FCA US LLC v. Secretary of State

.,

STATE OF MAINE BUSINESS AND CONSUMER COURT CUMBERLAND, ss Location: Portland Docket No,: BCD-AP-16-03 /

) FCA USLLC, ) ) Petitioner, ) ORDER ON FCA US LLC's ) M.R. Civ. P, SOC APPEAL v. ) ) MATTHEW DUNLAP, in his capacity as ) Secretary of State of the State of Maine, & ) DARLING'S, ) ) Respondents. )

Petitioner FCA US LLC appeals the Maine Motor Vehicle Franchise Board's (the

"B0a1·d") Order On Remand dated October 14, 2016, FCA is represented by Attorneys

Robert D. Cultice and Daniel Rosenthal. Attorneys Judy Metcalf and Noreen Patient

represent Respondent Darling's. Intervener Maine Auto Dealers Association is

represented by Attorney Matthew Warner.

I. Background

a. Facts

This action arises from the question of whether 10 M.R.S. § 1176 allows

Darling's and FCA to enter an agreement requiring Darling's to provide verification of

the retail rate customarily charged for labor beyond the posting requirement found in

Section 1176 for the purpose of reimbursement fol' warranty work perf9rroed. The

parties' agreement required further documentation on the part of Darling's in order to

receive reimbursement for warranty repair work peiformed on behalf of FCA. Fwther *2 details of the history of the dispute may be found in the Comt's Order on FCA US LLC's M.R. Civ. P, 80C Appeal dated June 6, 2016.

b. Remand

In the Court's Order on FCA US LLC's M.R. Civ. P. 80C Appeal dated June 6, 2016, the Court found that the legislative intent of the statute was to make the posting of the retail rate customarily charged in a place conspicuous to the deale1·'s customers determinative ofthe rate by which the dealerships would be reimbursed for warranty work performed on behalf of manufacturers. The Court remanded the matter to the Maine Motor Vehicle Franchise Board with instl'uctions to find whether the statute perntltted the parties to contract to require the dealers to provide further verification of the retail rate customarily charged.

On remand, the Board determined that even where terms requiring further verification of the retail rate customarily charged appeared in Dealer agreements, "§ 1182 precludes enforcement of such requirements." (Order on Remand, Oct. 14, 2016 at 2). FCA appeals from the Board's determination. II, Standard of Review

Board decisions appealed to the Superio1· Court pursuant to 10 M.R.S.A. § 1189­ B(I) are reviewed fol' e11·ors of law. When the claimed error involves the interpretation of a statute, the Couit reviews the Board's interpretation de nova. See Ford Motor Co. Y, Darltng's, 2014 ME 7, ~ 15, 86 A.3d 35. "When the dispute involves an agency's inte1pretation of a statute administered by it, the agency's interpretation, although not conclusive, is entitled to great deference and will be upheld unless the statute plainly compels a contrary result." Wood v, Superintendent ofIns., 638 A.2d 67, 70 (Me. 1994)

(quotation omitted). If the stalute is ambiguous, the Coult reviews whether the agency's construction is reasonable. Guilford Transp. Indus. v. Pub. Utils. Comm 'n, 2000 ME 31, 111, 746 A.2d 910 (citation omitted).

Here, the Board administers Section 1176 and its interpretation thereof is entitled to deference unless the statute compels a contrnry result. See 10 M.R.S.A. § 1188(1), (2) (the Board shall "review written complaints filed with the [BJoard by persons complaining of conduct governed by this chapter" and the Board shall "issue written decisions and may issue orders to a franchisee or franchisor in violation of this chapter"),

III. Discussion

The Court previously determined that the statute was ambiguous as to whether the . contract terms requiring verification of the retail rate customarily charged were prohibited. On remand, the Board found that any requirements of proof of the retail rate customarily charged for labor performed other than the statuto1ily required posting of the · rate would be in violation of Chapter 204 of Title 10 of the Maine Revised Statutes and therefore "deemed against public policy and . , , void and unenforceable," 10 M.R.S. § 1182. This interpretation of statute is reasonable, therefore, the Cou1t defers to the expertise of the Bciard.

