ROGERS, Circuit Judge.
Congress — in Section 747 of the Consolidated Appropriations Act of 2010 — created an arbitration procedure for automobile dealerships to seek continuation or reinstatement of franchise agreements that had been terminated by Chrysler during its bankruptcy proceedings, with the approval of the bankruptcy court. This case involves what happens when the dealerships prevail, as some did, in their statutorily-provided arbitrations.
The lawsuit below involved numerous claims, counterclaims, and cross-claims by Chrysler and various dealers. Among other things, the parties dispute the scope of relief provided for successful dealers under § 747, and whether such dealers are subject to state dealer protest laws that permit existing dealerships to protest the addition of a new dealer. The district court correctly held that § 747 does not constitute an unconstitutional legislative reversal of a federal court judgment, and that the only relief provided to successful dealers under § 747 is the issuance of a "customary and usual" letter of intent. The district court also properly found that the letters of intent at issue in this case were "customary and usual," with the exception of one contractual provision that requires reversal. Contrary to the district court's conclusion, however, application of the state dealer acts of the two states in question (Michigan and Nevada) is preempted by § 747, because the state acts provide for redetermination of factors directly addressed in federally-mandated arbitrations closely related to a major federal government bailout.
This case involves the post-bankruptcy corporate identity of Chrysler, the American automobile manufacturer. The bankruptcy transferred almost all of the business from "Old Chrysler" to "New Chrysler," an entirely new corporate entity.
As part of the final sale order of the bankruptcy court, Old Chrysler sold, free and clear of all liens and encumbrances, nearly all of its assets to New Chrysler, which was owned predominantly by a voluntary employees' beneficiary association and partially by Fiat and various entities of the federal government, with Fiat maintaining the possibility of acquiring a majority ownership in the future. Id. at 92, 113. This asset transfer was conducted pursuant to 11 U.S.C. § 363(f), which creates a mechanism for a bankruptcy trustee to sell certain property of the debtor "free and clear of any interest in such property of an entity other than the estate."
In addition to transferring substantially all of Old Chrysler's assets to the new entity, the restructuring plan included some procedures designed to consolidate and streamline Old Chrysler's business operations. At the time of the bankruptcy petition, Old Chrysler had 32 manufacturing and assembly facilities and a network of 3,200 independent dealerships in the United States. In re Chrysler LLC, 405 B.R. at 88. Early in the bankruptcy proceedings, Old Chrysler filed a motion seeking to "reject executory contracts and unexpired leases affecting 789 domestic car dealerships," that is, requesting permission to terminate its sales and service agreements with 789 dealers. See id. That request represented the elimination of nearly a quarter of Chrysler's dealerships in the United States.
In response to the upheaval in the American automobile industry — which was said to threaten almost 2,000 dealerships nationwide and put nearly 100,000 jobs at risk — the United States Senate held a special hearing on June 3, 2009, to address the issue of dealership closures. GM and Chrysler Dealership Closures: Protecting Dealers and Consumers: Hearing Before the S. Comm. on Commerce, Sci. & Transp., 111th. Cong. (2009) ("Senate Hearing"). One senator at the hearing expressed concern that "[w]e committed an awful lot of taxpayer money to try to save all those jobs that are now being cut," while the cause of the problem was that the automobile manufacturers were stubbornly refusing to innovate in the marketplace. See id. at 85 (statement of Sen. Bill Nelson). One senator stated that "because of this financial investment, we have an obligation to ensure Federal resources are being used wisely and fairly and in the best interests of the taxpayers." Id. at 20 (statement of Sen. John Thune).
During the hearing, James Press, the Vice Chairman and President of Old Chrysler, responded that the dealership terminations were necessary for the survival of New Chrysler. He pointed out
Id. at 30; see also In re Old Carco LLC, 406 B.R. 180, 193-95 (Bankr.S.D.N.Y.2009) (describing Project Genesis). Chrysler determined which dealerships would be targeted for termination based on an analysis of certain factors, including: total sales potential for the market, each dealer's record of meeting sales and operational targets, the modernity of the dealer's physical facilities, the location of the dealership with respect to "optimum retail growth area," and "[e]xclusive representation within larger markets." Senate Hearing at 31. As part of Project Genesis, 84 percent of the remaining dealers would carry all three of Chrysler's brands, compared to 62 percent prior to consolidation. Id. Congress did not take any action at that time.
