Ford Motor Co. v. Texas Department of Transportation

v. Dur of law . McKane III. process of due 684, 913, ston, 687, 14 S.Ct. 153 U.S. application The district court’s of the (1894).13 L.Ed. 867 Hensgens factors to allow the amendment joining separa- GCI as a defendant was a

4. ble order but did not come within the Therefore, exception. collateral order Finally, litigants op who 1447(d) § our review the bars of remand suspect not a class and pose remand are and also of the amendment itself. Such 1447(d) them of no fundamental deprives preclusion, upon based the dictates of only the statute need be based “a right, 1447(d), is not unconstitutional. Be- relationship disparity between the rational jurisdiction we cause lack to consider the govern legitimate of treatment and some it is appeal, Doe, purpose”. Heller v. 509 U.S. mental DISMISSED. 125 L.Ed.2d 257 113 S.Ct. recognized Congress’ Thermtron 1447(d) enacting “pre purpose of

venting] delay the trial remanded jurisdic by protracted litigation

cases of Thermtron, at

tional issues”. 423 U.S.

351, 96 584. This reason forms a S.Ct. for the decision in that re

rational basis does not denying

view of an order remand disrupt pending state court

threaten

decision, review of an providing whereas granting remand does. The United

order rational COMPANY, States offers additional claimed FORD MOTOR distinction, Corporation, a Delaware reasons for this but we need Plaintiff-Appellant, reach them. even one rational With distinction, Dr. Mi supporting reason negat meet his burden of chalson fails to “every might

ing conceivable basis which DEPARTMENT OF TRANS- TEXAS Heller, 509 U.S. PORTATION, support” the distinction. Di- Motor Vehicle Defendants, 320, 113 vision, al., at S.Ct. 2637.14 et suggestion, at Contrary Michalson’s established common law. Id. to Dr. 13. Co., contrast, Oberg, appellate Motor Ltd. v. review Honda In (1994), 129 L.Ed.2d 336 did unavailable until the Judi- remand orders was appellate process right not create a due review; 1875; ciary grant Act of and review of the Oregon provision Constitu- 1447(c) has been un- remand orders under merely Oberg struck down did not tion Thermtron, 423 U.S. at available since 1887. review, appellate but instead com- restrict 346, 96 S.Ct. 584. review, prohibited judicial including pletely court, jury's punitive review the trial of a request, pursuant to Federal Rule 14. Doleac's damage Id. 114 S.Ct. 2331 award. Appellate Dr. Michalson Procedure ("the question is whether the Due Process raising be sanctioned for frivolous issues requires judicial amount Clause review of the and, accordingly, is appeal without merit Moreover, awards”). punitive damage DENIED. Oberg denying protection against arbi- found trary deprivations property abrogated well- Bray, individually Director, Brett and as

Chief Executive and Administrative Department

Officer of

Transportation, Motor Vehicle Divi

sion, Defendant-Appellee.

No. 00-50750. Appeals,

United States Court

Fifth Circuit.

Aug. Billy M. Don- Ivey (argued), David

Jon TX, Hostetler, Houston, for ley, Baker & Plaintiff-Appellant. Coleman, Brian E. Ber- Scott

Gregory Gen., wick, Nancy Elizabeth Atty. Asst. Gen., Philip Andrew Atty. Olinger, Asst. Aus- (argued), Lionberger, Asst. Sol. Gen. tin, TX, DefendanNAppellee. for Fink, Anne F. Elizabeth Stephen Ritchie, Schartz, Thompson & Carolyn Dallas, TX, International Knight, Corp., Amicus Curiae. Engine Truck and (argued), Thomas Michael Vance Powell Yoxall, Hastings, Scott George William Dallas, TX, for Sapp, Liddell & Locke Ass’n, Texas Dealers National Automobile Ass’n, Indepen- Dealers Automobile Ass’n, Texas Mo- Dealers dent Automobile Dealers torcycle Dealers Ass’n RV Texas, Amici Curiae. JONES, 5.02C(c), § applied Showroom,

Before DEMOSS and to the BENAVIDES, Circuit Judges. violates Ford’s First Amendment right (3) speech; free is uncon-