In this case, the Court has already found that the legislative intent of the statute was to level the power inequality between manufacturers and dealers with 1·espect to reimbursement for warranty repairs performed. It would produce an absurd result if manufacturel's were able to use their superior bargaining power to contractually eliminate the safeguards set out by the Legislature. The Court defers to the Board's interpretation of statute and affirms the decision of the Board.

IV. Conclusion The Court af:firrns the decision of the Maine Motor Vehicle Franchise Board.

Dated: Michaela Mutphy Justice, Business & C01

Entered on the Docket: ~ / Y(I] . Copies sent via Mail_ _Electronically;/'

FCA US LLC. v. Matthew Dunlap, in his capacity as Secretary of State of the State of Maine, and Darling's

BCD-AP-16-03

Plaintiff

FCA US LLC. Daniel Rosenthal, Esq. One Canal Plaza Portland, ME 04101

Defendants

Matthew Dunlap, in his capacity as Secretary of State of the State of Maine William Laubenstein, AAG. 6 State Hours Station Augusta, ME 04333

Darling's Judy Metcalf, Esq. PO Box 9 Brunswick, ME 04011

STATE OF MAINE BUSINESS AND CONSUMER COURT CUMBERLAND, ss Locnt ion: Portland Docket No.: BCD-AP-16-03 / ) FCA US LLC, ) ) Petitioner, ) ORDER ON FCA US LLC's ) M.R. Ctv. P. BOC APPEAL v. ) ) MATTHEW DUNLAP, in his capacity as ) Secreta1y of State of the State of Maine, & ) DARLING'S, ) ) Respondents. )

Petitioner FCA US LLC ("FCA") appeals from the Maine Motor Vehicle Franchise Board's Orde1· on Cross Mot ions for Judgment on the Pleadings (the "Order") and the Finni Order that incorporates the Order (the "Pinal Ord el'"). At the heart of the parties' dispute is the meaning of, and proof required to demonstrnte, the ((retail rate custonrnr!ly charged" for labor that Darling's perfonns on no1H-varnmty repairs. Darling's rirgues llrnt the Board did not el'l' when it determined that the retail rate customarily charged for non-wmmnty labor is established by the dealer/franchisee posting its rate in a pince conspici10us to its re!ail customers. FCA contends lhnt this interpretation conflicts ,vith the plain language of l OM.R.S.A. § 1176 ("Section I 176"), misintel'prets relevnt1t case law, and produces absurd res,1lts by permitting dealers to receive reimbursement for ,vmrnnty labor at the posted rnte even if ti.mt rnte was never charged to non-warrnnty customers.

I. Background

Darling's is a duly nuthorized franchisee of PCA. (R. 116, 151.) Pmsuant to its obligations as n FCA franchisee, Darling's perfol'!ns wmrnnty repairs, including the provision of pnrls and the perfornrnnce of labor 011 qualified FCA vehicles. (R. 116, 152.) Darling's ancl

other Maine automobile dealers are entitled to reimbursement for such war1·anly repairs by

nrnnufocturers as required by Maine lnw. With respect to reimbursement for labor on warranty

repairs, Maine lnw provides, in pertinent part, that:

[T]he franchisor shall reimburse the frnnchisee for iiny lnbor so performed ot the re(nil rnle customarily charged by that franchisee fo1· the sc1me labor when not performed in satisfaction of a wmrnnty; as long as the franchisee's rate for labor not performed in satisfoclion or a wat·1·nnly is routinely posted in a place conspicuous to i Is service customer.

IO M.R.S.A. § 1176 (2015).

