April 4, 2005
On behalf of client Yamaha Motor Corporation, U.S.A., Willkie successfully argues that a Virginia statute that could significantly restrict the number of Yamaha motorcycle dealer franchises in Virginia is unconstitutional.
On behalf of client Yamaha Motor Corporation, U.S.A., Willkie successfully argued before the Court of Appeals for the Fourth Circuit that a Virginia statute that could significantly restrict the number of Yamaha motorcycle dealer franchises in Virginia is unconstitutional. The Court determined that the statute in question, Va. Code § 46.2-1993.67(5), which authorizes any existing franchised motorcycle dealer in the state the right to protest the establishment of a new dealership for the same brand anywhere in the state, infringes upon the Commerce Clause of the U.S. Constitution. In a unanimous ruling in the case of Yamaha Motor Corporation, U.S.A. v. Jim’s Motorcycle, Inc., No. 03-2070 (4th Cir., Mar. 18, 2005), the Court held that upholding the statute would be giving Virginia “the green light to extend similar protection to automobile dealers and franchises of other product lines, thereby turning Virginia into an island of economic protectionism.” The Second Paragraph of the challenged statute permits “[a]ny existing franchise dealer,” regardless of geographic proximity, the right to file a protest within 30 days of receiving notice from the manufacturer or distributor regarding plans to establish a new or additional motorcycle dealer franchise. The U.S. District Court for the Eastern District of Virginia referred the case to the Virginia Supreme Court for argument on the proper interpretation of the Second Paragraph prior to the ruling on the constitutional question. Reversing the district court’s decision to uphold the statute, the Fourth Circuit ruled that the provision’s “unnecessary and excessive breadth” imposed burdens on interstate commerce outweighing its benefits. The Court found that because the law left no area in Virginia safe from potential protests, motorcycle manufacturers could not reasonably plan for expansion in Virginia as they could in other states. The Court agreed that the provision created a substantial barrier to market entry and “chilled” the establishment of new dealers in Virginia. Further, the Court found that the provision was not comparable to that in other state dealer laws and that its “weak” benefits could have just the same been realized by establishing a reasonable geographic limit on protest rights. Rendering the provision unconstitutional, the Court underscored the potential for abuse by state lawmakers and the importance of maintaining limits on measures of economic protectionism. The case, handled by partner David Murray and associates Kevin Miller and John LoCurto, was remanded for entry of judgment in favor of Yamaha.