The bankruptcy court overseeing the Chrysler restructuring eventually authorized the dealership rejections. In re Old Carco LLC, 406 B.R. at 186-87. The authorization of the rejections was made under the authority of § 365 of the Bankruptcy Code, which provides that, with limited exceptions, "the trustee, subject to the court's approval, may assume or reject any executory contract ... of the debtor." 11 U.S.C. § 365(a). When authorizing the rejection of the rejected dealers' sales and service agreements, the bankruptcy court applied the business judgment standard, opting not to employ a higher standard despite the presence of state and federal statutes that protected auto dealerships from being terminated without good cause. See In re Old Carco LLC, 406 B.R. at 187-93; see also In re Penn Traffic Co., 524 F.3d 373, 382-83 (2d Cir.2008) (discussing § 365's business judgment standard). Applying the business judgment standard, the bankruptcy court ratified Chrysler's decision to reject its executory contracts with the dealers it desired to eliminate, reasoning that "rejection ... was necessary and appropriate" for the new company's business plans to the extent that it "enable[d] the Debtors to consummate the Fiat Transaction and transfer to New Chrysler a smaller, more effective, and more profitable dealer network without disruption." In re Old Carco LLC, 406 B.R. at 195. The bankruptcy court also held that § 365 of the Bankruptcy Code, as applied in this instance, preempted state laws that provided rights and remedies related to the termination of dealership agreements. Id. at 199-201.
Although earlier legislative attempts to protect the interests of the rejected auto dealers did not go anywhere,
§ 747(b), 123 Stat. at 3220. Subsection (d) establishes the procedure to be followed during the arbitration. In particular, it commands the arbitrator to
§ 747(d), 123 Stat. at 3220.
§ 747(e), 123 Stat. at 3221. A letter of intent is a contract that precedes a full sales and service agreement, the final contractual arrangement between a manufacturer and a dealer that provides the dealership with the right to sell certain makes of automobiles produced by the manufacturer.
A number of the terminated dealers sought arbitration against New Chrysler under § 747. Out of over 400 former dealers who elected to arbitrate, Chrysler prevailed in 76 arbitrations, the dealer prevailed in 32 arbitrations, and the remaining disputes were settled through other means. Chrysler Grp. LLC v. S. Holland Dodge, Inc., 862 F.Supp.2d 661, 670 n. 3 (E.D.Mich.2012). Of the hundreds of dealerships that were rejected pursuant to the bankruptcy court's order, five are currently parties to this appeal: Fox Hills Motor Sales, Inc., d/b/a Fox Hills Chrysler Jeep, which had been authorized to sell Chrysler and Jeep vehicles in Plymouth, Michigan; Village Chrysler Jeep, Inc., d/b/a Village Automotive Center, which had been authorized to sell Chrysler and Jeep vehicles in Royal Oak, Michigan; Jim Marsh American Corporation, d/b/a Jim Marsh Chrysler-Jeep, which had been authorized to sell Chrysler and Jeep vehicles in Las Vegas, Nevada; Livonia Chrysler Jeep, Inc., which had been authorized to sell Chryslers and Jeeps in Livonia, Michigan; and Spitzer Autoworld Akron, LLC, which had been authorized to sell Chrysler, Jeep, and Dodge vehicles in Akron, Ohio. Fox Hills, Village, Jim Marsh, Livonia, and Spitzer were among those dealers that prevailed, and each of the written arbitration determinations ordered Chrysler to offer a letter of intent or to renew and assume the dealership "in the manner provided for by
During the pendency of the arbitration, New Chrysler allegedly installed "like-line" dealers in the same vicinities as some of the rejected dealers that were pursuing reinstatement through § 747 arbitration. For example, the arbitrator in the Village arbitration noted: "Since terminating Village in June 2009, Chrysler has extended its Genesis plan to a dealer ("Suburban") at the Troy Motor Mall within a very close sales radius of Village. Suburban now sells all three brands...." Chrysler similarly issued to an existing dealer near Fox Hills a letter of intent to become a "3 in 1" dealer.