On or nbout November 1, 2013, Darling's alleges that it posted new hourly labor rates for

repnirs performed for its non-,vi:irnmty retai I customers at its Augusta location and provided FCA

proof of its posting. (R. 120-121.) After November 1, 2013, Dm'lit1g's submitted "Supplemental

Clnims" to FCA demanding the difference between the hourly labol' rate paid by FCA and Darling's posted hourly labor rate al the Augusta location. 1 (R. 122.) Similarly, Darling's adopted the ADP Se1·ving Pricing Guides in determining its "flat n1te 1' labor times fo1· its Ellsw01ih location on or about November l, 2013. (R 124.) Darling's asserts that its adoption of the ADP Service Pricing Guides did not require any nlterntion to the posting at its Ellswol'th location becm1se the existing post already advised of alternative flat rntes for labol' operations. (R. 124-125.) After November I, 2013, Darling's submitted supplemental claims for its Ellsworth locEJtion to FCA seeking lhe difference between the warranty rate 1rnid by FCA and Darling's flat rate pricing. (R. 125.) FCA reciuested additional information regarding each repair for which a Supplementnl Claim was st1bmilted at both locations, but Darling's declined to provide the infonnation. (R.. 122, 125-126.) FCA rejected each of lhe Ellsworth £\!lei Ai1gustil

1 fn the alternative, Dal'llng's clemanclect the difference between the wmrnnty rate pllid by PCA and Darling's flat rntc pricing using the ADP Service Pricing Guides for warranty repairs. (R. 122.)

Supplemcntnl Claims and refused to pay Dm'iir1g's posted labor rate 011 warranty claims from both locations from November l 1 2013 through September 7, 2014. (R. 123 1 J25-126.) On or about September 8, 2014, Darling's again posted increased retail labor rates for its Augusta and EJ lsworth locations. (R. I27-I28) 13 1-132, 44 l.) FCA refused to pay the new rntes Darling's requested and continued to reimburse Dal'ling's at the rates established up to November J, 2013.

(R. I30, 133 442.) 1

A. Procedmal History

On March 3I,2014 FCA filed a co111p!aint in tbe United States District Comt for the 1

District of Maine. (R. 2, 8-16.) Pursuant to 10 M.R.SA. § 1190-A, Darling's commenced the Board action at issue in the present appeal nnd l'ilect a motion to stay the action commenced by FCA in the U.S. District Comt. (R. 39-81, 439.) The U.S. Dish'ict Colllt granted Dat!ing's motion to stay and remanded the matter to the Board for adj,1dicatio11. (R. 84-106, 439.) On November 25, 2014, Darling's filed its Second Amended Complaint. (R. I 16-136.) Thereafter, botll FCA and Darling's filed motions for judgmcn! on the pleadings regarding the warranty rnte FCA must reimbmsc Darling's at for labor. (R. !81-256, 260-283.)

B. The Bonrd's Determinations

On .Tune I6, 2015, the Board determined tlrnl, in contrnst to establishing a reimbursement rate for pmts, Section J 176 only requires "that a fnmchisee's non-warranty labor rate be rnutinc[y post[ed] ... in fl place conspicuous to its service customers." (R. 440.) In suppo1·t oft-J1is determination, !he Boi:ird discussed the Amended Recapitulmion of Previous Rulings and New Findings ofFact a11d Co11c/11sio11s c?f Lm,, (!he "Amended Recapitulat/011") that accompanied the United States District Comt for the District of Maine's Certificate of Questions of State Law to

the Law Court. (R. 442.)2 The Board focused on the Amended Recapitulathm's discussion of the legislative history of Section 1176 concluding that the statute was concerned with "autonrnkers' superior bargaining power" enabling them to "coerce dealers into accepting reimbursement af a rate significantly below what dealers routinely charge ordinary retail customers .... " (Id.) (quoting Darling's dlbla Darling's Bangor Ford v. Ford Motor Co., Docket No. 950398-B-I·l (D, Me. Apr. 1, 1998), Amended Recapit11/a1ion at 16- 17) (quoting Final Report 01· the Joint Standing Committee on Business Legislntion, on its stmly pursuant to Joinl Order H.P. 1459 ("Final Report"), at 4-5 (fon. 25, 1980)) (emphasis from Amended RecapU11/ation omitted). The Board noted that the Joint Standing Committee on Business Legislation concluded, in pertinent part, that:

