Rimrock Chrysler v. MDOJ , 390 Mont. 235 ( 2018 )

02/13/2018
DA 17-0284
Case Number: DA 17-0284
IN THE SUPREME COURT OF THE STATE OF MONTANA
2018 MT 24
RIMROCK CHRYSLER, INC.,
Petitioner andAppellant,
and
CHRYSLER GROUP, LLC,
Franchisor,
v.
STATE OF MONTANA DEPARTMENT OF
JUSTICE, MOTOR VEHICLE DIVISION,
and
LITHIA MOTORS, INC., and its wholly
owned subsidiary, LITHIA OF BILLINGS, INC.,
d/b/a LITHIA CHRYSLER JEEP DODGE
OF BILLINGS,
Respondents and Appellees.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV 14-546
Honorable Ingrid G. Gustafson, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Rodd A. Hamman, Calton Hamman & Wolff, PC, Billings, Montana
W. Scott Mitchell, Brianne C. McClafferty, Holland & Hart, Billings,
Montana
(Attorneys for Chrysler Group, LLC)
For Appellees:
Timothy C. Fox, Montana Attorney General, Alan Joscelyn, Chief Assistant
Attorney General, A. Peter Funk, Assistant Attorney General, Helena,
Montana
(Attorneys for State of Montana)
Robert Y. Weller II, Kristen L. Baiardi, Abbott Nicholson, PC, Detroit,
Michigan
Paul N. Tranel, Bohyer, Erickson, Beaudette & Tranel, PC, Missoula,
Montana
(Attorneys for Lithia Motors, Inc.)
Submitted on Briefs: November 1, 2017
Decided: February 13, 2018
Filed:
__________________________________________
Clerk
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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Petitioner Rimrock Chrysler, Inc. (“Rimrock”) appeals the April 5, 2017 Order by
the Thirteenth Judicial District Court, Yellowstone County, denying Rimrock’s petition for
judicial review. We address the following issue:
Whether the District Court erred by denying Rimrock’s petition for judicial review.
¶2 We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 In 2009, Chrysler, LLC, (“Old Chrysler”) filed for bankruptcy and received
substantial assistance from the federal government as part of the 2009 Troubled Asset
Relief Program (“TARP”). Old Chrysler was required to restructure its business model
and, as a condition of TARP assistance, terminated over 700 dealership agreements across
the United States. Among the dealership agreements terminated was Rimrock’s dealership
in Billings, which occurred in May 2009.
¶4 Old Chrysler sold most of its assets to Chrysler Group, LLC (“New Chrysler”). In
July 2009, New Chrysler awarded its Chrysler-Jeep franchise to Lithia Motors, Inc., and
Lithia of Billings, Inc. (collectively “Lithia”), which already held a Dodge franchise in
Billings, having acquired it in 2003 when Dodge was a division of Old Chrysler.
¶5 Congress enacted Section 747 of the Consolidation Appropriations Act of 2010 to
enable terminated dealerships to pursue private arbitration and determine whether they
should be offered a letter of intent from New Chrysler to be added to New Chrysler’s dealer
network. Rimrock successfully arbitrated under Section 747, and was awarded a letter of
intent by New Chrysler to establish a Chrysler-Jeep franchise in Billings. New Chrysler
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and Rimrock’s agreement proposed a Chrysler-Jeep franchise location less than a mile
from Lithia’s existing Chrysler-Jeep dealership.
¶6 On February 23, 2011, Lithia protested Rimrock’s proposed new dealership
pursuant to § 61-4-206, MCA. In April 2012, the Department of Justice Motor Vehicle
Division (“Department”) held a hearing on the matter. At the hearing, New Chrysler
advocated for Rimrock’s establishment as a dealer pursuant to its obligation to issue a usual
and customary letter of intent following Rimrock’s Section 747 arbitration award.
