Opposition Brief — DaimlerChrysler Corp. v. Kolosso Auto Sales, Inc.

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)) & uoreme Court, U.S.

/ FILED

No. 98-986 JAN 26 1999

CLERK

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1998

DaimlerChrysler Corporation,

= Petitioner,

Kolosso Auto Sales, Inc.,

Respondent.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

RESPONDENT’S BRIEF IN OPPOSITION

TO PETITION FOR A WRIT OF CERTIORARI

PAUL R. NORMAN

Counsel of Record

JAMES E. BARTZEN

BOARDMAN, SUHR, CURRY

& FIELD LLP

One South Pinckney Street

Suite 410

P.O. Box 927

Madison, Wisconsin 53701-0927

(608) 257-9521

Counsel for Respondent

Midwest Law Printing Co., Chicago 60610, (312) 321-0220

RULE 29.6 STATEMENT

Pursuant to Supreme Court Rule 29.6, the Respon-

dent, Kolosso Auto Sales, Inc., states that it has no

parent companies and no nonwholly owned subsidiaries.

TABLE OF CONTENTS

PAGE

Mihaks 20.6 SLATE 6 8 GA Se is i

FABLS: OF ALEC AM 6 ood eekas tea ees iv

STATEMENT OF THE CASE ...............-. 1

CHRYSLER’S MISSTATEMENTS

CP FOASE Come SA 66 ks eee ee 6

REASONS FOR DENYING THE PETITION ..... 9

I. THE SEVENTH CIRCUIT'S DECISION

DOES NOT CONFLICT WITH THIS

COURTS PRECEDENIO. .0ss 0s she ache es 9

A. Chrysler Misstates the Seventh Cir-

CUIts DGS 6c we ee 9

B. The Seventh Circuit’s Decision Cor-

rectly Applies this Court’s Prece-

GOOEE oii ck nears 11

C. The Subject Regulation Is Justified

As A Proper Exercise of the State’s

FORGE FOU. Kiss Cae ee ees 13

Il. THE SEVENTH CIRCUIT’S DECISION

DOES NOT CREATE A SPLIT IN THE

CIRCUITS OVER WHEN CONTRACTU-

AL IMPAIRMENTS ARE FORESEE-

Pie Gera ew nr ys peer ce ery 17

ill

A. The Seventh Circuit’s Determination

That The Contractual Impairment

Here Was Foreseeable Is Justified

By Wisconsin’s Pervasive Regulation

of the Motor Vehicle Franchise

Agreements That Already Existed

When The Parties’ Franchise Agree-

Sn SU UNE cee ee vcakeec 17

B. The Seventh Circuit’s Decision Does

Not Conflict With The Eighth Cir-

cuit’s Decision In Holiday Inn Fran-

Ne sno ASG os pias a oe x0 21

MIE Vo ss ries eek bs bow 23

EI Sd nd Sic SW cay oo ey nore sk R. App. 1

TABLE OF AUTHORITIES

Cases: PAGE(S)

Allied Structural Steel Co. v. Spannaus,

Ge Vii as eaves Lahn aes 11, 12

American Suzuki Motor Corp. v. Bill Kummer,

Inc., 65 F.3d 1381 (7th Cir. 1995) ......... 15

Bob Willow Motors, Inc. v. General Motors

Corp., 872 F.2d 788 (7th Cir. 1989) ..... 15, 19

Department of Transp. v. Transportation

Comm’n, 111 Wis. 2d 80, 330 N.W.2d

LOD Cer Noa es ee oe Or eS 15, 19

Energy Reserves Group, Inc. v. Kansas Power

& Light Co., 459 U.S. 400 (1983) ...... 9, 11, 22

Ford Motor Co. v. Lyons, 137 Wis. 2d 397,

405 N.W.2d 354 (Ct. App. 1987) .......... 15

Forest Home Dodge, Inc. v. Karns,

29 Wis. 2d 78, 138 N.W.2d 214 (1965)-. . 1, 14, 15

General Motors Corp. v. Romein,

SOS 47. 2k Cee be daar eae bw ss 10

Holiday Inns Franchising v. Branstad,

29 F.3d 383 (8th Cir. 1994) ....... 8, 21, 22, 23

Keystone Bituminous Coal Ass’n v.

DeBenedictis, 480 U.S. 470 (1986) ...... 12, 16

Kuhl Motor Co. v. Ford Motor Co.,

270 Wis. 488, 71 N.W.2d 420 (1955) ....... 16

pee amare mecca mance cca

McDonald’s Corporation v. Nelson,

822 F. Supp. 597 (S.D. Iowa 1993),

O'S Be en OU kisi bei es BU 21

Nagle Motors v. Volkswagen N.C. Distributor,

51 Wis. 2d 413, 187 N.W.2d 374

CER CCF oh ee ERE Ce hOe ee ere 15, 17, 18

New Motor Vehicle Board v. Orrin W. Fox Co.,

450 0.5. BB C1078) kk ha 1, 13, 14, 16

Veix v. Sixth Ward Building & Loan Ass’n,

Ae Aes ND oe a hh wd 22

Wipperfurth v. U-Haul Co. of Western

Wisconsin, Inc., 101 Wis. 2d 586,

Ue Ee. Wi TOF AROS oi os Vw bo os oe eS 21

Statutes:

RR Re ET. RR epee aemmoere = Horie ia MRT. 1

Wis. Stat. § 218.01(2)(bd)2 (1985-86) .......... 18

Wis. Stat. § 218.01(2)(bd)3 (1985-86) ........... 2

Wis. Stat. § 218.01(2)(e) (1985-86) ............. 6

Wis. Stat. § 218.01(2a) (1985-86) .............. 7

Wis. Stat. § 218.01(3)(a)4, (9)(a) (1985-86) ...... 19

Wis. Stat. § 218.01(3)(a)11 (1985-86) ........... 3

Wis. Stat. § 218.01(3)(a)11, (9)(a) (1985-86) ..... 18

Wis. Stat. § 218.01(3)(a)14 (1985-86) ........... 3

Wis. Stat. § 218.01(3)(a)16 (1985-86) ........ 2,17

Wis. Stat. § 218.01(3)(a)17

ok) ey egy tee aren pasar 3, 7, 17, 18, 20

Wis. Stat. § 218.01(3)(a)23 (1985-86) ......... 3, 5

Wis. Stat. § 218.01(3)(a)24 (1985-85) ........... 3

Wis. Stat. § 218.01(3)(a)26 (1985-86) ........... 3

Wis. Stat. § 218.01(3)(a)26m

(SE) a es MEO a ees 4, 5, 7, 18, 19

Wis. Stat. § 218.01(3)(a)32, (3)(f)1 (1985-86) ... 3,7

Wis. Stat. § 218.01(3)(bf)1 (1985-86) ........... 6

Wis. Stat. § 218.01(3)(h) (1985-86) ........... 19

ee, Ss eS ok 6 ho hace ee eee passim

TEs eee BD BATLOMEE. cn eh 8 40 oe ee 4,5

Weak, TOME, F FIG DUSERE) 3s 6 kee ee eee ee 15

Wis. Stat. § 218.01(5)(a) (1985-86) ............. 2

Wis. Stat. § 218.01(9)(a) (1985-86) ............ 19

STATEMENT OF THE CASE

Since 1937, Wisconsin has regulated the franchise

agreements of motor vehicle manufacturers and their

dealers under the Wisconsin Motor Vehicle Dealer Law

(“WMVDL”), § 218.01, Wis. Stats. This regulation exists

“in recognition of the gross disparity of bargaining

power between the manufacturer of automobiles and

the local retailer” and “the long history of the abuse of

dealers by manufacturers.” Forest Home Dodge, Inc. v.

