulatory approval before engaging in specified practices." Ante at 108 (emphasis in original). As the Court itself recognizes at an earlier point, the California statute requires approval only in certain limited circumstances, i.e., "if necessary" because of a competitor’s protest. Ante at 105. As such, the statute clearly does allow competitors to "restrain appellee[s] from exercising [a] right that [they] had previously enjoyed." Ante at 104-105.

The Court also mischaracterizes the California statute when it describes it as

prohibiting automobile manufacturers from adding dealerships to the market areas of its existing franchisees where the effect of such intrabrand competition would be injurious to the existing franchisees and to the public interest.

Ante at 102. There is no such express prohibition in the California statute. Cf. Colo.Rev.Stat. § 12-6-120 (1973); Iowa Code § 322A.4 (1977); N.M.Stat.Ann. § 64-37-5(P) (Supp. 1975); S.D.Comp.Laws Ann. §§ 32-6A-3, 32-6A-4 (1976).

9. Cf. Fla.Stat. § 320.642 (1977); Ga.Code § 84-6610(f)(8) (Supp. 1977); Iowa Code § 322A.4 (1977); S.D.Comp.Laws Ann. § 32-6A-4 (1976); Tenn.Code Ann. § 59-1714(c)(20) (Supp. 1978); Wis.Stat.Ann. § 218.01(3)(f) (1957).

10. The statutory statement of purpose quoted by the Court, ante at 105 n. 12, includes no reference to a policy against new or relocated dealerships. By comparison, such statutes as Fla.Stat. § 320.642 (1977); Ga.Code § 84-6610(f)(8) (Supp. 1977); Tenn.Code Ann. § 59-1714(c)(20) (Supp. 1978); and Wis.Stat.Ann. § 218.01(3)(f) (1957), authorize public officials to deny applications for approval of new dealerships in all cases where existing dealers in the area are providing "adequate representation" of the relevant line and make of cars.

11. B. Pashigian, The Distribution of Automobiles, An Economic Analysis of the Franchise System 151 (1961); Comment, supra,n. 3, at 1065-1067.

12. California Veh.Code Ann. § 3062 (West Supp. 1978) provides, in part:

When such a protest is filed, the board shall inform the franchisor that a timely protest has been filed, that a hearing is required pursuant to Section 3066, and that the franchisor shall not establish or relocate the proposed dealership until the board has held a hearing as provided in Section 3066, nor thereafter, if the board has determined that there is good cause for not permitting such dealership.

(Emphasis added.) Section 507 defines the 314-square-mile area that encompasses competitors with standing to challenge new dealerships.

13. In addition to the portion of § 3062 quoted in n. 12, supra, § 3063 provides:

In determining whether good cause has been established for not entering into or relocating an additional franchise for the same line-make, the board shall take into consideration the existing circumstances, including, but not limited to:

(1) Permanency of the investment.

(2) Effect on the retail motor vehicle business and the consuming public in the relevant market area.

(3) Whether it is injurious to the public welfare for an additional franchise to be established.

(4) Whether the franchisees of the same line-make in that relevant market area are providing adequate competition and convenient consumer care for the motor vehicles of the line-make in the market area which shall include the adequacy of motor vehicle sales and service facilities, equipment, supply of vehicle parts, and qualified service personnel.

(5) Whether the establishment of an additional franchise would increase competition and therefore be in the public interest.

(Emphasis added.)

14. Cf. Iowa Code § 322A.4 (1977); S.D.Comp.Laws Ann. §§ 32-6A-3, 32-6A-4 (1976). See generally Comment, supra,n. 3, at 1062-1063.

15. Cal.Veh.Code Ann. § 3066(b) (West Supp. 1978) ("The [existing] franchisee shall have the burden of proof to establish there is good cause not to enter into a franchise establishing or relocating an additional motor vehicle dealership").

