New Hampshire Dealer Protection Law Survives Constitutional Attack

By Jerry Meek (January 15, 2016)

In 2013, New Hampshire repealed its existing heavy equipment dealer protection statute and expanded its motor vehicle dealer protection statute to include within the definition of a “motor vehicle” certain farm, utility, industrial, and construction equipment. The net effect was to expand the protections afforded to heavy equipment dealers by limiting manufacturers’ power to relocate dealers or add additional dealers to an existing territory.

A flurry of lawsuits by manufacturers ensued, alleging that the new provisions unconstitutionally impaired existing contracts in violation of the U.S. and New Hampshire constitutions and violated the Supremacy, Equal Protection, and dormant Commerce Clause of the U.S. Constitution.

Assuming that the law retroactively and substantially affected existing contracts, the New Hampshire Supreme Court held that the law’s impact on existing contracts was a constitutional exercise of government power. “The purpose of [the law] – to protect equipment dealers and consumers from perceived abusive and oppressive acts by manufacturers – is unquestionably a significant and legitimate public purpose.” Deere & Company et.al. v. State of New Hampshire, 2014-0315, 2014-0441, 2014-0575 (December 29, 2015). Numerous federal and state courts, the Court added, “have concluded that protecting dealers and consumers from the oppressive acts of manufacturers constitutes a legitimate public purpose.” This law was enacted, not as special interest legislation, but to address “a broad, generalized economic or social problem.” It reflected a reasonable approach to accomplishing “the legislature’s goal of preventing equipment manufacturers from engaging in abusive and oppressive trade practices.”

By creating liability for manufacturers who require dealers to agree to arbitration clauses in dealer agreements, the law did violate the Federal Arbitration Act, in violation of the Supremacy Clause of the U.S Constitution. But this provision, according to the Court, was severable from the remaining provisions of the law and thus did not impair the constitutionality of the law’s other provisions.

After rejecting the Equal Protection argument, the Court dismissed the argument that the law had the unconstitutional purpose or effect of discriminating against out-of-state manufacturers. The Court then remanded the case to the trial court to determine whether, under the Pike balancing test, the law places a burden on interstate commerce that “clearly outweighs” legitimate local benefits.