BENAVIDES, Judge: Circuit (4) stitutionally vague; the State’s Compa- This case involves Ford Motor enforcement of denied Ford (“Ford”) ny’s attempt law; preowned equal protection to market under the vehicles in Texas via process their internet site that Ford was denied due known as The Showroom. November Enforcement brought pursuant On Action 5.02C(c). the Texas Motor Vehicle Division parties filed cross-mo- (“the State”) an summary filed administrative com- tions for judgment. The district plaint against Ford with granted the Texas Motor court the State’s motion for sum- complaint, Vehicle Board. In the mary judgment as to all of Ford’s claims. alleged that State Ford violated the Texas timely appeal Ford filed a with this Court. (“the Motor Vehicle Commission Code grants summary We review Code”), 4413(36), Tex.Rev.Civ. Stat. art. novo, judgment guided by de the same 4.01, .06(a)(3), (6) 6.02C(c), §§ & as well as Rule 56 standard as the district court. Transp. 503.021, selling Tex. Code 56(c); Inc., Conoco, Fed.R.Civ.P. Stults used vehicles to Texas consumers without (5th Cir.1996). 76 F.3d Pursuant 4.01(a) a dealer’s license. Section a party may summary Rule obtain “engage Code makes unlawful to in busi- judgment pleadings, deposi when “the as, of, ness capacity serve or act as tions, interrogatories, answers to and ad ... a[n] [automobile] dealer without first file, together missions with the affida obtaining a license.”1 Ford is ineligible vits, if any, show that genuine there is no under law to receive a license be- any issue as to material fact and that the 5.02C(c) § cause provides that: moving party judgment is entitled to as a (c) section, Except provided by as a 56(c). matter of law.” Fed.R.Civ.P. On may manufacturer or distributor not di- summary judgment, cross-motions for we rectly indirectly: or party’s review each motion independently, (1) own an interest a dealer or viewing the evidence and inferences in the dealership; light nonmoving par most favorable to the (2) operate or control a dealer or (5th ty. Taylor Gregg, v. 36 F.3d dealership; or Cir.1994). standard, Applying this we find (3) capacity act in the of a dealer. summary judgment appropriate against all of Ford’s constitutional claims. Accord response In to the State’s administrative ingly, judgment of the district court is complaint, Ford filed suit in court federal AFFIRMED. 5.020(c) alleging that violates Ford’s rights under the United States Constitu- Facts (1) 5.02C(c) Specifically, tion. fa- cially, effect, or in practical Showroom, Through violates the located Clause;2 dormant Commerce vmw.fordpreovmed.com., customers indicated, 1. Unless nerically otherwise all section Supreme juris- num- to refer Court's bers refer to those contained in Tex.Rev.Civ. prudence restricting rights to States Stat. art. 4413(36). against discriminate or burden interstate commerce. Although per there is no se dormant Com- Clause, merce we ge- use the term herein to Discussion Boston, Washington Houston, Atlanta, to York, Newark are able D.C., New argues that Ford preowned Ford an on-line selection view the dormant Commerce the Code violates through vehicles available The vehicles. against discriminates Clause by a originally were leased Alternatively, Ford’s website interests. out-of-state consumer, leased or a sold unconstitutional Ford dealer contends companies, flow interstate ly car rental com to national burdens by Ford provides The Commerce Clause service vehicles merce. company or used Power ... Congress shall have that “[t]he does otherwise employees. Ford among ... regulate Commerce [t]o to re-sell in order used vehicles obtain I, 8,§ Art. cl. 3. The several States.” .Rather, the Showroom them. grants specifically thus Con Constitution mar- profitable the most to create attempt regulate interstate power to com gress Interested these vehicles. to re-sell ket conflicts regulation If state with merce. customers, a refundable placing after $300 commerce, the Su governing federal law designated arrange to have may deposit, that the mandates state premacy Clause dealer order sent to local vehicle In matters not gov law invalidated. be their Following it. may test-drive they “the legislation, Clause erned federal test-drive, may accept then the customer ‘nega understood to have long been has at the the vehicle purchase or decline that denies the States aspect tive’ by Ford and determined “no-haggle” price unjustifiably to discriminate power Upon payment on the website. listed articles of interstate flow of or burden the title Ford transfers financing approval, Systems, Oregon Waste Inc. commerce.” turn, dealer, who, title to transfers Quality, Environmental Department the customer. 1345, 1349, met- in the Houston Twenty-two dealers by sign- joined program area ropolitan reviewing regulations In Participation Agreements.

ing Dealer under the dormant interstate commerce selling prohibits dealers Agreement Clause, step first “the Commerce other than price vehicle at the selected ‘regulates it evenhand determine charging customer by Ford or that set on inter “incidental” effects edly only with documentary fees. or any handling commerce, against discriminates state ” from the dealer prohibits also Agreement Id. interstate commerce.’ the customer to interest attempting Oklahoma, Hughes v. 1345 (quoting after the inventory until dealer’s of the 1727, 1731, 325-26, 99 S.Ct. .purchase has declined customer (1979)). A discrim statute 60 L.Ed.2d 250 These were vehicle. dealers Ford internet it commerce when against interstate inates letter sent Carol through a advised in treatment of for “differential provides Depart- Kent, the Director of interests economic and out-of-state Sec- Transportation, Enforcement ment of and burdens the former that benefits tion, and alleged Ford’s violation on commerce “If a restriction latter.” Id. in virtually per consti- se program participation discriminatory, their 511 U.S. at abetting Oregon Sys., a violation Waste aiding and valid.” tuted hand, the other non ad- On potential notified of 114 S.Ct. 1345. They were Code. analyzed discriminatory regulations they if did action enforcement ministrative balancing test established under participation. their not discontinue Church, Inc., Pike v. Bruce whereby the ers and perceived detriment to the regulation is valid public unless “the burden im integration vertical of the au- posed on such clearly commerce is exces tomobile argues market. Ford this sive in relation to putative local bene isolation of Texas’ retail car imper- market 137, 142, 844, 847, fits.” 397 U.S. 90 S.Ct. missibly discriminates out-of-state (1970). 25 L.Ed.2d 174 Because of the interests and amounts to nothing more wide scrutiny variation in under the re protectionism. than economic tests, spective inquiry this initial is often Ford would have interpret us Or dispositive of the underlying issue. And egon Sys.’s Waste basic definition of dis while “there separating is no clear line crimination—“differential treatment in category regulation of state that is virtual state and out-of-state economic interests ly per se invalid under the Commerce that benefits the former and burdens the Clause, and the category subject to the latter” —to include all instances which a Pike v. Bruce balancing approach,” Church law, effect, burdens some out-of-state clearly this case falls on the Pike side of interest benefitting while some in-state in the equation. Brown-Forman Distillers Certainly, terest. a facially neutral statute Corp. Auth., Liquor New York State 476 may be discriminatory because of its ef 573, 579, 106 S.Ct. 90 fect. See Minnesota v. Clover Leaf Creamery Company, 449 U.S. 471 n. 66 L.Ed.2d 659 purpose The State’s enacting (“A may court find a state law constitutes 1.02, the Code is set forth in which protectionism’ ‘economic on proof of either provides: effect, discriminatory or of discriminatory The distribution and sale new motor (citations omitted)). purpose.” However, vehicles in this State vitally affects the beyond point, expansive inter general economy of the State and the pretation of discrimination is inconsistent public interest and welfare of its citi- with Supreme precedent Court including zens. It is policy of this State and Oregon Sys. Waste itself. The Court’s the purpose of this Act to exercise the jurisprudence finds only discrimination police power State’s to insure a sound when a State among discriminates similar system of distributing selling new ly situated in-state and out-of-state inter motor vehicles through licensing and Thus, ests. in Oregon Sys., Waste regulating manufacturers, distribu- Court found facially discriminatory an Ore tors, and franchised dealers of those ve- gon subjected law that out-of-state waste hicles to provide for compliance with to substantially higher fees than in-state warranties, manufacturer’s pre- waste. This critical high distinction is frauds, vent unfair practices, discrimina- lighted in principal the upon cases relied tion, impositions, and other abuses of by the parties. our citizens.