The legislative concern was labor chc1rges in general; there wns no suggestion that the concern was limited lo hourly rates . ,. [and that] the only equitnble method of express wmTauty reimbursement is rei..t.nbursement at the regular re/ail !'(ties .... We propose very simply that an automaker be reqi1ired to reimbmse a dealer for labor at the re/ail rate customarily clrnrged by the dealer for nonwarrnnly repairs ... There is only one condition that needs to be imposed to ensme that the dealer's rnte is bona fide-it should be routinely posted in a conspict1ous place."

(R. 442) (A mended Recapitulation at 16-17) (quoting Finni Repo11 at 4-5). After briefly discussing the Law Comt's response to the Certified Question of the Maine Federnl District Court, the Bomd explnined tlrnt <(Darling's central contention, that conspicuous posting of labor rates to its service customers with notice to FCA, establishes those rates under§ l 776, has Jong been established ns a matter of Mni.ne law." (R. 443.)3

2 The Distl'ict of Maine's Certificate of Questions was answered by the Law Court in Darling '.s v. Ford Motor Co., l998 NIB 232, 719 A.2d I l I. 3 The Board explained that it would address, in a later dctcnnination, the following issues:

whether Darling's November 2013 nnd September 2014 notices to FCA of its llourly and flat rates were sufficient under section 1776; if the notices were sufficient, whether PCA was requil'ecl to begin reimbursing Darling's at tllose rntes; whether section 1176 allowed Darling's to change its customary retnil rate twice within a cnlcudnr year; whether section 1176 allowed f:CA

On November 20, 2015, the Board granted Darling's motion for the entry of the Final Order inco1vorating the Order in Darling's fovor, imposing civil penalties of $2,000 on FCA, and ordering a determination as to Darling's attorney fees and costs following the final resolution of any appeal. (R. 490-491.) The Board nlso approved the parties' stipulation of dismissal flS to any remaining claims by Darling's that had not been resolved by the Final Order. (R. 490.) FCA filed a timely Notice of Appe,d and Pelilion for Review with this Court on December 17, 2015. (R. 492·493.)

II. Stnnclnrd of Review

Board decisions appealed to the Superior Coutt pursuant to 10 M.R.S .A. § I J 89-B( l) are reviewed for errors of law. Wilen the claimed error involves the interpretation of a slntute, the Court reviews the Bom·ct 's interpretation de nova. See Ford J.\Iotor Co. v. Darling's, 2014 ME 7, ~ 15, 86 A.3d 35. "When tlle dispute involves au agency's i11terprc(ation of a statute administered by ii, the agency's interpretation, although not conclusive, is entitled to great deference a11d \Vill be tipheld w1less Ille statute plainly compels a con(rnl'y result ." Wood v. Superintendent of Ins. , 638 A.2d 67, 70 (Me. 1994) (quotation omitted). Ir the statute is ambiguous, the Court reviews whether the agency's constrnction is reasorrnble. Guilford Transp. lndus. v. Pub. Urils. Comm'n, 2000 ME 31, ~ 11, 746 A.2d 910 (citation omitted).

Here, the BOftl'd adm[11islers Section l J 76 and its interpretation thereof.' is entitled to defore11cc unless the statl.itc compels a contrary result. See 10 M.R.S.A. § 1188(1), (2) (the Board shall "review written complaints filed with the [B]oard by persons complaining of conduct

to require Dmling ' s to submit supplemental cln ims since November 2013 and, il'so, what supplemental information Darling's had. to submi( ; and whether Darling's is en(itled to costs and nltorney 's lees. (R. 443-444 .)

governed by this clrnpter" ,md the Board shall "issue written decisions and may issue orders lo n frnnchisce or franchisor i11 violation of this chapter',).

