# Opposition Brief — Cassan Enterprises, Inc. v. Dollar Systems, Inc.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1998
- **Citation:** 524 U.S. 926

## Text

Supreme Court
FIL

No. 97-1669

IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1997

CASSAN ENTERPRISES. INC.. ET AI

Petitioners.

<i

DOLLAR SYSTEMS, INC., ET AL..
Respondents

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI

JAMES B. HICKS BENJAMIN S. SHARP

KATHY A. JORRIE Counsel of Record

LUCE, FORWARD, HAMILTON & ROBERT L. DEITZ
SCRIPPS, LLP PERKINS COIE LLP

777 South Figueroa St., Suite 3600 607 Fourteenth St., N.W

Los Angeles, Califorma 90017 Suite 800

Telephone: (213) 892-4992 Washington, DC 20005

; ; Telephone: (202) 628-6600
WILLIAM T. WALKER, ESQUIRE

DOLLAR RENT A CAR
SYSTEMS, INC

5330 East 31st Street

Tulsa, Oklahoma 74153-1667

(918) 669-3042 Attorneys for Respondents

NS a ae a
ale SiS ah Sc

i

QUESTION PRESENTED

Did the lower courts properly determine that
application of Washington State's Franchise Investment
Protection Act to the contract between Dollar and Cassan
would impair Dollar's contractual rights in violation of the
Contract Clause of the U. S. Constitution?

il

PARTIES TO THE PROCEEDINGS

Dollar adopts Cassan's statement on page ii of the
Petition, as to the petitioners only

Respondents Dollar Systems, Inc. and Dollar Rent A
Car Systems, Inc. have merged and are currently known as
Dollar Rent A Car Systems, Inc. ("Dollar"). Dollar is a
wholly-owned subsidiary of Respondent Dollar Thrifty
Automotive Group, Inc., formerly known as Pentastar
Transportation Group, Inc. ("Pentastar"). Since December
1997, Dollar Thrifty Automotive Group, Inc. has been a
publicly traded company and is no longer a subsidiary of
Chrysler Corporation.

111
TABLE OF CONTENTS
QUESTION PRESENTED .....
PARTIES TO THE PROCEEDINGS
TABLE OF CONTENTS .

TABLE OF AUTHORITIES

I STATEMENT OF THE CASE

II. REASONS FOR DENYING THE WRIT ..

a; CARCEARSION .......0..0-00-.

il

lil

iV
TABLE OF AUTHORITIES

Cases

Allied Structural Steel Co. v. Spannaus, 438 U.S.
EE 2 | RRP RS Rte ARG RL Bey) pot Ree natin ee 3:5

Birkenwald Distrib. Co. v. Heublein, Inc., 776 P.2d
Tae CRS TN, MOO cries aeons 7

Chico's Pizza Franchises, Inc. v. Sisemore 544 F.
Supp. 248 (E.D. Wash. 1981), aff'd, 685 F.2d

tk he Jot ae +,” | OR Reto ees Wenn opto MEN Yee nc ee ae 7
Energy Reserves Group, Inc., v. Kansas Power &

Light Co., 459 U5. GO CEGRD) «oi csccnescicsececep nice 3, 4,5
Exxon Corp. v. Eagerton, 462 U.S. 176 (1983) ..........00....... 6

Fireside Chrysler-Plymouth Mazda, Inc. v. Chrysler
Corp., 472 N.E.2d 861 (Ill. App. Ct. 1984) 0000.0... 7

Fornaris v. Ridge Tool Co., 423 F.2d 563 (1st Cir.),
rev'd on other grounds, 400 U.S. 41 (1970) «0.0.0.0... 6

Garris v. Hanover Ins. Co., 630 F.2d 1001 (4th Cir.
FREED SARI RITE ae MES CRONE Dake 7 PRONE Ben ie Nat SET 6

G-H Ins. Agency, Inc. v. Continental Ins. Co., 294
eee Be eas his iki a ooo ante ed, 7