Specifically, respect with to the addition of The State heavily, justi relies and 5.02C(c), the legislative history so, fiably indicates on Exxon Corp. Maryland, v. legislature’s intent prevent 117, manufac- 437 2207, U.S. 98 S.Ct. 57 L.Ed.2d 91 turers utilizing from superior their market We significant find no factual or position to compete against legal dealers distinction between Exxon and the retail car market. legislature’s The Exxon, con- instant case. In companies oil cern by was fueled the recent opening of challenged validity Maryland of a stat several dealerships by owned manufactur- ute prohibiting producers and refiners of why holding its controls punctuate serve to retail operating from products petroleum of this case. outcome In the Maryland. within stations service Ford, manu- case, automobile an present Hunt, Apple Washington State In a Tex- validity of facturer, challenges the Commission, which is com- Advertising of manufacturers prohibiting as statute and Washington apple growers of prised retailing automobiles from automobiles stat- dealers, a North Carolina challenged Exx- producers in The oil Texas. within from bear- prohibited that containers ute chal- Clause Commerce presented on applicable other than ing grade Ford. by those raised identical to lenges Hunt, 432 U.S. at grade or standard. U.S. Maryland “the producers argued The pro- thus 2434. statute S.Ct. Clause Commerce violatefd] the statute Washington of State display hibited the (1) discriminating by ways: three gained nationwide which had apple grades (2) commerce; unduly bur- by interstate The Court among consumers. acceptance (3) commerce; and interstate dening at was discrimina- the law issue held that activity a commercial on controls imposing doing costs of it raised the tory because character essentially interstate an of such market, away stripped in the local business regula- to state it is not amendable for an out-of- advantages the economic Exxon, S.Ct. at 437 U.S. tion.” advantages gave and participant, these rejected of each The Court 2207. Hunt, at 350- 432 U.S. participants. local made doing, the Court In so claims. the Court Importantly, 2434. 97 S.Ct. “the burden merely because clear effect of discriminatory evaluated some interstate falls on regulation a state Washington apples grow- on these factors itself, not, establish does companies to North compared and dealers ers against interstate discrimination claim of dealers. growers and apple Carolina Exxon, U.S. at commerce.” 351-52, 2434. Hunt, 97 S.Ct. facially discrimina- 2207. Absent S.Ct. focus respect, the Court’s same In the regulation statute or a State tory purpose, discriminatory effect on Exxon was dif- provides discriminatory when dealers, and out-of-state in-state between similarly situated treatment ferential out-of-state between not on discrimination with their contacts. upon entities based Exxon, in-state dealers. and producers providing has effect the State Hence, 125-26, 98 S.Ct. 437 U.S. at in-state interests advantage competitive is discrim- analyzing whether in- out-of-state similarly situated vis-a-vis dormant Commerce under inatory terests. similarly effect on examine Clause we entities. business situated Exx to characterize response is was the comparison This critical basis Su solely of the anomaly, born as an BT in Lewis v. holding focus of Court’s existing gas to the reaction preme Court’s in Lewis Inc. issue Managers, At contention, Invest. support In crisis. out-of- prohibiting Statute a Florida Advertising was Washington Hunt cites banks, holding companies, bank 53 state Comm., 432 U.S. owning or control companies trust In Lewis v. BT sells within the State Inc., 27, 100 ling a business Managers, vest. Lewis, 447 advisory services. (1980), investment two cases Florida 31-32,100 2009. The S.Ct. U.S. at stat the contested the Court found which in on similar restriction no placed statute discriminatory. Far from undermin utes or companies, banks, holding bank Exxon, cases these holding in ing companies trust offering investment advi- Michigan. Texas or In either circum- sory stance, services. The Court began analy- it similarly prohibited from en- sis of the statute noting Florida certain gaging retail sales in automobile Texas. similarities between the statutes Exxon See Corp. v. Dynamics Corp. CTS first, and Lewis: America, each statute discrimi- nated against vertical organization and 95 L.Ed.2d 67 (upholding a statute second, permitted each statute certain because “[i]t has the same ... effects kinds of competitors interstate into the whether [entity] or not the is a domiciliary Lewis, market while prohibiting State].”). others. or resident of points [the 447 U.S. at 100 S.Ct. 2009. Section the fact that Texas no has motor vehicle 5.02C(c) possesses both of likewise these manufacturers as evidence of the law’s dis- attributes. The significant point of dis- criminatory purpose and effect. In actual- tinction, why and Exxon did ity, not control in under the Code’s broad definition of Lewis, was vehicle, because: motor Texas manufacturers of mo- 659.141(1) motorcycles torboats

Section engages in an considered addi- motor vehicle tional form manufacturers. See discrimination that 1.03(25). § Irrespective fact, highly significant for purposes of Com- rejected Court a similar assertion in analysis. merce Exx- Clause Under on, finding consequence of no statute, Florida that there against discrimination Maryland were no oil producers affected or refin- organization business is not ev- Exxon, ers. 437 U.S. at banks, enhanded only bank holding companies, and trust companies 5.02C(c) Moreover, § does not discrimi- with principal operations outside of nate independent automobile deal- Florida are prohibited from operating ers seeking operate in Texas. The investment subsidiaries or giving invest- only prevents manufacturers, section re- ment advice-within the State. It follows gardless domicile, of their from entering 659.141(1) § among discriminates retail market. Consequently, [banks, affected business entities bank 5.02C(c) § does not protect dealers from holding companies, and companies] trust competition, out-of-state protects deal- according to the extent of their contacts ers competition from manufacturers. with the local economy. The absence of Out-of-state corporations, which are non- a similar discrimination between inter- manufacturers, have the same opportunity state and producer-refiners local was a as in-state corporations to obtain a license most critical factor in Exxon. operate Thus, Texas. dealership Lewis, (em- 100 S.Ct. 2009 5.02C(c) does not discriminate among phasis in original). in-state and manufacturers, out-of-state that,

