Lead Opinion
*41In this appeal, we address a dispute between a motor vehicle and replacement parts manufacturer and independently owned and operated franchise dealers concerning reimbursement for warranty repairs.
At the times relevant to this litigation, the appellants, Baer Buick GMC and Grata Chevrolet ("Dealers"), and the appellee, General Motors, LLC, were parties to dealer sales and service agreements, per which Dealers sold and serviced vehicles manufactured by General Motors. Under the contractual terms, Dealers committed to performing repairs required by limited warranties extended by General Motors upon sales with no additional charge to customers (albeit that the projected cost of such repairs was factored into the purchase price for new vehicles).
Through the SPPM, General Motors agreed to pay dealers at large for labor during warranty work under either of two options, denominated "Option A (Retail Rate) and Option C (CPI-based)." Stipulation at ¶16. The terms were as follows:
Under Option A, a dealer may establish its "effective" labor rate based on an average of its retail rate, subject to certain verification requirements.
Under Option C, GM offers to enter into specific labor rate agreements with its dealers pursuant to which they agree on an initial labor rate for warranty repairs, with a guaranteed minimum annual adjustment of at least 2.5% over a three year period based on the Consumer Price Index.
Id. at ¶¶17-18. Option C, apparently, was the preferred option among dealers for labor reimbursement. See id. at ¶19 ("Many GM dealers choose Option C because its guaranteed annual increases allow[ ] them to budget for their warranty *42labor rates for warranty repairs."). General Motors' standard reimbursement policy for parts installed in connection with warranty repairs was to pay one hundred and forty percent of the dealers' costs. See id. at ¶23.
Apparently, both labor reimbursement alternatives, Options A and C, were initially made available to all dealers regardless of whether they sought reimbursement for parts under the standard contractual methodology or invoked an alternative rate, presumably under a governing regulatory statute. In 2012, however, General Motors instituted a policy effectively rendering any dealer pursuing an alternative reimbursement methodology for calculating warranty parts reimbursement ineligible for contractually-based Option C reimbursement for labor. See Stipulation at ¶¶20, 22 ("Eligibility [for Option C] is contingent on [Dealer's] continued compliance with GM standard parts reimbursement policy." (quoting the 2014 version of the SPPM)). Instead, the SPPM made dealers selecting extra-contractual, retail-rate reimbursement for parts eligible for remuneration for the labor component of warranty repairs only under Option A.
The business relationship between vehicle manufacturers and dealers is also regulated, in Pennsylvania, by the Board of Vehicles Act.
The Act was amended in 2013, however, to do so. See 63 P.S. § 818.9(a)(2) ("Compensation for parts ... shall be at the dealer's retail rate."). The governing prescription for labor was also amended to track this language, see id. § 818.9(a)(3) ("Compensation for labor used in warranty service shall be at the dealer's retail rate."), and the general expression of a reasonableness nexus was removed. Further, the amendments added discrete methods for calculating retail rates, respectively, for parts and labor. See id. § 818.9(a)(2), (3).
Additionally, the General Assembly added Section 9(b.4) to regulate cost recovery by manufacturers, as follows:
(b.4) Recovery.--
(1)(i) A manufacturer or distributor may not recover its costs from a dealer within this Commonwealth that does not apply to the manufacturer or distributor for retail rate reimbursement for parts and labor, including an increase in the wholesale price of a vehicle or surcharge imposed on a dealer intended to recover the cost of reimbursing a dealer for parts and labor under this section.
(ii) A manufacturer or distributor may increase the price for a vehicle or part in the normal course of business.
(2) A dealer may elect to revert to the nonretail rate reimbursement for parts and labor once in a calendar year to avoid a manufacturer or distributor surcharge.
63 P.S. § 818.9(b.4). Significantly, although the Act addresses payment of retail rates *43in mandatory terms, see id. § 818.9(a)(2), (3), Section 9(b.4)(2) implies, if it does not explicate, that dealers are free to accede to payment of contractual rates rather than invoking the statutory ones.
