Recently passed legislation in New Hampshire pertaining to business practices between motor vehicle manufacturers, distributors and dealers is giving heavy equipment manufacturers a cause for concern and has resulted in the filing of a lawsuit by John Deere and Company, CNH America LLC and AGCO Corporation. On August 26, 2013, John Deere, et al. filed suit in state court in New Hampshire (Deere & Company, CNH America LLC, and AGCO Corporation vs. The State of New Hampshire, Hillsborough County Superior Court, Northern District), seeking a declaratory judgment and injunctive relief in connection with legislation classifying off-road heavy equipment as “motor vehicles.” S.B. 126 was signed into law on June 25, 2013 and went into effect on September 23, 2013. At this juncture, the court has issued a preliminary injunction, exempting the plaintiffs from the law as it relates to existing contracts. The suit alleges that S.B. 126 is unconstitutional because it applies retroactively to existing dealership contracts and will substantially alter (and impair) contractual relationships between the heavy equipment manufacturers and their dealers.
The suit further alleges that the new law effectively repeals a 1995 law (New Hampshire Revised Statutes Annotated Title 31, Chapter 347-A), which provided limited regulation of the manufacturer-dealer relationship and for the first time, includes as a “motor vehicle” the following equipment: farm and utility tractors, forestry equipment, industrial equipment, construction equipment, farm implements, farm machinery, yard and garden equipment, attachments, accessories and repair parts. Plaintiffs argue that this classification as a “motor vehicle” subjects heavy equipment manufacturers to numerous new prohibitions on manufacturer-dealer relationships and to a “highly complex and detailed statutory scheme that has governed motor vehicle manufacturers, distributors and dealers in one form or another since 1973.”
The complaint outlines numerous ways that S.B. 126 will substantially impair the plaintiffs’ dealer agreements and “effectively rewrite” the freely negotiated contracts. Among other allegations, some of the key arguments are as follows:
Without good cause, the plaintiffs are not permitted to change a dealer’s dealership area (which pursuant to existing contracts can be enlarged or reduced without written notice by the plaintiffs);
Plaintiffs cannot terminate, cancel or non-renew a dealership agreement without good faith, good cause and a finding by the New Hampshire Motor Vehicle Industry Board that good cause exists. Plaintiffs cannot compete with a dealer, authorize others to compete with a dealer, add dealerships [to an existing dealership area] or relocate an existing dealership without good cause;
The new law eliminates the plaintiffs’ discretion to set labor rates and product prices applicable to warranty claims, dictating that rates and prices be calculated in accordance with the statute;
By permitting that all disputes that may arise under a dealership agreement be submitted to the New Hampshire Motor Vehicle Industry Board and the superior court (in some instances), the law eliminates arbitration as the sole dispute resolution mechanism (as agreed upon by the parties); and
Plaintiffs and dealers may not freely amend their dealership agreements by mutual agreement.
The complaint containing 154 paragraphs sets forth an abundance of concerns and additional allegations regarding the impact that the new law will have on its dealership agreements in the state, including the regulation of many areas of such manufacturer-dealer relationships that have never been regulated before by New Hampshire law. Absent the relief requested, the plaintiff argues that “material elements of freely negotiated contracts will be rendered void” and that such an intrusion is unconstitutional. The complaint questions the intent and purpose of the law, which the purpose is stated “to revise business practices between motor vehicle manufacturers, distributors and dealers” and argues that it is really a “wholesale repeal” of the 1995 law governing such relationships.
This issue will be one to keep an eye on not only for equipment manufacturers doing business in New Hampshire but for those who counsel such clients in connection with manufacturer-dealer relationships nationwide.