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Manufacturers, AEM Fighting New Hampshire Dealer Law

Posted on September 9, 2013

Several agricultural and construction equipment manufacturers have filed a lawsuit in New Hampshire state court, seeking to halt enforcement of S.B. 126.  This new law is scheduled to go into effect on September 23, 2013.  (Deere & Company, CNH America LLC, and AGCO Corporation vs. The State of New Hampshire, Hillsborough County Superior Court, Northern District).

Despite strong opposition from AEM and several AEM member companies, and what AEM says is a willingness to discuss alternate legislative remedies, S.B. 126 was passed by the legislature, and signed into law by the governor on June 25, 2013.  With respect to off-road equipment manufacturers, S.B. 126, AEM and the manufacturers are advancing the following points:

Repeals existing New Hampshire law (Ch. 347-A) that, since 1995, has governed the relationship between equipment manufacturers and their New Hampshire dealers.

For the first time, subjects equipment manufacturers to the state’s Motor Vehicle Dealer Law (Ch. 357-C) and its numerous new restrictions and prohibitions on manufacturer-dealer contracts and business relationship.  The New Hampshire Motor Vehicle Dealer Law now defines 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.  “In other words, there’s no difference under NH law between a Buick and a bulldozer,” AEM said. 

 S.B. 126 applies retroactively to existing contracts that equipment manufacturers have with their NH dealers, effectively rewriting or obliterating these contracts.

This action by New Hampshire is unprecedented.  No other state in the Union subjects equipment manufacturers to the same regulatory regime that applies to motor vehicle dealerships.

The lawsuit argues that the new law, as applied for the first time to equipment manufacturers, is an unconstitutional “impairment of contracts” because it applies to dealer contracts that are in force—and as such the law substantially impairs, or eviscerates, existing dealer contracts, in violation of the U.S. and state constitutions.  AEM also said another legal argument forcefully advanced by the plaintiffs in the complaint is that the provisions in S.B. 126 that render all arbitration provisions in dealer contracts void and unenforceable is in direct conflict with the Federal Arbitration Act and the Supremacy Clause of the U.S. Constitution.

Regarding Substantial Impairments to Dealership Contracts:  According to the complaint, the plaintiffs’ current dealership agreements will be severely and substantially impaired by S.B. 126 in numerous ways, including:

(1) plaintiffs are not permitted to change a dealer’s dealership area without good cause;

(2) plaintiffs are not allowed to 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;

(3) plaintiffs are not permitted to compete with a dealer or to authorize others to compete with the dealer or to add dealerships to an existing dealership area or to relocate an existing dealership without good cause and, if challenged, approval of the New Hampshire Motor Vehicle Board is required;

(4) plaintiffs are not allowed to terminate a dealer for changing key management personnel, for selling competing products under the dealership’s roof, and for refusing to meet the minimum equity level or capital standards set by the plaintiffs;

(5) plaintiffs have no discretion to require their dealers to maintain a certain level of equity or capital in the dealership;

(6) plaintiffs have no discretion to control their warranty prices;

(7) plaintiffs have no discretion to limit within its line make the types of equipment a dealer may purchase for sale;

(8) arbitration as the sole dispute resolution under some of plaintiffs’ dealership agreements is eliminated;

(9) plaintiffs have no discretion to reject fulfilling orders from a dealer for certain reasons;

(10) plaintiffs ability to enter into good faith settlement agreements in connection with a dealership agreement is severely curtailed;

and (11) plaintiffs and their dealers may not freely amend their dealership agreements by mutual agreement.

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