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Judge partially blocks new N.H. dealer law after lawsuit from equipment manufacturers

A judge has partially blocked a new state law that grants broad legal protections to local automotive and equipment dealerships from taking effect Monday.

The expansion of New Hampshire’s existing “Dealer Bill of Rights” sailed through the Legislature and was signed into law June 25 by Gov. Maggie Hassan, to take effect 90 days later. Senate Bill 126 was opposed by auto manufacturers, who said it would improperly interfere with private business relationships, but was supported by the New Hampshire Auto Dealers Association, which said it would help correct the often one-sided relationship between automakers and dealerships.

Three companies that make farm and construction equipment – John Deere, AGCO Corp. and CNH, which sells Case and New Holland machines – then filed a lawsuit claiming the new law violates the state and U.S. constitutions by retroactively changing their contracts with dealerships.

They won an initial victory Thursday, when Hillsborough County Superior Court Judge Philip Mangones issued a preliminary injunction blocking the law from affecting existing contracts between the three companies and their dealerships in New Hampshire.

His order doesn’t block the law from taking effect Monday for other manufacturers, including automakers, and their dealerships.

“The law represents an unprecedented level of regulation for our industry and jeopardizes Deere’s ability to do business in New Hampshire by voiding many of the provisions of our dealer agreements,” wrote company spokesman Ken Golden in an email.

Mary Ann Dempsey, chief of the civil law bureau in the attorney general’s office, said the state would continue to fight the lawsuit.

“We’re in the process of analyzing the decision, but it is at the preliminary stage and we intend to continue to proceed with the litigation and defend the constitutionality of SB 126 as it applies to equipment manufacturers,” she said.

Pete McNamara, president of the New Hampshire Auto Dealers Association, said he was disappointed by the ruling.

“The people who really are hurt are consumers,” he said in a statement.

The bill that passed the Legislature this year expanded the existing protections offered under state law for locally owned franchises that sell cars, trucks and equipment such as tractors and backhoes.

Among other things, it bans manufacturers from requiring their dealerships to upgrade their facilities except every 15 years, requires manufacturers to pay higher reimbursement rates for repair work made under warranty and allows dealers greater access to the files manufacturers keep on them.

But equipment manufacturers cried foul because they and automakers are currently governed by separate state laws. Under the bill, an expanded state auto dealership law applies to equipment dealerships as well.

Such a retroactive application of a state law to existing contracts, the companies argued, would violate the state Constitution, which describes “retrospective laws” as “highly injurious, oppressive and unjust,” as well as the U.S. Constitution’s ban on state laws “impairing the obligation of contracts.”

Lawyers for the state argued the bill signed by Hassan was constitutional, would not substantially impair existing contracts and served a valid public interest by strengthening the New Hampshire economy.

In a 31-page ruling dated Thursday, Mangones found John Deere and the two other manufacturers “have made a sufficient preliminary showing that” the new law “will cause an impairment to (their) contracts,” and that the impairment would be substantial.

“The court recognizes that all parties have outlined good faith claims and defenses concerning these matters,” he wrote. “However . . . the court concludes, on a preliminary basis, that the plaintiffs have made a sufficient showing concerning the probability of success regarding their claims.”

Mangones ordered the lawsuit transferred to the Merrimack County Superior Court in Concord, where both sides will argue their cases ahead of a final ruling.

(Ben Leubsdorf can be reached at 369-3307 or
bleubsdorf@cmonitor.com or on Twitter @BenLeubsdorf.)

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