Court Opinion

ID: 4112395
Source: CourtListenerOpinion
Date Created: 2016-12-30 15:14:13.970703+00
Date Added: 2024-06-11T14:46:27.557810
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                           AT NASHVILLE
                                  May 3, 2016 Session

    HYUNDAI MOTOR AMERICA v. TENNESSEE MOTOR VEHICLE
                   COMMISSION, ET AL.

                Appeal from the Chancery Court for Davidson County
                     No. 15441III   Ellen H. Lyle, Chancellor
                        ________________________________

            No. M2015-01411-COA-R3-CV – Filed December 30, 2016
                     _________________________________

This appeal arises from a proceeding initiated by two automobile dealers who challenged
the location of a proposed dealership in a contested case proceeding before the Tennessee
Motor Vehicle Commission (the “Commission”); the manufacturer contended that the
dealers were not located in the “relevant market area,” as required by statute and moved
to dismiss the proceeding for lack of standing. The administrative law judge overruled
the manufacturer’s motion, and the manufacturer filed a petition in Chancery Court
seeking interlocutory review. The trial court dismissed the petition, holding that the court
lacked jurisdiction to review the administrative judge’s ruling on the motion. The motor
vehicle manufacturer appeals the dismissal of its petition for judicial review of the denial
of its motion to dismiss the contested case proceeding. Concluding that the manufacturer
did not meet the threshold requirement for immediate judicial review as set forth in the
Administrative Procedures Act, we affirm the judgment of the trial court.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

RICHARD H. DINKINS, J., delivered the opinion of the court, in which FRANK G.
CLEMENT, JR., P.J., M.S., and THOMAS R. FRIERSON, II, J., joined.

Jon D. Ross and Gerald D. Neenan, Nashville, Tennessee, for the appellant, Hyundai
Motor America.

Herbert H. Slatery, III, Attorney General and Reporter; Andrée Sophia Blumstein,
Solicitor General; and Mary Ellen Knack, Senior Counsel, for the appellee, Tennessee
Motor Vehicle Commission.

James W. Cameron, III, and Patrick W. Merkel, Brentwood, Tennessee, for the appellees,
Grayson Hyundai, LLC and Twin City Hyundai, Inc.
                                              OPINION

                         I.    FACTUAL AND PROCEDURAL HISTORY

       Hyundai Motor America (“Hyundai”) is a manufacturer and distributor of Hyundai
motor vehicles. On June 2, 2014, Hyundai sent written notice to Grayson Hyundai, LLC
and Twin City Hyundai, Inc., Hyundai dealers in the Knoxville, Tennessee area, of its
intent to appoint a new dealership in that area. The letter read, in pertinent part, as
follows:

        In accordance with the provisions of Tenn. Code Ann. 55-17-114(c) 20, this
        letter shall serve as formal notice of Hyundai Motor America’s intent to
        appoint a new dealer in the North Knoxville, TN market area. The new
        dealership facilities shall be located on adjacent parcels planned to be
        combined and located at 505, 509, and 513 Callahan Dr. NW, Knoxville,
        TN 37912.

On June 27, 2014, Grayson and Twin City filed a notice of protest with the Tennessee
Motor Vehicle Commission (the “Commission”) pursuant to Tennessee Code Annotated
section 55-17-114(c)(20), objecting to the appointment of the new Hyundai dealer and
requesting that the Commission deny Hyundai’s appointment and location of the new
dealer.1 On August 21, 2014, based on Grayson’s and Twin City’s notice of protest, the
Commission issued a Notice of Contested Case Hearing stating, inter alia, that a hearing
would be conducted in accordance with the Uniform Administrative Procedures Act.2

       Hyundai filed a motion to dismiss the proceeding on February 3, 2015, asserting
that the petition failed to state acts or omissions upon which the Commission could
proceed and that the Commission did not have jurisdiction to conduct a contested case
proceeding because the dealers did not have standing to pursue the protest because they
are not in the “relevant market area” as required by Tennessee Code Annotated section
55-17-114(c)(20). An administrative law judge entered an order on April 8, 2015,
denying the motion.

      Hyundai filed a Petition for Judicial Review and Injunctive Relief pursuant to
Tennessee Code Annotated section 4-5-322(a)(1) in Davidson County Chancery Court,

1
  The location of the proposed new dealer is referred to the “North Knoxville Open Point” and is referred
to as such in this opinion.
2
    Proceedings before the Commission are held in accordance with the Uniform Administrative
Procedures Act, Tenn. Code Ann. § 4-5-101, et seq., and conducted before the Commission along with an
administrative law judge pursuant to the contested case provisions of section 4-5-301, et seq. The rules
for the conduct of the proceeding are set forth at Tenn. R. & Regs. 1360-04-01.

