Court Opinion

ID: 4529470
Source: CourtListenerOpinion
Date Created: 2020-04-28 18:00:18.773022+00
Date Added: 2024-06-11T12:22:11.484363
License: Public Domain

PRECEDENTIAL

    UNITED STATES COURT OF APPEALS
         FOR THE THIRD CIRCUIT
             ______________

                   No. 19-2961
                 ______________

 NEW JERSEY COALITION OF AUTOMOTIVE
           RETAILERS, INC.,
                            Appellant

                        v.

     MAZDA MOTOR OF AMERICA, INC.
            ______________

  On Appeal from the United States District Court
            for the District of New Jersey
           (D.C. Civ. No. 3-18-cv-14563)
   District Judge: Honorable Brian R. Martinotti
                   ______________

             Argued March 24, 2020

BEFORE: JORDAN, RESTREPO and GREENBERG,
              Circuit Judges.

          (Opinion Filed: April 28, 2020)
                ______________
Daniel J. Kluska    (Argued)
Peter L. Schenke
Wilenz Goldman & Spitzer
90 Woodbridge Center Drive
Suite 900, Box 10
Woodbridge, N.J. 07095
       Counsel for Appellant

Donald B. Verrilli, Jr.
Adele El-Khouri      (Argued)
Munger Tolles & Olson
1155 F Street, N.W., 7th Floor
Washington, DC 20004
      Counsel for Amicus-Curiae National Automobile
      Dealers Association

Jessica L. Ellsworth (Argued)
Matthew J. Higgins
Hogan Lovells US
555 Thirteenth Street, N.W.
Columbia Square
Washington, DC 20004
       Counsel for Appellee

                     ______________

                        OPINION
                     ______________

GREENBERG, Circuit Judge.

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                   I.     INTRODUCTION

        This matter comes on before this Court on the appeal of
Plaintiff-Appellant New Jersey Coalition of Automotive
Retailers (“the Coalition”), seeking review of the District
Court’s dismissal of its case under the New Jersey Franchise
Practices Act (“NJFPA”) against Defendant-Appellee Mazda
Motor of America for lack of standing in an order entered on
July 30, 2019. For the reasons stated below, we find that the
District Court construed the complaint too narrowly in
concluding that the Coalition lacked association standing, so we
will reverse the Court’s order of July 30, 2019, and remand the
case to the District Court for further proceedings.

                   II.     BACKGROUND

        For the purposes of this opinion, we construe all facts
alleged in the complaint as true, and in the light most favorable
to the Coalition. See N. Jersey Brain & Spine Ctr. v. Aetna,
Inc., 801 F.3d 369, 371 (3d Cir. 2015). The Coalition is a trade
association whose members consist of franchised new car
dealerships in New Jersey, among whom sixteen members are
Mazda dealers. According to the complaint, Mazda initiated an
incentive program for its franchised dealers called the Mazda
Brand Experience Program 2.0 (“MBEP”), which provides
incentives, in the form of per-vehicle discounts or rebates on the
dealers’ purchases of vehicles from Mazda, to dealers who make
certain capital investments in their physical facilities that
highlight their sale of Mazda vehicles, or in some instances,
dedicate their dealerships exclusively to the sale of Mazda
vehicles.

                                3
        The incentives come in different tiers, with the highest
tier available to dealers who have exclusive Mazda facilities and
a dedicated, exclusive Mazda general manager. Mazda gives
lower incentives to dealers who do not employ an exclusive
Mazda general manager and/or dealers whose dedicated
facilities do not conform to all appearance requirements as
defined by Mazda. But Mazda dealers also earn incentives if
they meet customer experience metrics. Mazda dealers who do
not have a dedicated facility, i.e., those dealers who sell other
brands of vehicles as well as Mazdas, so-called “dual” dealers,
do not receive any incentives for brand commitment.

       Although the complaint did not set forth these
allegations, the District Court also relied on certain facts
contained in declarations the parties made in support and in
opposition to the motion to dismiss. According to the Court, at
the time of the filing of the complaint only three of the sixteen
Mazda dealers in the Coalition qualified for the highest tier of
incentives that we describe above, although eight others
qualified for some tier of incentives. N.J. Coal. of Auto.
Retailers v. Mazda Motor of Am., No. 18-14563, 2019 WL
3423572, at *7 (D.N.J. July 30, 2019) (“NJCOA”). The
complaint alleges that the MBEP creates unfair competitive
advantages for dealers who qualify for incentives under the
MBEP at the expense of those dealers who do not, and even
among incentivized dealers through different tiers of incentives,
in violation of the NJFPA. The Coalition seeks to enjoin the
implementation of the MBEP and to obtain declaratory relief.

