International Truck And Engine Corporation v. Brett BrayInternational Truck And Engine Corporation v. Brett Bray
Brian E. Berwick, Nancy Elizabeth Olinger, Kristen L. Worman (argued), Asst. Attys. Gen., Austin, TX, for Defendant-Appellee.
Martin D. Beirne, Beirne, Maynard & Parsons, Houston, TX, for Freightliner, LLC, Amicus Curiae.
Appeal from the United States District Court for the Western District of Texas.
Before KING, Chief Judge, and BENAVIDES and CLEMENT, Circuit Judges.
BENAVIDES, Circuit Judge:
Plaintiff-Appellant International Truck and Engine Corporation, a manufacturer of medium- and heavy-duty trucks, operates two used truck centers at which it sells trucks of the kind it manufactures. Defendant-Appellee Brett Bray is Director of the Motor Vehicle Division of the Texas Department of Transportation, the agency responsible for regulating sales of motor vehicles in Texas. Since 1999, the Director has maintained that Texas law prohibits motor vehicle manufacturers like International from owning, operating, controlling, or acting as dealers of motor vehicles. See
International contends that this refusal is unlawful. First, International argues that section 2301.476(c) prohibits manufacturers from acting as dealers of new vehicles, not from acting as dealers of used vehicles. Alternatively, International argues that if section 2301.476(c) applies to used vehicles, then it violates the dormant Commerce Clause. The district court granted summary judgment in favor of the Director. Because we conclude that section 2301.476(c) prohibits International from acting as a dealer of used vehicles and does not violate the dormant Commerce Clause, we affirm the judgment of the district court.
I.
In 1999, the Legislature extensively amended the Motor Vehicle Code. See Act of June 18, 1999, ch. 1047, 1999 Tex. Gen. Laws 3861. As amended, the Code included section 5.02C(c), which provided that “a manufacturer or distributor may not directly or indirectly: (1) own an interest in a dealer or dealership; (2) operate or control a dealer or dealership; or (3) act in the capacity of a dealer.” Id. § 14, 1999 Tex. Gen. Laws at 3875 (codified at Tex. Rev. Civ. Stat. Ann. art. 4413(36), § 5.02C(c) (Vernon Supp. 2002) (repealed 2003)). The Motor Vehicle Division, which was responsible for enforcing this provision of the Code, interpreted section 5.02C(c) as prohibiting manufacturer control of any dealer, not just dealers of new vehicles.
Section 5.02C(c) thus prohibited International from owning and operating its used truck centers, and in 2000, the Motor Vehicle Division announced that it would not renew International‘s dealer license. International then sued the Director in federal court for declaratory and injunctive relief. International conceded that, as written, section 5.02C(c) prohibited it from acting as a dealer of used trucks. International, however, argued that section 5.02C(c) was invalid because it violated the dormant Commerce Clause and the Equal Protection Clause. The parties agreed that International could continue to operate its used truck centers during the pendency of the district court case and this appeal.
While International‘s suit was pending in the district court, we addressed a similar challenge to section 5.02C(c) in Ford Motor Co. v. Texas Department of Transportation, 264 F.3d 493 (5th Cir. 2001). Ford wanted to sell “pre-owned” motor vehicles through a website and alleged that section 5.02C(c) violated a number of constitutional provisions, including the dormant Commerce Clause. Id. at 498. International submitted a brief as an amicus curiae in support of Ford. We rejected Ford‘s and International‘s arguments and held that Texas could constitutionally prohibit manufacturers from controlling dealers. Id. at 499-505.
International subsequently amended its complaint. International maintained its constitutional challenges and also argued that, as interpreted in Ford, section 5.02C(c) did not bar manufacturers from controlling dealers of used vehicles. International then sought partial summary judgment on its statutory claim only. The Director answered International‘s amended complaint and sought summary judgment on International‘s statutory and constitutional claims.
The district court granted summary judgment to the Director. The court determined that statements in Ford purporting to limit section 5.02C(c) to sales of new vehicles were non-binding dicta and construed section 5.02C(c) to prohibit manufacturer control of all motor vehicle dealers. The court also ruled that section 5.02C(c) violated neither the Commerce Clause nor the Equal Protection Clause. International appealed.2
Therefore, this appeal raises two questions: whether section 2301.476(c) bars manufacturers from owning, operating, or acting as dealers of used vehicles and, if so, whether section 2301.476(c) violates the dormant Commerce Clause.3 We review de novo the district court‘s grant of summary judgment. See New Orleans Assets, L.L.C. v. Woodward, 363 F.3d 372, 374 (5th Cir. 2004).4
II.