In 2014, Dealers sought retail reimbursement for warranty parts pursuant to Section 9(a)(2) of the Act while intending to remain enrolled in the contractual, Option C reimbursement program for labor. See id. at ¶28. Per the SPPM, however, General Motors advised Dealers that it would change their reimbursement for warranty labor from Option C to Option A, against their wishes. See id. at ¶42. General Motors also conveyed to Dealers that the company intended to impose a discrete cost recovery fee, or surcharge, to new vehicle invoices, initially in the amount of $122 per vehicle. See id. at ¶¶43-45.
Dealers, along with several other franchise dealers, lodged a protest with the State Board of Vehicle Manufacturers, Dealers and Salespersons (the "Board"), which is charged with administering and enforcing the Act. See 63 P.S. §§ 818.4(a), 818.8(d)(1). Relevantly, with respect to the labor rate, Dealers claimed that General Motors violated Section 9(a)(3) of the Act by contractually changing the manner in which it reimburses dealers for warranty labor, when Dealers had merely exercised their statutory rights concerning reimbursement for warranty parts. They also challenged General Motors' ability to impose a surcharge on dealers that elect the statutory retail reimbursement rate for warranty parts but not labor. See id. § 818.9(b.4)(1)(i) (providing that a manufacturer "may not recover its costs from a dealer ... that does not apply to the manufacturer ... for retail rate reimbursement for parts and labor...." (emphasis added)). According to Dealers, the statute's plain language did not permit manufacturers to impose surcharges when dealers elect statutory reimbursement for parts but not labor. See id. § 818.9(b.4)(1)(i), (2).
In response, General Motors contended that nothing in the Act guarantees dealers the right to participate in Option C, which is purely a matter of contract. According to General Motors:
GM is not obligated under Pennsylvania law to offer Option C, as it often results in a higher reimbursement rate than the dealer's own retail rate. GM voluntarily offers this program because it is administratively convenient for dealers and allows them to compete more aggressively for retail repair work by maintaining a lower retail labor rate without sacrificing the amount they receive for warranty labor reimbursement. In exchange for these benefits, however, dealers agree that their "[e]ligibility [for Option C] is contingent on [their] continued compliance with GM standard parts reimbursement policy." If a dealer instead prefers to request retail parts reimbursement rather than accept GM's standard 40% parts markup, it is no longer eligible for Option C and reverts to Option A.
Brief for General Motors dated Apr. 8, 2016, in Baer Buick GMC , No. 1325-60-2014, at 2.
With respect to the surcharge, General Motors recognized that the Act forbids cost recovery from dealers that have not chosen to seek retail reimbursement for "parts and labor." 63 P.S. § 818.9(b.4)(1)(i). According to the company, however, Dealers did not qualify for such safe-harbor protection on account of their selection of the statutory, retail rate for parts. General Motors asserted that foreclosing manufacturers from recouping costs attendant to warranty repairs lacks economic sensibility. Moreover, according to the company, such an approach would contravene the surcharge's reversionary provision. See *44id. § 818.9(b.4)(2) ("A dealer may elect to revert to the nonretail rate reimbursement for parts and labor once in a calendar year to avoid a manufacturer or distributor surcharge.").
After mediation efforts failed to resolve the above issues among the litigants,
On General Motors' subsequent appeal, a divided panel of the Commonwealth Court reversed. See General Motors, LLC v. Bureau of Prof'l and Occupational Affairs ,
[p]roperly understood, section 9 of the Act provides a safeguard for dealers that are dissatisfied with the warranty reimbursement available to them under contracts with manufacturers. Section 9 creates a statutory level of reimbursement that a dealer may rely upon. However, section 9 does not preclude manufacturers and dealers from contractual agreement to a different arrangement for warranty reimbursement.