                     III.   DISCUSSION

                               4
       The District Court had jurisdiction pursuant to 28 U.S.C.
§ 1332, and we have appellate jurisdiction pursuant to 28 U.S.C.
§ 1291. We review the District Court’s dismissal based on lack
of standing de novo. Aetna, 801 F.3d at 371.

        In dismissing the case, the District Court relied on the
three-prong test that the Supreme Court set forth in Hunt v.
Wash. State Apple Advertising Comm’n, 432 U.S. 333, 343, 97
S. Ct. 2434, 2441 (1977), to find that the Coalition lacked
association standing to bring its lawsuit on behalf of its
members. See NJCOA, 2019 WL 3423572, at *3-8. “[A]n
association has standing to bring suit on behalf of its members
when: (a) its members would otherwise have standing to sue in
their own right; (b) the interests it seeks to protect are germane
to the organization’s purpose; and (c) neither the claim asserted
nor the relief requested requires the participation of individual
members in the lawsuit.” Hunt, 432 U.S. at 343, 97 S.Ct. at
2441. The Court held that the Coalition’s complaint satisfied
the first prong but failed the second prong of the Hunt criteria,
thus the Court did not reach the third prong. NJCOA, 2019 WL
3423572, at *5-8.

       With regard to the first prong, the District Court held,
and we agree, that it is obvious on the face of the complaint at
least some of the Mazda dealers in the Coalition suffer
competitive harm due to implementation of the MBEP—the
program itself expressly discriminates among Mazda dealers.
See Warth v. Seldin, 422 U.S. 490, 511, 95 S. Ct. 2197, 2211-12
(1975); (noting that an association “must allege that its
members, or any one of them,” are harmed); Hosp. Council of
W. Pa. v, City of Pittsburgh, 949 F.2d 83, 87 (3d Cir. 1991).
When addressing the second prong, the Court held that because
eleven of the sixteen Mazda dealers would lose the incentives

                                5
they currently enjoy under the MBEP, the Coalition’s lawsuit,
which seeks to enjoin implementation of the MBEP, is in
conflict with the interests of those dealers, who make up the
majority of the Mazda dealers that the Coalition represents. See
NJCOA, 2019 WL 3423572, at *6. Under the Court’s rationale,
given that only five out of the sixteen Mazda dealers would
benefit from the lawsuit, the Coalition cannot possibly be
protecting the interests of its members. See Contractors Ass’n
of E. Pennsylvania, Inc. v. City of Philadelphia, 945 F.2d 1260,
1266 (3d Cir. 1991) (stating that an association does not have
standing to bring a lawsuit that is “contrary to the interests of a
majority of [its] members”).

        We disagree. The District Court impermissibly limited
the Coalition’s lawsuit to a single theory of harm, one that
arguably the complaint does not even raise. Essentially, in the
Court’s view, this case is about the haves versus the have nots.
Because some of the Mazda dealers have been shut out of the
MBEP altogether, this lawsuit is about vindicating their rights
and bringing competitive balance back between them and the
other dealers who do benefit from the MBEP. Though we
understand why the Court viewed the complaint as it did, we are
satisfied that its reading was too narrow. “[W]hen standing is
challenged on the basis of the pleadings . . . we must . . .
construe the complaint in favor of the complaining party.”
Hosp. Council, 949 F.2d at 86 (internal quotation marks and
citation omitted).1

1
  We point out that the information on which the District Court
relied in dismissing the complaint regarding the three dealers in
the highest tier and the eleven MBEP participants, came directly
from Mazda in a declaration by one of its own regional
managers. See App. 52.

                                6
         According to the District Court, only three of the Mazda
dealers enjoy the highest tier of incentives. We see no reason to
dismiss the possibility that the eight dealers who enjoy lower
tiers of incentives would forego such incentives in order to
prevent the creation of three “super” dealers who clearly have a
competitive advantage over all other Mazda dealers. In fact, the
very declarations on which the Court relied in granting the
motion to dismiss suggest this view of the complaint. Indeed,
one of the Mazda dealers declared that it qualifies for a lower
tier of incentives under the MBEP, but nevertheless supports the
lawsuit. See App. 89.

