Court Opinion

ID: 9859468
Source: CourtListenerOpinion
Date Created: 2023-09-24 21:52:23.384398+00
Date Added: 2024-06-11T10:49:22.708162
License: Public Domain

PRESIDING JUSTICE COOK, dissenting: I respectfully dissent. Plaintiff General Motors Corporation decided to add a GMC franchise at Jacobs Twin Buick on Chicago’s west side and another at Loren Pontiac-Buick in Glenview. In February and March 2001, pursuant to the Franchise Act (815 ILCS 710/1 through 32 (West 2000)), General Motors notified its existing franchisees in the 10-mile relevant market area of its intention to grant the additional franchises. 815 ILCS 710/4(e)(8) (West 2000) (“notice”); 815 ILCS 710/2(q) (West 2000) (“relevant market area”). Defendants Grossinger Autoplex, Inc., Castle Buick-Pontiac, Inc., North Shore, Inc., d/b/a/ Muller Pontiac/GMC Mazda, and Joe Mitchell Buick/GMC Truck, Inc., protested the Loren add point. Defendants Grossinger and Castle also protested the Jacobs add point. Pursuant to the Franchise Act, the State of Illinois Motor Vehicle Review Board commenced a hearing on May 20, 2002. The hearing concluded December 13, 2002. On May 28, 2003, the hearing officer entered his 97-page findings of fact, conclusions of law, and recommended decision, recommending the protests be upheld and the additional GMC franchises not be allowed. The Review Board adopted that recommendation on September 3, 2003. The circuit court affirmed the Board’s final order July 20, 2004, and General Motors appealed. I. BACKGROUND Under the Franchise Act, when a protest is filed with the Review Board, “[t]he manufacturer shall have the burden of proof to establish that good cause exists to allow the grant or establishment of the additional or relocated franchise.” 815 ILCS 710/4(e)(8) (West 2000). “ ‘Good cause’ means facts establishing commercial reasonableness in lawful or privileged competition and business practices as defined at common law.” 815 ILCS 710(2)(v) (West 2002). The Franchise Act requires the Board to consider all relevant circumstances in determining good cause, including but not limited to economic and marketing conditions, the investment of the objecting dealers, the public welfare, and the effect upon existing motor vehicle dealers. 815 ILCS 710/12(c) (West 2000). One of the relevant circumstances is whether the objecting dealers “have adequate motor vehicle sales and service facilities *** provided, however, that good cause shall not be shown solely by a desire for further market penetration.” 815 ILCS 710/12(c)(7) (West 2000). There are inconsistencies in the Franchise Act. See Fields Jeep-Eagle, Inc. v. Chrysler Corp., 163 Ill. 2d 462, 478, 645 N.E.2d 946, 954 (1994). How can you protect the private economic interests of dealers without destroying competition and frustrating consumers’ interests in lower prices and better service? Fields, 163 Ill. 2d at 478, 645 N.E.2d at 954. Motor vehicle franchise acts are controversial. They were justified on the basis of a “disparity in bargaining power between automobile manufacturers and their dealers.” New Motor, 439 U.S. at 100, 58 L. Ed. 2d at 370, 99 S. Ct. at 407. “ ‘Automobile production is one of the most highly concentrated industries in the United States, a matter of grave concern to officers of the Government charged with enforcement of the antitrust laws. Today there exist only 5 passenger-car manufacturers, 3 of which produce in excess of 95 percent of all passenger cars sold in the United States.’ ” New Motor, 439 U.S. at 100 n.4, 58 L. Ed. 2d at 370 n.4, 99 S. Ct. at 407 n.4, quoting S. Rep. No. 84-2073, at 2 (1956). We now live in a world of franchises. Motor vehicle dealers are given special treatment not enjoyed by other franchisees, who must protect themselves by the contracts they sign. Motor vehicle manufacturers from around the world now compete in the United States. New manufacturers can put dealers wherever they want them. Established manufacturers, such as General Motors, cannot. Motor dealer franchise laws create problems. Even frivolous protests can take years to resolve. Yamaha Motor Corp. v. Jim’s Motorcycle, Inc., 401 F.3d 560, 566 (4th Cir. 2005). The process is unpredictable because the standards for granting a protest are “ ‘highly subjective’ ” and “ ‘remarkably vague.’ ” Yamaha Motor, 401 F.3d at 566. These problems result in fewer new dealers and a reduction in intrabrand and interbrand competition, which “ ‘[a]s a matter of economic theory[,] *** lead[s] to higher prices for consumers.’ ” Yamaha Motor, 401 F.3d at 566, quoting Yamaha Motor Corp., U.S.A. v. Smit, 276 F. Supp. 2d 490, 503 (E.D. Va. 2003). The Fourth Circuit held the Virginia Motor Dealer Franchise Law unconstitutional under the dormant commerce clause, the application of the clause in the absence of congressional action. Yamaha Motor, 401 F.3d at 574. Franchise acts must be applied carefully if their constitutionality is to be sustained. General Motors’ expert, James Anderson, testified there were 73 different GMC market areas in Illinois. Of those 73 areas, 47 met or exceeded their particular adjusted national standard. The Loren and Jacobs relevant market areas, however, performed near the bottom of the 73 Illinois rankings. The Chicago metropolitan area has experienced tremendous growth in the light-truck market over the past decade in a large and expanding market of several million people. Anderson testified that the Jacobs relevant market area had the highest opportunity per dealer of any market in the state and the Loren relevant market area had the next highest. Anderson testified that tremendous opportunity existed in these areas and that “these markets have simply outgrown the ability of the now current GMC dealer networks to serve [them].” Anderson also testified that GMC franchises made up only 2.4% of total franchises in the Jacobs relevant market area and 3.1% in the Loren relevant market area. The national percentage of GMC franchises to other franchises, however, was 6.0%. Anderson examined other areas as well. General Motors’ franchise agreements refer to areas of primary responsibility (APRs), which are shared by many dealers. The Jacobs add point falls within the “section 1” APR, and the Loren add point falls within the “section 2” APR. General Motors’ APRs are then divided into areas of geographic sales and service advantage (AGSSAs) for each dealer within the APR. Anderson concluded there was underperformance in these APRs and AGSSAs as well. The objecting dealers’ expert, John Matthews, instead of comparing the two relevant market areas to the entire state and to the nation, compared them to a “Chicago Metro” area, which excluded the two relevant market areas. Even using this approach, the two relevant market areas were not performing adequately. General Motors argued that the entire Chicago Metro area was underperforming and it was a mistake to compare Chicago against itself. The Review Board found that Anderson’s conclusion that the low number of outlets accounts for GMC’s poor performance “makes sense on its face.” However, the Review Board concluded that Anderson’s analysis was “not perfect.” The Review Board complained that Anderson’s testimony did not account for (1) a possible local preference in the Chicago area for imports, (2) dealer complaints that they were not receiving a sufficient supply of high-demand product lines, and (3) distinctions between rural and metropolitan areas of the state. The Review Board concluded that these factors “may skew the national penetration percentages unfavorably against local CMC dealers.” The Review Board recognized that it did not automatically follow that adding new dealers would hurt existing dealers. Increased presence could increase sales without taking them away from existing dealers. The Review Board was not persuaded, however, that it would make much difference to a potential GMC purchaser whether he had to travel 5.1 miles or 2.9 miles to find a GMC dealer. The Review Board also noted that if the Jacobs relevant market area was 11 miles instead of 10 miles, we would go from 3 existing dealers to 7. The Review Board found that Matthews’ standard was at least comparable to Anderson’s, and Matthews found only a very insignificant shortfall in the relevant market areas under review. The Review Board accordingly found that the two add points were not warranted by economic and marketing conditions, that there was insufficient evidence the local dealers were failing to adequately perform, that the objecting dealers had invested millions of dollars in their facilities, that the benefit of being a mile or two closer to the nearest CMC dealer is incremental at best, and addition of the add points would hurt the existing dealers in the 10-mile relevant market areas. II. ANALYSIS An administrative agency’s findings and conclusions on questions of fact are deemed to be prima facie true and correct. City of Belvidere v. Illinois State Labor Relations Board, 181 Ill. 2d 191, 204, 692 N.E.2d 295, 302 (1998). A reviewing court is limited to ascertaining whether such findings of fact are against the manifest weight of the evidence. An administrative agency’s factual determinations are contrary to the manifest weight of the evidence when the opposite conclusion is clearly evident. City of Belvidere, 181 Ill. 2d at 204, 692 N.E.2d at 302. An administrative agency’s findings on a question of law, on the other hand, are reviewed with less deference. A court reviews such determinations on a de novo basis. As such, an agency’s decision on a question of law is not binding on a reviewing court. City of Belvidere, 181 Ill. 2d at 205, 692 N.E.2d at 302. Where the case involves a mixed question of fact and law, a clearly erroneous standard of review is appropriate. Such a standard is between a manifest-weight-of-the-evidence standard and a de novo standard so as to provide some deference to the Board’s experience and expertise. City of Belvidere, 181 Ill. 2d at 205, 692 N.E.2d at 302. The Review Board did not apply the correct legal standard in this case. General Motors was not required to prove, to the Board’s satisfaction, that the Chicago GMC dealers were underperforming. General Motors was only required to prove that it was acting reasonably in adding the two dealerships. “Good cause” means “commercial reasonableness in lawful or privileged competition.” 