Disagreement about what the § 747 arbitration orders entailed led almost immediately to the present litigation. This appeal arises out of three separate actions that were consolidated in the district court. In two separate complaints against various prevailing dealers, Chrysler sought declaratory relief, requesting that the court declare that "1) Section 747 does not preempt state dealer acts; 2) the [letters of intent] provided by New Chrysler are customary and usual within the meaning of Section 747; and 3) a [letter of intent] is the sole and exclusive remedy under Section 747." Id. at 672. An independent complaint filed by Livonia and counter-complaints filed by other prevailing dealers named in Chrysler's complaint all asserted various claims for declaratory, injunctive, and monetary relief. Id. at 672-73. Essentially, the rejected dealers that prevailed at arbitration claimed, with some variation, that § 747 preempted state dealer laws to the extent that existing dealers could prevent their reintroduction to the dealership networks, that Chrysler's letters of intent were not customary and usual, and that Chrysler owed the dealers monetary compensation for violating § 747. Some existing like-line dealerships, those who could potentially compete with the rejected dealerships were they to be reinstated, were named in Chrysler's original complaints. Some of them, including Fred Martin, filed cross-claims seeking a declaration that § 747 is invalid and unconstitutional, or in the alternative, that § 747 does not preempt the state dealer protest laws that grant such existing dealerships certain rights to protest the installation of competing dealerships in the same vicinity. Id. at 672.
A flurry of dispositive motions ensued, requesting declaratory relief along the lines of the claims outlined above. Id. at 673-75 (listing fifteen). When two of the parties raised constitutional challenges — Chrysler argued that the constitutional avoidance doctrine warranted a narrow construction, and Fred Martin argued that the act was unconstitutional under any construction — the United States Government intervened to defend the constitutionality of § 747.
In a lengthy opinion, the district court construed § 747 and addressed the constitutional issues raised by the parties. First, the court rejected the claims for any monetary damages by holding that "under the plain language of the Act, the sole and exclusive remedy for a dealer rejected by Old Chrysler who prevails in a Section 747 arbitration with New Chrysler is a customary and usual letter of intent to enter into a sales and service agreement with New Chrysler." Id. at 676, 678. Next, the court construed the remedy provided under
Some of the parties appealed, but we remanded because the district court's preliminary rulings did not amount to a final judgment, and the appeal was therefore premature. See Order, Chrysler Grp., LLC v. Jim Marsh Am. Corp., No. 12-1468 (6th Cir. June 27, 2012); Order, Chrysler Grp., LLC v. Fred Martin Motor Co., No. 12-1507 (6th Cir. June 27, 2012).
At the bench trial, the district court denied Fred Martin's motion for a separate trial, which Fred Martin argued was justified because it was seeking a declaratory judgment that § 747 is unconstitutional regardless of the court's earlier narrow construction of the remedy. Chrysler Grp. LLC v. S. Holland Dodge, Inc., Nos. 10-12984, 10-13290, 10-13908, 2013 WL 1499138, at *3 (E.D.Mich. Apr. 11, 2013). The court adopted the Government's reasoning that any constitutional issue had already been resolved by the court's interpretation of § 747 and that Fred Martin lacked standing to bring the claim. Id. at *2. On the same day, the district court issued a pre-trial order clarifying that the "customary and usual" standard would be determined by comparing the prevailing dealers' letters of intent to a "relevant universe" of letters of intent. The court adopted the reasoning of the Eastern District of New York in Eagle Auto Mall Corp., 2011 WL 6754087, and the Central District of California in Los Feliz Ford, Inc. v. Chrysler Group, LLC, No. 10-6077 (C.D.Cal. Apr. 9, 2012), and defined the "relevant universe" as the letters of intent issued by New Chrysler (not Old Chrysler) to new dealer candidates through July 2010, when the last of the disputed letters of intent was issued.
The district court held a bench trial on July 9, 2013, to determine whether Chrysler supplied each dealer that had prevailed at arbitration with a "customary and usual letter of intent," as required by the statute. Chrysler Grp. LLC v. S. Holland Dodge, Inc., Nos. 10-12984, 10-13290, 10-13908, 2013 WL 3817408 (E.D.Mich. July
The district court determined that all of the remaining rejected dealers had received "customary and usual" letters of intent. Id. at *8. First, the court used English language dictionaries, Black's Law Dictionary, and the federal Medicare regulations to define "customary" and "usual" in this context as "substantially the same [as] found in a majority" of the relevant universe of comparison letters of intent. Id. at *7. Applying this definition, the court found that "[t]he Rejected Dealers have failed to present evidence that any of the terms in their [letters of intent] were not included in at least the majority" of the relevant universe of issued letters of intent, and the court accordingly entered judgment in Chrysler's favor. Id. at *8.
This appeal followed. Three separate appeals were consolidated.