Karns, 29 Wis. 2d 78, 85, 188 N.W.2d 214, 217-18

(1965). See also New Motor Vehicle Board v. Orrin W.

Fox Co., 439 U.S. 96, 100-01 (1978) (“[t]he disparity in

bargaining power between automobile manufacturers

and their dealers prompted Congress and some 25

States to enact legislation to protect retail car dealers

from perceived abusive and oppressive acts by the

manufacturers”).

In 1988, the petitioner, DaimlerChrysler Corporation

(“Chrysler”), a motor vehicle manufacturer licensed

under the WMVDL, entered into franchise agreements

(the “Franchise Agreement”)' for Chrysler’s Jeep and

Eagle line makes of vehicles with the Respondent,

Kolosso Auto Sales, Inc. (“Kolosso”), a licensed motor

vehicle dealer in Appleton, Wisconsin. The Franchise

Agreement was for an indefinite term. However,

Chrysler reserved for itself the right to unilaterally

amend the Franchise Agreement where “the passage of

time, changes in the industry, ways of doing business

' Chrysler and Kolosso signed two separate Sales and Service

Agreements, one for Jeep vehicles and the other for Eagle

vehicles, which were otherwise identical. Both agreements are

referred to in this brief as the “Franchise Agreement.”

and other unforeseen circumstances” caused it to de-

termine that it should.

The Franchise Agreement contained, among others, a

provision that required Kolosso to obtain Chrysler’s

prior written approval before changing the location or

the use of Kolosso’s dealership facility. However, when

Chrysler entered into the Franchise Agreement, it knew

that, as a motor vehicle manufacturer licensed in Wis-

consin, its franchise agreements with dealers such as

Kolosso would be subject to extensive regulation by the

State of Wisconsin under the WMVDL, including reg-

ulation of Chrysler’s contractual right to approve the

location and use of Kolosso’s facilities.

This knowledge resulted from Chrysler’s having ob-

tained a license to act as a motor vehicle manufacturer

license in Wisconsin, thereby subjecting itself “to all

provisions of the Wisconsin statutes regulating manu-

facturers, importers and distributors.” § 218.01(2)(bd)3

(1985-86).” As of 1988, these provisions included:

1. The power of the licensing agency to “define un-

fair practices in the motor vehicle industry and trade

between licensees... .” § 218.01(5)(a) (1985-86).

2. The prohibition against “[bleing a manufacturer

. who has attempted to induce or coerce, or has

induced or coerced, any automobile dealer to enter into

any agreement with such manufacturer. . . or to do any

other act unfair to said dealer, by threatening to cancel

any franchise existing between such manufacturer . .

and said dealer” § 218.01(3)(a)16 (1985-86).

* Applicable provisions of the WMVDL in effect when the

Franchise Agreement was entered into are reproduced in the

Appendix to this brief.

Se Tee

r= ge en a

3. The prohibition against “[bleing a manufacturer

... who has unfairly, without due regard to the equi-

ties of said dealer and without just provocation, can-

celed ... the franchise of any motor vehicle dealer.”

§ 218.01(3)(a)17 (1985-86).

4. The prohibition against “(having indulged in any

unconscionable practice relating to said business.”

§ 218.01(3)(a)11 (1985-86).

5. The prohibition against “(having violated any law

relating to the sale, distribution or financing of motor

vehicles.” § 218.01(3)(a)14 (1985-86).

6. The prohibition against “[bleing a manufacturer

. who unreasonably withholds its approval of a

change of ownership or executive management of a

dealership,” § 218.01(3)(a)23 (1985-86).

7. The prohibition against “[bleing a manufacturer

. .. who unreasonably closes a dealer point.” § 218.01(3)

(a)24 (1985-85).

8. Provisions regulating the rights of “designated

family members” of a deceased or incapacitated dealer

to succeed to the ownership and operation of the dealer-

ship under an existing franchise agreement. § 218.01(3)

(a)26 (1985-86).

9. A procedure under which the licensing agency

could prevent a manufacturer from relocating or estab-

lishing a dealer in another existing dealer’s relevant

market area upon a showing of “good cause” for not

permitting the relocation or establishment. §§ 218.01(3)

(a)32, (3)(f)1 (1985-86).

10. A prohibition against “[bleing a manufacturer

. . who unreasonably refuses to allow a dealership to

share its facilities with another or who unreasonably

refuses to allow a dealership to add another franchise

at the same location as its existing franchise or fran-

chises.” § 218.01(3)(a)26m (1985-86).

In 1993, the Wisconsin Legislature amended the

WMVDL to, among other things, create § 218.01(3x).°

This subsection established an explicit procedure for

resolving disputes regarding a manufacturer’s refusal

to allow a dealer to “change its ownership or executive

management, transfer its dealership assets to another

person, add another franchise at the same location as

its existing franchise or relocate a franchise ... .”

§ 218.01(3x)(b)1. The procedure in § 218.01(3x) permits

the State of Wisconsin, acting through its agency, the

Division of Hearings and Appeals (“Division”), to allow

a dealer to undertake one or more of these proposed

actions where, after considering the interests of the

manufacturer, the dealer, other dealers and the public,’

* Section 218.01(3x) is reproduced in Appendix E (App. 45a-

48a) to the Petition.

* The factors specified in the statute to be considered by the

Division in determining whether “good cause” exists are:

a. The reasons for the proposed action.

b. The [manufacturer’s] reasons for not approving

the proposed action.

c. The degree to which the inability to undertake

the proposed action will have a substantial and ad-

verse effect upon the motor vehicle dealer's invest-

ment or return on investment.

d. Whether the proposed action is in the public

interest.

(continued...)

Map am SOREN, ect take BSE

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the Division determines that there is “good cause” to

permit the proposed action. Until such a determination

is obtained, the dealer is prohibited by the statute from

undertaking any of the listed actions without the manu-

facturer’s approval as required by the franchise agree-

ment. § 218.01(3x)(b)1.

Section 218.01(3x) replaced the prohibitions against

“[bleing a manufacturer ... who unreasonably with-

holds its approval of a change of ownership or executive

management of a dealership,” § 218.01(3)(a)23 (1985-

86), and “[bleing a manufacturer. . . who unreasonably

refuses to allow a dealership to share its facilities with

another or who unreasonably refuses to allow a dealer-

ship to add another franchise at the same location as

its existing franchise or franchises.” § 218.01(3)(a)26m

(1985-86), which had been in effect prior to 1988. These

changes were made applicable to franchise agreements

that existed prior to their effective date, as well as to

those entered into after the effective date.

Kolosso sought to invoke § 218.01(3x) in 1995, after

Chrysler had rejected its request to allow Kolosso to

relocate its Jeep-Eagle dealership “to another address

in Appleton in order to enable it to consolidate the ser-

vice facilities of its Chrysler dealership with the service

* (...continued)

e. The degree to which the proposed action will

interfere with the orderly and profitable distribution

of products by the [manufacturer].

f. The impact of the proposed action on other

motor vehicle dealers.

§ 218.01(3x\(c)1. a. - f.

facilities of a Toyota dealership that it owned at that

address.” App. 2a. After Kolosso filed a Complaint with

the Division under § 218.01(3x) challenging Chrysler’s

disapproval of this proposed action, Chrysler com-

menced the underlying suit in the United States

District Court for the Eastern District of Wisconsin.