* * *
[The General Motors' contract] offers Option C reimbursement for warranty labor only if a dealer agrees to standard reimbursement for warranty parts. Option C is not a creation of the Act; it is a creation of the contract, and the contract may define Option C eligibility. Section 9(a)(3) of the Act offers Protesting Dealers the safeguard of statutory retail rate reimbursement for labor if Protesting Dealers are dissatisfied with the reimbursement available pursuant to the agreement with GM. The Act does not protect Protesting Dealers' access to Option C.
The majority turned to whether General Motors violated Section 9(b.4)(1)(i) of the Act by imposing surcharges, crediting General Motors' argument that the statute's restriction on cost recovery effectively creates a safe harbor for dealers that do not seek any retail rate reimbursement under section 9(a). The majority recognized that the statute's language providing that manufacturers cannot recover costs from dealers that do not apply for retail rate reimbursement for "parts and labor" was "facially conjunctive." General Motors ,
The majority also found it material that the same "parts and labor" terminology is employed in Section 9(b.4)(2) of the Act, which prescribes that "[a] dealer may elect to revert to the nonretail rate reimbursement for parts and labor once in a calendar year to avoid a manufacturer or distributor surcharge," 63 P.S. § 818.9(b.4)(2) (emphasis added). According to the majority:
The self-evident object of section 9(b.4) is to permit manufacturers to recover increased costs from a dealer that invokes section 9(a) to be reimbursed at a statutorily defined retail rate instead of at the rate the parties had agreed upon in their contract. This Court cannot identify any policy reason that would justify limiting the ability of manufacturers to recover under section 9(b.4) only to instances where dealers elect to invoke retail rate reimbursement for both parts and labor.
General Motors ,
Judge Cosgrove authored a dissenting opinion, characterizing the Act as "an exercise of [the Commonwealth's] police power" designed to "prevent frauds, impositions and other abuses upon its citizens and to protect and preserve the investments and properties of the citizens of this Commonwealth." General Motors ,
[I]t is difficult to see how the Legislature could have intended statutory language, which may be subject to two reasonable interpretations, to be viewed in a way which favors multibillion dollar corporations based in other states (or countries) over the protective interests of local automobile dealers operating within the Commonwealth.
We allowed Dealers' appeal to consider the two matters of statutory construction posed by the Board's and the Commonwealth *46Court's decisions, as well as Dealers' contention that the Commonwealth Court failed to afford appropriate deference to the Board. See General Motors, LLC v. Bureau of Prof'l & Occupational Affairs ,
I. Section 9(a) and Option C
Dealers contend that Section 9(a) of the Act prohibits manufacturers from conditioning access to a contractual reimbursement rate on the non-exercise of a statutory right, and the contractual ineligibility requirement associated with Option C should therefore be deemed invalid to the extent that it impinges on a dealer's ability to exercise its statutory reimbursement options. They explain that the statutory compensation rates for parts and labor under the Act are subject to different reimbursement methodologies, see 63 P.S. § 818.9(a)(2), (3), which they believe reveals that the two compensation rates are independent options. From this, Dealers reason:
A statutory option is simply not available if a dealer loses something by accessing that option. And because the General Assembly mandated that the statutory reimbursement options be available to dealers, GM has violated the Act by conditioning access on the non-exercise of a statutory right.
... [T]he contractual and statutory reimbursement options must be independent of one another and must each be available with no strings attached. By attaching a string to the statutory parts reimbursement option, GM violated the unambiguous words of the statute.
Brief for Appellants at 25; see also id. at 30-31.