Globe Liquor Co. v. Four Horses Distillers Co.,
281 A.2d 19 (Del.), cert. denied, 404 U.S. 873
Cg) Re Raed een a GE MEE SEE TLD An aeamOna tee ee 7

Heublein, Inc. v. Department of Alcoholic Bev.
oo ee Ee ee Ragen ener 7

Vv

Jacobsen v. Anheuser-Busch, Inc. , 392 N.W.2d 868
(Minn. 1986), cert. denied, 479 U.S. 1060 (1987)........... 7

Larco Distrib. Inc. v. Latrobe Brewing Co., 1990
ky We ee is ewer 6

Mankaro Implement Inc. v. J.1. Case Co., [1990-
1992 Transfer Binder] Bus. Franchise Guide
COT) S 9N47 Ce. HE. TOF) ch ee 6

Martino v. McDonald's Corp., 304 N.W.2d 780
“hg Esp MIRA oD MIR Re ec re? Ss imilpae s Rel pelene Mareen 7

McDonald's Corp. v. Nelson, 822 F. Supp. 597
(S.D. Iowa 1993), affd sub nom., Holiday Inns
Franchising, Inc. v. Branstad, 29 F.3d 353 (8th
Ci:), cert. denied, $13 U.S. 1032 (1994) ..............5....5. 6

Morgan v. Kemper Ins. Co., 754 F.2d 145 (4th Cir.
= NRE nintsE ne SMEG OM Tiny beret fy eine Rcoabem me Weer eee 6

Northshore Cycles, Inc. v. Yamaha Motor Corp.,
519 F 26 1061 CN Oe. TIE i is 6

Park Benziger & Co. v. Southern Wine & Spirits,
pe ee eR. |: Re eee eames 7

Rochester v. Royal Appl. Mfg. Co., 569 F. Supp.
SE Pe A A ns ck vndcc aks acpiars ene isencreniesunctonenes 6

Shell v. Metropolitan Life Ins. Co., 380 S.E.2d 183
hte ,__, TRERISPRORARSER SO TRRER aeehestenennr oy ui or mney Sat re 7

Smith Ins., Inc. Co. v. Grievance Comm., 424 A.2d
LS 8 te: : RPM tne apiece fetes xt'y seaseaire verry bie eon peter 7

Superior Motors, Inc. v. Winnebago Indus., Inc.,
SIF FB Fis Ce es BIT a hassles ith eiscnsee sees 6

v1

Ward v. Chevron U.S.A., Inc., 598 P.2d 1027 (Ariz
1979) .... Se ta

Wipperfurth v. U-Haul Co., 304 N.W.2d 767 (Wis
1981) | ) ree

Statutes

United States Constitution, art. I, §10......

Constitutional Provisions

Wash. Rev. Code 19.100.180(1)(c) (1996) ........

No. 97-1669

IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1997

CASSAN ENTERPRISES, INC., ET AL.,
Petitioners,

DOLLAR SYSTEMS, INC., ET AL.,
Respondents.

-—BRIEF IN OPPOSITION TO
PETITION FOR WRIT OF CERTIORARI

;. STATEMENT OF THE CASE

This garden variety diversity case involves a
commercial dispute between respondent Dollar Rent A Car
Systems, Inc. (Dollar), a nationwide car rental company, and
petitioners Cassan Enterprises, Inc., and CMC Investments,
Inc. (Cassan), franchisees of Dollar. In 1993 Cassan filed an
action in Washington State court alleging a variety of tort and
breach of contract claims, as well as claims arising under two
Washington state statutes, the Washington Consumer
Protection Act and the Washington Franchise Investor
Protection Act (FIPA). Cassan sought both damages and
equitable relief. The case was removed to federal court.