Ford has failed to show ei nor does it among discriminate in-state ther facially or in practical effect, and out-of-state by raising dealers 5.02C(c) discriminates according to the doing costs of business in the local mar- extent of a entity’s business ket, contacts with stripping away the economic advan- 5.02C(c) State. Section does not dis tages for an participant, out-of-state criminate based Ford’s contacts with giving advantages to local participants. State, but rather on the basis of Ford’s The discrimination, absence such either status an automobile manufacturer. It facially practical effect, or in removes is irrelevant under from the Supreme Court’s def- Ford, manufacturer, as a is domiciled in inition of a discriminatory law. The without merit. State’s is argument thus controlling question The 5.02C(c) § passing purposes Bruce v. asserted whether, under Pike —-

becomes vertically integrated companies Church, on imposed prevent [inter burden “the incongru- in re their advantage of clearly excessive taking is state] commerce prevent “to local benefits.” and putative position the market ous lation to discrimination, of As im- evidence frauds, 90 S.Ct. practices, U.S. at unfair by caused commerce citi- on of our the burden other abuses positions, and the of the benefits 5.020(c), extols Ford § interests. See legitimate state zens”—are consumers, (“Dis- automobile Texas Showroom Lewis, 100 S.Ct. at U.S. district dealers, The itself. and Ford and economic concentrations couraging alleged bene these correctly ignored court are against fraud citizenry protecting the a con which is not fits, elimination interests.”). the undoubtedly legitimate These commerce. on burden stitutional even if the that State’s argues Ford next efficacy economic relate to arguments does legitimate, interests are to this misdirected are the statute In this re interests. further these not Exxon, 98 S.Ct. at 437 U.S. Court. is argument compelling Ford’s most gard, consuming (“It that be true may position occupy superior not that it does ... that ... but injured be will public marketplace.3 preowned vehicle of the to the wisdom argument relates “puta term of the with the use Consistent commerce.”). statute, on its burden not will Court balancing, this Pike tive” in the that to demonstrate also failed Ford has judgment empirical guess not “second inhib 5.02C(e) commerce will burden leg utility of concerning of lawmakers goods. interstate flow of iting the 92, 107 at Corp., 481 islation.” CTS retailed vehicles of out-of-state number explained Brennan Justice 1637. As decrease will not in Kassel Consolidated opinion concurring in his 5.02C(c) merely re 5.02C(c). Section Corp.: ghtways Frei retailed be automobiles quires dealerships, rather independent through benefits, a court determining those In dealerships. manufacturer-operated than ultimately regulato- on the focus should Exxon, See by the lawmakers identified ry purposes does (holding that Clause Commerce or available evidence before on structure particular “the protect their supported might have to them that market.”). in a retail operation methods must confine the court Since judgment. However, assuming even the lawmak- purposes to the analysis com on interstate does burden create regulation, maintaining the had for ers to establish has failed merce, Ford concerns evidence only relevant in relation clearly excessive burden rationally could the lawmakers whether local putative benefits. challenged regu- that the believed have It is purposes. those foster lation would there initially posits to decide court not the function so protect, interests legitimate state no promotes regulation clearly excessive. any burden fact In inventory the dealer’s lot. from the competing argues that it is not also 3. price competition, the through the obvious independent dealers addition to cer- without vehicles will a contention for its Showroom Such Ford sets Showroom. pur- preowned vehicles price to have consumers Ford seeks tainly merit. effect through its directly from Ford a vehicle independent chase dealers. sold vehicle purchasing a than site rather internet 504

its purpose, intended long so as an ex- Previously, Ford sold these vehicles amination of the evidence before through closed auctions to its dealers. to the available lawmaker indicates that Ford now selects some of these vehicles regulation is wholly not irrational in and, through Showroom, retails the light of purposes. vehicles itself.6 respect With to these ve- hicles, 450 680-81, Ford seems remain in a superior (1981) (citations omitted) (em- L.Ed.2d position market least, to its dealers. At phasis original). in Irrespective of Ford’s the evidence is not so one-sided as to lead or this Court’s view potential of the law’s this Court to believe that the proffered effect, there certainly evidence from state interests are an excuse to discrimi- which a legislator reasonable could believe nate or burden interstate com- would further the legiti- State’s merce for the benefit of industry. local mate interest in preventing manufacturers Ford has thus failed carry its burden of from utilizing their superior market posi- proving that “the burden imposed on such tion to compete against dealers.4 commerce is clearly excessive in relation to

Ford a large putative obtains volume local benefits.” preowned vehicles that were originally by

leased a Ford consumer, Finally, asserts, dealer to a Ford did the as sold or by producers Exxon, leased oil Ford to national car that the need for rental companies, or as company uniformity used nationwide ser- outweighs vice by vehicles employees. Ford State’s These interests regulating. Here, are not “used” vehicles the sense that Ford does not rely on the nationwide they have been previously to a market automobile, retailed for the but instead consumer.5 The vehicles are relatively the role of the internet and so-called new, Ford and Lincoln-Mercury vehicles e-commerce. For proposition, it to which Ford relinquished never title. cites American Libraries Assoc. v. Pa- background 4. As relationship on the between before this Court appropriately left to the dealers, automobile manufacturers and judge by administrative law court. district 1970’s, least existed in the late brief, see ex- In its Ford states that "[t]he district cerpts congressional from a report committee that, court concluded 'sold' Supreme cited Court in New Motor consumers, Showroom directly Vehicles Co., Bd. Vehicle v. Orrin W. Fox 'acting Ford was capacity of California a dealer’ (1978). 100 n. 99 S.Ct. 403 5.02C(c)(3).” in violation of On the con trary, the district expressly court declined "to 5. appears It nothing in the Code would determine whether Ford’s conduct violate[d] prohibit selling Ford from such "used” the Code vehi- as this determination is made best cles to consumers. only prohibits Code judge.” the administrative law Ford Motor selling manufacturer from Trans., "new Co. v. Dept. motor vehi- F.Supp.2d cles”—motor vehicles which (W.D.Tex.2000). have not been 913-14 At the time the subject prior of a case, retail See sale. were briefs filed in this the administra 103(15) judge tive law had Proposal submitted her Decision to the Motor Vehicles Board. The Pervading ruling Ford's challenges Board, constitutional a recommendation to the is its insistence that technically it is not which then sell renders final partyA decision. ing automobiles to judicial consumers since it entitled to tran review of final board s who, turn, fers title the dealer action in a transfers District County, Court of Travis title to Regardless the consumer. 7.01(a). of merit Texas. See Any ruling by Section argument, of this it is not relevant to Ford’s this Court on violated the Code constitutional claims. It relates to Ford’s al improperly would preempt established ad leged 5.02C(c), violation of question procedures. ministrative For Bar v. Went Florida See (S.D.N.Y.1997). expression. F.Supp. taki 2371, 623, 618, Inc., 115 S.Ct. It, 515 U.S. sought in Pataki challenged statute The (1995) (“Commercial dissemination, knowing the prohibit to protec- of limited measure enjoys a speech or depictions internet, sexual of via its subordinate with tion, commensurate at 163. minor. Id. to a communications Amendment of First in the scale position the district which on of bases One regula- subject to modes of values, and is was unconstitutional the Act ruled court might impermissible be types tion that among those falls internet that the expression.”). of noncommercial realm consistent “demand that of commerce speech analyzes commercial This Court susceptible therefore and are treatment four-part Hudson’s Central under level.” cases a national only on regulation to laws that framework: considering When at 181. Id. activities, this internet regulate outset, must determine