In the event that Section 9(a) is deemed ambiguous in the relevant regards, Dealers invoke multiple factors articulated in the Statutory Construction Act, including assessment of the occasion and necessity for the statute, the object to be attained, the mischief to be remedied, and the consequences of a particular interpretation. See 1 Pa.C.S. § 1921(c)(1), (3), (4), (6). In these regards, Dealers stress the legislative purpose to protect dealers from unfair treatment by vehicle manufacturers. See Brief for Appellants at 29 (citing Honorable Robert Tomlinson, Senate Co-Sponsorship Memorandum for SB 732 (Mar. 4, 2013)); accord Van Wie Chevrolet, Inc. v. General Motors, LLC ,
Upon review, we credit the Commonwealth Court majority's analysis and holding on the Option C issue on their terms. As General Motors persuasively argues, although the Act plainly modifies its contractual relationship with Dealers, nothing in the enactment precludes the company from enforcing a preexisting, contractual, *47incentive-based program, offering more favorable labor reimbursement rates than are available under the Act only to those dealers who will accept the company's standard parts reimbursement protocol. And nothing in the contract, beyond a monetary incentive to voluntarily refrain from invoking the statutory reimbursement methodology, interferes with Dealers' ability to access the full panoply of benefits made available under the Act. Accord Brief for Appellee at 44 ("[T]he Option C eligibility language presents no conflict with dealers' ability to receive statutory reimbursement for warranty parts and labor.").
We realize that the Act embodies remedial legislation designed to protect Pennsylvania dealers from unfair practices on the part of vehicle manufacturers, amidst business relationships with perceived bargaining disparities. Accordingly, the principle of statutory construction favoring a broad construction of remedial legislation militates in Dealers' favor. See 1 Pa.C.S. § 1928(c). Yet, in the context of statutes altering contractual agreements between vehicle manufacturers and dealers, courts have been particularly circumspect and careful not to exceed the express prescriptions of the governing statute. See, e.g. , General Motors Corp. v. Darling's ,
In terms of judicial deference to the Board's construction of the Act, Dealers *48cite Alpha Auto Sales, Inc. v. Dep't of State, Bureau of Prof'l & Occupational Affairs ,
Here, we agree with Dealers that the question presented ultimately devolves to whether the contractual condition attending a dealer's eligibility for Option C reimbursement is void as against a public policy deriving from the Act. However, while certainly General Motors bears the burden, under the Act, "to prove it has not violated any provision of this act," 63 P.S. § 818.9, we conclude that this allocation does not extend to a public-policy-based challenge to enforcement of a contractual provision. Indeed, arguably at least, such a challenge would more appropriately have been presented in a declaratory judgment proceeding lodged in a court of law. See, e.g. , Generette ,
In summary, we agree with the Commonwealth Court and General Motors that the Act does not create a statutory right for Dealers to participate in the Option C program, either by virtue of its plain terms or by implication.
II. Section 9(b.4) and Surcharge
Relative to the interpretation of Section 9(b.4), Dealers criticize the Commonwealth *49Court for construing the conjunctive phrase "parts and labor" as disjunctive, i.e. , "either parts or labor." According to Dealers, this approach undermines the Act's purpose to protect local Pennsylvania dealers. It is Dealers' position that the "parts and labor" can also be read to mean just that in the reversionary clause of Section 9(b.4), without creating any material incongruity.
General Motors, on the other hand, maintains that the Legislature intended for manufacturers to be able to recoup their costs for warranty repairs, and that the Commonwealth Court properly construed the plain language of Section 9(b.4)(1)(i) to conclude that General Motors was entitled to recover its increased costs from dealers that opt out of the safe harbor by seeking statutory retail reimbursement for warranty parts. Reading this subsection in conjunction with the reversionary provision in subsection (b.4)(2), the company contends, its approach represents the only reasonable interpretation of the phrase "parts and labor."