Four of the terminated dealers appeal in two separate appeals. In appeal number 13-2117, three of them — Fox Hills, Village, and Jim Marsh — filed a consolidated appellants' brief arguing that § 747 preempts state dealer laws and that, in any event, the district court erred in defining the "relevant universe" of letters of intent when determining whether their letters of intent were "customary and usual." In appeal number 13-2118, another terminated dealer, Livonia, appealed, arguing that § 747's remedy is unconditional reinstatement, that state dealer protest laws are preempted, and that, in any event, Chrysler's letter of intent to Livonia was not "customary and usual."
In appeal number 13-2119, one of the existing like-line dealers, Fred Martin, argues that the district court erred by not considering its constitutional challenge. Fred Martin contends that (1) it has standing to raise the issue, and (2) § 747 runs afoul of separation-of-powers principles by reopening the bankruptcy court's final judgment. In response, Spitzer Autoworld, a prevailing dealer in Fred Martin's relevant market area, defended § 747's constitutionality and claimed that Fred Martin lacked standing to raise a constitutional challenge to the act. Unlike the other prevailing dealers, Spitzer does not challenge the state dealer protest laws.
The Government intervened to defend the constitutionality of § 747.
The district court properly concluded that § 747 does not entitle prevailing dealers to unconditional "reinstatement,"
A customary and usual letter of intent is the sole remedy provided for a prevailing dealer under § 747. A close examination of the statutory language of § 747 shows that the statute contemplates that Chrysler's only immediate obligation after a positive arbitration is to issue a letter of intent. Subsection (e) provides that within seven days of an arbitration decision in favor of the rejected dealer, Chrysler "shall ... provide the dealer a customary and usual letter of intent to enter into a sales and service agreement." § 747(e) (emphasis added). In matters of statutory interpretation, where this court must discern Congress's intended meaning, we must start with the language itself. E.g., Brilliance Audio, Inc. v. Haights Cross Commc'ns, Inc., 474 F.3d 365, 371 (6th Cir.2007). Our interpretation of § 747 accords with those of other circuits, as no circuit has held that § 747 requires unconditional reinstatement. See Eagle Auto Mall Corp. v. Chrysler Grp., LLC, 550 Fed.Appx. 69, 69-70 (2d Cir.2014); Los Feliz Ford, Inc. v. Chrysler Grp., LLC, 571 Fed.Appx. 546, 547 (9th Cir.2014).
Livonia points to two phrases from § 747 that could be read to suggest that prevailing dealers are entitled to unconditional, no-strings-attached "reinstatement": subsection (b)'s statement that the rejected dealers "have the right to seek, through binding arbitration, continuation, or reinstatement of a franchise agreement, or to be added as a franchisee," and subsection (d)'s statement that the arbitrator "shall decide ... whether or not the covered dealership should be added to the dealer network of the covered manufacturer." § 747(b), (d) (emphases added). Far from mandating unconditional reinstatement, however, these provisions simply imply that the remedy should meaningfully facilitate incorporation of prevailing dealerships back into the network. Congress's chosen remedy — the letter of intent — does just that. A letter of intent is a binding contract to enter into a sales and service agreement, that is, a contract to be added to the dealer network, or "reinstated." As New Chrysler's National Dealer Placement Manager testified at the bench trial, after receiving a letter of intent, "the dealer candidate ha[s] contractual certainty that if they meet the requirements they will, in fact, get a sales and service agreement... [a]bsolutely."
Section 747 also preempts the state dealer protest laws in Nevada and Michigan. Although Congress stopped short of mandating unconditional reinstatement, Congress did intend to provide a substantial and meaningful remedy, one that would grant prevailing dealers "contractual certainty" that a sales and service agreement would be forthcoming, so long as customary and usual operational requirements were met. To that end, Congress intended for the arbitrator's decision
Section 747 preempts such state dealer protest laws because they stand as an obstacle to Congress's aim to provide a substantial and meaningful remedy to prevailing dealers. Conflict preemption occurs when a state law "`stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 373, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)); see also Fulgenzi v. PLIVA, Inc., 711 F.3d 578, 583-84 (6th Cir.2013). In other words, "[i]f the purpose of the act cannot otherwise be accomplished — if its operation within its chosen field ... must be frustrated and its provisions be refused their natural effect — the state law must yield to the regulation of Congress." Savage v. Jones, 225 U.S. 501, 533, 32 S.Ct. 715, 56 L.Ed. 1182 (1912).