directly we At may uniformity -well protected need for expression is alleged whether However, of application For commercial prevail. First Amendment. the instant like provision, circumstances it principle to come within speech It results. activity absurd and lead to would case concern lawful at least must to or individuals corporations Next, we ask wheth- misleading. would allow not be constitutional interest is governmental otherwise circumvent asserted er the by connect- simply posi- regulations yield inquiries and If laws both substantial. internet. Sec- to the answers, wheth- the transaction must ing we determine tive on a prohibition as directly advances serves regulation tion er the asserted, man- marketing and sales forms of all interest governmental via conducted just those is ufacturers, not than more extensive not whether Congres- absence In the that interest. necessary the internet. to serve 5.02C(c)’s incidental legislation, sional Miss., F.2d Oxford, City v. Dunagin not does activities of internet regulation banc) (en (5th Cir.1983) (quot- 738, 746-47 Clause. the Commerce violate 566, 100 Hudson, ing Central de- 2343). is thus to step first The S.Ct. challenge Ford’s second involved speech whether termine Showroom, 5.02C(c), to the applied as activity. The a lawful this case concerns right Amendment its First violates the information not contest does State information advertising speech. mis- and not is truthful website on Ford’s commercial constitutes Ford’s website leading. Amendment, ap First “The speech. the com- in order argues that through the Fourteenth the States plied to unlawful, it be must speech be mercial speech commercial Amendment, protects prohibit- or otherwise inherently unlawful regula governmental from unwarranted independent law by some ed Corp. & Elec. Gas Hudson Central tion.” 5.02C(c). reasons Specifically, York, 447 New Comm. Service v. Public Hud- Central analysis under proper “[t]he 561 100 U.S. determine prong son ’s first Virgi Pharmacy Board (citing Virginia law, challenged law, valid besides Council, some 425 Consumer nia Citizens were If this unlawful. speech made 761-62, law challenged state true, then (1976)). speech Commercial L.Ed.2d Amendment trump the First always un would protection however, lesser is, afforded ‘un- always be would speech one’s forms than other der Constitution lawful’ under the challenged law.” While regulation would protections invoke the superficially appealing, the flaw in Ford’s the First Amendment subjected and be logic apparent becomes upon consideration the intermediate scrutiny outlined in Hud- of its underlying assumptions and estab- son.

lished Supreme Court precedent. Typically, when an individual or corpora-

Section prohibits manufactur tion challenges an regulation economic un- ers from retailing motor vehicles to con der the Due Process Equal Protection sumers. An accompanying Clause, result of this a State the has minimal burden of prohibition is Ford is not allowed to showing that the law has a rational basis. advertise the sale of motor vehicles to con Under Ford’s reasoning, a petitioner could sumers. The Supreme Court has made bootstrap themselves into heightened the clear that “[a]ny First Amendment inter scrutiny of the First Amendment simply est which might be served by advertising by infusing the prohibited conduct with an ordinary commercial proposal and some element of speech. Petitioners in which might arguably outweigh gov the v. Giboney Empire Storage Co., & Ice 336 ernmental interest supporting regula the 490, 684, 93 (1949), L.Ed. 834 tion is altogether absent when the com attempted to the Supreme lead Court mercial activity itself illegal is and the down the same erroneous path suggested restriction advertising on is incidental a by to In Giboney, Ford. petitioners the were valid limitation on economic activity.” Union members sought who picket out- Pittsburgh Press Co. Pittsburgh Com side of their employer’s place of business. Relations, mission Human Id. at 69 684. S.Ct. Their picketing 93 S.Ct. 37 L.Ed.2d was in protest of a agreement company case, In the present the re purchase ice from peddlers. non-union Id. striction on ability Ford’s to advertise on A enjoined state court picketers pursu- their only website incidental law, ant to Missouri prevented which un- 5.02C(c)’s prohibition on right reasonable interferences with trade. Id. engage in the economic activity of retail 69 S.Ct. 684. After concluding that ing contrast, automobiles.7 In if the challenged law State was within the prohibited advertising the sale power State, of Supreme Court of motor vehicles dealers, licensed rejected a picketers’ contention that the commercial activity Texas, lawful in injunction was an unconstitutional abridge- case, In this Ford is really challenging explained court that “[t]he statute is aimed at prohibition on advertising through its regulating the brokering, business of not the website, it challenging its ability to speech retail of brokers. The statute pro- does not Therefore, automobiles in Texas. it is Ford's scribe what may may broker say not —it prove burden to is not a valid makes unlawful, brokering business of limitation on activity; economic it is not the thus makes speech conduct or made State's burden to show another law under in furtherance brokering of unlawful.... If which the activity economic prohibited. may the State prohibit constitutionally ac- an Press, Pittsburgh See 413 U.S. at tivity, may prohibit also speech commercial ("Discrimination employment is not relating case, to that activity. In the instant if only a activity, commercial illegal it is com- regulation the State's of new vehicle broker- activity Ordinance.") mercial (em- under ing constitutional, is otherwise then the re- added). phasis The federal district court sulting restriction on speech commercial of the Southern expounded District of Texas this permitted those not to broker new vehicles principle response to a similar First will not render the same statute unconstitu- challenge Amendment to 5.03 Automaxx, of Code— Morales, tional.” Inc. v. Texas' Anti-Brokering Statute. The district F.Supp. (S.D.Tex.1995). n. 6& regard, In this of a capacity dealer.” they were speech free of ment of correctly notes that neither these Id. The facts. disseminating truthful only The term are defined in the Code. phrases an part was speech that the found Court is, Additionally, during however. “which was in “dealer” course of conduct integrated Kent, the Director of deposition, Carol Id. Fur- her valid law.” of Missouri’s violation Department Transportation, the Texas thermore, deemed “it has been never Section, if indicated or Enforcement speech of freedom abridgement an company any questions regarding had illegal of conduct make course press to Code, violated the their conduct part inwas the conduct merely because Motor Vehicle Divi- by they could contact the evidenced, out initiated, or carried written, position as unrea- sion. Ford attacks spoken, either language, means inter- sonable. expansive Such an or printed_ guaranties constitutional

