New Motor Vehicle Board of California v. Orrin W. Fox Company

PETITIONER:New Motor Vehicle Board of California
RESPONDENT:Orrin W. Fox Company
LOCATION:Monroe County Courthouse

DOCKET NO.: 77-837
DECIDED BY: Burger Court (1975-1981)

CITATION: 439 US 96 (1978)
ARGUED: Oct 03, 1978 / Oct 04, 1978
DECIDED: Dec 05, 1978

James R. McCall –
Robert L. Mukai – for New Motor Vehicle Bd
William T. Coleman, Jr. – for appellees

Facts of the case


Media for New Motor Vehicle Board of California v. Orrin W. Fox Company

Audio Transcription for Oral Argument – October 03, 1978 in New Motor Vehicle Board of California v. Orrin W. Fox Company
Audio Transcription for Oral Argument – October 04, 1978 in New Motor Vehicle Board of California v. Orrin W. Fox Company

Audio Transcription for Opinion Announcement – December 05, 1978 in New Motor Vehicle Board of California v. Orrin W. Fox Company

Warren E. Burger:

The judgment and opinion of the Court in New Motor Vehicle Board of California against Fox and the consolidated case will be announced by Mr. Justice Brennan.

William J. Brennan, Jr.:

This is an appeal from a judgment of a three-judge District Court in the Central District of California declaring unconstitutional the California Automobile Franchise Act.

Under that Act, a motor vehicle manufacturer must secure the approval of the California New Motor Vehicle Board before opening a retail motor vehicle dealership within the market area of an existing franchisee but if and only if that existing franchisee protests the establishment of the competing dealership.

The Act also directs the Board to notify the manufacturer of this statutory requirement upon the filing of a timely protest by an existing franchisee.

Appellee, General Motors Corporation manufactures Buick and Chevrolet cars among many others and appellee Fox signed a franchise agreement with General Motors in May 1975 to establish a new Buick dealership in Pasadena. Appellee, Muller Chevrolet agreed with General Motors to transfer its existing Chevrolet franchise from a Glendale to La Canada, California in December of 1975.

In the proposed establishment of Fox and relocation of Muller, were protested respectively by existing Buick and Chevrolet dealerships.

The New Motor Vehicle Board responded as required by the Franchise Act by notifying appellees that protests had been filed and that therefore General Motors and the other appellees were not to establish or relocate the dealerships and though the Board had held the hearings required by the Act nor thereafter if the Board determined that there was good cause for not permitting these new dealerships.

And the Board is not required by the statute to hold a hearing on the merits of the dealer protest before sending the manufacturer such a notice and in this case no prior hearing was held.

The three-judge court held that the absence of such a prior hearing requirement denied General Motors and their potential franchisees procedural due process mandated by the Fourteenth Amendment.

We disagree and we reverse.

Even if the right to franchise constituted an interest protected by due process, the California legislature was still at least since the demise of the concept of substantive due process as an inhibitor on economic regulation constitutionally empowered to enact a general scheme of business regulation that imposed reasonable regulations upon the exercise of the right.

In particular the California legislature was empowered to subordinate General Motors’ franchise rights to their franchisees’ conflicting rights were necessary to prevent unfair or oppressive trade practices and also to protect franchisees’ conflicting rights through customary and reasonable procedural safeguards, that is as here by providing existing dealers with notice and an opportunity to be heard by an impartial tribunal before General Motors is permitted to inflict upon them grievous loss.

Such procedural safeguards can’t be said to deprive General Motors of due process.

Now, there’s another issue of suggested conflict with the Sherman Act which the District Court did not reach because of the ground it took in invalidating the statute ordinarily that we might send that back for the District Court to consider it but because it’s only a question of law, we have decided it.

And we hold there is no conflict with the Sherman Act.

The statutory scheme is a system of regulation designed to displace unfettered business freedom in establishing and relocating automobile dealerships and hence it’s outside the reach of the antitrust laws under the state action exemption of Parker and Brown.

Moreover, to the extent that there is a conflict with the Sherman Act because the Act does permit dealers to invoke state powers for the purpose of restraining intraband competition, that conflict cannot itself constitute a sufficient reason for invalidating the statute for if an adverse effect on competition were in and of itself enough to render a state statute invalid, the state’s power to engage in economic regulation would be effectively destroyed.

Mr. Justice Marshall joining the Court opinion has also filed a concurring opinion.

Mr. Justice Blackmun was joined by Mr. Justice Powell has filed an opinion concurring in the result.

Mr. Justice Stevens dissents and has filed a dissenting opinion.

Warren E. Burger:

Thank you Mr. Justice Brennan.