We first address whether section 2301.476(c) bars manufacturers from owning, operating, controlling or acting as dealers of used vehicles. International, relying principally on our treatment of section 5.02C(c) in Ford, argues that “dealer” refers only to a dealer of new motor vehicles. Therefore, International argues, section 2301.476(c) does not prohibit it from acting as a dealer of used trucks. The Director maintains that section 2301.476(c) bars a manufacturer from owning, operating, or acting as a dealer of any vehicles whether new or used. We conclude that Ford‘s treatment of section 5.02C(c) does not bind us and that section 2301.476(c) applies to dealers of new and used motor vehicles.
A.
We begin by determining whether Ford‘s treatment of 2301.476(c)‘s predecessor, section 5.02C(c) of the Motor Vehicle Code, controls our interpretation of section 2301.476(c). In Ford, we stated twice that section 5.02C(c) of the Motor Vehicle Code applied only to dealers of new motor vehicles. 264 F.3d at 504 n. 5, 508-09. The district court treated these statements as non-binding dicta, but International argues that they are binding interpretations of Texas law.
The first passage relied upon by International appears in Ford‘s discussion of the dormant Commerce Clause. Id. at 499-505. Ford had argued that section 5.02C(c) did not further Texas‘s purported interest in reducing manufacturer leverage over dealers because Ford did not enjoy a superior position in the market for the “pre-owned vehicles” it sought to sell. Id. at 503-04. In the course of rejecting this argument, we commented in a footnote that “[t]he Code only prohibits a manufacturer from selling `new motor vehicles’ — motor vehicles which have not been the subject of a prior retail sale.” Id. at 504 n. 5.
Our commentary in the footnote at issue was not necessary to the resolution of Ford‘s dormant Commerce Clause challenge and we did not rely on it in rejecting that challenge. Moreover, this statement was not an explication of the law governing our analysis, but commentary on a quirk in the Texas statutes. Therefore, the first passage relied upon by International is dictum, and we may disregard it.
The second passage relied upon by International appears in Ford‘s discussion of vagueness. See 264 F.3d at 507-10. Ford claimed that it had no fair notice of what conduct constituted “operating or controlling a dealer” or “acting in the capacity of a dealer” under Texas law. Id. at 507. We addressed this claim by explaining section 5.02C(c). We began with the premise that “[t]he Motor Vehicle Code provides that for purposes of [section] 5.02, `dealer’ means `franchised dealer‘” and therefore reasoned that “in deciding whether [section] 5.02C(c) provides a comprehensible standard for `acting in the capacity of a dealer,’ this Court must first look to the definition of a franchised dealer.” Id. We then observed that franchised dealers are dealers of new motor vehicles. Id.5
Whether this section of Ford‘s analysis represents dictum is a close question. Ford‘s equation of dealer and franchised dealer was not strictly necessary to its conclusion that section 5.02C(c) was not vague. Rather, the crux of Ford‘s vagueness analysis is that “[t]he phrase `in the capacity of a dealer’ is naturally read to include those activities performed by a licensed dealer,” and that “[t]he Code defines exactly what activities are performed by a dealer — buying, selling, or exchanging motor vehicles.” Id. at 510. This analysis did not hinge on whether vehicles are new or used. Nevertheless, the Ford panel‘s explanation of the challenged statute was not mere commentary but was arguably part of Ford‘s explication of governing law. See Gochicoa, 238 F.3d at 286 n. 11. In essence, Ford reasoned that section 5.02C(c) was not vague because it had a particular meaning, albeit a meaning section 5.02C(c) may not have had.
We need not resolve this question, however, because even were this second passage not dicta, it still would not bind us. A prior panel opinion‘s interpretation of state law binds us no less firmly than a prior panel interpretation of federal law would. Am. Int‘l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 270 n. 4 (5th Cir. 2003). When we interpret state law, however, we are also bound to apply the law as the state‘s highest court would. FDIC v. Abraham, 137 F.3d 264, 267-68 (5th Cir. 1998). To balance these obligations, we recognize that we need not follow a prior panel opinion when a subsequent state court decision or statutory amendment shows that a prior panel decision was clearly wrong. Id. at 269.
The Legislature intended this recodification to be nonsubstantive. Id. § 14, 2001 Tex. Gen. Laws at 5020. In most cases, that intent would confirm that a prior panel‘s prediction of state law was correct. In this unique instance, however, the nonsubstantive nature of the recodification leads us to precisely the opposite conclusion.6 We stated in Ford that “[t]he Motor Vehicle Code provides that for purposes of [section] 5.02, `dealer’ means `franchised dealer.‘” 264 F.3d at 508. The only plausible basis for this statement was old section 5.02(a), which provided: ”In this section, `dealer’ means `franchised dealer.‘” Tex. Rev. Civ. Stat. Ann. art. 4413(36), § 5.02(a) (Vernon 2002) (repealed 2003) (emphasis added). We then assumed that the equation of “dealer” and “franchised dealer” in old section 5.02(a) applied to old section 5.02C. See Ford, 264 F.3d at 508.