Michigan's and Nevada's state dealer protest laws, in particular, frustrate Congress's purpose in enacting § 747 because they permit state officials to delay and possibly nullify the effect of federal arbitration. Congress intended the federal arbitration to determine whether there is good cause for a terminated dealer to be added to New Chrysler's dealer networks. To that end, Congress placed within the discretion of the arbitrator the decision of "whether the franchise agreement at issue is to be renewed, continued, assigned or assumed by the covered manufacturer." § 747(d). State dealer protest laws create a process by which a state official subsequently and independently determines whether there is good cause for the new dealerships to have a sales and service agreement. This second, parallel determination of good cause impermissibly grants state officials the power to review the federal arbitral decisions. In an analogous case, involving whether a non-lawyer could practice before the United States Patent Office, the Supreme Court reasoned that
Sperry v. Florida, 373 U.S. 379, 385, 83 S.Ct. 1322, 10 L.Ed.2d 428 (1963) (relying in part on Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 77 S.Ct. 257, 1 L.Ed.2d 231 (1956) (internal citations omitted)).
Regardless of the intent of an auto manufacturer in tendering a letter of intent to a prospective dealer, state dealer protest laws give existing auto dealerships certain
A side-by-side comparison of the Michigan statute's "good cause" factors and § 747(d)'s factors demonstrates that the determinations are substantially similar. The similarity starts with the characterization of the determination: "whether or not the covered dealership should be added to the dealer network," § 747(d) (emphasis added), is not meaningfully different from "whether good cause exists for establishing... an additional new motor vehicle dealer," Mich. Comp. Laws § 445.1576(5). On the most general level, both analyses weigh the effect of the new dealership on "the public welfare," Mich. Comp. Laws § 445.1576(5)(c), or "the public at large," § 747(d). Similarly, they both consider the effect of the decision on the dealer, although Michigan does this only for relocating dealers — which face a situation
That leaves only a few factors that are unique to § 747, and each of those factors is easily explained by the different contexts of a run-of-the-mill franchise encroachment and the unprecedented and unique circumstances of a § 747 proceeding. First, § 747 explicitly considers the economic interest of the covered manufacturer, a consideration that would be unnecessary in the normal state protest proceeding, during which the court may presume that the manufacturer is acting in its best economic interest. Second, § 747 considers "the covered dealership's performance in relation to the criteria used ... to terminate, not renew, not assume or not assign" the prior dealership agreement. § 747(d). This factor is unique to the terminated dealers covered under § 747 and totally irrelevant to any other prospective dealer. These slight differences do not make the inquiries so substantially different that the Michigan "good cause" determination is not effectively the same determination as a § 747 determination that a terminated dealer "should be added to the dealer network."
The analysis for the Nevada "good cause" inquiry is similar. Even though the Nevada statute is much sparser than Michigan's or the federal statute, it still covers many of the same general categories of factors and is on the whole similar in scope. That is, the statute requires the
The analyses are thus largely the same. The subtle differences, in both substance and phrasing, are explained predominantly by differences in emphasis and framing: (1) whereas the state dealer protest laws look at the future effect of the new (or relocating) dealer, the federal law looks at the historic characteristics of the old dealer; (2) the state statutes encompass two slightly different types of cases-the establishment of entirely new dealerships and the relocation of existing dealerships; and (3) the state statutes contemplate that the manufacturer will be making the case in favor of the new dealer location, while the federal statute presupposes (as it must) that the dealer and manufacturer are adversaries. Especially considering these contextual differences, the determination is at heart the same: whether the new dealership should be allowed to operate, or good cause exists for allowing it to do so.
One of Chrysler's primary arguments is that the state dealer protest laws and § 747 "serve entirely different purposes." But the underlying inquiry is the same. Even if the state dealer protest laws are designed to protect the interests of existing dealers, while § 747 is meant to remedy the negative effects of unwarranted dealership terminations, the general concerns are the same: should this new dealer be allowed to enter the market? Congress, consistent with the retrospective intent of the act, deliberately chose not to weigh very heavily the interests of existing dealers, who would have had no state-created rights at the time of termination anyway. Given the context, namely the petitioning of a new dealership for entry into a specified geographic region to sell certain specified line-makes, and the similarity of factors, as discussed above, the state and federal determinations are of the same kind. Accordingly, the differences that Chrysler points out are not so great that the state laws are not an obstacle to the federal arbitration's effect.
