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YAMAHA MOTOR CORPORATION, U.S.A. v. QUILLIAN, et al.


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YAMAHA MOTOR
CORPORATION, U.S.A.

v.

QUILLIAN, et al.


PRESENT: Carrico, C.J., Hassell, Keenan,
Koontz, and Lemons, JJ., and Compton and Stephenson, S.JJ.

Record No. 021232

YAMAHA MOTOR CORPORATION, U.S.A.

v.

ASBURY W. QUILLIAN, IN HIS CAPACITY

AS THE COMMISSIONER OF THE DEPARTMENT OF MOTOR
VEHICLES, ET AL.

OPINION BY SENIOR JUSTICE ROSCOE B. STEPHENSON,
JR.

November 1, 2002

UPON QUESTIONS OF LAW CERTIFIED BY THE UNITED
STATES

DISTRICT COURT FOR THE EASTERN DISTRICT OF
VIRGINIA

Pursuant to Article VI, Section 1 of the
Constitution of Virginia and Rule 5:42, the United States
District Court for the Eastern District of Virginia (the Federal
Court), by its order entered May 17, 2002, certified four
questions of law to this Court. By order entered June 12, 2002,
we accepted the certified questions.

I

On July 25, 2001, Yamaha Motor Corporation,
U.S.A. (Yamaha) instituted an action in the Federal Court,
pursuant to 42 U.S.C. ? 1983, against Asbury W. Quillian,
the Commissioner of the Virginia Department of Motor Vehicles
(the Commissioner), and Jim’s Motorcycle, Inc., d/b/a Atlas
Honda/Yamaha (Atlas). In its action, Yamaha challenged the second
paragraph of Code ? 46.2-1993.67(5), which places
restrictions on motorcycle manufacturers and distributors who
wish to establish new franchise dealers in the Commonwealth (the
Second Paragraph). Yamaha alleged that the Commissioner’s
interpretation and enforcement of the Second Paragraph
"unduly interferes with [its] rights to engage in interstate
commerce, restrains the establishment of new businesses and
employment opportunities in Virginia, and deprives Virginia
consumers of the benefits of lawful intrabrand competition."
Accordingly, Yamaha asked the Federal Court to (1) declare that
the Second Paragraph violates Article I, Section 8, Clause 3 of
the Constitution of the United States, the so-called
"dormant" Commerce Clause; (2) enjoin the Commissioner
from enforcing the provisions of the Second Paragraph; and (3)
enjoin Atlas from protesting the establishment of a Yamaha
motorcycle dealership in Russell County.

The Federal Court determined that resolution of
Yamaha’s constitutional challenge depends upon the proper
interpretation of the Second Paragraph. Accordingly, the Federal
Court certified the following questions of law:

"1. Whether the Second Paragraph
grants to every existing Virginia franchised dealer of a
line-make of motorcycles the right to receive forty-five
days’ advance notice of, and to protest, the
establishment of any new or additional motorcycle dealer
franchise of the same line-make in any county, city or
town of Virginia, thereby placing on the manufacturer the
burden of proving, in a formal evidentiary hearing,
‘inadequate representation’ of its line-make of
motorcycles throughout the Commonwealth before it may
proceed to establish that dealership?

"2. Whether the Commissioner was
correct in interpreting the Second Paragraph in a manner
such that only those protesting franchised dealers who
make a preliminary showing that they actually are
representing, ‘in a not insubstantial way,’ the line-make
of motorcycles in the ‘county, city or town’ where the
proposed new or additional dealer would be located will
qualify for a formal evidentiary hearing in which the
manufacturer would bear the burden of proving ‘inadequate
representation’ of that line-make, by the protesting
franchised dealer, in that ‘county, city or town?’

"3. Whether the Second Paragraph
should be interpreted to make the advance notice and
protest rights granted therein applicable to only
existing franchised dealers of a line-make of motorcycles
which are located in the same ‘county, city or town’ in
which a proposed new or additional motorcycle dealer
franchise of the same line-make would be established, and
to limit the burden on the manufacturer to proving
‘inadequate representation’ of its line-make merely in
that ‘county, city or town?’

"4. If none of the three
aforementioned interpretations of the Second Paragraph is
correct, what is the correct interpretation of the
statute?"

