Court Opinion

ID: 9479828
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:29:58.82403+00
Date Added: 2024-06-11T17:47:18.128161
License: Public Domain

K.K. HALL, Circuit Judge,
concurring in part and dissenting in part:
I respectfully dissent from the majority opinion to the extent that it vacates the lower court’s declaratory judgment because I believe that the parties’ choice of New York law should be interpreted to include an agreement to be bound by New York’s statutes governing the non-renewal of automobile dealerships. The majority’s refusal to apply the New York non-renewal statutes, based on “explicit geographical limitations” in the definition section of that *361state’s code, is the result of a strained statutory construction and of a failure to focus on the intent of the contracting parties.
The majority recognizes, and I agree, that the contractual choice of New York law should, under the forum state’s (Virginia) choice of law rules, be given effect. I also agree with the majority’s determination that, absent a controlling statute to the contrary, New York law would uphold the unrestricted termination clause in the Peugeot-Eastern dealership contract. My disagreement stems from the majority’s constrictive reading of the New York statutes to limit the parties’ contractual choice of law to only that state’s common law and those statutes which can somehow be read to have been intended by New York to have no territorial limitation.
The majority declines to give effect to the parties’ choice of New York law with regard to the non-renewal statutes because the definition section of the regulatory scheme defines “distributor” as one who “sells or distributes in this state” and “franchised motor vehicle dealer” as one who is “required to be registered in this state.” Op. 358-359. Because Eastern had never done business in New York,1 the majority finds that the statutes “by their own terms do not apply to the dispute....” Op. 359. The cases cited by the majority, however, make it clear that the underpinning for this holding is that the New York legislature did not intend that these statutes have extraterritorial effect.
The primary authority upon which the majority relies, Bimel-Walroth Co. v. Raytheon Co., 796 F.2d 840 (6th Cir.1986), proceeded from the premise that a state legislature may affirmatively restrict the use of its laws to govern a contract and held that Wisconsin did just that with regard to its Fair Dealership Law. The Sixth Circuit’s analysis is based on a lower state court opinion which made an in-depth analysis of the legislative history of the 1977 amendments to the Wisconsin law. In Swan Sales Corp. v. Jos. Schlitz Brewing Co., 126 Wis.2d 16, 374 N.W.2d 640 (1985), the court found that a territorially-restrictive definition of “dealer” was clearly intended to confine the benefits of the Fair Dealership Law’s termination provisions to Wisconsin dealers only. Aside from the bare language of the definitional provisions of New York’s statutes, however, no showing has been made that New York affirmatively intended to deprive outside parties from choosing New York law. If anything, New York has clearly evinced a desire to have its laws chosen as governing contracts.2 Even if it is assumed that a state legislature may act to withhold its enactments from use by contracting parties, New York has not done so.
Most if not all regulatory schemes like New York’s could be tied to similar territorial restrictions because statutes are not normally enacted to affect the legal rights and duties of parties with no relationship to that state.3 In C.A. May Marine Supply *362Co. v. Brunswick Corp., 557 F.2d 1163, 1166 (5th Cir.1977), the court discussed a similar argument in the following manner:
The defendant further argues that, even if Wisconsin law must govern the contract, plaintiff still is not protected by the dealership law because it was not the intention of the Wisconsin legislature to extend protection to out-of-state dealers. The argument has surface appeal, but is decidedly a red herring. Obviously, the legislature passed the law to protect Wisconsin dealers, and had no concern for protecting the termination rights of dealers such as plaintiff. But that does not mean that parties, one or both of which have some reasonable contact with the State of Wisconsin, may not agree to clothe themselves with the rights and duties of citizens of that state when determining their respective rights under their contract.... No state intends to govern the transactions of citizens of other states when it establishes laws governing contractual relations between parties. When, however, parties to a contract have contact with more than one state, the parties are expected, and encouraged, to stipulate which state’s substantive law will govern. Obviously, when such agreement occurs, both parties are bound as well as protected by the state law stipulated.
(Citations omitted.) Peugeot contends that C.A. May is no longer good law in light of the subsequent amendments to the Wisconsin statute adding the territorial restriction. See Swan Sales; Bimel-Walroth. The Fifth Circuit, however, clearly indicated that the legislature’s intent to limit the statute’s protective scope vel non was irrelevant. I am persuaded that the analysis of the Fifth Circuit in C.A. May is more in line with the realities of both lawmaking and commerce.
By contracting, Peugeot and Eastern agreed to be bound by the various terms of their agreement. The choice of New York law essentially amounts to an agreement to incorporate that state’s laws, both statutory and common, into the contract itself. Accordingly, I would affirm the declaratory judgment of the district court on the ground that the New York non-renewal statutes apply to Peugeot’s attempted termination of its distributorship agreement with Eastern. Because Eastern’s counterclaims two, three, and four are essentially defenses or counter arguments to Peugeot’s declaratory judgment action, I would affirm the lower court’s grant of Eastern’s motion for summary judgment as to such counterclaims. I concur in the majority opinion to the extent that it affirms the district court’s order granting summary judgment to Peugeot on Eastern’s counterclaims 1 (breach of contract) and 5 (Dealer’s Day in Court).

