NJ CAR announced, today, a major victory in its lawsuit against Mazda for violating the New Jersey Franchises Practices Act. While the underlying law suit started as a simple declaratory judgment action brought by NJ CAR to challenge Mazda’s two-tier pricing program, on appeal the case was all about the Coalition’s ability to sue on behalf of its dealers and to assert legal rights that dealers cannot assert individually, either because of the prohibitive cost of litigation or threat of reprisals from powerful automakers.
The federal District Court for the District of New Jersey, last fall, dismissed NJ CAR’s complaint against Mazda, because the lower court found the Coalition lacked “standing” to sue. On appeal, the United States Court of Appeals for the Third Circuit reversed the District Court’s finding and held that NJ CAR does have standing and a right to appear before the federal courts to defend the legal rights of franchised new car and truck retailers. In doing so, the appeals court embraced the Coalition’s argument and acknowledged that the essence of NJ CAR’s work as a trade association requires the organization be free to stand up for individual dealers who cannot stand up for themselves.
This is a major victory for dealer trade associations across the country. NJ CAR is especially grateful to the NADA for their assistance in this matter and for the amicus brief they filed in support of our appeal. It should be noted that the appellate court’s decision is binding on all federal courts in the Third Circuit (all federal courts in New Jersey, Pennsylvania, Delaware, and the United States Virgin Islands). And, although it is not binding on federal courts outside the Third Circuit, this decision can be cited by other trade associations to persuade courts in their jurisdiction to recognize the important advocacy role they play.
Mazda still has the right to appeal this decision to the U.S. Supreme Court, which would have to agree to take the case. Absent such an appeal, Mazda would at long last be required to file a substantive answer in the lower court, after which discovery motions and a trial could come next. In this respect, the ball is back in Mazda’s court. But, keep in mind that the Third Circuit decision doesn’t resolve the underlying question whether the Mazda Brand Experience Program (MBEP) violates the New Jersey Franchise Practices Act’s prohibition against two-tier pricing. It’s an important question because many other automakers have or are planning to launch similar brand management programs that NJ CAR believes violate state law and it’s the reason the Coalition brought this case in the first place. NJ CAR also has a similar case pending against Lincoln in state court.