                                                   2
asserting that the protesting dealers did not have standing to protest because the proposed
dealership would not be located in the relevant market area, as defined in section 55-17-
114(c)(20), and, accordingly, the Commission had no jurisdiction to proceed with the
hearing. Hyundai requested that the court: (1) grant its petition for interlocutory judicial
review, reverse the order denying its motion to dismiss, and dismiss the administrative
proceeding with prejudice; (2) grant a stay of the administrative proceeding; (3) enter an
order vacating the Commission’s Notice of Contested Case Hearing; (4) award
appropriate injunctive relief to prevent further proceedings; and (5) grant “other relief as
may be proper.”3

        The Commission moved to dismiss Hyundai’s petition for lack of subject matter
jurisdiction pursuant to Tenn. R. Civ. P. 12.02(1) and for failure to state a claim upon
which relief could be granted pursuant to Rule 12.02 (6), asserting that Tennessee Code
Annotated section 4-5-322(a)(1) did not authorize immediate judicial review of the
administrative judge’s preliminary ruling and that the Uniform Administrative
Procedures Act (“UAPA”) did not authorize injunctive relief against the Commission.

        In a Memorandum and Order entered on July 7, 2015, the trial court held that
Hyundai failed to qualify under Tennessee Code Annotated section 4-5-322(a)(1) for
immediate review and dismissed the petition. Hyundai appeals, articulating the following
issues:

    1. Whether the Commission is barred by Tennessee Code Annotated § 4-5-
       301(b) from deciding standing because it is a procedural question of law.
    2. Whether the Administrative Proceeding is void ab initio because the
       Commission did not have jurisdiction to initiate or proceed with it.
    3. Whether exhaustion of administrative remedies is required on a purely legal
       issue governed by an unambiguous statute when the facts are undisputed
       and the agency has no expertise regarding the issue.

                                        II.     DISCUSSION

       This is an appeal of the chancellor’s dismissal of Hyundai’s petition for lack of
subject matter jurisdiction. Hyundai contends that judicial review pursuant to Tennessee
Code Annotated section 4-5-322 is necessary because review of the Commission’s final
decision would not provide an adequate remedy.

      In the resolution of the issues presented in this appeal, we are called to apply
Tenn. R. Civ. P. 12.02(1) and the jurisprudence attendant thereto.

3
  The record does not contain an order granting a stay of the contested case or injunctive relief relative
thereto; in its brief on Appeal, Hyundai advises that the proceeding has been stayed by agreement of the
parties pending resolution of this appeal.
                                                    3
       A motion to dismiss for lack of subject matter jurisdiction falls within the
       purview of Tenn. R. Civ. P. 12.02(1). Challenges to a court’s subject
       matter jurisdiction call into question the court’s “lawful authority to
       adjudicate a controversy brought before it,” Northland Ins. Co. v. State, 33
S.W.3d 727, 729 (Tenn. 2000), and, therefore, should be viewed as a
       threshold inquiry. Schmidt v. Catholic Diocese of Biloxi, 2008-CA-00416-
       SCT (¶ 13), 18 So. 3d 814, 821 (Miss. 2009). . . Litigants may take issue
       with a court’s subject matter jurisdiction using either a facial challenge or a
       factual challenge. See, e.g., Schutte v. Johnson, 337 S.W.3d 767, 769-70
       (Tenn. Ct. App. 2010); Staats v. McKinnon, 206 S.W.3d at 542. A facial
       challenge is a challenge to the complaint itself. See Schutte v. Johnson, 337
S.W.3d at 769. . . . “[a] factual challenge denies that the court actually has
       subject matter jurisdiction as a matter of fact even though the complaint
       alleges facts tending to show jurisdiction.” Staats v. McKinnon, 206
S.W.3d at 543.

Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436, 445-46 (Tenn.
2012) (footnotes omitted).