As related by a prominent commentator, "[t]he terms 'and' and 'or' are often misused in statutes." NORMAN SINGER , 1 A SUTHERLAND STATUTORY CONSTRUCTION § 21:14 (7th ed. 2018). But, by this point in time at least, the Legislature should be no less aware of the problem than we are, and accordingly, in the absence of a result that is unreasonable, absurd, or incapable of execution, this Court has generally taken "and" to mean "and" and "or" to mean "or." See, e.g. , Garratt v. City of Phila. ,
In terms of Section 9(b.4)(2)'s reversionary clause, we also agree with Dealers that the treatment of "parts and labor" in that section to mean both parts and labor does not create a result that is absurd, unreasonable, or incapable of execution. From our point of view, the Act appears to be somewhat of a blunt instrument in its protective provisions, since, for example, it does not require an inquiry into the impact of the statutory calculation of reimbursement rates and regulation cost recovery on manufacturers' or dealers' profit margins. The statute also does not require any assessment of the impact of any vehicle pricing adjustments that may result from a manufacturer's inability to impose surcharges on competitiveness or profitability.
Nevertheless, in response to General Motors' arguments about economic sensibility, we observe that "[t]he vast majority of states regulate the price of warranty reimbursement payments to automobile dealers, and over a dozen states have enacted ... recoupment prohibitions." Alliance of Auto. Mfrs., Inc. v. Currey ,
The order of the Commonwealth Court is affirmed as it relates to Section 9(a) and reversed as concerns Section 9(b.4)(1)(i).
Justices Todd, Donohue, Dougherty and Wecht join the opinion.
Justice Mundy files a concurring and dissenting opinion.
Justice Baer did not participate in the consideration or decision of this case.
Notes
Factual matters are drawn from a stipulation of facts filed by the parties before the State Board of Vehicle Manufacturers, Dealers and Salespersons, which has served as the factual predicate for all decisions in this case. See Stipulation of Facts dated Feb. 19, 2016, in Baer Buick GMC v. General Motors LLC , No. 1325-60-2014 (Bd. of Veh. Mfrs., Dealers & Salespersons) [hereinafter "Stipulation at ___"]. The litigants agree that the questions that have been presented throughout the litigation are entirely ones of law.
Act of Dec. 22, 1983, P.L. 306, No. 84 (as amended 63 P.S. §§ 818.1 -818.37 ) (the "Act").
Effective October 24, 2019, the enactment has been renumbered and further amended. See 63 P.S. §§ 101-704 (effective Oct. 24, 2019).
Most of the protestant-dealers withdrew from the proceedings at this stage.
The relevant passages of the Board's opinion fail to reconcile this conclusion with the central fact that Dealers' core claim is to a non-statutory rate of reimbursement for labor.
This justification is also tenuous, since a main purport of the Board's decision is that Dealers were entitled to a non-statutory rate of reimbursement identified in Dealers' agreements with General Motors, but which was nevertheless unavailable to Dealers under the specified terms of those agreements.
In this regard, we respectfully differ with Justice Mundy's position that Section 9(a)'s requirements for retail-rate reimbursement constitute statutory authority mandating General Motors to do something else (i.e. , maintain the contractual Option C rate for labor reimbursement, despite Dealers' non-observance of the contractual prerequisite). See Concurring and Dissenting Opinion, at 51. Responsively, we reiterate that Section 9(a) simply does not provide for Option C reimbursement.
The Darling's court cited the principle that "statutes in derogation of a natural or common right, including statutes that 'threaten [ ] to invade an existing property or contract right' must be narrowly interpreted."
Although, as Justice Mundy notes, Darling was a federal diversity case, the federal circuit court plainly expressed its own disinclination to unnecessarily interfere with commercial contracts in the absence of a clear legislative mandate. See Darling ,
The concurring and dissenting opinion posits that this Court should broadly undertake here to resolve whether the conferral of deference to administrative tribunals "is still cogent in Pennsylvania." Concurring and Dissenting Opinion, at 52. No party to this appeal, however, has suggested that we should engage in a wholesale reconsideration of the array of principles governing judicial deference in the administrative setting. Instead, General Motors' argument favoring less deference is premised on the circumstances at hand -- "where the questions presented are purely legal ones, the case was presented on stipulated facts, and the Board possessed no specialized expertise superior to that of the Commonwealth Court in reading the plain language of a non-technical statute on issues of first impression." Brief for Appellee at 24. Our present treatment conforms to the arguments presented.
