Can a “relevant market area” in Rhode Island’s general law extend beyond the state’s borders?
A federal appeals panel in Boston posed this very question to the R.I. Supreme Court in February 2024 while considering the constitutionality of a law halting competing truck dealerships from operating within 20 miles without giving notice to the state.
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The 1st U.S. Circuit Court of Appeals finally heard back with an answer Tuesday: Yes, Rhode Island’s law does reach across the state line.
“We take judicial notice of the fact that the state of Rhode Island is only 37 miles wide,” R.I. State Supreme Court Associate Justice Melissa A. Long wrote in the court’s July 29 opinion. “Given the state’s size, a circle with a radius of 20 miles will always encompass an area outside the state.”
The question over the reach of Rhode Island’s dealer law is at the center of a legal dispute that began in 2019 after Daimler Trucks North America authorized Advantage Truck Group to sell Freightliner-brand trucks at its dealership on Route 44 in Raynham, Massachusetts.
Advantage Truck is 18 miles from Rhode Island Truck Center in East Providence, which was authorized by Daimler to sell the same brand in 2016.
In 2022, Rhode Island Truck Center filed a protest petition against Daimler before the R.I. Motor Vehicle Dealers License and Hearing Board, a board created under the state’s dealer law to hear disputes between manufacturers and dealers. The five-member panel ultimately dismissed the case during the meeting held June 1, 2022, “due to a lack of jurisdiction.”
“This board lacks the authority to apply the provisions of the Rhode Island dealer law in an extraterritorial manner and therefore cannot prohibit respondent from establishing or moving a dealership outside the boundaries of this state,” wrote then-Chairman James Botvin.
The board had cited a 1994 case in which a Massachusetts-based Nissan dealership protested the establishment of a competitor in Rhode Island, only for the petition to be dropped on the grounds that out-of-state dealers lacked standing to protest under its dealer law.
Rhode Island Truck Center appealed the board’s dismissal in Providence County Superior Court, which Daimler then had moved to the U.S. District Court of Rhode Island where Judge John J. McConnell Jr. ruled in favor of Daimler on Oct. 24, 2022.
McConnell ruled that Rhode Island’s law violated the U.S. Constitution’s Dormant Commerce Clause, which prohibits states from engaging in protectionist practices against other states.
Rhode Island Truck Center appealed to the 1st Circuit Court in Boston, which submitted a “certified question” to the Rhode Island Supreme Court to define the state’s dealer law. It’s a process that doesn’t get used too often, Roger Williams University School of Law professor Michael Yelnosky said in an interview.
The last time the Rhode Island Supreme Court answered a certified question was in 2021 over the definition of “civil action” under the state’s insurance law.
For a federal court to certify a question, Yelnosky said two things are required: First, the case must hinge on an essential question of state law. Second, the state courts should not yet have answered that question in any prior cases.
When a question is certified, Yelnosky said, it’s done under the legal doctrine of “constitutional avoidance” – a way for the federal court to resolve a case without relying on constitutional grounds.
“A constitutional question does go away if the court had said it only applies in Rhode Island,” he said.
But Long’s answer now means the federal appeals court must decide on the constitutionality of Rhode Island’s dealer law.
“As a general matter, state A can’t control the matters of state B,” Yelnosky said. “That’s a violation of state B’s sovereignty.”
Andrew Johnson, head of communications for Daimler North America, based in Portland, Oregon, declined to comment on the case.
“We don’t comment on pending litigation,” he said.
A representative from Advatange Truck Raynham did not immediately respond to request for comment.
Joe Travers, Rhode Island Truck Center’s director of operations, called the state Supreme Court’s answer to the certified question “a big win” for the company, which employs 50 people.
“It’s definitely been an impact on business,” he said of having a competitor so close to the truck center. “I’m not sure how equitable it is for us. When you look at all the things impacting economic conditions right now, does that justify having that kind of saturation?
But Travers said the dealership has managed to maintain its regular customers including the R.i. Department of Transportation, along with municipalities like Pawtucket, Warwick, and Warren. Rhode Island Truck Center also holds accounts for numerous oil companies in the area, Gold Medal Bakery in Fall River and the National Lumber Company in Mansfield, Mass.
“We have a pretty diverse customer base,” he said.
Not mentioned in any of the legal filings is how Massachusetts’ own dealer law defines “relevant market area” – which is set at an 8-mile radius between competing franchises within Bristol County.
But Yelnosky said the Massachusetts limit is irrelevant to the federal appeals court’s proceedings since its focus is squarely on Rhode Island’s law.
Still, he said he found it “cute” to see Rhode Island’s small size noted in the state Supreme Court’s opinion.
“We don’t think about state lines here as much as people do in other parts of the country,” Yelnosky said. “You can drive in and out of two or three states in the matter of a couple hours here.”
Christopher Shea is a staff writer for the Rhode Island Current.
