In Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC, the Rhode Island Supreme Court recently held on a certified question from the U.S. Court of Appeals for the First Circuit that, based on the plain language of Rhode Island’s add-point statute, R.I. Gen. Laws § 31-5.1-4.2 (a), a dealer’s “relevant market area” could extend beyond that state’s borders, potentially giving Rhode Island dealers a right to protest add-point locations in Connecticut and Massachusetts. The Court in its decision expressly declined to rule on the constitutionality of applying the statute beyond state lines, leaving that issue for the First Circuit, but this broad interpretation of the Rhode Island statute paves the way for a potential conflict with the long-standing presumption against the extraterritorial application of state law.

Cross-Border Franchise Feud: From Dealer Protest to Federal Certification

In August 2021, Freightliner granted Advantage Truck Group (“ATG”) the opportunity to open a Freightliner dealership in Raynham, Massachusetts, approximately 18 miles away from an existing Freightliner dealer in East Providence, Rhode Island. The new dealership would be located in Bristol County, Massachusetts, which was designated as part of an existing Rhode Island dealer’s AOR in its Freightliner dealer agreement, and thus within the existing dealer’s statutory relevant market area (“RMA”). Rhode Island requires OEMs to provide written notice of the proposed establishment of a new dealership within the RMA of any existing dealers to those existing dealers and the state Department of Revenue, and permits affected dealers to file a protest with the Rhode Island State Motor Vehicle Dealers’ License and Hearing Board. 

Because the proposed new dealership would be in Massachusetts and beyond the presumptive reach of Rhode Island law, the manufacturer did not provide statutory notice to the existing dealer in Rhode Island.  The existing dealer nevertheless filed an administrative protest in that state, arguing that it had a right to protest the establishment of the proposed new dealership in Massachusetts.  The Board dismissed this protest, finding it lacked “authority to apply the provisions of the Rhode Island dealer law in an extraterritorial manner . . . .” The existing dealer appealed the Board’s decision to a Rhode Island state trial court, and the OEM removed the case to federal court. Following removal, the federal court in Rhode Island granted the manufacturer’s summary judgment motion, affirming the Board’s decision to dismiss the protest.

In its decision, the federal court stressed that the Rhode Island add-point statute “protections only go as far as the state’s geographic borders,” and that, even if the statute expressly covered conduct outside the State of Rhode Island, “the statute would still be subject to the limits imposed by the Commerce Clause.”  On appeal, the First Circuit bifurcated the analysis, separating the legislative scope of the Rhode Island add-point statute from the potential constitutional concerns under the Commerce Clause. Reasoning that it would be unnecessary to address the Commerce Clause issue if the Rhode Island statute were interpreted in a manner that was confined to Rhode Island’s borders, the First Circuit certified the following state-law question to the Rhode Island Supreme Court: “Can a ‘relevant market area’ in Rhode Island General Laws section 31-5.1-4.2(a) extend beyond Rhode Island’s borders?”

The Rhode Island Supreme Court’s Ruling

Reviewing the certified question de novo, the Rhode Island Supreme Court answered affirmatively. The Court applied the rules of statutory construction—that statutes are given their plain meaning if unambiguous, considered holistically to effectuate legislative intent—and held that the Rhode Island add-point statute’s plain and unambiguous language allows a “relevant market area” to extend beyond state borders. The Court explained that the statutory limits to the size of the RMA (a radius of 20 miles and/or the AOR defined in the dealer agreement, whichever is greater) clearly ”make no reference to [Rhode Island’s] borders.”  

Rhode Island’s unique geography played an important role in the Court’s holding.  Because Rhode Island is only 37 miles wide, the Court explained, "a circle with a radius of 20 miles will always encompass an area outside the state." As such, "to give the legislature’s inclusion of the ‘20-mile radius’ force and effect, and given the readily observable facts about the size of this state, we conclude that a ‘relevant market area’ was intended to encompass out-of-state areas if that area is within 20 miles of an existing dealer.”  The Court also noted that, if the statute were interpreted to be limited to state borders, the phrase “whichever is greater” in the statutory definition of RMA would be rendered meaningless “as to any area outside the state, because the only relevant calculation for the purposes of determining a ‘relevant market area’ would be the 20-mile radius, which would always stop wherever that radius intersected with a state border.” Based on the limited scope of the certified question and the unambiguous language of the statute, the Court concluded it did not need to decide whether such the statute was unconstitutional. The case now returns to the First Circuit to determine if the Rhode Island add-point law, as interpreted, violates the dormant Commerce Clause by improperly regulating out-of-state commerce.