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Monmouth Chrysler-Plymouth Inc. v. Chrysler Corp.

Decided: May 20, 1986.

MONMOUTH CHRYSLER-PLYMOUTH, INC., PETITIONER-APPELLANT,
v.
CHRYSLER CORPORATION, RESPONDENT-RESPONDENT, AND RITTENHOUSE LINCOLN MERCURY, INC., INTERVENOR-RESPONDENT



On certification to the Superior Court, Appellate Division, whose opinion is reported at 203 N.J. Super. 281 (1985).

For modification and affirmance -- Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None. The opinion of the Court was delivered by Stein, J.

Stein

[102 NJ Page 488] In this case Chrysler Corporation (Chrysler) sought to establish a new dealership in Asbury Park for its Plymouth and Chrysler automobiles. Appellant Monmouth Chrysler-Plymouth, Inc. (Monmouth), an existing Chrysler dealer located in Eatontown approximately 4.25 miles from the proposed dealership, filed a protest with the Motor Vehicle Franchise Committee (Committee) pursuant to the New Jersey Motor Vehicle Franchise Act, N.J.S.A. 56:10-16 to -25 (Act). Monmouth contended

that the new dealership would be "injurious" to it and to the public interest. The Committee upheld the protest and enjoined the establishment of the new dealership.*fn1 The Appellate Division reversed, 203 N.J. Super. 281 (1985), holding that the evidence did not support the Committee's conclusion that the establishment of the new dealership would be injurious. We granted certification, 102 N.J. 336 (1985), to review the decision of the Appellate Division and to consider the standard to be applied in determining whether a new automobile dealership is "injurious to existing franchisees and to the public interest." N.J.S.A. 56:10-23.

I

The Motor Vehicle Franchise Act parallels legislation adopted by a number of states*fn2 for the purpose of "giving auto dealers [102 NJ Page 490] a voice in the heretofore unilateral establishment or relocation of dealerships by manufacturers or distributors." Sponsor's Statement accompanying A.636. The Act requires a franchisor to give existing franchisees "in the same line make within the relevant market area 90 days' advance written notice of its

intention to grant, relocate, reopen or reactivate a franchise of the same line make * * *." N.J.S.A. 56:10-19. The "relevant market area" is the "geographic area 8 miles in radius from a proposed franchise * * *." N.J.S.A. 56:10-16(f). Within thirty days after either receipt of the notice or conclusion of the franchisor's internal appeal procedure, whichever is later, an aggrieved franchisee may file a protest with the Motor Vehicle Franchise Committee.*fn3 N.J.S.A. 56:10-19. After a hearing,*fn4 the Committee must determine whether the new distributorship will be "injurious" in accordance with the criteria set forth in section 8 of the Act:

In determining whether the grant, relocation, reopening or reactivation of a franchise or establishment, relocation, reopening or reactivation of a business will be injurious to existing franchisees and to the public interest, the committee may consider, but shall not be limited to considering the following:

a. The effect that the proposed franchise or business would have on the provision of stable, adequate and reliable sales and service to purchasers of vehicles in the same line make in the relevant market area;

b. The effect that the proposed franchise or business would have on the stability of existing franchisees in the same line make in the relevant market area;

c. Whether the existing franchisees in the same line make in the relevant market area are providing adequate and convenient consumer service for motor vehicles of the line make in the relevant market area, which shall include the adequacy of motor vehicle sales and service facilities, equipment, supply of motor vehicles parts and qualified service personnel;

d. The effect on a relocating dealer of a denial of its relocation into the relevant market area. [ N.J.S.A. 56:10-23.]

To discern the limits intended to be imposed by the broad statutory criteria for determining injury, we look first to the legislative history. The Sponsor's Statement noted that the Act was intended to redress the lack of a forum for an automobile dealer to protest against the arbitrary insertion of a new dealer

into its market area. The sponsor cited with approval the Supreme Court's opinion in New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 99 S. Ct. 403, 58 L. Ed. 2d 361 (1978), which upheld the validity of an analogous statute enacted in California. The Court in Fox relied on a 1956 Congressional Committee Report that found that:

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 becomes 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 manufacturer. [439 U.S. at 100 n. 4, 99 S. Ct. at 407 n. 4, 58 L. Ed. 2d at 370 n.4.]

Both the Sponsor's Statement and the Governor's Conditional Veto Message observed that the Act complemented the objectives of New Jersey's Franchise Practices Act, N.J.S.A. 56:10-1 to ...


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