However, New Chrysler’s witness also testified that Rimrock’s proposed dealership was
not viable and that its proposed location, within a mile of an existing dealership, was
unprecedented. On June 26, 2012, the Hearing Examiner issued her Proposed Order on
Findings of Fact and Conclusions of Law, finding good cause did not exist to re-establish
Rimrock as a Chrysler-Jeep franchise in Billings as per § 61-4-205(2), MCA. In July 2012,
Rimrock and New Chrysler filed exceptions with the Department to the Hearing
Examiner’s Proposed Order. On March 13, 2014, after performing its own review and
analysis of the Hearing Examiner’s Proposed Order, the Department entered its Notice of
Adoption of Final Decision, and held: “[T]he Hearing Examiner’s Proposed Order on
Findings of Fact and Conclusions of Law is incorporated herein by reference in its entirety,
and is adopted as the Department’s Final Decision in this matter.”
¶7 In April 2014, Rimrock filed a Petition for Judicial Review with the Thirteenth
Judicial District Court, Yellowstone County. Lithia moved to dismiss Rimrock’s Petition,
and the District Court granted Lithia’s motion to dismiss. Rimrock appealed and we
reversed and remanded to the District Court for adjudication of Rimrock’s Petition.
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Rimrock Chrysler, Inc. v. Mont. Dep’t of Justice, Motor Vehicle Div., 2016 MT 165, 384
Mont. 76, 375 P.3d 392.
¶8 On remand, the District Court held that § 61-4-205(2), MCA, set forth a two-prong
test for establishing an additional dealership in any community in which the same
line-make is already represented. The prospective franchisor must show: (1) good cause
for an additional new motor vehicle dealership; and (2) the additional dealership is in the
public interest. In affirming the Department’s Final Decision, the District Court held New
Chrysler failed to meet its burden to show good cause existed to establish Rimrock as an
additional Chrysler-Jeep franchise in the Billings community.
STANDARDS OF REVIEW
¶9 We review agency decisions under the Montana Administrative Procedure Act,
which provides in pertinent part:
(2) The court may not substitute its judgment for that of the agency as to the
weight of the evidence on questions of fact. The court may affirm the
decision of the agency or remand the case for further proceedings. The court
may reverse or modify the decision if substantial rights of the appellant have
been prejudiced because:
(a) the administrative findings, inferences, conclusions, or decisions
are:
(i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of law;
(v) clearly erroneous in view of the reliable, probative, and
substantial evidence on the whole record;
(vi) arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(b) findings of fact, upon issues essential to the decision, were not
made although requested.
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Section 2-4-704(2), MCA; Blaine Cnty. v. Stricker, 2017 MT 80, ¶ 16, 387 Mont. 202,
394 P.3d 159. The same standards of review apply to both the District Court’s review of
the agency’s decision and our review of the District Court’s decision. Blaine Cnty., ¶ 16.
“A reviewing body’s standard on review ‘is not whether there is evidence to support
findings different from those made by the trier of fact, but whether substantial credible
evidence supports the trier’s findings.’” Blaine Cnty., ¶ 26 (quoting Schmidt v. Cook, 2005
MT 53, ¶ 31, 326 Mont. 202, 108 P.3d 511). In determining whether the findings are
clearly erroneous, we apply a three-part test: (1) does a review of the record demonstrate
substantial evidence supports the findings; (2) if substantial evidence supports the findings,
did the agency misapprehend the effect of this evidence; and (3) if substantial evidence
supports the findings and the agency did not misapprehend the effect of this evidence, does
a review of the record leave the court with a definite and firm conviction that a mistake has
been made. Mercer v. McGee, 2008 MT 374, ¶ 17, 346 Mont. 484, 197 P.3d 962.
DISCUSSION
¶10 Whether the District Court erred by denying Rimrock’s petition for judicial review.
¶11 The purpose of the Montana Dealer Act, § 61-4-201, MCA, et seq., is to protect an
established Montana franchisee-dealer from the unequal bargaining power of an
automobile franchisor. State ex. Rel. Billings Chrysler-Plymouth, Inc. v. Dept. of Business
Regulations, No. 14597, 10, Or., 1979 Mont. LEXIS 804 (Mont. Jan. 23, 1979) (“The act
is obviously intended for the protection of Montana motor vehicle retail dealers who have
franchise agreements with motor vehicle manufacturers or distributors.”).