II

Code ? 46.2-1993.67(5), a part of the
Motor Vehicle Code, contains two paragraphs. Pursuant to the
first paragraph, an existing motorcycle dealer has the right to
protest the establishment of a new dealership of the same
line-make of motorcycles within its "relevant market
area," which is defined, in Code ? 46.2-1993, as 7-,
10-, 15-, or 20-mile radii around the existing dealer’s location,
depending on population densities (the First Paragraph). The
First Paragraph further provides that no new dealership may be
established "unless the Commissioner has determined, if
requested by a dealer of the same line-make in the relevant
market area . . . , and after a hearing on the matter,
that there is reasonable evidence that after the grant of the new
franchise, the market will support all of the dealers in that
line-make in the relevant market area."

The Second Paragraph, enacted subsequent to the
First Paragraph in 1997, provides, in pertinent part, as follows:

No new or additional motorcycle dealer
franchise shall be established in any county, city or
town unless the manufacturer . . . gives
advance notice to any existing franchised dealers of the
same line-make. The notice shall be in writing and sent
by certified mail, return receipt requested, at least
forty-five days prior to the establishment of the new or
additional franchise. Any existing franchise dealer may
file a protest within thirty days of the date the notice
is received. The burden of proof in establishing
inadequate representation of such line-make motorcycles
shall be on the manufacturer . . . .

Yamaha seeks to establish a new motorcycle
dealer franchise at Rosedale, which is located in Russell County.
The proposed new dealer is a dealer of Suzuki-brand motorcycles
and desires to add Yamaha-brand motorcycles to its product line.

Atlas is located in the City of Bristol and has
been representing Yamaha in far Southwest Virginia for many
years. In addition to Atlas, there is one other Yamaha dealer in
Southwest Virginia, located in the Town of Wytheville.

At various times, Yamaha has expressed the view
that Atlas’ target market encompasses the area within a 30-mile
radius of its location in Bristol. Most of Russell County and all
or portions of more than a dozen other counties, cities, and
towns are located within that 30-mile radius.

In 1999, Atlas, to better serve its target
market, expanded its dealership by 14,500 square feet, at a cost
of approximately $345,000, and hired additional personnel. Yamaha
proposed to establish the new dealer in Russell County about the
time Atlas was completing its expansion.

In compliance with the Second Paragraph, Yamaha
gave notice of the proposed new dealer to Atlas and to Yamaha’s
25 other existing Virginia dealers. Atlas then sent a letter of
protest to the Commissioner.

Yamaha challenged Atlas’ standing to protest
the establishment of the new dealer, arguing that Atlas did not
fall within the "relevant market area," as defined by
the First Paragraph. Yamaha asserted that the Second Paragraph
should be read to restrict protest rights to those existing
dealers of the Yamaha brand located in the same city, county, or
town as the proposed new dealer.

The Commissioner rejected Yamaha’s assertion
and determined that Atlas met the threshold standing requirement.
The Commissioner further determined, however, that Atlas, in
order to obtain a formal evidentiary hearing, must show a
substantial level of sales activity in Russell County.

The Commissioner determined, based on sales
data submitted by Atlas and Yamaha, that Atlas had made a
sufficient showing that it is actually representing Yamaha in
Russell County and, therefore, is entitled to a formal hearing.
In so deciding, the Commissioner stated, in pertinent part, the
following:

Although the language is not as
artfully drawn as might have been desirable, it is clear
that the primary objective of [the Second Paragraph] was
to afford added protection to motorcycle dealers, above
and beyond the relevant market area protection provided
by [the First] Paragraph . . . . It is not
entirely clear why such additional protection was
provided only in the motorcycle dealer provisions and not
in the motor vehicle dealer provisions (Va. Code
? 46.2-1569), but presumably the 10, 15 and 20 mile
limits on the definition of relevant market area
applicable to both motorcycles and motor vehicles (compare
Va. Code ? 46.2-1500 to ? 46.2-1993) might be
considered less meaningful geographic limits for
motorcycle dealers because there are far fewer franchised
motorcycle dealers than motor vehicle dealers in
Virginia. . . . Hence, it would be rational to
assume that motorcycle dealers may need a larger sales
territory in order to survive and that the 10, 15 and 20
mile limits for relevant market area protections are less
appropriate for motorcycle dealers.

The Commissioner also determined that the
Second Paragraph requires a motorcycle manufacturer to give at
least forty-five days’ notice of a proposed new dealer to every
existing dealer of the same line-make in Virginia and that each
existing dealer has an unqualified right to file a protest.
However, the Commissioner reasoned that,

[i]f the existing dealer sells no
motorcycles in that county, city or town, then there is
no need to hold a formal evidentiary hearing to determine
that the dealer is inadequately representing the
franchisor there. No representation at all by the dealer,
as a matter of law, must be considered "inadequate
representation" in that county, city or town, and it
would be unreasonable to require that a formal
evidentiary hearing be held in order to arrive at that
conclusion.