General Motors notes as an aside that the Board is disproportionately composed of dealer representatives, and indeed, there is no representative of any manufacturer on the Board. See Brief for Appellee at 3 n.1 (citing 63 P.S. § 818.3(a) ). To the degree there is any appearance that members of the Board may have a direct or indirect financial interest in the outcome of a case, this circumstance obviously makes the affordance of deference less comfortable for a neutral judiciary.
For a contrary view reflecting a more flexible approach to the interchangeability of "and" and "or," see, for example, R.A. Peacock v. Lubbock Compress Company ,
Section 9(b.4)(1)(ii) allows that "[a] manufacturer or distributor may increase the price for a vehicle or part in the normal course of business." 63 P.S. § 818.9(b.4)(1)(ii).
Of course, the General Assembly very well may have considered information about profitability and competition in the legislative process giving rise to the 2013 amendments to the Act.
By Order, dated November 15, 2018, Appellant Mel Grata Chevrolet, Inc. was dismissed from the present proceedings, and our present Order should be read accordingly.
Dissenting Opinion
I join Section II of the well-reasoned Majority Opinion finding that the surcharge General Motors imposed in this case is not permissible pursuant to Section 9(b.4) of the Board of Vehicles Act. I write separately, however, to note my disagreement with Section I of the Majority Opinion. Because I conclude that the Majority's construction in Section 1 of the Board of Vehicles Act (the Act), 63 P.S. §§ 818.1 - 818.37, is antithetical to its stated purpose and undercuts the mandatory language utilized in the Act, I respectfully dissent.
When faced with questions of statutory interpretation, "the primary maxim ... is to ascertain and effectuate legislative intent." Commonwealth v. Shiffler ,
The Board of Vehicles Act was promulgated as an "exercise of [the General Assembly's] police power ... in order to prevent frauds, impositions and other abuses upon [the Commonwealth's] citizens and to protect and preserve the investments and properties of the citizens[.]"
The Darling's case concerned Maine's warranty reimbursement statute and was heard by a federal court sitting in diversity, which impacted the court's analysis of the matter. Darling's ,
Unlike the dealer in Darling's , the dealers in this case are not basing their argument on the silence of the Act. Rather, the dealers here are relying on the consistent, mandatory language utilized. For example, the Act provides that compensation for parts used in warranty repairs "shall be at the dealer's retail rate[,]" and provides the procedure by which the retail rate "shall be established." 63 P.S. § 818.9(a)(2) (emphasis added); see also Coretsky v. Board of Comm'rs of Butler Twp. ,
Further, I agree with the Commonwealth Court's dissent in that proper deference was not afforded to the Board's interpretation of the Act. "The proper place to begin the appropriate inquiry is not ... with the dictionary but with due deference to the views of the regulatory agency directly involved in administering the statute in question." Alpha Auto Sales v. Dep't of State, Bureau of Prof'l & Occupational Affairs ,
*52Maggiano v. Pennsylvania State Bd. of Vehicle Mfrs., Dealers, and Salespersons ,
Neither the Commonwealth Court nor the Majority of this Court have established on what basis the Board's interpretation of the Act is clearly erroneous. The Majority Opinion implies that great deference should not be afforded to the Board because the interpretation in this case is not a longstanding one. Majority Opinion at 47-48. The Majority fails, however, to fully appreciate that the Act is chiefly within the ambit of the Board's expertise.
In fact, the Pennsylvania Board of Vehicles Act was the statutory authority that created the Pennsylvania State Board of Vehicle Manufacturers, Dealers, and Salespersons. 63 P.S. § 818.3
This Court has consistently shown a willingness to chip away at the administrative deference rule. See Harmon v. UCBR , --- Pa. ----,