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¶12 The Act allows an existing franchisee to object to the establishment of a new or
additional motor vehicle dealership of the same line-make by filing a written objection with
the Department. Section 61-4-206(1)(a), MCA. Section 61-4-205(2), MCA, provides:
A franchisor may not enter into a franchise for the purpose of establishing an
additional new motor vehicle dealership in any community in which the same
line-make is then represented unless there is good cause for an additional
new motor vehicle dealership under a franchise and it is in the public interest.
Section 61-4-207(3), MCA, provides guidance for the Department to determine:
whether good cause has been established for entering into an additional
franchise for the same line-make[, and consider] the existing circumstances,
including but not limited to:
(a) amount of business transacted by other franchisees of the same
line-make in that community;
(b) investment necessarily made and obligations incurred by other
franchisees of the same line-make in that community in the
performance of their part of their franchises; and
(c) whether the franchisees of the same line-make in that community
are providing adequate consumer care, including satisfactory new
motor vehicle dealer sales and service facilities, equipment, parts
supply, and qualified management, sales, and service personnel, for
the new motor vehicle products of the line-make.
The burden is on the franchisor to show that good cause exists to establish a new franchise
in the community. The existing franchisee is entitled to the statutory protections. Hi-Tech
Motors, Inc., v. Bombardier Motor Corp. of Am., 2005 MT 187, ¶ 17, 328 Mont. 66,
117 P.3d 159.
¶13 “If the language [of a statute] is plain, simple, direct and unambiguous, it does not
call for construction by the courts. It construes itself.” Fergus Motor Co. v. Sorenson, 73
Mont. 122, 126, 235 P. 422, 423 (1925). “We must endeavor to avoid a statutory
construction that renders any section of the statute superfluous or fails to give effect to all
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of the words used. It is blackletter law that in the construction of a statute, the office of a
judge is simply to ascertain and declare what is in terms or in substance contained therein,
not to omit what has been inserted or insert what has been omitted.” Mont. Trout Unlimited
v. Mont. Dep’t of Nat. Res. & Conservation, 2006 MT 72, ¶ 23, 331 Mont. 483, 133 P.3d
224 (internal citations omitted).
¶14 Rimrock argues the District Court fundamentally misapprehended the purpose of
the Montana Dealer Act. Rimrock contends that the analysis was overly protectionist and
makes it impossible to establish a new dealership. Rimrock also contends the District Court
erred by affirming the Department’s decision that limited the good cause determination to
only those statutorily enumerated factors in contradiction to the non-exhaustive list in
§ 61-4-207(3), MCA. Rimrock maintains the existing circumstances inquiry should
include the circumstances of the Billings community more generally, and that limiting the
analysis of existing circumstances to Lithia as the existing franchisee is too narrow a
construction of the good cause inquiry. Rimrock also asserts the Hearing Examiner failed
to consider facts regarding existing circumstances that constitute good cause in favor of
establishing Rimrock Chrysler-Jeep, such as market share, sales into and out of Billings,
Lithia’s profitability and return on sales, and the proposed Rimrock Chrysler-Jeep’s impact
on Lithia. Finally, Rimrock claims that many of the findings of fact were not supported by
substantial evidence and other relevant and undisputed facts were not considered that
would favor establishing a Rimrock franchise.
¶15 Lithia counters that the Montana Dealer Act compelled the Hearing Examiner to
make findings of fact on the specific statutory facts listed in § 61-4-207(3), MCA. Lithia
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notes that the District Court determined that the Hearing Examiner “did in fact go beyond
the factors set forth in 207(3)(a)–(c) and considered existing circumstances in the
community, contrary to Rimrock’s contention.” Lithia contends that the District Court
properly held the Hearing Examiner’s findings related to good cause are not clearly
erroneous and there was no indication a mistake was made or the law improperly applied.