Subsequent legislation, however, clarifies that section 5.02(a) applied only within section 5.02 and that section 5.02C was a separate section. The recodification eliminated old section 5.02(a), and the subsections to which section 5.02(a) had applied were modified to clarify that they apply only to franchised dealers. See Act effective June 1, 2003, §§ 5, 13, 2001 Tex. Gen. Laws at 4439, 4947-53, 5020. Compare
We thus turn to the meaning of section 2301.476(c) as currently codified. Applying Texas principles of statutory interpretation, see Tonkawa Tribe v. Richards, 75 F.3d 1039, 1046 (5th Cir. 1996), we hold that the term “dealer” in section 2301.476(c) extends to all dealers, not just dealers of new vehicles.
First, when a statute defines a term, Texas courts must construe that term according to its statutory definition.
Second, Texas courts must interpret statutory terms consistently. See Needham, 82 S.W.3d at 318. If “dealer” meant only “a dealer of new vehicles” for purposes of section 2301.476(c), then a “dealer” in section 2301.476(c) would be different from a “dealer” in other parts of the Occupations and Transportation Codes. See
Third, Texas courts avoid interpreting statutory language as superfluous.
International asserts that our construction of section 2301.476(c) creates a strange loophole. Section 2301.476(c) prohibits a manufacturer from owning, operating, or controlling an interest in a “dealer or dealership.” In chapter 2301 of the Occupations Code, the term “dealership” means “the physical premises and business facilities on which a franchised dealer operates his business.”
Therefore, the term “dealer” in section 2301.476(c) is not limited to dealers of new vehicles. Section 2301.476(c) bars International from owning, operating, or acting as a dealer of used trucks.
III.
We turn next to International‘s argument that if section 2301.476(c) bars International from acting as a dealer of used trucks, then that provision violates the dormant Commerce Clause,
To evaluate whether a state statute comports with the dormant Commerce Clause, we begin by asking whether the statute impermissibly discriminates against interstate commerce or regulates evenhandedly with only incidental effects on interstate commerce. Ford, 264 F.3d at 499. If the statute impermissibly discriminates, then it is valid only if the state “can demonstrate, under rigorous scrutiny, that it has no other means to advance a legitimate local interest.” C & A Carbone, Inc. v. Town of Clarkstown, N.Y., 511 U.S. 383, 392 (1994). If the statute does not impermissibly discriminate, then the statute is valid unless the burden imposed on interstate commerce is “clearly excessive” in relation to the putative local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970).
A.
Section 2301.476(c) does not impermissibly discriminate against interstate commerce. In this context, discrimination means “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.” Or. Waste Sys., Inc. v. Dep‘t of Envtl. Quality, 511 U.S. 93, 99 (1994). A court may find discrimination based on evidence of discriminatory effect or discriminatory purpose. Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 270 (1984).
As Ford makes clear, however, discrimination does not include all instances in which a state law burdens some out-of-state interest while benefitting some in-state interest. 264 F.3d at 500; see also Tex. Manufactured Hous. Ass‘n v. City of Nederland, 101 F.3d 1095, 1102 (5th Cir. 1996) (“[T]he mere fact that a statute has the effect of benefitting a local industry while burdening a separate interstate industry does not in itself establish that the statute is discriminatory.“). Rather, a state statute impermissibly discriminates “only when a[s]tate discriminates among similarly situated in-state and out-of-state interests.” Ford, 264 F.3d at 500.9
International characterizes Ford‘s holding as a failure of summary judgment proof and claims that the improved summary judgment record in this case raises issues that the record in Ford did not. Like Ford, however, International has failed to create any genuine question that Texas law impermissibly discriminates between similarly situated in-state and out-of-state interests.
First, International emphasizes that the practical effect of section 2301.476(c) falls primarily on out-of-state companies. That all or most affected businesses are located out-of-state does not tend to prove that a statute is discriminatory. See Exxon, 437 U.S. at 126; Ford, 264 F.3d at 502. Thus, the record that International has purportedly enhanced supports a proposition we have already dismissed as irrelevant.
International also relies heavily on an exception to section 2301.476(c) added by the Legislature in 1997. See Act of May 22, 1997, ch. 639, § 36, 1997 Tex. Gen. Laws 2158, 2007. That exception provides that a person who held both a motor home manufacturer‘s license and a motor home dealer‘s license on June 7, 1995,10 may continue to hold both licenses and operate as a manufacturer and as a dealer of motor homes but of no other type of vehicle.
B.
Because section 2301.476(c) is not discriminatory, we apply the Pike balancing test, which asks whether a challenged statute imposes a burden on interstate commerce that is “clearly excessive” in relation to the statute‘s putative local benefits. See Pike, 397 U.S. at 142. International has failed to demonstrate any burden, much less a burden clearly excessive in relation to the state‘s legitimate interests. Therefore, section 2301.476(c) passes the Pike balancing test.