16. See ante at 110 n. 14; Brief for Appellees 10 n. 13.

17. Cf. statutes cited in n. 10, supra.

18. Cf. Iowa Code § 322A.7 (1977).

19. See Brief for Appellees 10 n. 13.

20. Cal.Veh.Code Ann. §§ 3062, 3066 (West Supp. 1978).

21. California’s statutory scheme may be contrasted with another approach that also affords existing dealers a cause of action to block new dealerships, but does so with considerably more process. Under N.M.Stat.Ann. § 637-5(P) (Supp. 1975), it is unlawful for a manufacturer to establish an additional franchise in a community where the same line-make is currently represented "if such addition would be inequitable to the existing dealer." The statute makes "the sales and service needs of the public" relevant "in determining the equities of the existing dealer." Existing dealers are given a private cause of action in state courts to enforce this prohibition, and are expressly afforded the right to seek either an injunction, damages, or both. §§ 637-11, 637-13 (Supp. 1975). It is apparent from the statute that the normal incidents of civil practice -- for example, the requirement of an adequate complaint, and judicial consideration of the merits before any relief is afforded -- apply in these authorized suits. See also Colo.Rev.Stat. §§ 12-6-120(1)(h), 12-6-122(3) (1973); Mass.Gen.Laws Ann., ch. 93B, § 4(3)(1) (West. Supp. 1978-1979).

22. Cal.Veh.Code Ann. §§ 11705(a)(3), 11705(a)(10), 11713.2(1), 40000.11 (West. Supp. 1978).

23. In addition, the statute gives the "defendants" the burden in every case of informing the "plaintiffs" when their cause of action arises.

24. Put in the more traditional language of due process analysis, the California scheme recognizes a right on the part of manufacturers and prospective dealers to establish or relocate automobile dealerships. It allows the State permanently to deprive those persons of that right upon a hearing and demonstration of cause. Finally, and what is at issue here, it allows private persons to invoke the power of the State to deprive manufacturers and prospective dealers of their rights temporarily without any process at all.

25. Once a protest is filed, and an injunction has automatically been granted, Cal.Veh.Code Ann. § 3066(a) (West. Supp. 1978) requires the Board to set a hearing. Although the hearing must be held within 60 days under that provision, this time limit is usually avoided when the Board refers the protest to a hearing officer, upon whom no statutory time limit is imposed. Moreover, after the hearing officer reaches a decision, the Board may either take another 30 days in adopting that decision or an indefinite period of time in reaching an independent decision. The Board may also refer the decision back to the hearing officer with directions to take additional evidence and reach a new decision.

26.

The manner in which the passage of the Act and the administration thereof have affected the present plaintiffs is revealed in the uncontradicted affidavits and documentary exhibits submitted by the parties. The only Buick dealer in Pasadena terminated his franchise early in 1974, and a replacement dealer had not been established until May, 1975, when plaintiffs General Motors and Orrin W. Fox Co. executed a franchise agreement. Protests promptly were filed by Buick dealers located in the nearby cities of Monrovia and San Gabriel on about May 22, 1975. On May 29, 1975, the Board sent letters to General Motors advising of the protests and stating that

you may not . . . establish the proposed dealership until the Board has held a hearing as provided for in Section 3066 Vehicle Code, nor thereafter if the Board has determined that there is good cause for not permitting such additional dealership.

The letter also advised that the Board would later fix a time for the hearing and would advise accordingly. On July 8, 1975, the Board assigned the dates of August 11 and 12, 1975, for the hearing.

However, as the result of requests for continuance by the protesters and by stipulation, and protracted litigation in the courts concerning the right to take pre-hearing depositions, the protests were reset for hearing on September 15, 1976. They therefore were still pending when the present action was filed, on April 13, 1976.

The foregoing recital shows that, under the provisions of the Act, the protesters were able to prevent plaintiff Fox from being established as a potential (although geographically rather remote) competitor for more than fifteen months (including the entire 1976 Buick model year), without any official consideration being given to the merit or lack of merit of the protests. Fox understandably assesses at many thousands of dollars its damages occasioned by such delay.

Plaintiff Muller Chevrolet took over an existing dealership in the Montrose section of Glendale in 1973. It soon became apparent to Muller that its physical facilities were completely inadequate and rapidly deteriorating, and that a move to a new and much larger location was mandatory. In December, 1974, Mr. Muller learned that the location of the current Volkswagen dealership in the adjacent community of La Canada might become available. Negotiations were begun that were contingent upon the Volkswagen dealer’s finding a new site for his operation, and upon the ability of the parties to finance their respective moves. After a year of complex and time-consuming negotiations, an agreement was reached in December, 1975, and the required notice of intention to relocate was served upon the Board and the surrounding Chevrolet dealers on about January 16, 1976. A few days later, Chevrolet dealers in Pasadena and Tujunga, respectively, filed with the Board letters saying, in effect, no more than "I protest," and, on February 6, 1976, the Board responded by enjoining the proposed relocation pending a hearing on the protests. About two weeks later, on February 23, 1976, the Board "tentatively" set the hearing for June 23 through 25, 1976, and on April 21, 1976, issued a formal order confirming those dates. It is worthy of note here that such hearing was scheduled for a time more than four months after the injunction had been issued.

