May 4, 2020 | by Dafney Dubuisson Stokes, Esq.
In N.J. Coal. of Auto. Retailers, Inc. v. Mazda Motor of Am., Inc., No. 19-2961, 2020 U.S. App. LEXIS 13611 (3d Cir. Apr. 28, 2020), the Third Circuit decided that associations have standing to challenge programs that would have otherwise benefitted its members, as long as most members support the challenge. This interesting twist on standing presents a broader reading to the Supreme Court’s ruling in Hunt v. Wash. State Apple Advert. Comm’n, 432 U.S. 333 (1977), but it is now law in the Third Circuit.
By way of background, the New Jersey Coalition of Automotive Retailers ( the “Coalition”) filed a lawsuit against Mazda Motor of America, Inc. (“Mazda”), claiming that the so-called “Mazda Brand Experience Program” (“MBEP”) created an unfair competitive advantage for certain dealers, in violation of the New Jersey Franchise Practices Act.1 The U.S. District Court dismissed the case, finding that the Coalition lacked standing to bring the suit on behalf of its members, because the suit was found to be in conflict with the dealers’ interest.
In dismissing the matter, the lower court relied on the three-prong test that the Supreme Court set forth in Hunt. Pursuant to the Hunt test, an Association has standing to bring suit on behalf of its members when: 1) its members would otherwise have standing to sue in their right; 2) the interests it seeks to protect are germane to the organization’s purpose; and 3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Hunt, 432 U.S. at 343. The district court held that the matter clearly met the first prong of the Hunt test. However, when addressing the second prong, the district court stated that “because eleven of the sixteen Mazda dealers would lose the incentives they currently enjoy under the MBEP, the Coalition’s lawsuit, which seeks to enjoin implementation of the MBEP, is in conflict with the interest of those dealers, who make up the majority of the Mazda dealers that the Coalition represents.” N.J. Coal. of Auto. Retailers, Inc. v. Mazda Motor of Am., Inc., No. 19-2961, 2020 U.S. App. LEXIS 13611, at *5. Because the district court found that the Complaint had failed to meet the second prong, they did not reach the third prong and the matter was dismissed.
The Third Circuit, in an opinion written by Judge Morton Greenberg and L. Felipe Restrepo of the Third Circuit, disagreed with the district court’s purportedly “narrow” reading of the Complaint. Viewing the Complaint in the light most favorable to the Coalition, the panel essentially held that majority rules:
|“Only three of Mazda dealers enjoy the highest tier of incentives. We see no reason to dismiss the possibility that the eight dealers who enjoy lower tier of incentives would forgo such incentives in order to prevent the creation of three “super” dealers who clearly have a competitive advantage over all other Mazda dealers..[.] In fact, one of the Mazda dealers declared that it qualifies for a lower tier of incentive under the MBEP, but nevertheless supports the lawsuit.” N.J. Coal. of Auto. Retailers, Inc. v. Mazda Motor of Am., Inc., No. 19-2961, 2020 U.S. App. LEXIS 13611, at *6.|
Mazda even presented declarations from five dealerships who were in opposition to the lawsuit. But the Third Circuit noted that five was not a majority. Therefore, the panel saw “little support for the Court’s conclusion that the Coalition was acting in conflict to the interests of its members.” Id. at *7. The Third Circuit further found that Mazda did not meet its burden to present facts to attack the basis of jurisdiction pled in the Complaint. The District Court’s July 30, 2019 Order was reversed and the case remanded to Court for further proceedings.2
References The MBEP, which went into effect in July 2018 gives dealers up to 6.5 % off the cost of vehicles. A dealership that sells only Mazda vehicles, has a general manager exclusive to Mazda, and meets various dealership design factors gets the highest level of incentives. Dealers that do not have a Mazda-only general manager but meets other facility factors get a mid-level incentive of roughly 2.8%. However, dealers that sell Mazdas and another brand forfeit the entire incentive. Dealers who comply with Mazda’s “customer experience” criteria get a small 2% incentive.
 The court was careful to stress that, with this ruling, they meant to express no opinion as to the merits of the case and limited their holding to the conclusion that the Coalition has association standing to bring this case only. On remand, the District court is free to consider any other arguments that Mazda advances.