       [A factual challenge] controverts the complaint’s factual allegations
       regarding jurisdiction, Cedars-Sinai Med. Ctr. v. Watkins, 11 F.3d 1573,
       1583-84 (Fed. Cir. 1993), and puts at issue the sufficiency of the evidence
       to prove facts that would bring the case within the court’s subject matter
       jurisdiction, Ensign-Bickford Co. v. ICI Explosives USA, Inc., 817 F.Supp.
       [1018], 1023 (D. Conn. 1993)]. “Factual” challenges to jurisdiction create
       “genuine issues as to material fact,” but they do not require courts to
       convert the motion into one for summary judgment. Chenault v. Walker,
       36 S.W.3d 45, 55-56 (Tenn. 2001). Instead, the courts must resolve these
       factual issues, at least preliminarily. Edick v. Poznanski, 6 F. Supp. 2d 666,
       668 (W.D. Mich. 1998); Malkin v. United States, 3 F. Supp. 2d 493, 497
       (D.N.J. 1998). The court must “determine whether the evidence in favor of
       finding jurisdiction is sufficient to allow the case to proceed.” Chenault v.
       Walker, 36 S.W.3d at 56.[4]

4
  In Midwestern Gas Transmission Co., the court discusses its role in assessing a factual challenge to
subject matter jurisdiction:

       In assessing “factual” challenges to subject matter jurisdiction at the motion to dismiss
       stage, courts must keep in mind that the plaintiff bears the ultimate burden of proving
       facts establishing the courts’ jurisdiction over the case. Chenault v. Walker, 36 S.W.3d at
       56; Wilson v. Sentence Info. Servs., No. M1998-00939-COA-R3-CV, 2001 WL 422966,
       at *5 (Tenn. Ct. App. Apr. 26, 2001) (No Tenn. R. App. P. 11 application filed). If a
       defendant has filed affidavits or other competent evidentiary materials challenging the
       plaintiff’s jurisdictional allegations, the plaintiff may not rely on the allegations of the
                                                    4
Midwestern Gas Transmission Co. v. Camilla Jean Palmer Revocable Living Trust, No.
M2005-00789-COA-R3-CV, 2006 WL 461108, at *12 (Tenn. Ct. App. Feb. 24, 2006).
Thus, it was incumbent upon the trial court, and this court in our review, to determine
whether the evidence supports a determination that review of the final agency decision
will not provide an adequate remedy; in our de novo consideration, we look at the
petition, the materials filed, and the evidence cited by the parties to answer the question.5

       Subject matter jurisdiction in this case is conferred by Tennessee Code Annotated
section 4-5-322(a), which reads:

        (a)(1) A person who is aggrieved by a final decision in a contested case is
        entitled to judicial review under this chapter, which shall be the only
        available method of judicial review. A preliminary, procedural or
        intermediate agency action or ruling is immediately reviewable if review of
        the final agency decision would not provide an adequate remedy.

In its motion and on appeal, the Commission asserts that Tennessee Code Annotated
section 4-5-322(a)(1) “does not authorize immediate judicial review of the administrative
judge’s preliminary ruling under the circumstances alleged” and that “[t]he UAPA does
not authorize an award of injunctive relief against the Commission, and Hyundai cannot
join a claim for injunctive relief… .” Because the motion to dismiss challenges the facts
upon which Hyundai relies in its petition, the Commission’s assertion is a factual
challenge to the court’s subject matter jurisdiction.

      Hyundai filed the following documents as attachments to the petition for judicial
review:

     Exhibit 1- Notice of Intent from Hyundai to Appoint a New Dealer;
     Exhibit 2- Protest of Grayson and Twin City;

        complaint alone, but instead must present evidence by affidavit or otherwise that makes
        out a prima facie showing of facts establishing jurisdiction. Tenn. R. Civ. P. 43.02;
        Chenault v. Walker, 36 S.W.3d at 56. The trial court will “take as true the allegations of
        the nonmoving party and resolve all factual disputes in their favor…[without crediting]
        conclusory allegations or draw[ing] farfetched inferences.” Chenault v. Walker, 36
S.W.3d at 56; accord Wilson v. Sentence Info. Servs., 2001 WL 422966, at *5.

2006 WL 461108, at *13 (bracketed text in original).
5
  Review of the trial court’s findings of fact is de novo upon the record, accompanied by a presumption
of correctness, unless the preponderance of the evidence is otherwise. See Tenn. R. App. P. 13(d);
Kaplan v. Bugalla, 188 S.W.3d 632, 635 (Tenn. 2006). Review of the trial court’s conclusions of law is
de novo with no presumption of correctness afforded to the trial court’s decision. See Kaplan, 188
S.W.3d at 635.

