Industry Coalition Obtains Preliminary Injunction Against Enforcement Of North Dakota Dealer Statute

On December 14, 2017, the U.S. District Court in Bismarck, North Dakota issued a preliminary injunction preventing the enforcement of recently enacted amendments to the North Dakota Farm Equipment Dealership Statute known as "Senate Bill 2289." The decision is significant because Senate Bill 2289 is arguably the most restrictive state law affecting franchise and dealer relationships ever enacted. As enacted, Senate Bill 2289 applies only to farm equipment dealership agreements. If it withstands constitutional challenge, however, Senate Bill 2289 could serve as a model for other industry-specific dealer protection statutes and state laws that regulate distribution and franchise relationships generally.

Enacted in the spring of 2017, Senate Bill 2289 was scheduled to become effective on August 1, 2017. On July 25, 2017, however, an industry coalition consisting of the Association of Equipment Manufacturers ("AEM") and four manufacturers of agricultural equipment that are members of AEM (collectively, the "Manufacturers")1 filed suit in the U.S. District Court for the District of North Dakota challenging the constitutionality of Senate Bill 2289.2 The original named defendants were the Governor and Attorney General of North Dakota (the "State"). The dealers' association that had successfully lobbied for Senate Bill 2289's enactment, the North Dakota Implement Dealers Association ("NDIDA"), sought and obtained the right to intervene as a defendant in support of what it called "one [of] the most comprehensive and impactful pieces of legislation that the NDIDA has ever introduced in our 117 year history." In addition, the national Equipment Dealers Association and eight of its regional affiliates also filed an amicus brief in defense of the North Dakota statute. After filing suit, the Manufacturers sought preliminary injunctive relief to prevent enforcement of Senate Bill 2289 pending final judgment on the merits. Thereafter, the State agreed not to enforce Senate Bill 2289 until the Manufacturers' preliminary injunction motion was fully briefed, argued, and decided.

The so-called "Offending Provisions" of Senate Bill 2289 challenged by the Manufacturers, as described more fully in the Complaint,3 include the "No Enforcement of Performance Standards" Provisions whereby the courts of North Dakota could invalidate any performance standards in farm equipment dealer agreements as "unreasonable," "arbitrary," or "unfair." Certain types of dealer...