Therefore, the Commissioner interpreted the
Second Paragraph to require a protesting dealer to make a
preliminary showing that it represents, "in a not
insignificant or insubstantial way," the same line-make
motorcycles in the county, city, or town where the proposed new
dealer would be located. The Commissioner would then decide on a
case-by-case basis through an informal fact-finding proceeding,
conducted pursuant to Code ?? 2.2-4019 and -4020(B) of the
Virginia Administrative Process Act, whether to grant a formal
evidentiary hearing under the Second Paragraph.

The Commissioner further determined that, if a
formal evidentiary hearing is granted, the Second Paragraph
requires the manufacturer to prove inadequate representation of
its motorcycles based on the factors set forth in Code
? 46.2-1993.73(D). That statute provides the following:

For purposes of any matter brought to
the Commissioner under subdivisions 3, 4, 5, 6 and 9 of
? 46.2-1993.67 with respect to which the
Commissioner is to determine whether there is good cause
for a proposed action or whether it would be unreasonable
under the circumstances, the Commissioner shall consider:

1. The volume of the affected dealer’s
business in the relevant market area;

2. The nature and extent of the
dealer’s investment in its business;

3. The adequacy of the dealer’s service
facilities, equipment, parts, supplies, and personnel;

4. The effect of the proposed action on
the community;

5. The extent and quality of the
dealer’s service under motorcycle warranties;

6. The dealer’s performance under the
terms of its franchise; and

7. Other economic and geographical
factors reasonably associated with the proposed action.

In addition, the Commissioner suggested that
"market penetration" should be considered in
determining "inadequate representation."

III

Yamaha contends that the Second Paragraph
should be interpreted so that the phrase, "county, city or
town," which is found in the first sentence, applies
throughout the remainder of the Second Paragraph. Thus, according
to Yamaha, only those existing dealers located in the same
county, city, or town as the proposed new dealer would be
afforded notice, allowed to file a protest, and granted a formal
evidentiary hearing. Further, in such hearing, the manufacturer
would bear the burden of proving inadequate representation of its
line-make only in that county, city, or town. Therefore, Yamaha
urges us to answer Certified Question Three in the affirmative.

Atlas urges us to adopt, with one exception,
the Commissioner’s interpretation of the Second Paragraph. Atlas
would have us require the manufacturer to bear the burden of
proving inadequate representation in "the market area likely
to be served by the new dealer," rather than in the county,
city, or town in which the proposed new dealer would be located.
Thus, as restated by Atlas, Certified Question Two would read as
follows:

Should the Second Paragraph, and the
statutory scheme of which it is a part, be interpreted to
mean that only those protesting franchised dealers who
make a preliminary showing that they are actually
representing "in a not insubstantial way" the
line-make of motorcycles in the county, city or town in
which the proposed new dealer would be located will
qualify for a formal evidentiary hearing in which the
manufacturer would bear the burden of proving inadequate
representation of that line-make by the protesting dealer
in the market area likely to be served by the new
dealer
?

(Emphasis added.)

IV

A

In construing the statute at issue, we are
guided by a number of well-established rules. First and foremost,
we endeavor to determine the intent of the General Assembly as
gleaned from the words in the statute. Va. Society for Human
Life v. Caldwell
, 256 Va. 151, 156, 500 S.E.2d 814, 816
(1998). If, however, the words in the statute are not
sufficiently explicit, we may determine legislative intent
"from the occasion and necessity of the statute being passed
[or amended]; from a comparison of its several parts and of other
acts in pari materia; and sometimes from
extraneous circumstances which may throw light on the
subject." Richmond v. Sutherland, 114 Va. 688, 691,
77 S.E. 470, 471 (1913). Furthermore, the construction of a
statute by the official charged with its administration, though
not binding on us, is entitled to great weight. Commonwealth
v. General Electric Company
, 236 Va. 54, 64, 372 S.E.2d 599,
605 (1988); Winchester TV Cable v. State Tax Com., 216 Va.
286, 290, 217 S.E.2d 885, 889 (1975).

