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Greater New York Auto. Dealers Ass'n v. Department of Motor Vehicles

Supreme Court of New York, Albany County

April 10, 2013

In the Matter of the Application of GREATER NEW YORK AUTOMOBILE DEALERS ASSOCIATION and Brian Miller, Petitioners, For a Judgment Pursuant to Article 78 of the Civil Practice Law and Rules
DEPARTMENT OF MOTOR VEHICLES of the State of New York, Barbara Fiala, solely in her capacity as Commissioner of the Department of Motor Vehicles, Tesla Motors, Inc. and Tesla Motors New York LLC, Respondents.

[969 N.Y.S.2d 723] Philip H. Kalban, Esq., Putney, Twombly, Hall & Hirson LLP, New York, Attorneys for Petitioners.

Eric T. Schneiderman, Attorney General for the State of New York, Charles J. Quackenbush, Esq., AAG, of Counsel, Albany, Attorneys for Respondent Department of Motor Vehicles and Barbara Fiala, Commissioner.

Linda J. Clark, Esq., Hiscock & Barclay, LLP, Albany, Attorneys for Respondents Tesla Motors, Inc. and Tesla Motors New York, LLC.

Hermes Fernandez, Esq., Bond, Schoeneck & King, PLLC, Albany, Attorneys for Proposed Intervener New York State Automobile Dealers Association.


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Petitioners filed an Amended Petition pursuant to CPLR Article 78 which sought a judgment cancelling and annulling the registration and the certificate of registration issued by the Commissioner of the Department of Motor Vehicles (" DMV" ) to Tesla Motors New York (" Tesla-NY" ) to register and operate as a retail motor vehicle dealer in the State of New York at 125 Westchester Avenue, White Plains, New York and at 630 Old Country Road, Garden City, New York. Alternatively, the Petitioners request that the DMV conduct necessary hearings in order to revoke and cancel the previously issued registrations. The Respondents move to dismiss the Amended Petition on the grounds the Petitioners lack standing, failed to state a cause of action as the determination of the DMV was not arbitrary and capricious and the Petition was untimely pursuant to CPLR 3211(a)(3), (a)(5) and (a)(7) and CPLR § 7804(f). On December 21, 2012, the New York State Automobile Dealers Association (" NYSADA" ) moved to intervene as a party in this action. Petitioners

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consented to NYSADA's application to intervene. Respondents oppose the Motion to intervene.

Respondent, Tesla Motors, Inc., is a California company that designs, develops, manufacturers and distributes electric vehicles. Tesla vehicles are sold in galleries and shopping mall locations, and Tesla does not maintain an inventory of vehicles. In order to purchase a Tesla vehicle, consumers must place a reservation for a vehicle which is later manufactured to their specifications. Tesla does not operate a dealership with cars on the lot.

Respondent, Tesla Motors New York LLC (" Tesla-NY" ), opened a store in New York City in 2009. Tesla-NY applied and received a license to operate as a new retail motor vehicle dealer in Manhattan. In June 2011, the Petitioner, Greater New York Automobile Dealers Association (" GNYADA" ), commenced a CPLR Article 78 proceeding challenging the DMV's issuance of a dealer registration to Tesla-NY in violation of Article 16 of the Vehicle and Traffic Law. On May 3, 2011, Supreme Court (O'Connor, J.) determined the Article 78 proceeding was untimely and dismissed the petition in its entirety.

In April 2012, Tesla-NY filed two applications with DMV to operate two additional stores in White Plains and Garden City, New York. In the applications for a new retail motor vehicle dealer registration, Tesla-NY certified that it was acting as a dealer and not as a " franchisor" pursuant to the Franchise Dealer Act. ( see, VTL § 415(7)(f)). Tesla-NY manages Tesla's stores in New York. Tesla maintains it does not have any dealers or retailers in New York besides Tesla-NY. On June 21, [969 N.Y.S.2d 724] 2012, DMV granted the application of Tesla-NY to register a White Plains facility as a retail motor vehicle dealer. On September 12, 2012, DMV granted the application of Tesla-NY to register a Garden City facility as a retail motor vehicle dealer. On December 7, 2012, Petitioners, GNYADA and Brian Miller, who owns automobile dealerships in Manhattan, Westchester County and Suffolk County, filed this CPLR Article 78 proceeding challenging the issuance of new retail motor vehicle dealer registrations to Tesla-NY for the White Plains and Garden City locations.