Chrysler’s suit sought a declaratory judgment that the

application of § 218.01(3x) to Kolosso’s proposal violates

the Contracts Clause of the United States Constitution.

By agreement of the parties, the proceedings on Kolos-

so’s Complaint under § 218.01(3x) have been stayed

pending the completion of this action.

The District Court held that the application of

§ 218.01(3x) to Kolosso’s proposal does not contravene

the Contracts Clause. App. 12a-19a. Chrysler appealed

that decision to the Seventh Circuit, which affirmed.

App. la-1lla.

CHRYSLER’S MISSTATEMENTS

OF FACT OR LAW

Kolosso disputes several statements of fact or law

made in the petition, including:

1. At page 1 of the petition, Chrysler states that,

prior to the Wisconsin Legislature’s enactment of

§ 218.01(3x) in 1993, “the State of Wisconsin had never

regulated the location of automobile dealerships... .”

This statement is contradicted by several provisions of

the WMVDL which existed before 1988 when Chrysler

signed the Franchise Agreement with Kolosso, includ-

ing: §§ 218.01(2)(e), (3)(bf)1 (1985-86), which required

licensed dealers to own a vehicle display lot and per-

ee Ce ee ee eee Eee ee en el

FRE! EERE DIENT SIS NS El SS RITE BS STE RO

manent facilities for display of vehicles and required

that the location of such facilities be specified in the

dealers’ licenses issued by the licensor; § 218.01(2a)

(1985-86), which required that, before changing its lo-

cation, the dealer notify the licensor and apply for an

amended license; §§ 218.01(3)(a)32, (3)(f) (1985-86),

which prohibited manufacturers from relocating a

motor vehicle dealership within the “relevant market

area” of an existing enfranchised dealer of the same

line make of vehicle without first notifying that dealer

and providing it 30 days to protest the relocation with

the licensing agency; § 218.01(3)(a)17, which prohibited

a manufacturer from terminating a dealer’s franchise

for, among other things, relocating without the manu-

facturer’s approval if the manufacturer’s withholding of

such approval was not “just and fair” enforcement of

the franchise agreement;° and § 218.01(3x), which pro-

hibited manufacturers from unreasonably refusing “to

allow a dealership to share its facilities with another

2. At page 5 of the petition, Chrysler states that

“Chrysler denied Kolosso’s request, because Kolosso’s

original location was extremely advantageous for the

sale of Jeep and Eagle vehicles.” The reasons for

Chrysler’s denial of Kolosso’s request have not yet been

litigated or determined by any court or administrative

agency. Kolosso contends that Chrysler’s opposition to

° See further discussion below under Section II.A.

° See further discussion below under Section II.A. regarding

why § 218.01(3)(a)26m (1985-86) would likely have been con-

strued to apply to a proposal to change a dealership’s location

in order to share facilities with another dealership.

Kolosso’s proposal has more to do with Kolosso’s in-

tention to share service facilities with Toyota and

Chrysler’s desire to force Kolosso to sell its Jeep-Eagle

dealership to the local Chrysler-Plymouth dealer, than

with any perceived advantages of Kolosso’s existing

location. App. 27a.

3. At several places in the petition, Chrysler con-

tends that the Seventh Circuit has held that no “police

power justification” is required for § 218.01(3x). This is

a misstatement of the Seventh Circuit’s analysis for the

reasons set forth in Section I.A. below.

4. The petition also infers that there is no “police

power justification” for § 218.01(3x). This is a misstate-

ment of law and fact for the reasons set forth in Section

I.C. below.

5. The petition states that the Seventh Circuit’s de-

cision creates a conflict in the circuits with the Eighth

Circuit’s decision in Holiday Inns Franchising v. Bran-

stad, 29 F.3d 383 (8th Cir. 1994), over when contractual

impairments are foreseeable. For the reasons set forth

in Section II below, this statement is incorrect because

the prior regulation of the franchise relationships in-

volved in Holiday Inns Franchising, which was virtually

nonexistent, was fundamentally different from the

WMVDL’s prior regulation of motor vehicle franchise

agreements such as the agreement in this case.

ee ee ee eT a re ee

REASONS FOR DENYING THE PETITION

I. THE SEVENTH CIRCUIT’S DECISION DOES NOT

CONFLICT WITH THIS COURT’S PRECEDENTS

A. Chrysler Misstates the Seventh Circuit’s De-

cision

Chrysler argues that the Seventh Circuit’s decision

conflicts with this Court’s precedents by holding that

“no state police power justification is required, as long

as a court can characterize the resulting burden as a

‘small step.’” Petition at 13 (emphasis in original). It

further argues that “(t]he Seventh Circuit acknowl-

edged that the amended Dealer Act ‘could not be “sus-

tained as an exercise of the police power”’... .” Id.

The truth is that the Seventh Circuit’s decision does

not address the issues of whether a state police power

justification is required for a statute retroactively ap-

plied to an existing contract and whether the statute

retroactively applied here was in exercise of the State’s

police power. The phrase “police power” does not appear

anywhere in the Seventh Circuit’s decision. Instead,

after concluding that the subject regulation was not a

substantial impairment of Chrysler’s preexisting con-

tract rights, the Seventh Circuit merely restated what

this Court has often held—that insubstantial or minor

impairments of contract rights do not require “a signifi-

cant and legitimate public purpose behind the regula-

tion . . . such as the remedying of a broad and general

social or economic problem.” Energy Reserves Group,

Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-12

(1983).

In its analysis of the Seventh Circuit’s decision,

Chrysler confuses a State’s exercise of its police power,

which is required for any state’s economic regulation,

whether prospective or retroactive, under the Four-

teenth Amendment to the United States Constitution,

General Motors Corp. v. Romein, 503 U.S. 181, 191

(1992), with the special justification that must exist in

order for the State to substantially impair an existing

contract right under the Contracts Clause. In discuss-

ing justification for the subject regulation here, the

Seventh Circuit was clearly addressing the latter form

of justification, which it correctly held is not required

in this case because the contract impairment is not sub-

stantial.’

’ If justification beyond the requisite exercise of the State’s

police power were required in this case, it does exist. First, the

Seventh Circuit’s decision concludes that “the 1993 amend-

ment in effect regularized a gray area in the dealership law.”

App. 9a. Clarification of the existing law is, in itself, sufficient

justification for the insubstantial impairment that exists here.

Second, the amendment deals with critical issues of motor

vehicle facility locations and use, in which the public, in addi-

tion to dealers and manufacturers, has an important interest.

The public has an obvious and substantial interest in the con-

venient location of motor vehicle dealer facilities and in the

efficient use of those facilities, which may result from sharing

of facilities by dealerships to avoid excess capacity and to

achieve overhead cost savings that may be passed through to

car buyers and owners as retail price reductions. For this rea-

son, § 218.01(3x)(c)1.d specifies “[w]hether the proposed action

is in the public interest” as one of the factors to be considered

by the Division in determining whether there is “good cause”

to allow a dealer relocation and facility sharing proposal to be

undertaken.

Sve rs so oon ae wats y-andi<tds

B. The Seventh Circuit’s Decision Correctly Ap-

plies this Court’s Precedents

The Seventh Circuit’s determination that no special

justification, beyond the “police power” justification

required for all State regulation of private contracts, is

required for minor impairments of contract rights, is

consistent with this Court’s precedents.