Additionally, when the constitutionality of a
statute is challenged, we are guided by the principle that all
acts of the General Assembly are presumed to be constitutional. Caldwell,
256 Va. at 156-57, 500 S.E.2d at 816; Hess v. Snyder Hunt
Corporation
, 240 Va. 49, 52, 392 S.E.2d 817, 820 (1990).
Therefore, "a statute will be construed in such a manner as
to avoid a constitutional question wherever this is
possible." Eaton v. Davis, 176 Va. 330, 339, 10
S.E.2d 893, 897 (1940).

B

In the light of these principles, we will
endeavor to determine the General Assembly’s intent in enacting
the Second Paragraph. At the outset, we agree with the
Commissioner’s observation that, "[a]lthough the language
[in the Second Paragraph] is not . . . artfully drawn
. . . , it is clear that the primary objective of
[the Second Paragraph] was to afford added protection to
motorcycle dealers, above and beyond the relevant market area
protection provided by [the First] Paragraph."

We also agree with the Commissioner’s
observation that the Second Paragraph leaves certain matters
unstated. The Second Paragraph does not expressly require a
formal evidentiary hearing. While it does provide that a
manufacturer has the burden of proof in establishing inadequate
representation, this may occur in either a formal evidentiary
hearing pursuant to Code ? 2.2-4020, or an informal
fact-finding proceeding under Code ? 2.2-4019. Thus, it is
reasonable to conclude that the Commissioner has discretion in
determining whether a formal evidentiary hearing would be
appropriate. Indeed, we have consistently held that a threshold
standing determination ensures "that the person who asserts
a position has a substantial legal right to do so and that his
rights will be affected by the disposition of the case." Cupp
v. Board of Supervisors
, 227 Va. 580, 589, 318 S.E.2d 407,
411 (1984).

The Second Paragraph also does not expressly
limit the rights to notice and protest only to existing dealers
of the same line-make in the county, city, or town wherein the
proposed new dealer would be located. We think it is clear,
therefore, that the phrase "any existing franchised
dealer" in the Second Paragraph means any existing dealer of
the same line-make of motorcycles in the Commonwealth of
Virginia.

In addition, the Second Paragraph does not
expressly state the geographical parameters within which the
manufacturer must prove inadequate representation. Arguably,
absent a geographic modifier, inadequate representation would
have to be proved throughout the Commonwealth; however, this
interpretation would likely violate the Commerce Clause of the
Federal Constitution. As the Commissioner correctly asserts,
"such an interpretation would not appear rationally related
to the legislative intent to protect individual dealers from the
economic power of manufacturers."

While we agree with the Commissioner that the
Second Paragraph does not require proof of inadequate
representation on a statewide basis, we do not agree that proof
of inadequate representation should be limited to the same
county, city, or town in which the proposed new dealer would be
located. Such a limitation is not found in the Second Paragraph
and conflicts with legislative intent. As Atlas correctly
observes, "[t]he intent of the legislature was to provide
motorcycle dealers a protest opportunity not limited by
the arbitrary mileage restrictions of the First Paragraph."
We also agree with Atlas that limiting proof of inadequate
representation to such county, city, or town "invites absurd
outcomes in which the purpose of the Second Paragraph could
easily be evaded."
[1]

C

For these reasons, we reject Yamaha’s
interpretation of the Second Paragraph. If we were to answer
Certified Question Three in the affirmative, as Yamaha urges, we
effectively would render the Second Paragraph superfluous.

V

In conclusion, we will restate Certified
Question Two as set forth above in Part III of this opinion and
answer it in the affirmative. We answer Certified Questions One
and Three in the negative, and we determine that Certified
Question Four is inapplicable.
[2]

Certified Question Two restated and

answered in the affirmative.

Certified Questions One and Three

answered in the negative.

FOOTNOTES:

[1] For example, an
existing dealer located within the City of Richmond would have no
protest rights or opportunity to litigate the representation
issue pursuant to the Second Paragraph with regard to a proposed
new dealer located only a few blocks away, but in Henrico County.
That same dealer, however, would automatically get a hearing
pursuant to the First Paragraph. If the proposed new dealer were
located as many as 20 miles away but within the City of Richmond,
the existing dealer would have protest rights under both the
First Paragraph and the Second Paragraph. In the first situation,
in which destructive intrabrand competition is more likely, the
existing dealer’s options are restricted. In the second
situation, in which destructive intrabrand competition is less
likely, the existing dealer’s options are not restricted.

[2] None of the parties advocated that Certified Question
One be answered in the affirmative.

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