Petitioners claim Tesla is a wholly owned subsidiary of Tesla and Tesla is the manufacturer of automobiles under the Tesla trademark. Petitioners allege Tesla-NY is a retail new vehicle dealership that sells Tesla automobiles manufactured by

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Tesla. Petitioners contend Tesla-NY is a franchisee of Tesla. Petitioners claim Tesla's equity ownership interests in Tesla-NY is unlawful as the ownership contravenes the provisions of VTL § 463(2)(bb). Petitioners allege DMV is in violation of VTL § 415(7)(f) as it knowingly issued a certificate of registration to Tesla-NY as a franchisor. Petitioner claims the purpose of enacting VTL § 415(7)(f) was " to prevent the opening of factory stores' owned by a franchisor." Petitioners maintain DMV has acted beyond and contrary to their authority in granting the registration certificates to Tesla-NY and in violation of VTL §§ 463(2)(bb), 463.2(u) and 415(7)(f). Petitioner claims the actions of the DMV were arbitrary, capricious, and contrary to the authority granted to them under the VTL and must be vacated and nullified.

In support of the Amended Petition, Petitioners allege they only seek relief against DMV. Petitioners allege Tesla and Tesla-NY are in violation of the Franchise Dealer Act as Tesla is a " franchisor" . Respondents claim Tesla is " a party to a franchise with a franchised motor vehicle dealer" with Tesla-NY. Petitioners contend the issuance of the two new registrations subject the Respondents to a new and timely Article 78 proceeding based upon the two new locations of the dealerships. Petitioners contend the Tesla Respondents are in violation of VTL §§ 415(7)(f) and 463(2)(bb) which precludes a franchisor owing an interest in a franchise. Petitioners allege Tesla is circumventing " the prohibitions against factory-owned stores by creating franchises' that are owned by the manufacturer." Petitioner, GNYADA alleges its members will suffer competitive economic injury if they must compete in the marketplace against factory-owned stores. GNYADA also claims the economic injury its members stand to suffer falls within the zone of interest protected by the Franchised Dealer Act. Petitioners maintain DMV must take the necessary steps to enforce compliance with the law and find that Tesla as the manufacturer, must sell their vehicles through independently owned dealerships. Petitioners claim it is improper for DMV to grant dealer registrations to Tesla-NY dealerships as they are factory owned. Petitioners allege Tesla's ownership of Tesla-NY is unlawful and in violation of the Franchised Dealer Act.

The Tesla Respondents allege the Franchised Dealer Act was enacted to regulate the relationship between a dealer and an affiliated

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car company (manufacturer) in a franchise relationship. Tesla maintains the Franchised Dealer Act allows an aggrieved franchised motor vehicle dealer to commence an action against the franchisor. ( see, VTL § 469(1)). Tesla contends Article 17-A of the VTL only allows for lawsuits to enforce the provisions of the statute against a car company that has taken actions that affect its own franchised dealers. Tesla alleges the Petitioners do not have standing to commence this action. [969 N.Y.S.2d 725] Tesla contends the Petitioners may not enforce the statute against a car company with which it has never had a franchise agreement. Tesla alleges the GNYADA is comprised of " franchised motor vehicle dealers" pursuant to the Franchised Dealer Act, but they only have franchisees with other car companies and not with Tesla. Tesla claims the Franchised Dealer Act does not pertain to actions against competitive dealers who sell vehicles made by different manufacturers. Tesla alleges the Franchised Dealer Act regulates the relationship between dealers and manufacturers in a franchise relationship but does not regulate competition with unaffiliated dealers. Tesla maintains DMV correctly determined that it was a motor vehicle dealer and not a franchisor.

The New York State DMV alleges this proceeding is precluded by the doctrine of res judicata. DMV maintains in 2010 GNYADA commenced an Article 78 proceeding and raised the same claims between the same parties seeking the same equitable relief in relation to the registration certificate granted to a Manhattan Tesla-NY dealer in 2009. DMV alleges Supreme Court, (O'Connor, J.) issued a Decision/Order and Judgment which dismissed the proceeding as time barred. DMV claims the only difference in this proceeding is a challenge to the two registration certifications it granted to the White Plans and Garden City Tesla-NY dealers.