pretation precedent, this Court’s Under prac- make it press would and speech of chal vagueness test for a appropriate laws ever to enforce impossible tically at the statute lenge depends of trade as' in restraint agreements For criminal is civil or criminal. issue and con- agreements many other well "two-part employ the void- “[w]e statutes society.” Id. injurious to deemed spiracies City in for-vagueness test described of 684; Ohralik v. 502, see also 69 S.Ct. at Chicago v. Morales 447, 456, Assoc., Bar 436 U.S. Ohio State criminal may a law Vagueness invalidate 1912, 1918, 444 56 L.Ed.2d 98 S.Ct. independent of two reasons. for either reasoning Giboney in First, provide The Court’s the kind may it fail to advertisement, via the ordinary to Ford’s applies people that will enable notice internet, motor vehicles. it preowned prohibits; conduct understand what facts, advertisement, of truthful second, may while and even en- authorize That of conduct course integrated discriminatory of an en- part courage arbitrary is and -retailing motor violates which forcement. law— speech Ford’s without a license.

vehicles Escalante, 678, F.3d v. 239 States United activity concern a lawful not does 56, (5th Cir.2001) 41, (quoting 527 U.S. 680 is speech on Ford’s commercial restriction (1999)). 1849, 67 A 144 119 S.Ct. L.Ed.2d prohibition on incidental to the State’s only to civil applied is stringent standard less vehicles. motor ability to retail activity. economic regulate that statutes Thus, further in the progress not we need Flipside Estates v. Village See of Hoffman reject analysis in order to Hudson Central Inc., Estates, 455 U.S. Hoffman claim. Ford’s First Amendment (1982) 1186, 1191, 71 L.Ed.2d 362 102 S.Ct. (“[E]conomic a subject to less 5.02C(c) regulation is that a manu- provides Section test”). reg- An economic vagueness indirectly, op- strict may directly or facturer “only if it commands ulation is invalidated act in control a dealer or or erate and indefi- vague ‘so terms compliance administrative a dealer. In its capacity of Ford, rule or standard at ’really nite as to be no alleged complaint, the State incompre- ‘substantially Showroom, ... or if it is all’ operation through ” v. Clinical United States hensible.’ a dealer. capacity acted 120, Service, Inc., 122 F.2d n. Leasing 925 unconstitution- counters Cir.1991) (5th A.B. Small Co. v. (quoting 2 it fair provide and does not ally vague Co., Refining 267 U.S. Sugar American “operat- what conduct notice of constitutes 295, 239, L.Ed. 589 233, 45 S.Ct. “acting controlling a or ing or dealer” ” Busbee, Corp. Exxon 644 F.2d ment.’ (citing Lawson, Id. Kolender v. (5th Cir.1981)). is, however, There caveat to general rule. (1983)). Civil statutes Similarly, this Court regulations or quasi-criminal that contain found that permits where statute “poten- penalties may subject be to the more strin- tially significant civil and administrative gent review afforded criminal statutes. penalties, including fines and license revo- cation,” quasi-criminal treatment is appro-

The Supreme Court applied the more priate and thus more strict stringent standard of reviewing standard in an ordi- review applies. nance Women’s Medical Center required stores to obtain a li- Bell, Northwest items, effect, cense Houston v. “any to sell 248 F.3d 411 parapher- (5th Cir.2001). nalia, case, In accessory present thing or which designed only Code provides or marketed illegal monetary for use with civil dam- cannabis drugs_” ages Hoffman, the event of a violation. And while the potential substantial,8 S.Ct. 1186. fines purchased Customers that are pro- no goods hibitory such quasi-criminal were forced to effect or sign penálties their names and register addresses to a associated with a violation of the Code. Thus, would be police. available Id. at 500 n. must show that 16, 102 vague, S.Ct. 1186. The Court concluded “not requires the sense that it that, while the nominally statute imposed person to conform an imprecise, but penalties, civil its prohibitory and stigma- comprehensible standard, normative but tizing effect quasi-criminal warranted rather in the sense that no standard of 489, treatment. Id. at 102 S.Ct. 1186. conduct specified is at all.” Ferguson v. Estelle, (5th Cir.1983) 718 F.2d 735 In United States v. Clinical Leas Cincinnati, (quoting Coates v. Service, ing Inc., (5th 925 F.2d L.Ed.2d Cir.1991), this Court reviewed a federal (1971)). statute prescribing penalties civil for “[a]ny party who distributes or authorizes The Motor provides Vehicle Code the distribution of controlled substances for purposes §of 5.02 “dealer” means adequate without registration.” Although Therefore, “franchised dealer.” in decid- the statute penalties, 5.02C(e) authorized civil ing provides compre- a Court determined that “its prohibitory ef hensible standard “acting for capaci- the fect quasi-criminal is dealer,” a ty warrants rela of a this Court must first look tively such, strict test.” Id. As the statute to the definition of a franchised dealer. A “ was required to define the offense hvith “any franchised dealer is person ... who sufficient that ordinary people definiteness engaged is in the of buying, business sell- can understand what prohibited conduct ing, is exchanging or new motor vehicles and and in a manner that does not encourage servicing repairing or motor vehi- arbitrary and discriminatory 1.03(15). enforce- ...”9 cles. Section A new mo- Indeed, 8. the judge Department administrative law pursuant sub- Chap- to the terms of Proposal mitted her Decision to the Motor Code, Transportation ter and who is recommending Vehicles Board penalty a civil engaged buying, selling, business of of approximately $ 1.7 million. exchanging or new motor vehicles and ser- vicing repairing or pursuant motor vehicles 1.03(15) provides: The full text of to the a terms of franchise a and manufac- "Franchised any person dealer” means who warranty per- turer's at an established and holds a franchised motor vehicle dealer's place pursuant manent of business to a general distinguishing by number issued the intended, permissibly legislature probably which vehicle “a motor vehicle means tor so, creative conduct capture to whatever sale’ of a ‘retail subject the not been has by manufacturers to imagined be vehi- could mileage regard to the without 1.03(26). prohibi- intended the statute’s A retail sale circumvent cle.” Section unconstitutionally A is not statute except tion. of a motor vehicle “the sale means company or an vague merely because acquires a purchaser in which the sale uncertainty raise about its can individual of resale.” Section purpose for the vehicle A to the facts of their case. 1.03(32). that, application based on the argues unconstitutionally “only vague technically 1.03, statute §in did it definitions outlined at of conduct is no standard sold where in a retail because engage sale all; activity prohibited when no core then sold it who to the dealer automobile Edwards, Margaret S. purchaser, defined.” Because to the customer. (5th Cir.1986). for the F.2d dealer, the vehicle purchased resale, transaction is‘ex-

