The Franchise Memorandum

The state's Supreme Court has held that New Hampshire may regulate equipment dealerships in the same way it regulates motor vehicle dealerships, without violating the Contracts Clause of either the state or federal constitutions. Deere & Co. v. New Hampshire, 130 A.3d 1197 (N.H. Dec. 29, 2015). At issue was an amendment to New Hampshire's "Auto Dealer's Bill of Rights." Specifically, SB 126 amended the bill of rights to include "equipment" in the definition of "motor vehicle." This addition could be read to increase regulation of equipment manufacturer/dealer relationships in a variety of ways. For example, equipment manufacturers are now prohibited from competing with a New Hampshire dealer in most circumstances. Further, they are now required to provide the state's Motor Vehicle Industry Board evidence of "good cause" for terminating or failing to renew a current dealer. Because SB 126 is retroactive, equipment manufacturers were made to contend with these requirements for the first time. These manufacturers brought suit primarily to challenge the statute for unconstitutionally impairing existing contracts.

The state Supreme Court rejected the manufacturers' arguments after subjecting the statute to constitutional scrutiny. After finding that the dealer-protection purpose of the statute is unquestionably a significant and legitimate purpose that benefits consumers and the state's economy more generally, the court declined to speculate regarding the legislature's views of the reasonableness or necessity of the law. In reaching its decision, the court did make two important limiting distinctions. First, the court affirmed the trial court's holding that SB 126's provision declaring arbitration provisions to be an unfair business practice contradicted the Federal Arbitration Act and must be struck down under the Supremacy Clause. Second, in a similar case, it held that SB 126 applies only to equipment with "an engine, wheels and transmissions" or attachments to such equipment. In sum, this statute and the court's holding represent an incursion into the relationships between equipment manufacturers and dealers in New Hampshire.