1.
International has not demonstrated any burden on interstate commerce. A statute imposes a burden when it inhibits the flow of goods interstate. See Ford, 264 F.3d at 503. In Ford, we found no evidence to suggest that section 5.02C(c) inhibited the flow of passenger vehicles interstate, id., and International offers no credible reason why the situation would be different for medium- and heavy-duty trucks, whether new or used.
International seeks to establish a burden by claiming that closing its used truck centers will inhibit the flow of new medium- and heavy-duty trucks into Texas. According to International, its used truck centers drive up demand for new trucks by accepting trade-ins. Ending this practice, claims International, will suppress demand for new trucks and thereby reduce the supply of new trucks coming into Texas.
The fact that a regulation causes some business to shift from one supplier to another does not mean that the regulation burdens commerce; the dormant Commerce Clause “protects the interstate market, not particular interstate firms.” Exxon, 437 U.S. at 127-28. Purchasers of medium- and heavy-duty trucks will simply turn to new trucks manufactured by International‘s competitors.
2.
Even if section 2301.476(c) created some minimal burden on interstate commerce, that burden would not be clearly excessive as compared to the putative local benefits. In assessing a statute‘s putative local benefits, we cannot “second-guess the empirical judgments of lawmakers concerning the utility of legislation.” CTS, 481 U.S. at 92 (quoting Kassel v. Consol. Freightways Corp., 450 U.S. 662, 679 (1981) (Brennan, J., concurring)). Rather, we credit a putative local benefit “so long as an examination of the evidence before or available to the lawmaker indicates that the regulation is not wholly irrational in light of its purposes.” Ford, 264 F.3d at 504 (quoting Kassel, 450 U.S. at 680-81).
Thus, in Ford, we declared that Texas‘s purpose for passing section 2301.476(c)‘s predecessor — “to prevent vertically integrated companies from taking advantage of their market position” and “to prevent frauds, unfair practices, discrimination, impositions, and other abuses of [its] citizens” — are legitimate state interests. Ford, 264 F.3d at 503 (quoting Lewis, 447 U.S. at 43). We also held that a reasonable legislator could have believed section 2301.476(c)‘s predecessor would further those legitimate interests. Id. at 504. Although International maintains that the Legislature had no credible evidence to believe that manufacturers could use their disproportionate market power to the disadvantage of dealers, we may not now revisit Ford‘s conclusion that the Legislature did not act irrationally in banning manufacturer control of dealers.13
International‘s own operations confirm the reasonableness of this conclusion. According to International, its used truck centers are designed to help dealers of its new trucks by driving up demand. At oral argument, counsel for International described the relationship between the used truck centers and the new truck dealerships as “symbiotic.” International may wield its power over dealers beneficently, but it no doubt wields power. Thus, a legislator could reasonably have believed that a ban on manufacturers acting as dealers of used cars would further Texas‘s legitimate interests. That reasonable belief is enough to confirm that section 2301.476(c) has at least putative local benefits.
Thus, International has failed to raise a genuine issue of material fact as to whether the burden on commerce supposedly created by section 2301.476(c) is clearly excessive in relation to the putative local benefit.
IV.
The district court correctly granted summary judgment to the Director. Section 2301.476(c) prohibits International from operating as a dealer of used trucks and does not violate the Commerce Clause.
AFFIRMED.
Notes
In a cursory reference at the beginning of his brief, the Director also claims sovereign immunity from International‘s suit. The Director waived sovereign immunity. A state “cannot simultaneously proceed past the motion and answer stage to the merits and hold back an immunity defense.” Neinast v. Texas, 217 F.3d 275, 279 (5th Cir. 2000). By seeking summary judgment on the merits before raising sovereign immunity, the Director did exactly that.
Fleming Foods does not control this case because the text of section 2301.476(c) does not unequivocally demonstrate that the recodification was, in actuality, substantive. See id. at 286. Rather, it is precisely the nonsubstantive nature of the recodification that proves our prior interpretation was in error. We note with interest, however, the Texas Supreme Court‘s adherence to the text of the recodified statute in roughly analogous circumstances. We also echo the Texas Supreme Court‘s concern that citizens be able to rely on the plain text of the current Code.
In contrast, the Court has found impermissible discrimination when a state statute discriminates between similarly-situated interests. See, e.g., Or. Waste, 511 U.S. at 100 (discrimination between in-state and out-of-state waste); Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 42 (1980) (discrimination among similarly-situated financial conglomerates according to their contacts with the state); Hunt v. Wash. State Apple Adver. Comm‘n, 432 U.S. 333, 351-52 (1977) (benefit to in-state apple growers and dealers at the expense of out-of-state apple growers and dealers).