815 ILCS 710(2)(v) (West 2000). Even if General Motors, in the Review Board’s view, was making a mistake, it was still acting reasonably. Competition involves the taking of risks, the making of predictions at a time when facts are uncertain. “[T]he [Franchise Act] does not protect'a dealer from fair, commercially reasonable competition. The public interest is not served by keeping dealers secure from financial loss occasioned by fair competition.” Jack Wolf, Ill. Motor Vehicle Review Bd. at 18. Generally speaking, when competition is increased, lower prices and better service are a result of this increased competition. In re Application of General Motors Corp., 232 Neb. 11, 19, 439 N.W2d 453, 458-59 (1989). If the Review Board had decided that General Motors was not acting in a commercially reasonable manner, that decision would have been contrary to the manifest weight of the evidence (or clearly erroneous). General Motors’ decision was clearly a reasonable one. The two relevant market areas were performing near the bottom of the Illinois franchises. They were performing below the national average. General Motors was not required to accept the argument of the objecting dealers that “Chicago is different.” The evidence was that light trucks and SUVs are no longer found only in rural America; these vehicles have caught on even in the big cities. General Motors has fewer franchises in the Chicago area, in comparison to other manufacturers, than it does nationally. General Motors did not have to sit back and accept that. Given the applicable legal standard, it is unusual for the Review Board to second-guess a manufacturer’s decision to add a dealership. Jack Wolf, Ill. Motor Vehicle Review Bd. at 20 (finding good cause for relocation); Southwest Jeep-Eagle, Ill. Motor Vehicle Review Bd. at 6 (finding good cause for additional dealership). This decision appears to be the first in Illinois to do so. Why would a manufacturer add a dealership unless there was a commercial reason to do so? Certainly a manufacturer is not allowed to maliciously harm an existing dealer, but there is no evidence of that here. Jack Wolf, Ill. Motor Vehicle Review Bd. at 18 (not a predatory move); Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp., 341 Ill. App. 3d 438, 446, 792 N.E.2d 488, 494 (2003) (a demand is not “coercion” unless it is commercially unreasonable behavior). “Commercial reasonableness” means actions taken reasonably and with proper motive, and not arbitrarily or capriciously. Ford Motor Co., 338 Ill. App. 3d at 890-91, 788 N.E.2d at 196. Defendants point to the language that “good cause shall not be shown solely by a desire for further market penetration.” 815 ILCS 710/12(c)(7) (West 2000). There is more than a bare desire for market penetration here. General Motors thinks it will make more money if it has more GMC dealerships. General Motors thinks it will provide better customer service if it has more GMC dealerships. Should General Motors be persuaded by the Board’s arguments that adding these two franchises will not do it any good? First, there was certainly evidence that although imports do well in the Chicago area, domestic products other than GMC also do very well. Anderson testified that he made adjustments to his calculations to recognize the Chicago area’s unique features. Second, dealer complaints that they are not receiving enough of a “hot” item are common. Yamaha Motor, 401 F.3d at 568. General Motors cannot be expected to abandon its national allocation system to favor Chicago dealers on these “hot” items. When an item is in great demand, every dealer in the country wants more than it is receiving. General Motors is entitled, however, to Chicago dealerships that sell a reasonable amount of its products across the board. Finally, light trucks and SUVs are increasingly popular in the large cities. It was a mistake for the Review Board to refuse to consider how poor the sales of GMC products were in the two Chicago relevant market areas-in comparison to the rest of the state. Section 13 of the Franchise Act provides dealers with two causes of action. A dealer who suffers loss of money or property because of a manufacturer’s “unfair method of competition or an unfair or deceptive act or practice declared unlawful by this Act may bring an action for damages and equitable relief.” 815 ILCS 710/13 (West 2000). A dealer who has not suffered loss of money or property may still obtain equitable relief for such “an unfair act or practice.” 815 ILCS 710/13 (West 2000). Where the dealer substantially prevails, attorney fees shall be awarded and costs assessed. 815 ILCS 710/13 (West 2000). Attorney fees were improperly awarded in this case. This was not an action for damages or injunctive relief. No finding was made that General Motors was guilty of “an unfair method of competition or an unfair or deceptive act or practice declared unlawful by this Act.” 815 ILCS 710/13 (West 2000).