                                                    5
    Exhibit 3- Notice of Contested Case Hearing;
    Exhibit 4- Affidavit of John Frith, with the following attachments:
        o Exhibit A- Map of the relevant market area of Twin City;
        o Exhibit B- List of census tracks in North Knoxville Open Point;
        o Exhibit C- List of census tracks in Twin City’s relevant market
                   area;
        o Exhibit D- Map prepared by the dealers’ expert witness, Edward
                   Stockton;
    Exhibit 5- Hyundai’s Motion to Dismiss and Memoranda;
    Exhibit 6- Collective Exhibit: Protesting Dealers Affidavits; Edward
     Stockton’s Affidavit (Dealer’s expert witness);
        o Exhibit A to Edward Stockton’s Affidavit- Map of Grayson’s and
           Twin City’s RMA’s Before Open Point
        o Exhibit B to Edward Stockton’s Affidavit – Map of Grayson and
           Twin City’s RMA’s by 2000 Census Tract and 2010 Census Tract
    Exhibit 7- Portion of the Hearing Transcript Before the ALJ;
    Exhibit 8- Order denying Hyundai’s motion to dismiss

       Exhibits 1, 2, 3, 5, 7, and 8 are portions of the administrative record, which
primarily present the factual and procedural history of that proceeding; exhibits 4 and 6
address the issue of the relevant market area of the proposed dealership with respect to
those of the dealers, which is an issue to be resolved through an interpretation and
application of Tennessee Code Annotated section 55-17-114(c)(20). Because our inquiry
under section 4-5-322(a)(1) focuses on whether our review of the agency’s final decision
would not provide an adequate remedy, it is not necessary to consider these materials,
which pertain to the substance of the underlying proceeding.

       In our review of the factual allegations of the petition, we have identified
paragraphs 19, 43, and 44 as addressing in some fashion the question of whether a final
agency decision would provide Hyundai with an adequate remedy:

      19. The Commission’s unlawful arrogation of power will irreparably harm
      Hyundai and the consuming public.
      ***
      43. Unless this Court intervenes to limit the Commission to its lawful
      jurisdiction, Hyundai will be forced to incur substantial expense defending
      itself against the Commission’s illegal Administrative Proceeding. In
      addition, Hyundai’s statutory right to grant the new dealership will be
      unlawfully abridged during the pendency of the illegal Administrative
      Proceeding, to the detriment of both Hyundai and the consuming public.

      44. Hyundai is entitled to the relief sought in this Petition for Judicial

                                           6
        Review pursuant to Tenn. Code Ann. § 4-5-322(a)(1). Hyundai is clearly a
        person aggrieved by the Commission’s actions which are illegal and exceed
        the jurisdiction conferred upon it under the Licenses Act as set forth above.

       Paragraphs 19, 43, and 44 contain argumentative and conclusory allegations,
which this court is not required to treat as fact. See Midwestern Gas Transmission Co.,
2006 WL 461108, at *12-13 (holding that the court, in resolving factual challenges to
subject matter jurisdiction, is not required to give credit to the nonmoving party’s
conclusory allegations). Moreover, the possibility that Hyundai will have to bear the
costs associated with the administrative hearing is not the type of injury contemplated by
Tennessee Code Annotated section 4-5-322(a)(1), which provides a remedy for parties
who consider themselves as being aggrieved by a final decision in a contested case.6 Any
alleged injury to the public is not contemplated by the statute, and the authority for the
Commission’s action is a matter for a court to determine after a final decision by the
Commission.7

       Paragraph 31 also makes reference to the adequacy of review of the final agency
decision, stating:

6
  This court contemplated the type of injury warranting immediate judicial review in George
Nichopoulos, M.D. v. State of Tennessee Bd. of Med. Examiners,:

        Attempts to enjoin administrative hearings because of a supposed or threatened injury,
        and thus to obtain judicial relief before the prescribed administrative remedy has been
        exhausted, have been held to be contrary to the long-settled rule of judicial
        administration.
        …
        Irreparable injury is usually considered to be a ground for injunctive relief, but the party
        seeking such relief must be able to show that pursuit and exhaustion of the administrative
        remedy will cause imminent harm as distinguished from merely speculative damages
        based on nothing more than apprehension that the final outcome if administrative
        proceedings will be prejudicial. . .

No. 01A01-9411-CH-00534, 1995 WL 145978, at *2 (Tenn. Ct. App. Apr. 5, 1995)(citing 73 C.J.S.
Public Administrative Law and Procedure § 46 (1983)).

7
  In its brief on appeal, Hyundai cites to the preliminary statement as well as paragraphs 17, 18, 19, 20,
and 43 of the petition in support of its contention that an administrative hearing would not be an adequate
remedy. We have addressed paragraphs 19 and 43 in this discussion. The remaining portions assert: that
the consuming public and Hyundai will be irreparably harmed; that the Commission has exceeded its
jurisdictional authority in violation of Tennessee Code Annotated section 55-17-101 et seq.; and that
Hyundai will be forced to incur substantial expenses in defending a case that is illegally before the
Commission. As with paragraphs 19, 43, and 44, these are conclusory and argumentative statements and
do not allege facts to support a determination that a final decision by the Commission would not be an
adequate remedy.

