Illinois car dealers won't be able to stop electric car makers like Rivian and Tesla from selling their vehicles directly to customers in the state, after a state appeals panel ruled they can't sue state officials for allegedly violating state law by awarding dealer licenses to the manufacturers.
The legal action accused the Illinois Secretary of State's office, then under former Secretary of State Jesse White, of allegedly violating the Illinois Vehicle Code and the Motor Vehicle Franchise Act by granting licenses to Rivian Automotive and Lucid USA to sell their electric vehicles directly to consumers.
The dealerships assert the state laws require that new cars and other vehicles can only be sold to consumers by franchised dealerships.
They assert the Secretary of State's action violates their constitutional rights to equal protection and due process.
Their lawsuit was initially tossed by a Cook County judge in Chicago, who ruled the dealers' lawsuit misrepresented the law and also ruled the dealers couldn't sue because they couldn't show they had any kind of property right in "exclusive franchise-based vehicle sales."
On appeal, the dealers' claims fared no better.
The appellate order was written by Justice Michael B. Hyman. Justices Sharon Oden Johnson and Carl A. Walker concurred in the ruling.
The justices noted the state attempted to block electric car maker Tesla from selling cars in Illinois in 2019. However, Tesla challenged that action, and ultimately reached an agreement with the state and two trade groups, the Illinois Automobile Dealers Association and the Chicago Automobile Trade Association, under which Tesla would be allowed to sell its vehicles through 13 direct-to-consumer dealerships.
Shortly after, Rivian and Lucid sought similar arrangements. According to court documents, the Secretary of State secured an informal opinion from Illinois Attorney General Kwame Raoul's office that state law "does not require a newly established motor vehicle manufacturer to establish and utilize franchise dealerships" to sell vehicles in Illinois, nor does the law "prohibit a newly established motor vehicle manufacturer from selling motor vehicles directly to the public..."
That opinion rested on what the Attorney General's office said was a distinction in the law between "franchisee" and "motor vehicle dealer."
While the law "clearly provides that a manufacturer may not own or operate a business as a franchisee, the plain language ... does not prohibit a manufacturer from owning or operating a business as a motor vehicle dealer."
Both the dealer trade associations and at least two state legislators disputed that interpretation of the two state laws, read in conjunction with each other. But the Attorney General and Secretary of State did not relent from their reading of the laws.
In the appellate ruling, Hyman and his colleagues said they believed the proper interpretation of the law is not to preclude manufacturers from selling their vehicles directly to consumers.
Rather, they said, lawmakers desired "to make certain that new motor vehicles were sold with a manufacturer's authorization and consent, not to prevent them from obtaining dealer licenses."
"With this purpose in mind, the reasonable interpretation of (the law) requires that only parties other than a manufacturer obtain a dealer license to sell new motor vehicles," Hyman wrote. "Given the provision's purpose, requiring a manufacturer to contract with a third party to obtain a dealer license to sell its own vehicles makes no sense."
The justices also rejected the car dealers' argument that the state had violated their constitutional due process rights by essentially reducing the value of "their interest in the 'established franchise system.'"
But the justices said the granting of licenses to the electric car makers only allowed for a different business model.
The dealers' "licenses remain intact, and they continue to do business as new motor vehicle dealers," Hyman wrote. "Although newly licensed motor vehicle dealers, whether manufacturers or additional franchises may affect market share and profits, freedom from competition does not constitute a constitutionally protected interest."
The car dealers have been represented by attorneys John S. Elias and Janaki Nair, of the firm of Elias, Meginnes & Seghetti, P.C., of Peoria; and Ira M. Levin, Eric P. Venderploeg, Danielle J. Gould, Victoria R. Collado and Brittany A. Martin, of Burke Warren MacKay & Serritella, of Chicago. They were also represented before the appellate court by attorney Michael T. Reagan, of Ottawa.
The state defendants have been represented by lawyers from the Attorney General's office, including Solicitor General Jane Elinor Notz and Assistant Attorney General Evan Siegel.
Attorneys David M. Friebus, Andrew M. Grossman, Billy M. Donley and David R. Jarrett, of the firm of BakerHostetler LLP, of Chicago, Houston and Washington, D.C., represented Rivian and Lucid.