This conclusion is compelled by the Supreme Court's decision in Leslie Miller, Inc. v. Arkansas, in which the Supreme Court held that an Arkansas regulation that operated in parallel to a federal regulation was preempted as it applied to contractors working for the United States Armed Forces. 352 U.S. 187, 77 S.Ct. 257, 1 L.Ed.2d 231 (1956). Both the state and federal regulations required contractors to be "responsible" as defined by statute, and the regulatory factors were substantially similar, albeit not identical, in their details. See id. at 188-89, 77 S.Ct. 257. The Court held that the Arkansas regulation was preempted as applied, because "[s]ubjecting a federal contractor to the Arkansas
It could be argued that the Court's decision in Leslie Miller relied on the rationale of "immunity of the instruments of the United States from state control." See Leslie Miller, 352 U.S. at 190, 77 S.Ct. 257 (quoting Johnson v. Maryland, 254 U.S. 51, 57, 41 S.Ct. 16, 65 L.Ed. 126 (1920)). In North Dakota v. United States, Justice Brennan criticized the majority's exclusive reliance on preclusionary principles: "The plurality's assertion that Leslie Miller, Inc., was not decided on immunity grounds is inconsistent with that opinion's own analysis." 495 U.S. at 453, 110 S.Ct. 1986 (Brennan, J., dissenting) (citation omitted).
In any event, the instant case, like inter-governmental immunity cases, involves how the federal government spends its funds. Indeed, our conclusion that the state protest law provisions are preempted is bolstered because Chrysler was categorized as a § 747 "covered manufacturer" due to the fact that "the United States Government ha[d] an ownership interest in it" and "the Government ha[d] provided financial assistance" to it under TARP. § 747(a)(1)(B). We need not address today what our holding would be if this were not the case.
Our holding above that § 747 provides only the limited relief of a "customary and usual letter of intent" is fully consistent with congressional intent to preempt state law in this respect.
The preemption in this case moreover does not substantially interfere with state
Not only can the purpose of § 747 be reconciled with the overall scheme of state dealer laws, but preemption at most marginally encroaches on state regulatory turf in this case. It is true that there is a stronger presumption against preemption when the area of regulation is "`in a field which the States have traditionally occupied.'" Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947)). However, § 747 does not to any great extent interfere even with the state dealer protest scheme. The act here has an extremely limited effect, as it applies only to a limited class of dealers and is limited in temporal scope. Nor is this "a field which the States have traditionally occupied." Many states do not have protest laws like the ones at issue in this case, as Chrysler's witness conceded at trial. And this is not an area of exclusive state regulation; federal law has protected automobile dealers from termination by manufacturers without "good cause" since 1956, before many of the states passed their state dealer protest laws. See Automobile Dealers' Day in Court Act, 15 U.S.C. §§ 1221-25 (1956).
At oral argument, Chrysler suggested that a Michigan constituency — although it was not clear whether it was the terminated dealers or some representative body of all dealerships — could have lobbied for a Michigan-specific protest-law abrogation in the final version of the bill. Chrysler's logic is that the absence of such a provision implies that there was no preemptive intent. This argument, first, relies on overly speculative counterfactuals about the possibility of assembling a strong and cohesive constituency that could lobby effectively on a state-by-state basis. But more importantly, the argument undermines itself with its own implicit assumption about the variety of state dealer protest laws. Rather, the variety of state dealer protest laws — ranging from no such law to Iowa's expansive encroachment laws
The history of the legislation, namely the related bills that were introduced but never passed through both houses of Congress, see n. 3, supra, does not suggest a limitation on § 747's scope, as suggested by Chrysler. Chrysler reasons that "legislators had considered, but declined to enact, more sweeping legislation" and that the legislative history demonstrates a "legislative compromise" that "provides rejected dealers the right to enter the network on the same terms as ordinary course dealer candidates." In turn, Chrysler argues that because the statutory "framework requires Chrysler Group to treat prevailing rejected dealerships just like any other dealer candidate," those prevailing dealers must "engage in the same [state] process as must any other Dealer Candidate." The specific conclusion does not appear to follow from the given premise, and in any event, we would be on treacherous ground to derive congressional intent from the contrasting content of unenacted bills because they "are not reliable indicators of congressional intent." Mead Corp. v. Tilley, 490 U.S. 714, 723, 109 S.Ct. 2156, 104 L.Ed.2d 796 (1989).
Accordingly, § 747 preempts the operation of Michigan and Nevada dealer protest laws, which would authorize state officials to review the federal arbitral decisions.