                                                     7
         31. Hyundai is also entitled to immediate judicial review because this
         procedural question of law cannot be adjudicated by the Commission.
         T.C.A. § 4-5-301(b) requires that, “[a]n administrative judge or hearing
         officer shall, upon the judge’s or the officer’s own motion, or timely motion
         of a party, decide any procedural question of law.” Hyundai was entitled to
         have its Motion to Dismiss adjudicated, and granted, by the Administrative
         Law Judge. By statute, the Commission has no jurisdiction whatsoever to
         adjudicate this procedural question of law, so this Petition is Hyundai’s
         only adequate remedy.

(Emphasis added). Hyundai’s argument in this regard is consistent with its position that
the dealers do not have standing to protest the location of the proposed dealership
because the dealers are not in the “relevant market area” as required by Tennessee Code
Annotated section 55-17-114(c)(20). We respectfully disagree that the question of
whether the dealers are located in the relevant market area, such as to grant the
Commission authority to convene and conduct a contested case, is a “procedural question
of law” within the meaning of Tennessee Code Annotated section 4-5-301(b).8

       The authority for the Commission to consider the dealers’ protest and convene a
contested case proceeding derives from the powers granted at Tennessee Code Annotated
section 55-17-114; subsection (c)(20) of that statute states:

         (c) In addition to the grounds contained in subsection (a), the commission
         may deny an application for a license, or revoke or suspend the license of a
         manufacturer, distributor, distributor branch, factory branch or officer,
         agent or other representative thereof who has:
         ***
         (20) Granted a competitive franchise in the relevant market area previously
         granted to another motor vehicle dealer. “Relevant market area,” as used in
         this subdivision (c)(20), means that area as described or defined in the then

8
    Tennessee Code Annotated section 4-5-301(b) states:

         It is the duty of the administrative judge or hearing officer to preside at the hearing, rule
         on questions of the admissibility of evidence, swear witnesses, advise the agency
         members as to the law of the case, and ensure that the proceedings are carried out in
         accordance with this chapter, other applicable law and the rules of the respective agency.
         At no time shall the administrative judge or hearing officer hearing a case with agency
         members under subsection (a) take part in the determination of a question of fact, unless
         the administrative judge or hearing officer is an agency member. An administrative judge
         or hearing officer shall, upon the judge’s or the officer’s own motion, or timely motion of
         a party, decide any procedural question of law.

                                                      8
       existing franchise or dealership of any dealer or dealers; provided, that if
       the manufacturer wishes to grant a franchise to an independent dealer, or to
       grant an interest in a new dealership to an independent person in a bona fide
       relationship in which the person has made a sufficient investment subject to
       loss in the dealership, and can reasonably expect to acquire full ownership
       of the dealership on reasonable terms and conditions, then the manufacturer
       shall give written notice to the existing dealer or dealers in the area, and the
       matter shall be submitted to the commission for final and binding action
       under the principles herein prescribed for a determination of the relevant
       market area, the adequacy of the servicing of the area by the existing dealer
       or dealers and the propriety of the granting of additional dealerships. The
       complaint, whether filed by an existing dealer or upon motion of the
       commission, shall be filed within thirty (30) days of the receipt by affected
       dealers of notice as required herein, and if no protests are filed, the
       manufacturer may proceed to grant the additional franchise;

Thus, under the plain language of the statute, it is the Commission’s duty to make a
determination of the “relevant market area,” defined as “that area as described or defined
in the then existing franchise or dealership of any dealer or dealers.”

       Hyundai’s motion itself, as a motion to dismiss, is a procedural matter. The
substance of the motion, i.e., the determination of “relevant market area,” however, is
substantive, inasmuch as it involves the interpretation of Tennessee Code Annotated
section 55-17-114(c)(20) and its application to the existing franchise agreements and the
proposed franchise; this is a determination vested by the statute in the Commission.
Since Hyundai’s motion was predicated on the allegation that the contesting dealers were
not in the “relevant market area,” the administrative judge properly ruled that the
resolution of the motion required a factual determination which was to be resolved by the
Commission, and the motion should accordingly be denied.

       Hyundai has failed to demonstrate that “review of the final agency decision would
not provide an adequate remedy,” Tenn. Code Ann. § 4-5-322(a)(1); consequently, the
court lacks subject matter jurisdiction and the petition was properly dismissed pursuant to
Tenn. R. Civ. P. 12.02(1).

      For the foregoing reasons, the judgment of the trial court is affirmed. The case is
remanded to the trial court with instructions to remand the case to the Motor Vehicle
Commission for further proceedings.

                                                  RICHARD H. DINKINS, JUDGE

                                              9