III. Discussion

The disputed statutory section, 10 M.R.S.A. § I l 76 provides, in pertinent pnrt:

[T)he franchisor shnll reimbmse the franchisee for any labor so performed at the retail rate custonrnrily charged by that frnnchisce for the same labor when not performed in satisfaction of n warranty; as long ns the franchisee's rnte for labor not performed in satisfaction of a warranty is routinely posted in ft plc1ce conspicuous to its service customer.

l O M.R.S.A. § l 176.

FCA argues that the Bomd el'l'ed by interpreting Section 1176 as only requiring a franchisee to post its non-warrauty labor rote in a place conspicuous to its service c\lstomer in order lo establish its retail rate customarily charged for warrnnty reimbul'sement. Jn support 1 FCA contends that the Board's interpretation effectively reads the phrase "customal'ily clrnrged', out of the statute, renders the statutory language "retail rate customarily charged" mere smp!usage by equating the "posted rate" with the "retail rate custotmll'ily clrnrged, and leads to the absurd result of requiring a manufacturer to reimburse a dealer for wlrntever rnle it "posts," no matter how h.igh the rnte and regardless of whether that rate was ever charged to a custome1·. PCA further asserts thnl the Bonrd,s interpretation is not suppmtect by Darling's v. Ford Motor Co., 1998 ME 232, 719 A.2d l l l ("Darling's f'), and that lhe Board erroneously relied on legislative history without first concluding tlrnt Section 1176 was ambigum1s. Darling's responds that the plain language of Sect ion 1176 compels and supports the Board's interpretation .

"When interpreting a stntute, [the Court] seeks(s] to give effect to rhe intent of the Legislature by examining the plain meaning of the statutory l11ngungc i-mcl considering the

lm1guagc in the context of' the whole statutory scheme." Darling's I, 1998 ME 232, ~ 5, 719 A.2d 111 (citntions omitted). Only when n statute is ambigu<rns should the Court look beyond the plain language of the statute and the context of the stntutory scheme "to indicia of legislc1tive intent such as the stc1tute's history nud its underlying policy." Fuhrmann v. Staples, 2012 ME l 35, ,r 23, 58 A.3d 1083 (quotnllon omitted). "A statute is mnbiguous if it is' reasonRbly susceptible to different interpretations." Id. (quotation omitted). "When a statute administered by un ngency is ambiguoi1s, [the Court] review[ sJ whether the agency's interpretation of the sti=1ll.1tc is rei1sonable and uphold[s] its interpretntion unless tile statute plainly compels a contrary result." Id. (quotation omitted). The Court avoids "stat1.1to1y constructions that create absurd, illogical or inconsistent results." Darling's!, 1998 ME 232, ~ 5, 719 A.2d 111 (citation omitted).

Here, Section 1176 is ambiguous as to whether the fnmchisee's act of publicly posting its rate for non-warrnnty labor in and of itself establishes the franchisee's retail rate customarily charged. On the one hand, Section 1176 could be reasonably read as directly linldng the posting of the frn11chisee's rate for non-warranty labor with the establishment of its retail rnte custonrnl'ily charged. On the other hand, given that Section 1176 refers to a "retail rate customarily charged," the stat1.1te could also be read to provide the franchisor an opportunity to verify, through reasonable means, that the franchisee's posted rnle is in line with the retail rate it customarily charges. Becm1se Section 1176 contains ambiguity as to this point, the Court looks to indicia of legislative intent.

