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Nissan North America, Inc. v. Motor Vehicle Review Bd.

Court of Appeals of Illinois, First District, Fourth Division

February 20, 2014

NISSAN NORTH AMERICA, INC., Along With Its Infiniti Division, Plaintiff-Appellant,
v.
THE MOTOR VEHICLE REVIEW BOARD; TERRENCE M. O'BRIEN, Chairperson of the Motor Vehicle Review Board; M.E. FIELDS, INC., d/b/a Fields Infiniti; and YAMPA VALLEY ENTERPRISES, INC., d/b/a Fields Infiniti of Lake County, Defendants-Appellees

Page 26

[Copyrighted Material Omitted]

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Appeal from the Circuit Court of Cook County. No. 11 CH 10167. The Honorable Mary L. Mikva, Judge Presiding.

Affirmed.

For APPELLANT: BINGHAM McCUTCHEN LLP, Boston, MA Daniel L. Goldberg, James C. McGrath, and Christina Chan; GOODSMITH GREGG & UNRUH LLP, Chicago, IL Kenneth S. GoodSmith and D. R. Edwards.

For APPELLEES: BURKE, WARREN, MACKAY & SERRITELLA, P.C., Chicago, IL Ira M. Levin and Eric P. VanderPloeg; OFFICE OF THE ILLINOIS ATTORNEY GENERAL, Chicago, IL Lisa Madigan, Attorney General, Michael A. Scodro, Solicitor General, and Ann C. Maskaleris, Assistant Attorney General.

For AMICUS CURIAE, ON BEHALF OF APPELLANT: ALLIANCE OF AUTOMOBILE MANUFACTURERS, HOGAN LOVELLS U.S. LLP, Washington, D.C. Kathryn Long, and HOGAN LOVELLS U.S. LLP, New York, N.Y. John J. Sullivan and Carl J. Chiappa.

For AMICUS CURIAE, ON BEHALF OF APPELLEES: ILLINOIS AUTOMOBILE DEALERS ASSOCIATION, Springfield, IL Larry R. Doll; and CHICAGO AUTOMOBILE TRADE ASSOCIATION, Lake Forest, IL Dennis M. O'Keefe.

JUSTICE FITZGERALD SMITH delivered the judgment of the court, with opinion. Presiding Justice Howse and Justice Lavin concurred in the judgment and opinion.

OPINION

FITZGERALD SMITH, JUSTICE

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[¶1] Defendants-appellees M.E. Fields, Inc., d/b/a Fields Infiniti (Fields), and Yampa Valley Enterprises, Inc., d/b/a Fields Infiniti of Lake County (Yampa), filed protests with defendant-appellee the Motor Vehicle Review Board (Board) against plaintiff-appellant Nissan North America, Inc., along with its Infiniti Division (Nissan), with respect to a " Warranty Supplemental Cost Recovery" charge Nissan was imposing on all of its new Infiniti vehicles purchased by Infiniti dealers in Illinois. Fields and Yampa asserted that this charge violated section 6 of the Motor Vehicle Franchise Act (Act) (815 ILCS 710/6 (West 2012)). Following a hearing, the Board agreed with Fields and Yampa. Nissan sought administrative review of the decision, and the trial court upheld the Board's order. Nissan appeals, contending that the Board's order is inconsistent with the plain language of the Act, that the trial court's interpretation of section 6 was erroneous, that a portion of section 6 has been impermissibly applied retroactively, and that the Board's interpretation of section 6 is unconstitutional. Nissan asks that we reverse the Board's order with instructions that judgment be entered in its favor.[1] For the following reasons, we affirm.

[¶2] BACKGROUND

[¶3] The crux of this appeal centers around section 6 of the Act, so we begin by laying out those portions relevant to the instant cause. Section 6, as a whole, pertains to automotive warranty agreements and warranty repairs, and attempts to strike a balance regarding the issue of reimbursement as between manufacturers that sponsor these agreements and their dealers that are required to complete the repairs. Currently, and for purposes of the instant cause, section 6(a) directs that a manufacturer " shall properly fulfill any warranty agreement and adequately and fairly compensate each of its motor vehicle dealers for labor and parts." 815 ILCS 710/6(a) (West 2012). In relation, section 6(b) discusses what is " adequate" and " fair" compensation, and states, in relevant part:

" In no event shall such compensation fail to include reasonable compensation for diagnostic work, as well as repair service, labor, and parts. *** The franchiser shall reimburse the franchisee for any parts provided in satisfaction of a warranty at the prevailing retail price charged by that dealer for the same

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parts when not provided in satisfaction of a warranty; provided that such motor vehicle franchisee's prevailing retail price is not unreasonable when compared with that of the holders of motor vehicle franchises from the same motor vehicle franchiser for identical merchandise in the geographic area in which the motor vehicle franchisee is engaged in business." 815 ILCS 710/6(b) (West 2012).

Subsequent subsections of section 6 define how the " prevailing retail price" is calculated, what parts are covered, and who qualifies as a franchiser. See 815 ILCS 710/6(d), (e), (f) (West 2012).

[¶4] Also significant to the instant cause is subsection (g), which the legislature added to section 6 in 2001. See Pub. Act 92-498 (eff. Dec. 12, 2001) (adding 815 ILCS 710/6(g)). That subsection permits a manufacturer and a majority of its dealers to agree to a uniform warranty reimbursement policy that would allow the manufacturer to pay those dealers entering into the written agreement a price less than the dealers' prevailing retail price, for parts used in warranty repairs as specified in subsection (b). Section 6(g)(1) states, in relevant part:

" Any motor vehicle franchiser and at least a majority of its Illinois franchisees of the same line make may agree in an express written contract citing this Section upon a uniform warranty reimbursement policy used by contracting franchisees to perform warranty repairs. *** Reimbursement for parts under the agreement shall be used instead of the franchisees' 'prevailing retail price charged by that dealer for the same parts' as defined in this Section to calculate compensation due from the franchiser for parts used in warranty repairs." 815 ILCS 710/6(g)(1) (West 2012).[2]

Section 6(g)(2) then describes that, if such an express written contract between the manufacturer and a majority of its dealers exists, the manufacturer may recover its costs from the remaining, minority dealers who did not join in the written agreement but who continue to receive their prevailing retail price for parts used in warranty repairs pursuant to subsection (b):

" A franchiser that enters into an agreement with its franchisees pursuant to paragraph (1) of this subsection (g) may seek to recover its costs from only those franchisees that are receiving their 'prevailing retail price charged by that dealer' under subsections (a) through (f) of this Section ***[.]" 815 ILCS 710/6(g)(2) (West 2012).[3]

And, in the event that a manufacturer and a majority of its dealers do not enter into an agreement as described concerning warranty reimbursement, section 6(g)(4) states:

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" If a franchiser and its franchisees do not enter into an agreement pursuant to paragraph (1) of this subsection (g), and for any matter that is not the subject of an agreement, this subsection (g) shall have no effect ...

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