Third, contrary to Fred Martin's argument,
As an initial matter, Fred Martin has standing to raise the constitutional issue. The increase in direct competition caused by the possible entrance of Spitzer
The act does not violate the separation of powers doctrine because § 747 does not interfere with a final court judgment. Section 747 neither nullifies nor reopens a prior court order; rather, it simply reverses the effects of a court order through prospective relief. Though the integrity of the "Judicial Power of the United States" established in Article III of the Constitution forbids congressional or executive interference with the final judgments of courts, Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 223-24, 115 S.Ct. 1447, 131 L.Ed.2d 328 (1995), it does not forbid the granting of prospective relief intended to mitigate the perceived negative effects of a court order. That distinction follows logically from the Supreme Court's exposition of Plaut's scope with respect to injunctions: "Plaut ... was careful to distinguish the situation before the Court in that case — legislation that attempted to reopen the dismissal of a suit seeking money damages — from legislation that `altered the prospective effect of injunctions entered by Article III courts.'" Miller v. French, 530 U.S. 327, 344, 120 S.Ct. 2246, 147 L.Ed.2d 326 (2000) (quoting Plaut, 514 U.S. at 232, 115 S.Ct. 1447).
Finally, four of the prevailing dealers challenge the district court's determination that they received a "customary and usual letter of intent." For the most part, the district court correctly rejected these claims. However, we do not apply the extraordinarily restrictive standard employed by the district court, which defined "customary and usual" provisions as those that are "substantially the same [a]s found in a majority" of the letters offered "to dealers who were given the opportunity to be added as new franchisees to the dealer network ..., both in the ordinary course of New Chrysler's dealer network activities and to arbitrating dealers" from June 9, 2009 to July 31, 2010. Chrysler Grp., 2013 WL 3817408, at *7. Including in the "relevant universe" the letters of intent issued to prevailing dealers under § 747 without considering whether certain terms render the promise of a sales and service agreement illusory, would distort the statutory meaning of "customary and usual letter of intent" and undermine the effectiveness of the remedy that Congress provided to prevailing dealers.
First, because there is very little that is "usual" about the letters of intent issued by Chrysler in accordance with a § 747 arbitration, the proper set of letters of intent used to ascertain what is "customary and usual" should not include those required by a § 747 arbitration. A typical letter of intent follows a lengthy process of strategizing, negotiating, and vetting, after which Chrysler has almost no reservations committing to a sales and service agreement. An ordinary, run-of-the mill dealership installation does not occur at the behest
This approach finds some support from the Ninth Circuit, which limited the "relevant universe" to "the terms of [letters of intent] that new Chrysler dealers actually agreed to," in order to preclude the hypothetical possibility that a covered manufacturer could "nullify an arbitrator's order by offering onerous terms in initial [letters of intent] and then selectively negotiating more advantageous terms only with dealers it chooses." Los Feliz Ford, 571 Fed. Appx. at 548. The Second Circuit similarly suggested that the proper set of letters of intent for comparison purposes are those "issued by Chrysler in the ordinary and voluntary course of business." Eagle Auto Mall, 550 Fed.Appx. at 70.
Further, the letters of intent must constitute a meaningful intention to enter into a full sales and service agreement, rather than a merely illusory promise that may not materialize for arbitrary reasons. To this end, a genuine letter of intent may not contain provisions that are unreasonably onerous or that grant Chrysler broad discretion to back out. This is consistent with decisions of other courts that have considered the issue, which have held that "Chrysler cannot frustrate the purpose of Section 747 by offering dealers who prevailed in arbitration `unusual and onerous' terms." Eagle Auto Mall Corp. v. Chrysler Grp., LLC, 2012 WL 4579375, at *2 (E.D.N.Y. Sept.28, 2012), aff'd 550 Fed. Appx. 69 (2d Cir.2014) (quoting Los Feliz Ford, Inc. v. Chrysler Grp., LLC, 10-cv-6077 (C.D.Cal. Apr. 9, 2012) (slip op. at 423)); see also Los Feliz Ford, 571 Fed. Appx. at 548.
However, notwithstanding how the district court defined the "relevant universe" of letters of intent, there is reversible error only with respect to one provision in one of the letters of intent that are challenged on this appeal.
Fox Hill, Village, and Jim Marsh argue that there should be a new trial solely because the "relevant universe" was not defined correctly. Because they make no effort to show how changing the "relevant universe" would affect the application of the customary and usual standard to their letters of intent, their argument fails.