Cassan's claims fell into two categories. First, it
contended that Dollar wrongfully failed to offer financial
assistance to Cassan in connection with Cassan's bid for a

2

concession at Sea-Tac Airport in Washington. Cassan
demanded financial assistance of up to one-half of the
monthly franchise fee that its Seattle operation was obligated
to pay Dollar under the Franchise Agreement. Second,
Cassan claimed that Dollar wrongfully refused to allow
Cassan to accept an advertising allowance from GM, which
was conditioned upon Cassan's advertising GM vehicles.
Dollar had a policy that if vehicles were featured in
advertisements, they had to be Chrysler vehicles. At the time
Dollar was owned by Chrysler Corporation, which was also
its featured fleet provider. Dollar refused to make an
exception to this policy for Cassan.

Of relevance to the petition filed by Cassan, FIPA,
generally prohibits franchisors from "discriminat[ing] between
franchises in the charges offered or made for royalties, goods,
services, equipment, rentals, advertising services, or in any
other business dealing," unless the discrimination is 1)
"reasonable," or 2) "based on franchises granted at materially
different times" and the discrimination is "reasonably related"
to that difference in time, or 3) is "not arbitrary." Wash. Rev.
Code 19.100.180(1)(c) (1996). Cassan claimed that Dollar
had discriminated against Cassan because Dollar had
provided financial assistance to some franchisees seeking
airport concessions and had allowed some franchisees to
accept GM advertising allowances, while denying similar
benefits to Cassan. Dollar denied these allegations.

The district court granted Dollar's summary judgment
motion on the FIPA claim on the ground that application of
the Act, which became law in 1972, to the Dollar-Cassan
contract, which was entered into five years earlier, would
violate the Contract Clause of the Washington State
Constitution and of the United States Constitution, art. I,
§10.

3

The other claims went to trial, and a jury found in
favor of Cassan in the amount of $8.7 million. The court
entered two injunctions against Dollar.

On appeal, the United States Court of Appeals for the
Ninth Circuit reversed in every respect. It granted judgment
to Dollar as a matter of law on all legal claims, vacated the
One injunction, and remanded the other injunction for further
determinations.! In addition, it affirmed the grant of
summary judgment in favor of Dollar with respect to the
Contract Clause, holding that retroactive application of FIPA
would indeed violate that provision.

In this Court, Cassan seeks review only of the Ninth
Circuit holding that application of FIPA in this case would
violate the Contract Clause.

II. REASONS FOR DENYING THE WRIT

This case involves no conflict among the courts of
appeals or with precedent of this Court. It breaks no new
legal or constitutional ground. And it bears no national
significance. The issue was decided correctly by both the
district court and the court of appeals in accordance, as
Petitioners concede, Pet. at 7-8, with virtually all courts that
have looked at this or similar legislation

Although not every state law affecting contracts
violates the Contract Clause, that provision "is not a dead
letter," Allied Structural Steel Co. v. Spannaus, 438 US.
234, 241 (1978), and protects the legitimate, reasonable
expectations of parties to a contract. The "threshold inquiry
is ‘whether the state law has, in fact, operated as a substantial
impairment of a contractual relationship.’ " Energy Reserves

' That injunction is still pending in the district court.

4

Group, Inc., v. Kansas Power & Light Co., 459 U.S. 400,
411 (1983), quoting Spannaus 438 US. at 244

If the impairment is substantial, the second inquiry is
whether the state has a “significant and legitimate public
purpose behind the regulation... such as the remedying of a
broad and general social or economic problem." nergy
Reserves Group, 459 US. at 412-13 (citation omitted); see
Spannaus, 438 US. at 249 (legislation at issue "was not
enacted to deal with a situation remotely approaching the
broad and desperate emergency economic conditions of the
early 1930's. . .")