In Energy Reserves, this Court stated that, in deter-

mining if a state regulation violates the Contract Clause,

“(t]he threshold inquiry is ‘whether the state law has, in

fact, operated as a substantial impairment of a contrac-

tual relationship.” Energy Reserves, 459 U.S. at 411

(quoting Allied Structural Steel Co. v. Spannaus, 438

U.S. 234, 244 (1978)). It then is stated that “[i]f the state

regulation constitutes a substantial impairment, the

State, in justification, must have a significant and legit-

imate public purpose behind the regulation, such as the

remedying of a broad and general social or economic

problem.” Jd. at 411-12 (citation omitted).

In Allied Structural Steel, the threshold test was

stated as follows:

[T]he first inquiry must be whether the state

law has, in fact, operated as a substantial im-

pairment of a contractual relationship. The

severity of the impairment measures the height

of the hurdle the state legislation must clear.

Minimal alteration of contractual obligations

may end the inquiry at its first stage. Severe

impairment, on the other hand, will push the

inquiry to a careful examination of the nature

and purpose of the state legislation.

Allied Structural Steel, 438 U.S. at 244-45 (emphasis

supplied) (footnotes omitted).

Also, in Keystone Bituminous Coal Ass’n v. DeBen-

edictis, 480 U.S. 470 (1986), this Court indicated that

inquiry into the justifications for the impairment is

required only if a substantial impairment is found.

We agree that the statute operates as “a sub-

stantial impairment of a contractual relation-

ship,” and therefore proceed to the asserted

justifications for the impairment.

(Citation omitted.)

The Seventh Circuit’s decision correctly applies this

Court’s precedents. Because the challenged regulation

was found not to operate as a substantial impairment

of a contractual relationship, the Seventh Circuit did

not need to inquire into the justification for the impair-

ment. The statement in the Seventh Circuit’s decision

that “little, predictable impairments .. . don’t have to

be justified at all,” App. 9a, is nothing more than a

paraphrase of this Court’s statement that “[m]inimal

alteration of contractual obligations may end the in-

quiry at its first stage.” Allied Structural Steel, 438

U.S. at 245.

The Seventh Circuit did not hold, as Chrysler asserts,

that the regulation did not need to be sustained as an

exercise of the police power or that the regulation could

not be so sustained. No argument that the regulation in

question is beyond the scope of the State of Wisconsin’s

police power to regulate private contract relations was

made to the Seventh Circuit or the District Court in

this case. Under prior judicial precedents, which are

discussed in the next section of this brief, it was im-

ylicitly assumed that the State’s regulation of franchise

relationships to protect the franchisee from abuse of the

— eee

franchisor’s superior bargaining power is an appropri-

ate exercise of the State’s police power.

C. The Subject Pegulation Is Justified As A Prop-

er Exercise of the State’s Police Power

The regulation challenged in this case is clearly a

proper exercise of Wisconsin’s police power under this

Court’s and other judicial precedent. Motor vehicle

franchise regulation has been adopted by Congress and

by many states, and the purpose of such regulation has

been frequently articulated by the courts. For example,

in holding that a California statute governing the es-

tablishment or relocation of new motor vehicle dealer-

ships did not violate manufacturers’ due process rights

under the Fourteenth Amendment, this Court has ob-

served that:

The disparity in bargaining power between

automobile manufacturers and their dealers

prompted Congress and some 25 States to enact

legislation to protect retail car dealers from

perceived abusive and oppressive acts by the

manufacturers.

New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S.

96, 100-01 (1978).

In Orrin W. Fox, this Court supported its statement

of the purpose underlying motor vehicle franchise

legislation by quoting from a Congressional Committee

report, which included the following passage:

This vast disparity in economic power and bar-

gaining strength has enabled the factory to de-

termine arbitrarily the rules by which the two

parties conduct their business affairs. These

rules are incorporated in the sales agreement or

franchise which the manufacturer has prepared

for the dealer’s signature.

Dealers are with few exceptions completely

dependent on the manufacturer for their supply

of cars. When the dealer has invested to the

extent required to secure a franchise, he be-

comes in a real sense the economic captive of

his manufacturer. The substantial investment of

his own personal funds by the dealer in the

business, the inability to convert easily the

facilities to other uses, the dependence upon a

single manufacturer for supply of automobiles,

and the difficulty of obtaining a franchise from

another manufacturer all contribute toward

making the dealer an easy prey for domination

by the factory. On the other hand, from the

standpoint of the automobile manufacturer, any

single dealer is expendable. The faults of the

factory-dealer system are directly attributable

to the superior market position of the manufac-

turer.

Id. at 100 n.4.

In Orrin W. Fox, this Court also cited the Wisconsin

Supreme Court’s decision in Forest Home Dodge, Inc. v.

Karns, 29 Wis. 2d 78, 138 N.W.2d 214 (1965) “[flor a

helpful discussion of the purpose served by such laws—

the promotion of fair dealing and the protection of

small business.” Jd. at 102 n.7. In Forest Home Dodge,

the state Supreme Court described the purpose of the

WMVDL, in which the regulation challenged here is

included, as follows:

Implicit in this law is the recognition of the

gross disparity of bargaining power between the

RINEIUAIM Ei i mr ea

NS a ws

manufacturer of automobiles and the local re-

tailer. It was enacted in recognition of the long

history of the abuse of dealers by manufac-

turers. Kuhl Motor Co. v. Ford Motor Co.

(1955), 270 Wis. 488, 71 N.W.2d 420. These

laws deal with the relationship between auto

manufacturers and auto dealers. The purpose of

the law is to furnish the dealer with some pro-

tection against unfair treatment by the manu-

facturer.

Forest Home Dodge, 29 Wis. 2d at 85, 138 N.W.2d at

217-18 (emphasis supplied).

This purpose underlying the WMVDL has been often

repeated in state and federal court decisions that have

applied the statute. See American Suzuki Motor Corp.

v. Bill Kummer, Inc., 65 F.3d 1381, 1389 (7th Cir.

1995); Bob Willow Motors, Inc. v. General Motors Corp.,

872 F.2d 788, 794 (7th Cir. 1989); Ford Motor Co. v.

Lyons, 137 Wis. 2d 397, 433-34, 405 N.W.2d 354, 369

(Ct. App. 1987); Department of Transp. v. Transporta-

tion Comm’n, 111 Wis. 2d 80, 94-95, 330 N.W.2d 159,

165-66 (1983); Nagle Motors, Inc. v. Volkswagen N.C.

Distributor, 51 Wis. 2d 413, 423, 187 N.W.2d 374, 381

(1971).

By enacting the challenged regulation in this case,

the Wisconsin Legislature has chosen to protect Wiscon-

sin motor vehicle dealers from unfair treatment with

respect to dealer relocation and facility sharing propos-

als by allowing dealers, who are denied manufacturer

approval, to seek an order from the Division allowing

their proposals to be implemented, if a determination

is made that there is “good cause” for the change.

§ 218.01(3x)(c). The “courts should ‘properly defer to

[the Legislature’s] judgment as to the necessity and

reasonableness of [this] particular measure.’” Keystone

Bituminous Coal, 480 U.S. at 505 (quoted source omit-

ted).

The regulation of contract relationships to protect the

party with unequal bargaining power has so often been

held to fall within the exercise of the states’ police

powers that the issue is no longer debatable. In reject-

ing the manufacturer’s due process attack on the Cali-

fornia statute in Orrin W. Fox, this Court held:

(T]he California Legislature was empowered to

subordinate the franchise rights of automobile

manufacturers to the conflicting rights of their

franchisees where necessary to prevent unfair

or oppressive trade practices.