It appears from a supplemental affidavit filed by Mr. Muller on September 17, 1976, that the scheduled hearing took place before a hearing officer, and that the latter rendered a decision favorable to the proposed relocation on about August 20, 1976. Then began the thirty-day waiting period within which time the Board might act upon that decision before the proposed relocation could be deemed approved and the injunction finally lifted (Vehicle Code § 3067). On September 14, 1976, before the end of such waiting period, Muller was advised that the new leasehold premises were no longer available for his dealership because of his long failure to take possession and otherwise assume the obligations of the lease. Muller thereupon "gave up" with respect to this litigation, and is starting all over again in his attempt to find a new site for his business.

440 F.Supp. 436, 439-440 (CD Cal.1977) (three-judge court).

27. Fuentes v. Shevin, 407 U.S. 67, 84-85 ("[I]t is now well settled that a temporary, nonfinal deprivation of property is nonetheless a "deprivation" in the terms of the Fourteenth Amendment").

28. See, e.g., Ferguson v. Skrupa, 372 U.S. 726; Lincoln Union v. Northwestern Co., 335 U.S. 525, 536-537; North Dakota Board of Pharmacy v. Snyder’s Drug Stores, Inc., 414 U.S. 156; Williamson v. Lee Optical Co., 348 U.S. 483.

Although the Court has distinguished between economic and other rights in giving scope to the substantive requirements of the Due Process Clause, United States v. Carolene Products Co., 304 U.S. 144, 152-153, n.4, it has carefully and explicitly avoided that distinction in applying the procedural requirements of the Clause. E.g., North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 608; Fuentes v. Shevin, supra at 89-90. Accordingly, I assume that, despite its curious citation of the cases that establish a low level of substantive protection for economic rights, the Court is not implying that those rights do not merit the procedural protection afforded by the Fourteenth Amendment.

29. Although the Court has endorsed the modern relaxation of pleading rules, it has never receded from the requirement that civil complaints provide parties defendant with "fair notice" of the claims against them. Conley v. Gibson, 355 U.S. 41, 48.

30. See also Mitchell v. W. T. Grant Co., 416 U.S. 600, 615-617; Gibson v. Berryhill, 411 U.S. 564, 578-579; Washington ex rel. Seattle Title Trust Co. v. Roberge, 278 U.S. 116, 121-122; Eubank v. City of Richmond, 226 U.S. 137, 143-144.

The Court places great store in the fact that the California Legislature, rather than some administrative or adjudicative body, stands behind the deprivation at issue in this case. Ante at 105. But, as Fuentes indicates, a legislative abdication of power to private citizens who are prone to act arbitrarily is no less unconstitutional than the arbitrary exercise of that power by the state officials themselves.

31. Although the Court reads my opinion differently, see ante at 106, I do not imply that there would be any constitutional defect in a statute imposing a general requirement that no dealer may open or relocate until after he has obtained an approval from a public agency. Nor do I imply that the appellees have an interest that may not be suspended except on a case-by-case basis. If, however, a State mandates a case-by-case determination of one private party’s rights, the State may not confer arbitrary power to make that determination on another private party.

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Chicago: Blackmun, "Blackmun, J., Concurring," New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978) in 439 U.S. 96 439 U.S. 114. Original Sources, accessed September 30, 2022, http://www.originalsources.com/Document.aspx?DocID=LHXXT7VK1ZHRXYK.

MLA: Blackmun. "Blackmun, J., Concurring." New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978), in 439 U.S. 96, page 439 U.S. 114. Original Sources. 30 Sep. 2022. http://www.originalsources.com/Document.aspx?DocID=LHXXT7VK1ZHRXYK.

Harvard: Blackmun, 'Blackmun, J., Concurring' in New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978). cited in 1978, 439 U.S. 96, pp.439 U.S. 114. Original Sources, retrieved 30 September 2022, from http://www.originalsources.com/Document.aspx?DocID=LHXXT7VK1ZHRXYK.