DMV alleges the Petitioners do not posses any express private right of action. DMV maintains in order to provide a basis for a claim of injury based upon a failure to comply with provisions of a statute, the law itself must authorize a private right of action. ( Pelaez v. Seide, 2 N.Y.3d 186, 778 N.Y.S.2d 111, 810 N.E.2d 393 [2004] ). DMV contends since Tesla-NY is a dealer and not a " franchisor", the VTL is not applicable to this situation. DMV alleges VTL §§ 415 and 463 make no provision for a private suit by the Petitioners against DMV based upon a breach of a statutory duty. DMV contends the Petitioners have no basis to claim that they are members of a class for whose particular

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benefit VTL § 415 was enacted. DMV maintains VTL § 415 was designed to govern the relations between franchisors and franchisees, not franchisors and all of the competing automobile dealers throughout New York State. DMV also claims VTL § 463(2)(cc)(10) limits standing to " existing franchise motor vehicle dealers of the same line-make." DMV contends the Petitioners seek Article 78 relief in mandamus to compel it to revoke the issued registrations. DMV alleges the Petitioners are not entitled to mandamus relief, and they cannot demonstrate any clear right to the relief sought. DMV maintains the Franchised Dealer Act was enacted to provide protections to motor vehicle dealers operating under franchise agreements with manufacturers.

Initially, the Court will address Petitioners' application for a default judgment. Petitioners maintain the Tesla Respondents motion papers were not timely served pursuant to CPLR 2214(b) and CPLR § 7804(f). Petitioners contend Tesla's Motion to dismiss was returnable December 14, 2012. Petitioners claim the Tesla Respondents did not mail their moving papers until December 7, 2012, seven days before the Motion was to be heard. Petitioners contend CPLR 2214(b) requires service at least eight days before the motion is noticed to be heard. Petitioners also claim DMV's Notice of Motion was untimely as it was not mailed until December 10, 2012. Petitioners request the Court to reject the Motions of the Respondents as untimely.

[969 N.Y.S.2d 726] Respondents allege its Motion was timely as CPLR § 7804(f) provides that a motion to dismiss may be made " within the time allowed to answer." The time to answer is " at least five days before such time" [that the petition is noticed to be heard] pursuant to CPLR § 7804(b).

The Motions of the Respondents were timely as they were mailed on December 7, 2012 and December 10, 2012, pursuant to CPLR § 7804(b) and (f). In addition, it is the preference of the courts that cases be decided on the merits rather than on default. ( Posada v. New York State Dept. of Health, 75 A.D.3d 880, 907 N.Y.S.2d 322 [3rd Dept.2010] ).

In deciding the issue of standing, the court must first determine whether the individual party seeking relief sustained an injury. ( Mahoney v. Pataki, 98 N.Y.2d 45, 745 N.Y.S.2d 760, 772 N.E.2d 1118 [2002] ). Standing is a threshold determination and the burden of establishing standing to raise a claim is on the party seeking review. ( Society of Plastics v. County of Suffolk, 77 N.Y.2d 761, 570 N.Y.S.2d 778, 573 N.E.2d 1034 [1991] ). To establish standing in an action against a government body, the

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Petitioners must show that they will suffer an injury in fact that is distinct from that of the general public. ( Matter of Transactive Corp. v. New York State Dept. of Social Servs., 92 N.Y.2d 579, 684 N.Y.S.2d 156, 706 N.E.2d 1180 [1998] ). In addition, to have standing to commence an action, Petitioners must demonstrate an actual legal stake in this outcome and an injury in fact worthy and capable of judicial resolution. ( Mittelmark v. County of Saratoga, 85 A.D.3d 1359, 925 N.Y.S.2d 235 [3rd Dept.2011]; Aiardo v. Town of East Greenbush, 64 A.D.3d 849, 881 N.Y.S.2d 698 [3rd Dept.2009] ).

Under the well established test for associational and organizational standing set by the Court of Appeals, the Petitioners " must show at least one of its members would have standing to sue, that it is representative of the organizational purpose it asserts and that the case would not require the participation of individual members." ( New York State Assn. of Nurse Anesthetists v. Novello, 2 N.Y.3d 207, 778 N.Y.S.2d 123, 810 N.E.2d 405 [2004]; Matter of Dental Society of State of N.Y. v. Carey, 61 N.Y.2d 330, 474 N.Y.S.2d 262, 462 N.E.2d 362 [1984] ). Pursuant to the first requirement of the associational standing test, a petitioner must demonstrate an injury-in-fact to one or more of its members and the injury falls " within the zone of interests or concerns sought to be promoted or protected by the statutory provision under which the agency acted." ( New York State Assn. of Nurse Anesthetists v. Novello, 2 N.Y.3d at 211, 778 N.Y.S.2d 123, 810 N.E.2d 405; Society of Plastics Indus. v. County of Suffolk, 77 N.Y.2d at 773, 570 N.Y.S.2d 778, 573 N.E.2d 1034).