Id. at 107.

Similarly, in Kuhl Motor Co. v. Ford Motor Co., 270

Wis. 488, 502, 71 N.W.2d 420, 427 (1955), the Wiscon-

sin Supreme Court held with respect to the WMVDL:

It would seem reasonably clear that one of the

chief objectives of the legislature in enacting

sec. 218.01, Stats., insofar as it seeks to regu-

late the dealings between automobile manufac-

turers and dealers, is to promote fair dealing,

which, of course, is a legitimate exercise of

police power.

Because the challenged regulation here was clearly

justified by the exercise of the State’s police power and

because Chrysler never argued otherwise in the courts

below, Chrysler’s argument that this case should be

heard because there is no state police power justifica-

tion for the regulation must be rejected.

Il. THE SEVENTH CIRCUIT’S DECISION DOES NOT

CREATE A SPLIT IN THE CIRCUITS OVER WHEN

CONTRACTUAL IMPAIRMENTS ARE FORESEE-

ABLE

A. The Seventh Circuit’s Determination That

The Contractual Impairment Here Was Fore-

seeable Is Justified By Wisconsin’s Pervasive

Regulation of the Motor Vehicle Franchise

Agreements That Already Existed When The

Parties’ Franchise Agreement Was Formed

The Seventh Circuit’s decision correctly concluded

that § 218.01(3x) does not substantially impair Chrys-

ler’s cuntractual right to approve the location and use

of Kolosso’s facility because, in view of the pervasive

regulation of motor vehicle franchise agreements by the

WMVDL when the Franchise Agreement was entered

into, it was foreseeable that a regulation similar to

§ 218.01(3x) might someday be enacted.

In 1988, when the Franchise Agreement was signed,

Chrysler already was prohibited by § 218.01(3)(a)17

(1985-86) of the WMVDL from terminating that agree-

ment without “just provocation” and “due regard to the

equities” of the dealer, which the Wisconsin Supreme

Court had construed to require manufacturers to be

“just and fair in enforcing the terms of the contract”

and to make Wisconsin dealers “immune from unrea-

sonable contract terms or the arbitrary, capricious,

vengeful enforcement of those terms.” Nagle Motors, 51

Wis. 2d at 431, 187 N.W.2d at 385. The law also pro-

hibited Chrysler from inducing or coercing a dealer to

do any “act unfair to said dealer, by threatening to

cancel any franchise existing between such manufactur-

er, ... and said dealer.” § 218.01(3)(a)16 (1985-86).

Other provisions of the statute gave Kolosso a cause of

action if Chrysler “indulged in any unconscionable prac-

tice” or engaged in an “unfair practice.” §§ 218.01(3)

(a)11, (9)(a) (1985-86).

As noted in the Seventh Circuit’s decision, at the time

the Franchise Agreement was signed, Chrysler’s con-

tractual right to approve the location and use of Kolos-

so’s facility was already restricted by these provisions.

App. 7a-8a. Under the law existing then and until the

1993 amendment to the WMVDL, if Chrysler refused to

approve Kolosso’s proposal to relocate its Jeep-Eagle

dealership in order to share facilities with its Toyota

dealership, Kolosso could have obtained review of

Chrysler’s disapproval by the licensing agency through,

among other means, relocating and sharing facilities

without Chrysler’s approval and then defending against

the termination of its franchise on the basis that

Chrysler had not been “just and fair” in enforcing the

contract. §§ 218.01(2)(bd)2, (3)(a)17 (1985-86); Nagle

Motors, 51 Wis. 2d at 431, 187 N.W.2d at 385.

Also, the WMVDL contained a prohibition against

“(bleing a manufacturer, . . . who unreasonably refuses

to allow a dealership to share its facilities with another

or who unreasonably refuses to allow a dealership to

add another franchise at the same location as its exist-

ing franchise or franchises.” § 218.01(3)(a)26m (1985-

86). Prior to its repeal in 1993, when it was replaced by

§ 218.01(3x), there was no judicial or administrative

determination as to whether § 218.01(3)(a)26m applied

to a proposal, such as Kolosso’s, where the dealership

needed to be relecated in order “to share its facilities

with another.” However, the Wisconsin Supreme Court

has held that the provisions of the WMVDL are to be

liberally construed to promote the statutory purpose of

Se ee

protecting dealers against unfair treatment by manu-

facturers. See Department of Transp., 111 Wis. 2d at

95, 330 N.W.2d at 166. See also Bob Willow Motors,

872 F.2d at 793. In order for two dealerships to begin

sharing their facilities, at least one of them would have

to relocate. Therefore, a construction of § 218.01(3)

(a)26m that limited it to facility sharing proposals not

involving a dealership relocation would have rendered

that statute meaningless.

Accordingly, it is likely that § 218.01(3)(a)26m (1985-

86) would have been found to apply to Kolosso’s propos-

al to relocate its Jeep-Eagle dealership in order to

share facilities. Prior to 1993, if Chrysler unreasonably

refused to allow Kolosso’s request to share its Jeep-

Eagle dealership facilities with those of its Toyota

dealership in violation of § 218.01(3)(a)26m (1985-86),

Kolosso could have sought to enjoin the violation pursu-

ant to § 218.01(3)(h) (1985-86) or treble damages under

§§ 218.01(3)(a)4, (9)(a), if the violation was “wilful.”*

The 1993 amendment to the WMVDL merely modified

Kolosso’s remedies in the event Chrysler refused to

approve a Kolosso proposal to relocate and share its

facilities. Instead of Kolosso being able to sue Chrysler

for treble damages caused by Chrysler’s unreasonable

refusal to allow Kolosso to share its facilities or Kolosso

being able to relocate and share its facilities without

Chrysler’s approval and to defend a subsequent fran-

* Section 218.01(9)a) (1985-86) allowed dealer licensees to re-

cover three times the damages caused by a manufacturer li-

censee’s violation of § 218.01(3)(a)4 (1985-86), which prohibited

any “[wlilful failure to comply with any provision of [§ 218.01]

chise termination based on § 218.01(3)(a)17, the amend-

ment requires Kolosso to remain at its existing location

while it pursues a determination from the Division

under § 218.01(3x) that there is “good cause” to allow

Kolosso to undertake its proposal. In many respects,

Chrysler benefits from the amendment because it is not

exposed to the risk of treble damages or of Kolosso

relocating and sharing facilities without Chrysler ap-

proval prior to a determination by the Division allowing

it to do so, based on consideration of Chrysler’s, as well

as Kolosso’s and the public’s, interests.

The Seventh Circuit’s decision correctly concluded,

therefore, that “the 1993 amendment in effect regular-

ized a gray area in the dealership law by creating a

specific procedure for resolving disputes over dealers’

requests to relocate” and that such change was not

“major,” but “was rather the sort of fine tuning of the

statute that Chrysler would have expected to take place

from time to time because the statute regulates in such

detail a complex commercial relationship.” App. 8a, 9a.

Kolosso agrees with Chrysler that for a retail busi-

ness “location is critical to success.” Petition at 1. This

is particularly so where, as here, one location will allow

a dealership to share its facilities with another dealer-

ship and another location will not. The importance of

dealership location, coupled with the Wisconsin Legisla-

ture’s clear purpose of promoting fair dealing by

manufacturers with respect dealer-initiated changes, in-

cluding facility sharing proposals, made it foreseeable,

when the Franchise Agreement was signed, that Chrys-

ler’s contractual right to approve the location and use

of Kolosso’s dealership facility could become subject to

a regulation such as § 218.01(3x).