. Peugeot, however, does do business in New York; moreover, it is the successor (by 1974 merger) to Peugeot, Inc., a New York corporation with which Eastern executed the 1971 contract involved in this case.

. N.Y.Gen.Obligations Law § 5-1401 (1984) provides as follows:
1. The parties to any contract, agreement or undertaking, contingent or otherwise, in consideration of, or relating to any obligation arising out of a transaction covering in the aggregate not less than two hundred fifty thousand dollars, including a transaction otherwise covered by subsection one of section 1-105 of the uniform commercial code, may agree that the law of this state shall govern their rights and duties in whole or in part, whether or not such contract, agreement or undertaking bears a reasonable relation to this state. This section shall not apply to any contract, agreement or undertaking (a) for labor or personal services, (b) relating to any transaction for personal, family or household services, or (c) to the extent provided to the contrary in subsection two of section 1-105 of the uniform commercial code.
2. Nothing contained in this section shall be construed to limit or deny the enforcement of any provision respecting choice of law in any other contract, agreement, or undertaking.

.For instance, each state in the Fourth Circuit also presently has a statutory prohibition against the termination or non-renewal of motor vehicle dealership contracts without good cause, regardless of the terms of the franchise agreement: Va.Code Ann. § 46.2-1569(5) (1989); N.C.Gen.Stat. § 20-305(6) (1988); Md. *362Transp.Code Ann. § 15-209(a) (1984); S.C.Code Ann. § 56 — 15—40(3)(c) (Law.Co-op.1977); W.Va. Code § 17A-6A-4(l)(c) (1986). Each of these states’ statutes, moreover, has some "explicit geographical limitation” which arguably would, under the analysis put forward in the majority opinion, circumvent the good cause requirement if the laws of any one of these states had been chosen by the parties to govern their contract: Va.Code Ann. § 46.2-1500 ("Distributor means a person who sells or distributes new motor vehicles pursuant to a written agreement with the manufacturer, to franchised vehicle dealers in the Commonwealth.”); N.C.Gen.Stat. § 20-286(3) (1988) (" 'Distributor' and ’wholesaler’ mean a person ... who sells or distributes motor vehicles to motor vehicle dealers in this State ...”); S.C.Code Ann. § 56-15-10(g) (1988 Cum.Supp.) ("‘Distributor’ [means] any person who sells or distributes new motor vehicles to motor vehicle dealers or who maintains distributor representatives within the State.”); Md. Transp.Code Ann. § 11-112 (1984) ("‘Distributor’ means any person who: (1) Sells or distributes to dealers in this State new vehicles of a type required to be registered under Title 13 of this article; or (2) Maintains distributor representatives in this State for these purposes.”); W.Va.Code § 17A-6A-3 (1986) (“ ‘New motor vehicle dealer’ means a person who holds a dealer agreement granted by a manufacturer or distributor for the sale of its motor vehicles ... and who has an established place of business in this State.”).