         We think it is also plausible that many of the Mazda
dealers regard the capital investment required to participate fully
in the MBEP as financially unjustified, but nevertheless feel
pressured to participate due to the competitive disadvantages
artificially created by the MBEP for non-participation or partial
participation. See compl. ¶ 16 (App. 32). As Mazda points out
in its brief, one of the dealers supporting the lawsuit had done
just that after the District Court dismissed the case. Appellee’s
Br. 8 n.1. Although Mazda highlights five dealers who had
submitted declarations in opposition to this lawsuit, five does
not constitute a majority of the sixteen Mazda dealers.
Construing the complaint most favorably to the Coalition, we
see little support for the Court’s conclusion that the Coalition is
acting in conflict to the interests of its members. See Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 1965
(2007) (“Asking for plausible grounds to infer [a claim] does
not impose a probability requirement at the pleading stage . . . .
[A] well-pleaded complaint may proceed even if it strikes a
savvy judge that actual proof of those facts is improbable, and
that a recovery is very remote and unlikely.”) (citation and
internal quotation marks omitted).

                                7
        At oral argument before us, Mazda argued that the
conflict of interest issue is a factual dispute, and the District
Court made its ruling because the Coalition did not rebut
Mazda’s evidence that eleven of the sixteen Mazda dealers
enjoy some form of benefit from the MBEP. That argument
turns the analysis at the pleading stage on its head. We construe
the complaint in the light most favorable to the Coalition, and it
is Mazda’s burden to present facts to attack the basis of
jurisdiction pled in the complaint, which Mazda failed to do.
See Davis v. Wells Fargo, 824 F.3d 333, 349 (3d Cir. 2016)
(“Rule 12(b)(1) allows a defendant to attack the allegations in
the complaint and submit contrary evidence in its effort to show
that the court lacks jurisdiction.”). Instead, it submitted
affidavits from only five dealers clearly showing opposition to
the lawsuit, while asking the District Court to infer, from those
affidavits, that six other dealers would have opposed the lawsuit
as well, which the District Court unfortunately did. That is not
construing the complaint in the light most favorable to the
complainant.2

2
  In analyzing the conflict of interest issue, the District Court
held that “in calculating the total membership of NJ CAR for
the purpose of determining whether the litigation runs contrary
to the interests of the majority, it will consider the total relevant
membership to include only Mazda dealer members.
Accordingly, NJ CAR members that do not sell Mazda vehicles
are not included in the calculation.” NJCOA, 2019 WL
3423572, at *7 n.7. We question the validity of that holding.
After all, even if fifteen out of the sixteen Mazda dealers might
oppose a lawsuit of this kind due to the significant investment
they have already made as MBEP participants, there can be no
question that the last remaining Mazda dealer holding out would

                                 8
       In view of our analysis, we will reverse the Court’s July
30, 2019 order dismissing the case, and remand the case to that
Court for further proceedings.3

have standing to bring a lawsuit against Mazda on its own, and
the success of that lawsuit would harm the other fifteen dealers
regardless of their opposition. The germaneness prong of the
Hunt test, therefore, is primarily concerned with the
association’s ability to zealously advocate the claims of that one
dealer. 432 U.S. at 343, 97 S. Ct. at 2441 (“[W]hether an
association has standing to invoke the court’s remedial powers
on behalf of its members depends in substantial measure on . . .
[whether] the remedy, if granted, will inure to the benefit of
those members of the association actually injured.” (quoting
Warth, 422 U.S. at 515, 95 S.Ct. at 2213)). If the other non-
Mazda members, numbered in the hundreds, have an
exceedingly strong interest in the success of such a lawsuit
because, for example, they wish to prevent other manufacturers
from implementing similar coercive programs against them,
there should be little concern over the Coalition’s capacity to be
a zealous advocate of that one member’s claims, even if the
non-Mazda members may not have standing to bring a lawsuit
on their own. In that scenario, the opposition of the fifteen
Mazda dealers would be immaterial, as they would constitute a
tiny minority of the membership. However, we need not
squarely address the District Court’s holding here, as it erred
even if we accept its holding as correct.
3
  We stress that in so ruling, we express no opinion as to the
merits of this case. We limit our holding to the conclusion that
the Coalition has association standing to bring this case. In fact,
our opinion should not be understood as implying that the

                                9
complaint sufficiently has stated a valid claim under the NJFPA.
 On remand, the District Court is free to consider any other
arguments for dismissal that Mazda advances.

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