purpose a stat precision level of sale. retail from the definition cepted part, depends, upon must contain ute event, know if Or, they could not the enactment. Clinical nature of prohibited arrangement was such an pro Broader Leasing, 925 F.2d at 122. 5.02C(c). regu in economic scriptions permitted “businesses, face which because essentially argues lations care plan behavior 5.020(c) un economic demands Ford was vague relevant fully, expected can consult be of the Show operation sure whether Indeed, action. legislation of a advance of acting capacity constituted room enterprise may have regulated argument misapprehends dealer. meaning regu ability clarify vague prohibiting purpose behind

the basic inquiry, resort by its own pro violate due lation Vague statutes statutes. Id. process.” an administrative person cess, “give laws must in inquiry an By making 102 S.Ct. 1186. op a reasonable ordinary intelligence case, pre obtained a Ford could have prohibited, is so to know what portunity ” the Show ruling on Grayned v. enforcement accordingly. may act that he fact, In 104, 108, with law. complied room 92 City Rockford, 408 U.S. (1972). and Gen negotiations between the State 2294, 2298, 222 33 L.Ed.2d S.Ct. in manufacturer, become eral Motors allowed GM knew, it was that as a Ford compliance in a running volved website and it selling from automobiles prohibited adminis Even absent an Texas law. may violate conduct with had fair notice 5.020(c) § not uncon- is 5.02C(c).10 5.02C(c), procedure, the trative drafting In vehicle select a Consumers or each vehicle. effect a manufacturer franchise in with and, de- $300 for a refundable the site distributor. vehicle to a local posit, delivers the Ford opera- Showroom's 10. A brief review the drive, After the test a test drive. dealer for impli- clear that Ford's activities tion makes pur- or not to consumer decides whether acting prohibition manufacturer cate the on clearly Until the consumer the vehicle. chase directly capacity a dealer. Ford vehicle, the dealer rejects the Ford internet through its operates website Showroom a vehicle from the consumer cannot offer www.fordpreowned.com. Ford owns title to decides inventory. If consumer dealer's site; displayed controls vehicles on vehicle, Ford purchase the Ford site; internet con- displayed which vehicles dealer, who then trans- title to the transfers presented about the trols what information vehicles; price fers title to the consumer. “no-haggle” and sets the 510

stitutionally vague. pro- Section pro- conceivable state of facts that could comprehensible vides a standard of the vide a rational basis for the classification.” proscribed Communications, acting capacity Inc., FCC v. Beach 508 conduct— 307, 313, of a dealer. The “in phrase capacity of a dealer” is naturally read to include L.Ed.2d 211 argues Ford performed those activities by a licensed there is no rational for classifying- basis exactly dealer. The Code defines what differently manufacturers than dealers be- performed by activities are buy- cause manufacturers do not have dispro- dealer — ing, selling, exchanging motor portionate power vehicles. preowned vehicle Escalante, See 239 F.3d at (upholding market. For the reasons discussed in the a Mississippi prohibiting statute careless dormant analysis, Commerce Clause we imprudent Thus, driving). it hesitancy is clear “have in concluding no 5.020(c) under pro- what conduct [§ ] bears reasonable relation- Accordingly, scribed. argument ship to the legitimate purpose State’s 5.020(c) unconstitutionally vague controlling the retail mar- [automobile] fails. Exxon, ket-” 437 U.S. at 2207. Equal

The Protection Clause commands person that no equal pro- shall be denied Ford’s second claim is that tection of the law State. U.S. State Equal violated the Protection Clause Const, XIV, § amend. alleges because it did not have a rational basis for was equal protection denied in two re- treating differently than General Mo first, spects: the State had no rational tors. Equal “[T]he Protection Clause es classifying basis for manufacturers differ- sentially persons similarly directs that all dealers; second, ent than that no ra- situated be treated alike.” Wheeler v. tional justify basis exists to differential Miller, (5th Cir.1999). 168 F.3d treatment between Ford’s Showroom and Thus, clearly “[i]t is established that a a similar program website named Dri- GM equal protection violates the clause verSite. when it persons treats one set of different ly from similarly others who are situat equal protection guaran Stalder, ed.” Yates v. 217 F.3d applies government tee to all actions which (5th Cir.2000). classify individuals for different benefits or burdens under the law. See Labat v. Ben General Motors and Ford are both man- nett, (5th (“The Cir.1966) 365 F.2d ufacturers and should be similarly prohib- equal protection prohibits clause a state ited from entering the retail automobile from making arbitrary and unreasonable market. Nothing this case indicates classifications.”). “In areas of social and that differing placed restrictions have been policy, economic a statutory classification on the companies. two argues Ford that that proceeds neither along suspect lines the has State treated General Motors dif- infringes nor fundamental constitutional ferently by allowing operate them to a rights must be upheld against equal pro retailing website Despite automobiles. challenge tection if any there is reasonably Ford’s attempt to characterize the GM here, questionable, It is present challenge whether Ford’s discriminatory a to treat- claim even amounts to the sort of Olech, discrimina- Village ment. Willowbrook v. prohibited tion Equal Protection 1073, 1074, U.S. 120 S.Ct. 145 L.Ed.2d However, Supreme Clause. Court has (2000). recognized that even a “class of one” can