The Franchised Dealer Act regulates the relationship between a car company (manufacturer) and its franchised dealers. In order to commence an action for a violation of Article 17-A of the VTL Law, there must be a franchise relationship between the franchisor and the franchisee. Manufacturers and dealers cannot utilize the Franchised Dealer Act as a means to sue their competitors. From the facts presented, Tesla has never had a franchise relationship with Brian Miller individually or with GNYADA. Neither Petitioner has demonstrated that it sustained an injury when DMV issued the two registration certifications to Tesla-NY.

In order to sustain standing pursuant to the New York State Franchise Dealer Act, the litigant must demonstrate that it is a franchise dealer with the same line-make manufacturer. [969 N.Y.S.2d 727]( Tri-County Motors, Inc. v. Am. Suzuki Motor Corp., 494 F.Supp.2d 161 [E.D.N.Y.2007] ). Petitioners do not have standing pursuant to an action under the Franchise Dealership Act when there is no franchise relationship between the parties. In

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Lee Dodge, Inc. v. Kia Motors Am., Inc., WL 3859914 [D.N.J. Aug. 31, 2011], the Court concluded the Petitioner " was never a franchise under the Franchised Dealer Act and lacks standing to make claims under the Franchise Dealer Act." In a very similar case, the Massachusetts State Automobile Dealers Association sought to enjoin Tesla Motors from operating its store in Massachusetts. The Court denied the Automobile Dealers Association standing as they were " not affiliated with Tesla." ( Massachusetts Dealers Ass'n, Inc. v. Tesla Motors, MA, Inc., (Civ. Act. No. 12-01691 [Mass. Superior Ct. Nov. 16, 2012] )).

The Petitioners have failed to sufficiently demonstrate that they sustained " special damage", different in kind and degree from the community in general. ( Rockland Hospitality Associates, LLC v. Paris, 302 A.D.2d 597, 756 N.Y.S.2d 585 [2nd Dept.2003] ). The Petitioners have not shown they would suffer direct injury different from that suffered by the public at large and the injury asserted falls within the zone of interests to be protected by the statute or constitutional guarantee. ( Matter of Graziano v. County of Albany, 3 N.Y.3d 475, 787 N.Y.S.2d 689, 821 N.E.2d 114 [2004]; Matter of Dairylea Coop. v. Walkley, 38 N.Y.2d 6, 377 N.Y.S.2d 451, 339 N.E.2d 865 [1975] ). Nor has the Petitioners demonstrated that any of its members would have individual standing. ( Energy Ass'n of New York State v. Public Service Com'n of State of N.Y., 273 A.D.2d 708, 710 N.Y.S.2d 662 [3rd Dept.2000] ).

The only potential injury suggested in the record is an increase in business competition which, considered alone, is insufficient to confer standing. ( Matter of Sun-Brite Car Wash v. Board of Zoning & Appeals, 69 N.Y.2d 406, 515 N.Y.S.2d 418, 508 N.E.2d 130 [1987] ). Petitioners cannot claim its injury falls within the " zone of interest" protected by the statute or by a constitutional guarantee. ( Matter of Lasalle Ambulance v. New York State Dept. of Health, 245 A.D.2d 724, 665 N.Y.S.2d 747 [3rd Dept.1997] ). " Absent demonstration of some injury other than potential economic harm caused by increased business competition, the Petitioners lacked standing to challenge the determination, and the proceedings were properly dismissed" . ( Friedman v. Town Clerk of Town of Hempstead, 62 A.D.3d 699, 879 N.Y.S.2d 156 [2nd Dept.2009] ). From the facts presented, the Petitioners do not have standing to commence this proceeding alleging violations of the Franchised Dealer Act. ( New York Psychiatric Ass'n, Inc. v. Mills, 29 A.D.3d 1058, 814 N.Y.S.2d 382 [3rd Dept.2006], lv. denied 7 N.Y.3d 708, 822 N.Y.S.2d 482, 855 N.E.2d 798 [2006] ).

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Accordingly, the Motions to dismiss the instant Article 78 Petition are hereby granted and the Amended Petition is hereby dismissed. The Motion to intervene by NYSADA is denied.

This shall constitute the Decision, Order and Judgment of the Court. This Decision, Order and Judgment is being returned to the attorneys for the Tesla Respondents. All original supporting documentation is being filed with the Albany County Clerk's Office. The signing of this Decision, Order and Judgment shall not constitute entry or filing under CPLR 2220. Counsel are not relieved from the applicable provisions of that rule relating to filing, entry, and notice of entry.


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