Ak Bh tos teeta

B. The Seventh Circuit’s Decision Does Not Con-

flict With The Eighth Circuit’s Decision In

Holiday Inn Franchising

Notwithstanding the Wisconsin Legislature’s previous

effort to make a newly-enacted franchise protection law

retroactive to preexisting dealerships, see Wipperfurth

v. U-Haul Co. of Western Wisconsin, Inc., 101 Wis. 2d

586, 304 N.W.2d 767 (1981), Chrysler contends that the

failure of the Wisconsin Legislature to make other fran-

chise regulations expressly retroactive rendered the

challenged reguiation unforeseeable and that the Sev-

enth Circuit’s refusal to so find conflicts with the Eight

Circuit’s decision in Holiday Inns Franchising v. Bran-

stad, 29 F.3d 383 (8th Cir. 1994). App. la.

Chrysler fails to note that, in Holiday Inns Franchis-

ing, lowa’s regulation of the subject industries “prior to

the Iowa Franchise ‘-t focused mainly on the delivery

of services to the custon..r, including health and safety

concerns .. . and discrimination against employees or

customers” and that “(t]he Act, which focuses on the

business relationships between franchisors and franchi-

sees, is much different from the type of regulation

existing at the time the Act became effective.” McDon-

ald’s Corporation v. Nelson, 822 F. Supp. 597, 606 (S.D.

Iowa 1993), affirmed 29 F.3d 383. In discussing pre-

vious state franchise legislation in Iowa, the Eighth

Circuit was addressing statutes regulating “other fran-

chise arrangements,” 29 F.3d at 385, not prior regula-

tion of the same franchise relationships regulated by

the statute being challenged in that case.

In Holiday Inns Franchising, regulation of the subject

franchise relationships prior to the enactment of the

subject regulation had been virtually nonexistent. 822

F. Supp. at 607. In this case, prior to the enactment of

§ 218.01(3x), Wisconsin’s regulation of the Franchise

Agreement had been pervasive and included the very

issues of dealership location and facility sharing that

are the subject of the challenged regulation. Where a

new body of regulation is created for franchise relation-

ships which have never been previously regulated, it

may be reasonable for the franchisors to argue that

they could not foresee the regulation coming and that,

therefore, the imposition of such regulation to their

existing franchise agreements is a “substantial impair-

ment” of those agreements requiring further scrutiny of

the State’s justification for the regulation. Energy Re-

serves, 459 U.S. at 411. However, where the subject

franchise relationship is already regulated, not only

generally, but “in the particular to which [the fran-

chisor] now objects,” the franchisor cannot reasonably

contend that “further legislation upon the same topic”

was not foreseeable. Veix v. Sixth Ward Building &

Loan Ass’n, 310 U.S. 32, 38 (1940).

Here, the Seventh Circuit correctly concluded, in view

of the existing provisions of the WMVDL when the

Franchise Agreement was signed, that the regulation in

question was “the sort of fine tuning of the [existing

motor vehicle franchise] statute that Chrysler would

have expected to take place from time to time because

the statute regulates in such detail a complex commer-

cial relationship.” App. 9a. This conclusion does not

conflict with the Eighth Circuit’s decision in Holiday

Inns Franchising, which dealt with franchise arrange-

ments that had not been previously regulated by the

State. The issue before the Eighth Circuit was whether

Iowa’s and other states’ regulation of other franchise

arrangements made the new regulation of previously

unregulated arrangements foreseeable. Because the

histories of the past regulation of the franchise reiation-

ships involved in the Seventh Circuit’s decision and in

the Eighth Circuit’s decision in Holiday Inns Franchis-

ing were fundamentally different, there is no split in

the circuits created by these decisions over when con-

tractual impairments are foreseeable.

CONCLUSION

The petition for writ of certiorari should be denied.

Respectfully submitted,

PAUL R. NORMAN

Counsel of Record

JAMES E. BARTZEN

BOARDMAN, SUHR, CURRY

& FIELD LLP

One South Pinckney Street

Suite 410

P.O. Box 927

Madison, Wisconsin 53701-0927

(608) 257-9521

Counsel for Respondent

R. App. 1

APPENDIX

WISCONSIN STATUTES (1985-86)

218.01 Motor vehicle dealers; salesmen; sales fi-

nance companies, licenses; fees; regulations; coer-

cion; subsidies; penalties.

(1) DEFINITIONS. In this section, unless the context

otherwise requires, the following words and terms shall

have the following meanings:

(a) “Agreement” means contract or franchise or any

other terminology used to describe the contractual

relationship between manufacturers, distributors, im-

porters and dealers.

(d) “Department” means the department of trans-

portation.

(k) “Licensor” means the body, either the commis-

sioner or the department or both, issuing a license

hereunder.

(1) “Manufacturer” means any person, resident or

nonresident who manufactures or assembles motor

vehicles or who manufactures or installs on previously

assembled truck chassis, special bodies or equipment

which when installed form an integral part of the motor

vehicle and which constitutes a major manufacturing

alteration and which completed unit is owned by such

manufacturer.

R. App. 2

(n) “Motor vehicle dealer” means any person, firm 01

corporation, not excluded by par. (0) who:

1. For commission, money or other thing of value,

sells, exchanges, buys, rents with the option of pur-

chase, offers or attempts to negctiate a sale or exchange

of an interest in motor vehicles; or,

2. Is engaged wholly or in part in the business of

selling motor vehicles, including motorcycles, whether

or not such motor vehicles are owned by such person,

firm or corporation.

(la) AUTHORITY OF DEPARTMENT AND COMMISSIONER.

The department shall issue the licenses provided for in

sub. (2) (d) 1 to 6 and have supervision over the licens-

ees thereunder in respect to all the provisions of this

section, except only as to such matters as relate to the

sale of motor vehicles on retail instalment contracts

and the financing and servicing of such contracts, over

which matter the commissioner shall have jurisdiction

and control, and the commissioner shall issue the li-

censes to sales finance companies. Either licensor here-

under shall, upon request, furnish the other licensor

with any information it may have in respect to any

licensee or applicant for license or any transaction in

which such licensee or applicant may be a party or be

interested. No license shall be issued under sub. (2) (d)

1 and 8 until both licensors have approved the appli-

cation. The suspension or revocation of either of such

licenses shall automatically likewise suspend or revoke

the other license; and such suspension or revocation

shall be certified by the licensor ordering it to the other

licensor.

R. App. 3

(2) LICENSES, How GRANTED; AGREEMENTS, FILING.

(a) No motor vehicle dealer, motor vehicle salesman or

sales finance company shal! engage in business as such

in this state without a license therefor as provided in

this section. If any motor vehicle dealer acts as a motor

vehicle salesman he shall secure a motor vehicle sales-

man’s license in addition to a license for motor vehicle

dealer. Every motor vehicle dealer shall be responsible

for the licensing of every motor vehicle salesman in his

employ.

(am) No manufacturer of motor vehicles, or factory

branch, or distributor or distributor branch shall en-

gage in business as such in this state without a license

therefor as provided in this section.

(bd)2. Any dealer or distributor discontinued or

canceled may within such 60-day notice period, file with

the department and office of the commissioner of trans-

portation and serve upon the respondent a complaint

for a determination of unfair discontinuation or cancel-

lation under sub. (3) (a) 17. Allowing opportunity for an

answer, the office of the commissioner of transportation

shall thereafter schedule a hearing on and decide the

matter. Agreements and certificates of appointment

shall continue in effect until final determination of the

issues raised in such complaint. If the complainant

prevails he or she shall have a cause of action against

the defendant for reasonable expenses and attorney’s

fees incurred by him or her in such matter.