In this case, the courts below properly found both that
the impairment.wrought by FIPA was severe and that the
legislation did not address a broad and general social or
economic problem. They are right on both counts. FIPA is
special interest legislation which, if applied retroactively,
would alter fundamental contract nights, such as Dollar's right
to collect its franchise fee and its right to control its
trademarks

Although Petitioners tellingly do not address the
seriousness of the contractual impairment that FIPA would
cause in this case, it can hardly be gainsaid. First, if Dollar
were required by FIPA to provide Cassan financial assistance
in connection with Cassan's bid for a concession at Sea-Tac
Airport, this obligation would materially change the franchise
fees payable by Cassan to Dollar set forth in the franchise
agreement. Similarly, if Dollar were required by FIPA to
allow Cassan to accept an advertising allowance from GM
conditioned upon featuring GM vehicles in Cassan's
advertisements, this obligation would materially alter the
contractual provision that allows Dollar to approve use of its
logo in all advertising

5

These changes would not constitute mere tinkering at
the margins of the Dollar-Cassan agreement: they address,
rather, core contractual issues. These "severe" and
"permanent" changes, as the district court observed, would
have "substantially impair[ed] Dollar's contractual rights
because [they] would alter the reasonable expectations of the
parties." A-14-15. These rights and expectations, moreover,
were the result of "bargaining by the parties; and throughout
the years since the contract was signed, the parties appear to
have relied upon [their] terms." A-15. The courts below
were thus clearly right that FIPA would operate as a
substantial impairment of the contractual relationship between
Dollar and Cassan.

With respect to the second part of the Spannaus-
Energy Reserves Group test, the courts below were also
correct in ruling that FIPA addressed only a “narrow class,
not a general or broad societal problem..." A-14 (district
court) and that retroactive application of FIPA was
"insufficiently justified," A-10 (court of appeals). On its face,
this statute clearly benefits only a special interest group,
franchisees, and does not have as its purpose "the remedying
of a broad and general social or economic problem." /nergy
Reserves Group, 459 U.S. at 411-12 (citation omitted).
Thus, FIPA is akin to the pension funding charge that applied
only to Minnesota employers that was struck down in
Spannaus and is far different from the Kansas act that
imposed price controls on natural gas that was upheld in
Energy Reserves Group 2

? The Energy Reserves Group Court found it significant
that the natural gas industry is "heavily regulated," 459 US. at
413, presumably because parties to a contract ina heavily
regulated industry must reasonably expect that contractual terms
may be altered by laws or regulations. By contrast, Washington

6

FIPA did not impose "a generally applicable rule of
conduct designed to advance 'a broad societal interest’. ."
but instead "directly ‘adjusted the rights and responsibilities of
contracting parties." /xxon Corp. v. kKagerton, 462 U.S
176, 191-92 (1983) (citation omitted). The "overall purpose
of the Act is specifically to adjust the balance of power
between contracting parties." McDonald's Corp. v. Nelson,
822 F. Supp. $97, 608 (S._D. lowa 1993), affd sub nom.,
Holiday Inns Franchising, Inc. v. Branstad, 29 F 3d 353 (8th
Cir.), cert. denied, 513 U.S. 1032 (1994)

In sum, the courts below properly held that
retroactive application of FIPA would violate the Contract
Clause. The proof of this particular proposition lies in the
fact, as acknowledged by Petitioners, that virtually every
court (and every court of appeals) that has examined special
interest statutes like FIPA has found them to be severe and
unconstitutional impairments of contracts? Indeed, the very

”

State "had not previously regulated franchises in this manner. . ..
A.14-15.

3See, e.g., Holiday Inns Franchising, Inc. v. Branstad, 29
F 3d 383 (8th Cir.), cert. denied, 513 U.S. 1032 (1994),
Northshore Cycles, Inc. v. Yamaha Motor Corp., 919 F.2d 1041,
1043 (Sth Cir. 1990); Morgan v. Kemper Ins. Co., 754 F.2d 145,
147-48 (4th Cir. 1985); Garris v. Hanover Ins. Co. , 630 F.2d
1001, 1005-07 (4th Cir. 1980); Fornaris v. Ridge Tool Co. , 423
F.2d 563 (ist Cir.), rev'd on other grounds, 400 US. 41
(1970)(resolution of constitutional question should have been
deferred to see if Puerto Rico court might construe statute in a way
avoiding that question); Mankaro Implement Inc. v. JI. Case Co.,
{1990-1992 Transfer Binder] Bus. Franchise Guide (CCH) §] 9947
(D. Minn. 1991); Larco Distrib. Inc. v. Latrobe Brewing Co.,
1990 WL 168702 (D. Kan. 1990), Rochester v. Royal Appl. Mfg.
Co., 569 F. Supp. 736 (W.D. Wis. 1983), Superior Motors, Inc. v.
Winnebago Indus., Inc., 359 F Supp. 773, 779 (D.S.C. 1973).

