A Third Circuit Ruling in Favor of Association Standing

New Jersey Coalition of Automotive Retailers, Inc. v. Mazda Motors of America, 957 F.3d 390 (3d Cir. 2020). In Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 333 (1977), the Supreme Court of the United States held that an association can have standing to sue on behalf of its members if (a) its members would have had standing to sue in their own right, (b) the interests it seeks to protect are germane to the organization’s purpose, and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. In this case, the District Court rejected association standing based on failure to satisfy factor (b). But the Third Circuit, applying de novo review, reversed in an opinion by Judge Greenberg (no relation).

Plaintiff (“NJCAR”) consists of franchised new car dealers. Sixteen of its members are Mazda dealers. Mazda had an incentive plan (“the MBEP”) for dealers, with different tiers of incentives, depending on such things as whether a dealer has an exclusively Mazda facility or a dedicated, exclusive Mazda general manager. NJCAR sought to enjoin the MBEP, as only three Mazda made the top tier, eight others qualified for at least some incentives, and others got no incentives at all.

The District Court ruled that NJCAR’s case, which sought to enjoin the tiered incentive plan, conflicted with the interests of the majority (eleven out of sixteen) of NJCAR’s Mazda dealer members. For that reason, NJCAR lacked association standing.

But Judge Greenberg said that was the wrong way to view the case. “When standing is challenged on the basis of the pleadings … we must … construe the complaint in favor of the complaining party.” Properly viewed, “b]ecause some of the Mazda dealers have been shut out of the MBEP altogether, this lawsuit is about vindicating their rights and bringing competitive balance back between them and the other dealers who do benefit from the MBEP.”

Five dealers had submitted declarations opposing NJCAR’s lawsuit, but “five does not constitute a majority of the sixteen Mazda dealers.” The District Court had “unfortunately” inferred from the five opposing declarations that all eleven dealers who got some level of incentives opposed the suit. That was error because it did not construe the complaint most favorably to NJCAR.

One dealer that qualified for a lower tier nonetheless submitted a declaration favoring the suit. Thus, Judge Greenberg saw “no reason to dismiss the possibility that the eight dealers who enjoy lower tiers of incentives would forego such incentives in order to prevent the creation of three ‘super’ dealers who clearly have a competitive advantage over all other Mazda dealers.”

Accordingly, the Third Circuit reversed the dismissal for lack of standing and remanded to the District Court for further proceedings. Judge Greenberg was careful to note, however, that the panel was not opining on the merits of the case, or even as to whether NJCAR had stated a valid claim. The District Court was free to consider on remand “any other arguments for dismissal that Mazda advances.”