3. Ne manufacturers’, distributors’ or importers’

vehicles shall be sold in this state unless either the

R. App. 4

manufacturer on direct dealerships of domestic vehicles,

the importer of foreign manufactured vehicles on direct

dealerships or the distributor on indirect dealerships of

either domestic or foreign vehicles are licensed under s.

218.01. The obtaining of a license under s. 218.01 shall

conclusively establish that such manufaciurer, distribu-

tor or importer is doing business in this state and shall

subject the licensee to all provisions of the Wisconsin

statutes regulating mariufacturers, importers and dis-

tributors.

tion of a dealer agreement is in the process of being

heard, no replacement application for the agreement

may be considered until a decision is rendered by the

office of the commissioner of transportation.

b. In cases where a complaint has been filed under

sub. (3) (f) protesting the proposed establishment or

relocation of a dealership in a relevant market area, no

license may be issued until the office of the commission-

er of transportation has rendered a decision permitting

the issuance of the license.

(d) The license fee for each calendar year, or part

thereof, shall be:

1. For motor vehicle dealers, $20 for each office or

branch thereof, plus $1 for a supplemental license for

each used motor vehicle lot within the same municipal-

ity, but not immediately adjacent to the office or to a

branch.

2. For motor vehicle manufacturers, $20; and for

each factory branch in this state, $20.

eae ae ee

R. App. 5

(e) The licenses of dealers, manufacturers, factory

branches, distributors, distributor branches and sales

finance companies shall specify the location of the office

or branch and must be conspicuously displayed there.

In case such location be changed, the licensor shall

indorse the change of location on the license without

charge :f it be within the same municipality. A change

of location to another municipality shall require a new

license, except for sales finance companies.

(2a) CHANGES IN PLACES OF BUSINESS TO BE REPORT-

ED. (a) Before changing the location of a place of busi-

ness or opening a new place of business in a municipal-

ity in which authorized to do business, a licensed deal-

er, distributor, or manufacturer shall apply to the de-

partment for an amended license. The department shall

issue such license without charge.

(3) LICENSES, How DENIED, SUSPENDED OR REVOKED.

(a) A license may be denied, suspended or revoked on

the following grounds:

4. Wilful failure to comply with any provision of this

section or any rule or regulation promulgated by the

licensor under this section.

11. Having indulged in any unconscionable practice

relating to said business.

RETO ORR ANE EE PE Li SMES MIPS

R. App. 6

14. Having violated any law relating to the sale,

distribution or financing of motor vehicles.

15. Being a manufacturer of motor vehicles, factory

branch, distributor, field representative, officer, agent

or any representative whatsoever of such motor vehicle

manufacturer or factory branch, who has induced or

coerced or attempted to induce or coerce any motor

vehicle dealer to accept delivery of any motor vehicle or

vehicles, parts or accessories therefor, or any other

commodities which shall not have been ordered by said

dealer.

16. Being a manufacturer of motor vehicles, factory

branch, distributor, field representative, officer, agent

or any representative whatsoever of such motor vehicle

manufacturer or factory branch, who has attempted to

induce or coerce, or has induced or coerced, any motor

vehicle dealer to enter into any agreement with such

manufacturer, factory branch or representative thereof,

or to do any other act unfair to said dealer, by threat-

ening to cancel any franchise existing between such

manufacturer, factory branch or representative thereof

and said dealer.

17. Being a manufacturer, factory branch, distribu-

tor, field representative, officer, agent or any represen-

tative whatsoever of such motor vehicle manufacturer

or factory branch, who has unfairly, without due regard

to the equities of said dealer and without just provoca-

tion, canceled or failed to renew the franchise of any

motor vehicle dealer, or being a manufacturer, factory

branch or importer, who unfairly, without due regard to

the equities of a distributor and without just provoca-

tion, canceled or failed to renew the franchise of any

R. App. 7

distributor. All existing dealers’ franchises shall contin-

ue in full force and operation under a newly appointed

distributor on the termination of an existing distributor

unless a mutual agreement of cancellation is filed with

the department between the newly appointed distribu-

tor and such dealer.

23. Being a manufacturer, factory branch or distrib-

utor who unreasonably withholds its approval of a

change of ownership or executive management of a

dealership.

24. Being a manufacturer, factory branch or distrib-

utor who unreasonably closes a dealer point.

26. Being a manufacturer, factory branch, distribu-

tor, field representative, officer, agent or any represen-

tative of such manufacturer, factory branch or distribu-

tor who, notwithstanding the terms of any agreement,

refuses to honor the succession to the ownership or

operation of a dealership under an existing franchise

agreement by a designated family member of a de-

ceased or incapacitated dealer, except in the manner

prescribed by sub. (3c), or who unreasonably withholds

its approval of a change of ownership or executive

management of the dealership after the dealer’s death

or incapacity.

26m. Being a manufacturer, factory branch or dis-

tributor who unreasonably refuses to allow a dealership

to share its facilities with another or who unreasonably

refuses to allow a dealership to add another franchise

at the same location as its existing franchise or fran-

chises.

R. App. 8

32. Being a manufacturer, factory branch or distrib-

utor who enters into a franchise agreement establishing

or relocating a motor vehicle dealership in a relevant

market area without first complying with the procedure

in par. (f) 1.

(bf) 1. The department shall not license as a dealer

an applicant for the sale of motor vehicles at retail

unless such applicant owns or leases a vehicle display

lot and a permanent building wherein there are facili-

ties to display automobiles and motorcycles and facili-

ties to repair functional and nonfunctional parts of

motor vehicles and where replacement parts, repair

tools and equipment to service motor vehicles are kept,

and at which place of business shall be kept and main-

tained the books, records and files necessary to conduct

the business. A residence, tent or temporary stand is

not a sufficiently permanent place of business within

the meaning of this paragraph.

(f) 1. A manufacturer, factory branch or distributor

who seeks to enter into a franchise agreement estab-

lishing or relocating a motor vehicle dealership within

the relevant market area of an existing enfranchised

dealer of the line make of motor vehicle shall first

notify in writing the department and each such existing

enfranchised dealer of its intention to establish or

relocate a dealership. Within 30 days of receiving the

notice or within 30 days after the end of any appeal

procedure provided by the manufacturer, factory branch

or distributor, whichever is later, any existing enfran-

R. App. 9

chised dealer of the same line make to whom the manu-

facturer, factory branch or distributor is required to

give notice under this subdivision may file with the de-

partment and the office of the commissioner of trans-

portation a complaint protesting the proposed establish-

ment or relocation of the dealership within the relevant

market area of the existing enfranchised dealer. If a

complaint is filed, the department shall inform the

manufacturer, factory branch or distributor that a

timely complaint has been filed, that a hearing is re-

quired, and that the proposed franchise agreement may

not be entered into until the office of the commissioner

of transportation has held a hearing, nor thereafter, if

the office of the commissioner of transportation deter-

mines that there is good cause for not permitting the

proposed establishment or relocation of the dealership.

In the event of multiple complaints, hearings shall be

consolidated to expedite the disposition of the issue.

2. In determining whether good cause exists for not

permitting the proposed establishment or relocation of

a dealership, the office of the commissioner of transpor-

tation shall take into consideration the existing circum-

stances, including, but not limited to:

a. The amount of business transacted by existing

enfranchised dealers of the line make of motor vehicle

when compared with the amount of business available

to them.

b. The permanency of the investment necessarily

made and the obligations incurred by existing enfran-

chised dealers in the performance of their franchise

agreements.

c. The effect on the retail motor vehicle business in

the relevant market area.