7

provision at issue in this case was found to violate the federal
Contract Clause if applied retroactively in Chico's Pizza
Franchises, Inc. v. Sisemore 544 F. Supp. 248, 250 (ED
Wash. 1981), affd, 685 F.2d 440 (9th Cir. 1982). ("[T]he
conclusion is inescapable that FIPA profoundly altered, to the
point of potential obliteration, the reasonable expectations of
the parties")

Petitioner is simply unhappy with the state of the law.
as it has been almost uniformly developed by federal and state
courts, because it would like to see circumstances that better
favor franchisees. That does not make out a basis for this
Court's review. Petitioner fails to show any inconsistency
between the case below and recent Contract Clause decisions
in the federal courts of appeals. Nor can it distinguish such
cases. In short, this private dispute between franchisor and
franchisee over a reduction in the franchise fee and
advertising restrictions implicates no "general or broad
societal problem" that justifies retroactive application of
FIPA. To the contrary, retroactivity would seriously interfere

Shell v. Metropolitan Life Ins. Co., 380 §.E.2d 183, 188-91
(W.Va. 1989); Heublein, Inc. v. Department of Alcoholic Bev
Control, 376 S_E. 2d 77, 79 (Va. 1989); Birkenwald Distrib. Co
v. Heublein, Inc., 776 P.2d 721, 724-25 (Wash.Ct.App. 1989);
Jacobsen v. Anheuser-Busch, Inc., 392 N.W.2d 868. 872-74
(Minn. 1986), cert. denied, 479 U.S. 1060 (1987), Fireside
Chrysler-Plymouth Mazda, Inc. v. Chrysler Corp., 472 N.E.2d
861, 866 (Ill. App. Ct. 1984); G-H Ins. Agency, Inc. v. Continental
Ins. Co., 294 §_E.2d 336 (S.C. 1982): Martino v. McDonald's
Corp., 304 N.W.2d 780 (Wis. 1981); Wipperfurth v. U-Haul Co.,
304 N.W 2d 767, 773 (Wis. 1981), Park Benziger & Co. v
Southern Wine & Spirits, Inc., 391 So.2d 681 (Fla. 1980); Smith
Ins., Inc. Co. v. Grievance Comm. , 424 A.2d 816, 820 (N.H.
1980), Ward v. Chevron U.S. A., Inc., 598 P.2d 1027 (Ariz. 1979):
Globe Liquor Co. v. Four Horses Distillers Co., 281 A.2d 19
(Del.), cert. denied, 404 U.S. 873 (1971)

with private commercial obligations in a fashion that the
Contract Clause was intended to prevent

Il. CONCLUSION

For the reasons set forth above, the petition for a writ
of certiorari should be denied.

Respectfully submitted,

JAMES B. HICKS BENJAMIN S. SHARP
KATHY A. JORRIE Counsel of Record
LUCE, FORWARD, HAMILTON & ROBERT L. DEITZ
SCRIPPS, LLP PERKINS COIE LLP
777 South Figueroa St., Suite 3600 607 Fourteenth St., N.W., Suite 800
Los Angeles, California 90017 Washington, DC 20005
Telephone: (213) 892-4992 Telephone: (202) 628-6600

WILLIAM T. WALKER, ESQUIRE

DOLLAR RENT A CAR
SYSTEMS, INC.

5330 East 31st Street

Tulsa, Oklahoma 74153-1667

(918) 669-3042 Attorneys for Respondents

Dated: May 15, 1998

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386006_1377%3A2. Public record. Not legal advice.