American Honda Motor Co., Inc. v. The Tennessee Motor Vehicle Commission
M2016-00406-COA-R3-CV
Tenn. Ct. App.Oct 31, 2016Background
- American Honda notified Jim’s Motorcycle (Johnson City) in March 2013 of its intent to establish a new Honda powersports dealership in Kingsport and warned Jim’s it "may be within the relevant market area."
- Jim’s filed a timely protest under Tenn. Code Ann. § 55-17-114(c)(20); Honda later (Dec. 2013) designated Primary/Relevant Market Areas (PMAs/RMAs) for Tennessee dealers that excluded Kingsport from Jim’s PMA and then attempted to rescind its March 2013 notice.
- The Tennessee Motor Vehicle Commission held a contested-case hearing and found (among other things) that Kingsport was within Jim’s relevant market area, the Tri‑Cities area was adequately served by existing Honda dealers, and a new Kingsport dealer would adversely impact Jim’s.
- The Commission concluded Honda had failed to show sufficient new sales opportunity in Kingsport and denied the license for the proposed dealer; the Chancery Court affirmed on judicial review.
- On appeal, American Honda challenged (1) Jim’s standing to protest, (2) the Commission’s jurisdiction and market‑area determination, (3) sufficiency of the evidentiary support, and (4) the Commission’s alleged failure to define precise RMA boundaries.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to protest under §55-17-114(c)(20) | Honda: Protest rights attach only if dealer was previously granted an RMA that includes the proposed location; Jim’s lacked a preexisting RMA so no standing. | Jim’s: Statute’s "provided" clause grants notice/protest rights to dealers "in the area" when manufacturer proposes a new franchise; Honda gave notice so Jim’s had standing. | Court held Jim’s had standing: the notice triggered protest rights and the Commission — not Honda — determines RMA once a protest is filed. |
| Manufacturer’s post-protest redefinition of RMA | Honda: Its later designation of Jim’s PMA excluding Kingsport divested the Commission and Jim’s of authority to proceed. | Jim’s & Commission: Allowing unilateral post-notice RMA changes would defeat statutory protections; Commission has exclusive authority after protest. | Court held Honda could not unilaterally redefine RMA to avoid the protest; Commission retains authority. |
| Sufficiency of evidence that Kingsport was within Jim’s RMA and adequately served | Honda: Commission’s ruling lacked substantial and material evidence; network analysis showed minimal lost opportunity and various economic factors. | Commission/Jim’s: Historical servicing, Honda internal documents, advertising, distance, and dealer conduct supported finding Kingsport in Jim’s market and adequate servicing by existing dealers. | Court held the Commission’s determination was supported by substantial and material evidence and was not arbitrary or capricious. |
| Requirement to define precise geographic boundaries of RMA | Honda: Commission failed to define metes and bounds of Jim’s RMA as required. | Commission/Jim’s: Statute required determination whether proposed location fell within dealer’s RMA; exact metes and bounds not required for this decision. | Court held Commission’s conclusion that Kingsport fell within Jim’s RMA satisfied statutory duty; no precise boundary delineation required. |
Key Cases Cited
- StarLink Logistics Inc. v. ACC, LLC, 494 S.W.3d 659 (Tenn. 2016) (sets "narrow and deferential" standard for judicial review of agency decisions and explains "substantial and material evidence" standard)
- Lee Med., Inc. v. Beecher, 312 S.W.3d 515 (Tenn. 2010) (statutory interpretation principles: give full effect to legislative purpose and words)
- Gen. Motors Corp. v. Capital Chevrolet Co., 645 S.W.2d 230 (Tenn. 1983) (purpose of Motor Vehicle Sales Licensing Act to protect dealers from manufacturer abuses)
- City of Memphis v. Civil Serv. Comm’n, 216 S.W.3d 311 (Tenn. 2007) (agency decision is arbitrary or capricious if unsupported by substantial and material evidence)
- Jackson Mobilphone Co., Inc. v. Tenn. Pub. Serv. Comm’n, 876 S.W.2d 106 (Tenn. Ct. App. 1994) (discusses standards for determining arbitrary or capricious agency action)