R. App. 10

d. Whether it is injurious to the public welfare for

the proposed dealership to be established or relocated.

e. Whether the establishment or relocation of the

proposed dealership would increase competition and

therefore be in the public interest.

f. Whether the existing enfranchised dealers of the

line make of motor vehicle are providing adequate con-

sumer care for the motor vehicles of that line make,

including the adequacy of motor vehicle service facili-

ties, equipment, supply of parts and qualified person-

nel.

g. Whether the existing enfranchised dealers of the

line make of motor vehicle are receiving vehicles and

parts in quantities promised by the manufacturer, fac-

tory branch or distributor and on which promised

quantities existing enfranchised dealers based their

investment and scope of operations.

h. The effect the denial of such establishment or

relocation would have on the license applicant or dealer

who is seeking to establish or relocate a dealership.

3. The decision of the office of the commissioner of

transportation shall be in writing and shall contain

findings of fact and a determination of whether there is

good cause for not permitting the proposed establish-

ment or relocation of the dealership. The office of the

commissioner of transportation shall deliver copies of

the decision to the parties personally or by registered

mail. The decision is final upon its delivery or mailing

and no reconsideration or rehearing by the office of the

commissioner of transportation is permitted.

4. For purposes of this paragraph:

R. App. 11

a. The reopening of a dealership, which has been

closed for less than 2 years, at the original location is

not the establishment or relocation of a motor vehicle

dealership. The reopening of a dealership at a locatior

other than the original location is the establishment or

relocation of a motor vehicle dealership_if the new

location is within 6 miles, by the closest highway route,

of another enfranchised dealer of the same line make

and is closer to such dealer than the reopening dealer’s

closed dealership.

b. The relocation of an enfranchised dealership to a

location within the existing area of sales responsibility

assigned to that enfranchised dealership by the manu-

facturer, factory branch or distributor is not the reloca-

tion of a dealership, unless the relocation site is within

6 miles, by the closest highway route, of the location of

another enfranchised dealer of the same line make and

is closer to such dealer than the relocating dealer’s

existing location.

(h) In addition to the licensor’s authority to deny,

suspend or revoke a license under this section, the

commissioner, after public hearing, may issue a special

order enjoining any licensee from engaging in any act

or practice which is determined by the commissioner to

be in violation of any provision of par. (a), and the

office of the commissioner of transportation may be

petitioned to issue such a special order after notice and

hearing thereon.

(3c) FAMILY MEMBER’S RIGHT TO SUCCEED DECEASED

OR INCAPACITATED DEALER UNDER EXISTING FRANCHISE

R. App. 12

AGREEMENT. (a) The term “designated family member”,

as used in this subsection and in sub. (3) (a) 26, means

the spouse, child, grandchild, parent, brother or sister

of a dealer who, in the case of a deceased dealer, is

entitled to inherit the dealer’s ownership interest in the

dealership under the terms of the dealer’s will or under

the laws of intestate succession of this state, or who, in

the case of an incapacitated dealer, has been appointed

by a court as the legal representative of the dealer’s

property. The term “designated family member” shall

also mean and include the duly appointed and qualified

personal representative and the testamentary trustee

of a deceased dealer.

(b) Any designated family member of a deceased or

incapacitated dealer shall have the right to succeed

such dealer in the ownership or operation of the deal-

ership under the existing franchise agreement provided

the designated family member gives the manufacturer,

factory branch or distributor written notice of his or her

intention to do so within 120 days of the dealer’s death

or incapacity and unless there exists good cause for

refusal to honor such succession on the part of the

manufacturer, factory branch or distributor. The manu-

facturer, factory branch or distributor may request, and

the designated family member shall provide, such per-

sonal and financial data as is reasonably necessary to

determine whether the succession should be honored.

believes it has good cause for refusing to honor the

succession to the ownership and operation of a dealer-

ship by a family member of a deceased or incapacitated

dealer under the existing franchise agreement, such

R. App. 13

manufacturer, factory branch or distributor may, within

30 days of receipt of notice of the designated family

member’s intent to succeed the dealer in the ownership

and operation of the dealership, serve upon such desig-

nated family member and the department notice of its

refusal to honor the succession and of its intent to

discontinue the existing franchise agreement with the

dealership no sooner than 60 days from the date such

notice is served. Such notice shall state the specific

grounds for the refusal to honor the succession and the

discontinuance of the franchise agreement. If no notice

of such refusal and discontinuance is timely served

upon the family member and department, or if the

office of the commissioner of transportation rules in

favor of the complainant in a hearing held under par.

(d), the franchise agreement shall continue in effect

subject to termination only in the manner prescribed in

this subchapter.

(d) Any designated family member who receives a

notice of the manufacturer’s, factory branch’s or distrib-

utor’s refusal to honor his or her succession to the

ownership and operation of the dealership may within

the 60-day notice period, serve on the respondent and

file in triplicate with the office of the commissioner of

transportation a verified complaint for a hearing and

determination by the office of the commissioner of

transportation on whether good cause exists for such

refusal and discontinuance. The office of the commis-

sioner of transportation shall forward a copy of the

complaint to the department. The manufacturer, factory

branch or distributor shall have the burden of estab-

lishing good cause for such refusal by showing that the

succession would be detrimental to the public interest

R. App. 14

or to the representation of the manufacturer, factory

branch or distributor. The franchise agreement shall

continue in effect until the final determination of the

issues raised in such complaint. If the complainant

prevails he or she shall have a cause of action against

the defendant for reasonable expenses and attorney’s

iees incurred in such matter. If the manufacturer,

factory branch or distributor prevails, the office of the

commissioner of transportation shall include in its

order approving the termination of the franchise agree-

ment such conditions as are reasonable and adequate

to afford the complainant an opportunity to receive fair

and reasonable compensation for the value of the deal-

ership.

(e) Nothing in this subsection shall prevent a dealer,

during the dealer’s lifetime, from designating any per-

son as his or her successor dealer by written ins-ru-

ment filed with the manufacturer, factory branch or

distributor.

(5) RULES AND REGULATIONS. (a) The licensor shall

promote the interests of retail buyers of motor vehicles

relating to default, delinquency, repossession or collec-

tion charges and the refund of the finance charge and

insurance premium on prepayment of the instalment

contract. It may define unfair practices in the motor

vehicle industry and trade between licensees or be-

tween any licensees and retail buyers of motor vehicles,

but may not limit the price at which licensees may sell,

assign or transfer receivables, contracts or other evi-

dence of any obligation arising out of an instalment

sale made under this section.

R. App. 15

as it shall deem necessary or proper for the effective

administration and enforcement of this section, but no

licensee shall be subject to examination or audit by the

licensor except as provided in sub. (3) (d).

(9) CIVIL DAMAGES. (a) Any licensee suffering pecuni-

ary loss because of a violation by any other licensee of

sub. (3) (a) 4, 11, 15, 16, 17, 23, 24, 26, 32 or 35 or be-

cause of any unfair practice found by the commissioner

or office of the commissioner of transportation under

sub. (5) (a) may recover damages therefor in any court

of competent jurisdiction in an amount equal to 3 times

the pecuniary loss together with costs including a rea-

sonable attorney fee.

TS I SLT Og a ee TL Te AT a Oe RG Maan

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.