We agree.
¶16 Section 61-4-205(2), MCA, requires that in order to establish an additional new
motor vehicle dealership in any community in which the same line-make is then
represented, the franchisor must demonstrate “there is good cause for an additional new
motor vehicle dealership under a franchise and it is in the public interest.” (Emphasis
added.) The District Court correctly summed this up: “[T]he issue actually boils down to
whether or not [New] Chrysler can prove it has good cause to add an additional same
line-make dealership in the Billings market and, then, whether it would be in the public
interest to do so.”
¶17 Although the specifically enumerated good cause factors set forth in § 61-4-207(3),
MCA, are not exhaustive, they are mandatory:
In determining whether good cause has been established for entering into an
additional franchise for the same line-make, the department shall take into
consideration the existing circumstances, including but not limited to:
(a) amount of business transacted by other franchisees of the same
line-make in that community;
(b) investment necessarily made and obligations incurred by other
franchisees of the same line-make in that community in the
performance of their part of their franchises; and
(c) whether the franchisees of the same line-make in that community
are providing adequate consumer care, including satisfactory new
motor vehicle dealer sales and service facilities, equipment, parts
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supply, and qualified management, sales, and service personnel, for
the new motor vehicle products of the line-make.
(Emphasis added.) Boiled down, the mandatory good cause factors require the
franchisor—New Chrysler—to establish that the existing franchisee—Lithia—is
underperforming or otherwise not fulfilling its obligations as a dealer to the community in
which it is located. New Chrysler’s own testimony established the contrary—that Lithia
is meeting or exceeding New Chrysler’s contractual expectations.
¶18 The District Court noted “not limited to” reflects the ability for a fact finder to
analyze factors beyond those set forth with specificity under § 61-4-207(3)(a)–(c), MCA.
However, this non-exhaustive list does not require the fact finder to go beyond those
enumerated factors with any specificity—otherwise those specifics would have been
enumerated. This is especially so when, based on her consideration of the mandatory
factors, the Hearing Examiner determined that the existing circumstances did not establish
good cause for adding a franchise for the same line-make.
¶19 The District Court held that when New Chrysler failed to prove Lithia was
underperforming and to show good cause existed to establish Rimrock as an additional
franchise, the Hearing Examiner was not required to continue and inquire into the second
“public interest” prong set forth in § 61-4-205, MCA. In construing two-prong tests in
which both prongs must be satisfied, we have held “if an insufficient showing is made
regarding one prong of the test, there is no need to address the other prong.” Whitlow v.
State, 2008 MT 140, ¶ 11, 343 Mont. 90, 183 P.3d 861. New Chrysler’s failure to meet its
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burden and show good cause to establish an additional franchise is dispositive and renders
an inquiry into the public interest unnecessary.
¶20 Contrary to Rimrock’s contention, the Hearing Examiner’s findings and conclusions
illustrates its decision is not based solely on a statutory protection that allowed Lithia to
exist as the only Chrysler-Jeep franchise without competition in Billings. The Hearing
Examiner made extensive findings of fact regarding the good cause factors pertaining to
Lithia as the existing franchisee, and we may not substitute our judgment for the
Department’s judgment regarding the weight of the evidence. Section 2-4-704(2), MCA;
Mercer, ¶ 17. A review of the record demonstrates substantial evidence supports the
Hearing Examiner’s findings; the Department did not misapprehend the effect of the
evidence; nor are we left with a definite and firm conviction that a mistake has been made.
Mercer, ¶ 17. The District Court correctly held the findings of fact were not clearly
erroneous and that there was no indication that a mistake has been made or the law was
improperly applied.
CONCLUSION
¶21 The District Court did not err when it affirmed the Hearings Examiner’s Findings
of Fact and Conclusions of Law as adopted by the Department, and denied Rimrock’s
petition for judicial review. The District Court’s Order is affirmed.
/S/ JAMES JEREMIAH SHEA
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We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ JIM RICE
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