Opinion ID: 626928
Heading Depth: 2
Heading Rank: 1

Heading: The New Jersey Franchise Protection Act

Text: The NJFPA provides that: The motor vehicle franchisor shall reimburse each motor vehicle franchisee for such [warranty] services as are rendered and for such parts as are supplied, in an amount equal to the prevailing retail price charged by such motor vehicle franchisee for such services and parts in circumstances where such services are rendered or such parts supplied other than pursuant to warranty; provided that such motor vehicle franchisee's prevailing retail price is not unreasonable when compared with that of the holders of motor vehicle franchises from the same motor vehicle franchisor for identical merchandise or services in the geographic area in which the motor vehicle franchisee is engaged in business. N.J. Stat. Ann. § 56:10-15(a). Ford appeals the District Court's holding that the NJCS violates the express language of the statute and frustrates its legislative purpose. We review the District Court's interpretation of the NJFPA de novo and construe the statute as we believe the New Jersey Supreme Court would construe it. Liberty II, 134 F.3d at 563. As a general rule of statutory construction, we look first to the language of the statute. If the statute is clear and unambiguous on its face and admits of only one interpretation, we need delve no deeper than the act's literal terms to divine the Legislature's intent. First Resolution Inv. Corp. v. Seker, 171 N.J. 502, 795 A.2d 868, 873 (2002) (citation omitted). When the language of the statute is ambiguous, courts may look to the statute's history, policy, purpose, and other extrinsic aids to ascertain statutory intent. See Cedar Cove, Inc. v. Stanzione, 122 N.J. 202, 584 A.2d 784, 788-89 (1991). Consistent with this Court's reasoning in Liberty II, 134 F.3d at 564-65, we conclude that Ford's assessment of the NJCS does not violate the clear text of the NJFPA. [2] The Liberty II Court stated that in general, Ford was permitted to recover its cost of complying with the NJFPA. Id. at 564. It drew a distinction, however, between permissible and impermissible cost-recovery systems. Id. at 564-65. When determining whether Ford's DPS was a permissible cost-recovery system, the Liberty II Court looked to our sister circuit's interpretation of a similar Maine statute in Acadia Motors, Inc. v. Ford Motor Co. (Acadia), 44 F.3d 1050 (1st Cir.1995), superceded by statute, Me.Rev. Stat. tit. 10, § 1176, as recognized in Alliance of Auto. Mfrs. v. Gwadosky, 430 F.3d 30 (1st Cir.2005). See Neptune T.V. & Appliance Serv. Inc. v. Litton Microwave Cooking Prods. Div., Litton Sys., Inc., 190 N.J.Super. 153, 462 A.2d 595, 600 (N.J.Super.Ct.App.Div.1983) (holding when no state court has construed the relevant statutory language, New Jersey courts look to cases construing similar statutes in other jurisdictions). The United States Court of Appeals for the First Circuit held that the text of the Maine statute clearly permitted wholesale price increases because the statute sa[id] nothing about wholesale or retail prices, and apparently l[eft] the manufacturer free to increase wholesale prices, and the dealer to increase retail prices. Acadia, 44 F.3d at 1056. Thus, the Maine statute regulated warranty reimbursements, but not wholesale or retail vehicle transactions. See Liberty II, 134 F.3d at 564 (interpreting Acadia, 44 F.3d at 1056). Under this interpretation, Ford's warranty parity surcharge (WPS) in Acadia was a bona fide wholesale price term beyond the realm of statutory regulation because the WPS imposed a flat surcharge on all wholesale vehicle prices. Id. It accrued in proportion to the number of vehicles a dealer purchased, regardless of the amount of warranty reimbursement claims submitted. Id. The Liberty II Court found that, in contrast to the WPS, the DPS in New Jersey accrued in direct proportion to the amount of warranty reimbursement claims submitted by each dealer, and thus, was not a bona fide wholesale price term. Id. at 564-65. Rather, it automatically reduc[ed the Dealers'] reimbursements to below-retail rates, violat[ing] the NJFPA's clear mandate that the franchisor `shall reimburse' the franchisee for warranty parts `in an amount equal to the prevailing retail price.' Id. at 565 (citing N.J. Stat. Ann. § 56:10-15(a)). Consistent with our interpretation of Acadia in Liberty II, we hold that the text of the NJFPA clearly permits cost-recovery systems using bona fide wholesale price increases. Like the Maine statute in Acadia, the NJFPA regulates warranty reimbursements but does not impose limitations on wholesale vehicle transactions. Thus, reading a restriction against wholesale price increases into the statute would improperly establish `a rule unsupported by state statute.' Liberty II, 134 F.3d at 564 (quoting Acadia, 44 F.3d at 1057). And like the WPS at issue in Acadia, the NJCS is a bona fide wholesale price increase. It is a flat surcharge assessed on all wholesale vehicles sold within the State, so the surcharge that each Dealer pays depends on the number of wholesale vehicles purchased, regardless of the amount of warranty claims submitted by each Dealer. [3] Therefore, it is not subject to regulation under the NJFPA. Because the statute is clear, we do not need to venture beyond its text to ascertain the Legislature's intent. First Resolution Inv. Corp., 795 A.2d at 873 (citation omitted). But we elect to address the Dealers' contention that there is no real difference between the DPS struck down in Liberty II and the NJCS we uphold today because both contravene the statute's remedial purpose to equalize the disparity of bargaining power in franchisor-franchisee relations. Liberty II, 134 F.3d at 566 (citations omitted). In Liberty II, we held that the DPS violated the text and remedial legislative intent of the NJFPA because dealers had no choice but to bear the full cost of the retail-rate warranty reimbursements. Id. at 565 n. 6. Under the standard franchise agreement, dealers must perform all warranty repairs brought to [their] dealership[s] and cannot charge customers for those repairs[.] Id. Thus, they cannot control the volume, timing or profitability of those repairs. Id. Accordingly, they were unable to mitigate the increased cost imposed by the DPS, which depended entirely on the amount of warranty work performed. Id. However, the NJCS does not impose this hardship because the surcharge depends on the number of wholesale vehicles Dealers choose to purchase from Ford, and Dealers are able to control the volume, timing, and profitability of the vehicles they purchase. We recognize that after the Acadia Court upheld Ford's WPS, the Maine Legislature amended the warranty reimbursement statute to expressly prohibit a manufacturer from recover[ing] its cost for reimbursing a franchisee for parts and labor[.] Me.Rev.Stat. tit. 10, § 1176. However, contrary to the District Court's contention, see Liberty III, 2006 WL 1098178, at  n. 6, this does not mean that the Acadia Court misconstrued the Maine statute. Rather, the Maine Legislature's subsequent amendment to the statute indicates that legislatures are capable of speaking clearly to prohibit franchisors from recovering compliance costs when that is the legislature's intention. See Me.Rev.Stat. tit. 10, § 1176; see also Fla. Stat. § 320.696(6) (categorically prohibiting cost recovery); Va.Code Ann. § 46.2-1571(B)(5) (same); W. Va.Code § 17A-6A-8a(3) (same). But where, as here, the statute does not limit such cost recovery schemes, we cannot impose additional restrictions unsupported by the clear language of the statute. [4]