5H own, Ford’s first that the out image a mirror of their claim website as First, significant differences. hearing there are predetermined come of the was with a third Motors contracted Kent, General Director of the baseless. Carol DeMontrond, the web- operate to party, Department of En Transportation, independent DeMontrond is an site.12 Section, sent a forcement out letter advis to sell in Tex- licensed automobiles dealer that ing dealerships participation their DeMontrond, situation, unlike Ford’s as. program the Showroom violated state law. receives title to the automo- immediately Perhaps improperly, letter stated that auto- on the If the bile for sale website. Code, in violation of Ford was con GM, sold, DeMontrond, not mobile is not properly which should be left to the clusion finding for an alternative responsible Bray Brett “ac apparently Board. selling the car. DeMontrond’s means of in this quiesced” being letter sent out. price internet for vehicle is established definitively Because the letter stated that mutually developed through the use of a Code, in violation Ford was hand, Ford, schedule. on the other pricing that the the Enforce contends outcome of price has sole discretion set predetermined ment Action was before its price may A influence the vehicle. which position the fact hearing. ignores sold preowned being other vehicles price of weight the letter carries no throughout the State. While there proceedings opinion nor Kent’s later does certainly the two web- similarities between Bray’s that the was Even Code violated. sites, them are differences between letter, acquiescence apparent in the enough justify the significant State’s therein, binding stated no opinion has Ford has restric- position. not shown hearing in the administra effect before the placed upon tion their involvement judge Finally, law or the as a tive Board. similarly market been retail has matter, general pre-hearing opinion Notably, there is no evi- placed GM. agent an that a defendant allow Ford enforcement dence the State would not ties through maintain website similar violated the law does not rise to the level party pro- Ford’s equal to a third dealer. process due procedural violation. challenge thus tection fails. position In his Director of the “a fair trial process requires Due Division, Bray Motor administers Vehicle Murchison, 349

in a fair tribunal.” In re Kent, brought both who the Enforcement 623, 625, 99 L.Ed. U.S. Action, judge and the law administrative (1955). right applies This fundamental it. presided alleges who over an equally proceedings before adminis roles, Bray in these can serving multiple hill, 411 agency. Berry trative Gibson v. in influence the individuals improperly possibility and that the mere volved Ford’s final claim inherent in this structure impropriety during its process that it was denied due hearing. it cannot obtain a fair means First, hearing. because enforcement several Court has identified Supreme second, predetermined was and outcome the mere types of decision makers which Bray con Brett has an inherent because of bias renders them constitu probability serving interest in his several flict of (1) unacceptable: the deci tionally where within the Divi capacities Motor Vehicle pecuniary maker has interest sion. sion apparently run the hardware and used to site. 12. GM owns the software 512 (2) case;

outcome of the and where an discrimination interstate commerce adjudicator has target personal been the where a state prohibited competi statute party abuse or criticism from the tion with gasoline before local retailers out-of- Larkin, 35, 47, companies him. Withrow v. 421 state product U.S. at another level of 1456, 1464, (5th (refiners). 43 L.Ed.2d 712 distribution Exxon seems woe Cir.1975). A fully step third class of decision mak- out of with the Court’s more ers, case, See, the one at e.g., Lynn issue the instant recent cases. West Cream ery, are those that exercise both investigative Healy, Inc. v. 512 114 U.S. S.Ct. 2205, 129 adjudicative responsibilities. Id. With L.Ed.2d 157 Texas’s out and class, respect right prohibition this third movant competition “[t]he retail strong presumptions: must overcome two out-of-state auto manufacturers is about as (1) honesty the presumption integri- negative toward interstate commerce as ty adjudicators; If, pre- legislative get. action can as the Court sumption making says, negative that those decisions af- juris its commerce clause fecting public doing prudence public so intends prevent “economic Valley Rapides protectionism” businesses, interest.” v. Parish of local Bd., (5th School 118 F.3d 1052-1053 S.Ct. at stop and to states from Cir.1997); Withrow, (in see also imposing higher U.S. at prohibitive) this case (“Without 95 S.Ct. 1456 showing costs on products from out-of-state contrary, sources, 2213-14, state administrators ‘are as- S.Ct. at then Ford’s sumed to be men of conscience and intel- dealer-cooperative, consumer-friendly pro lectual discipline, capable gram judging par- ought stymied by not be parochial controversy ticular fairly on the basis legislation. state It should be obvious that ” own (quoting circumstances.’ United goods flow of interstate is diminished 409, 421, States v. Morgan, 313 U.S. entry totally 61 when barriers to prevent fair (1941))). S.Ct. competition 85 L.Ed. 1429 potential a class of distribu Even assuming that the administrative tors: price favored local distributors’ structure of the Motor Vehicle Division and service incentives keenly become less places Bray position in a competitive, prices rise, to function both and overall sales as an investigator adjudicator, and an will decline from equilibri the free-market Ford has not any proof point. offered um to over- Since this ap Texas statute presumption come the pears fairness. genre With- reflect a of state laws favor out Bray’s influence, evidence of improper ing local automobile dealers over out-of- process challenge manufacturers, Ford’s due fails. perhaps the Supreme will give guidance. Court us further Having rejected reviewed and Ford’s at- tacks on judgment court, of the district

the same is AFFIRMED. JONES,

EDITH H. specially

concurring:

I concur in Judge Benavides’s conscien- opinion,

tious but as to the negative com- analysis,

merce only clause I do so Corp. Maryland,

Exxon (1978), compels

this result. The Exxon case found no

Case Details

Case Name: Ford Motor Co. v. Texas Department of Transportation

Court Name: Court of Appeals for the Fifth Circuit

Date Published: Aug 27, 2001

Citation: 264 F.3d 493

Docket Number: 00-50750

Court Abbreviation: 5th Cir.