As the Board's Order made clenr, the Pinal Report of the Joint Standing Committee proposed thn! the franchisee's retail rate ct1stonrnrily charged for non-wi1rra11ty labor be estnblished through the act of posting said rate in a conspicuous place. The Final Report explained, in pertinent part, that "[f]or many years ... the m1tomnkers' superior bargaining power

lrns enabled them to coerce dealers into accepting reimbursement at a rnte sign.ificantly below what dealers routinely chnrgc ordinary retail customers for non-warnmty repairs." Finn] Report at 4. While the Commi!tee notes that intervention is normally not advised or justified, the Committee believes tlrnt @der the present circumstances "the only equi(nbie method of express warrnnty reimbursement is reimbursement at regular retnil rates." id. The Committees proposed:

"very simply that an mitomnker be required to reimbmse a dealer for labor at the retail rate customm·ily charged by the dealer for non-warranty repairs. Our only co11cern need be that the rate is legitimate. There is only one condition that need~· to be imposed lo ensure the dealer's mte is bona Jide - it should be rolilinely posted in a conspic11011s place. 771e rate itself should be determined through co111pelilio11 in the marketplace."

Id. at 4-5 (emphasis added). This language makes clear that the Joint Standing Committee on Business Legislntion recommended, and the Legisfotme subsequently adopted, a statute under which the check on ensuring the dealer's retail rate customal'lly charged fol' non-warrnnty repairs was accurnte wns that the rate "be routinely posted in a conspicuous spnce." Competition, the Final Report recommended, would determine tile posted rate And keep dealers honest. Accordingly, the Board's Order did not err in determining that the only prerequisite Section 1176 requires ln order to establish the "retail rate customarily charged" is the posting of said rate in a place conspicuous Lo its service customers."

A. \Vhether Section 1176 Permits Verification Beyond the "Posting" Requirement

FCA contends that the Board's Order was overly broad and unjustifiably prevented FCA from exercising its contractrnil right to inspect D11rling's books and records to ensure thnl its ''posted rnte" \WIS the same as ils "l'etail rate custonrnrily charged." Darling's ,·esponds thr1t this 4 Given the clear legislative history behind this portion of Section 1176, the Court notes tlrnt it

would 1·each the same result regardless of whether it reviewed the Board's Order de nova or afforded the Board's interpretation of Section 1176 deference.

argument is waived because FCA did not rmse it in the underlying proceedings, tlrnt the contractual agreements at issue are not in the Record, that the alleged right to inspect only pertains lo warrnnty claims, rmd tlrnt the alleged contracti.rnl right is void and unenforceable pmsuanl to 10 M.R.S.A. § 1182.

Here, PCA at least raised the question of whethel' Section 1176, while not regui1'ing verification, permits a fra11chisor to impose-tlu·ough agreement-reasonable verification of a fhmchisee's retail rnte customol'ily charged before the Board. It is not clear, however, whether the Board's Order considered this argument. This is because the Board's Order determined: 1) the act of posting labor rntes to service customers, with notice to the franchisor, establishes the retail rate customarily charged under Sectiou 1176; aud 2) Section 1176 "does uot require [Darling's] lo furnish internal records or otherwise verify to FCA its wananty reimburse rnte." (R. 443.) The Board's Order did not explicitly address whether Section 1176, while not requiring, nevertheless permits franchisors and franchisees to contrnctucilly agree to additional verification measmes beyond the posting requirement imposed by Section 1176. Because it is not clear whether the Board considered th.is iss\le, the Comt remands the matter Cot· the Board's determination and/or clarification thereon.

IV. Conclusion

For the reRsons discussed above, the Com! afftnns that the Board did not err in determining t!rnt the only prerequisite 10 M.R.S.A. § l 176 requires in order to establish the "retail rnte custonrnri ly charged" is the posting of said rate in a place conspicuous lo its service C\lStomers. The Court, however, remands for the Board's considen1tion mid/or clad fication, the question of ,:vhethet· Section 1176, while nol l'equiring, nevertheless pel'mits franchisors rind *10 fronchisees to ngrce to additio1rnl verification mef!sures of tbe franchisee's "retail rate customarily clrnrgcd" beyond the 11 posting" requirement in Section 1176.

Pursurtnl to M.R. Civ. P. 79(a), the Clerk is hereby directed to incorporate this Order by reference in the docket.

Dated: June 6, 2016 :J.~~ Ji1sticc, Business & Consumer

Entered on the Docket: Cz. ~ l lo Copirm sent via Mail._Electronfcally >/