The customary and usual standard serves to ensure that each letter of intent affords the prevailing dealership a substantial and meaningful remedy, a remedy not rendered illusory by the inclusion of onerous provisions or conditions that a voluntarily entered into contract would not contain. Fox Hill, Village, and Jim Marsh argue that, by limiting the "relevant universe," the district court effectively guaranteed a finding that their letters of intent were customary and usual. Yet Fox Hill, Village, and Jim Marsh have failed to identify — before the district court or on appeal — a single burdensome provision in their respective letters of intent that, if reviewed against a different "relevant universe," would not be considered "customary and usual." Even after Chrysler highlighted their failure to identify how an alternative universe would have changed the trial outcome, Fox Hill, Village, and Jim Marsh did not address the deficiency in their reply brief. Absent such a showing, there is no basis for overturning the district court's finding that their letters were customary and usual.
Livonia's challenge to the site-approval provision in its letter of intent, however,
The provision in dispute requires Livonia to submit a site proposal to Chrysler for approval; should Chrysler reject the proposal, the letter of intent is nullified. However, it was clear throughout the arbitration that Livonia would be operating in the same location at the same facility it had operated before termination. The arbitrator considered Livonia's location at 30777 Plymouth Road in Livonia, Michigan, and the letter of intent was sent to Livonia at 30777 Plymouth Road. The arbitrator noted that Livonia intends to operate in the same location and out of the same facility it was running profitably before. Furthermore, the arbitrator reasoned that "[t]he difference to the consumer of the location of [a nearby existing dealer] versus [Livonia] likely lacks meaningful significance to the public." Under these circumstances, it appears unreasonable to expect a terminated dealer that was operating profitably before and still maintains control of the original premises of the dealership to obtain approval to operate a dealership at the same site. Even if, as alleged by Chrysler, a majority of letters of intent contain a site-approval requirement, Chrysler has not provided any reason why a dealership in Livonia's peculiar situation would not be pre-approved. By possibly granting Chrysler an effective veto, the site-approval provision may render the letter of intent merely illusory.
Livonia further challenges the site-control and exclusivity provisions in the letter of intent, arguing that because such provisions are not provided for a majority of dealerships, they are not customary and usual. However, because such provisions are customary and usual for dealerships in Livonia's position, namely a dealership located in a suburban or metropolitan market, they do not require reversal.
The site-control option, paragraph 8(H) of Livonia's letter of intent, requires Livonia to provide Chrysler Group Realty Company LLC an option to lease or purchase the dealership facility. This option would only be triggered by particular events, presumably the termination of the sales and service agreement. Chrysler justifies waiving this provision for rural dealerships, because "rural markets have an abundance of land and locations" at which Chrysler could operate another dealership, at least as compared to "metropolitan and secondary markets." This appears to be a reasonable justification because, as Chrysler's witness explained at trial, suburban auto malls tend to be very crowded, with little vacant space available in which to construct a new facility in an optimally competitive location. Because Chrysler has provided a reasonable justification for discriminating between rural markets on one hand and suburban markets on the other, and 85 percent of letters of intent that were issued to dealerships in metropolitan and suburban markets required a site-control option, the provision was customary and usual as applied to Livonia.
For the foregoing reasons, we REVERSE and REMAND in Nos. 13-2117 and 13-2118 so that the district court may enter a declaratory judgment consistent with this opinion to the effect that the state dealer protest laws in Michigan and Nevada are preempted. With respect to No. 13-2117, we AFFIRM the district court's judgment dismissing the counter-claims of Fox Hills, Village, and Jim Marsh that alleged that they did not receive customary and usual letters of intent. With respect to appeal No. 13-2118, however, we VACATE the judgment of the district court dismissing Livonia's claim and REMAND for reconsideration of whether Livonia's letter of intent is customary and usual, in proceedings consistent with this opinion. With respect to appeal No. 13-2119, we AFFIRM the district court's judgment.
S. 1304, 111th Cong. § 2(b)(2) (2009). The House bill was substantively identical. See H.R. 2743, 111th Cong. § 3(b) (2009).
These bills did not pass either chamber. In July, another measure, which would have allowed dealerships terminated during the bankruptcy "to enter into a new dealer agreement... on the same terms as existed immediately before" the termination, passed in the House of Representatives, attached to an appropriations act. H.R. 3170, 111th Cong. § 745(b) (2009). The Senate never passed that version of the bill.
§ 747(d), 123 Stat. at 3220-21.