Beck Chevrolet Co., Inc., Appellant,v.General Motors LLC, Respondent.BriefN.Y.June 2, 2015 CTQ-2015-00002 Court of Appeals of the State of New York BECK CHEVROLET CO., INC., Plaintiff-Appellant, – v. – GENERAL MOTORS LLC, Defendant-Respondent. –––––––––––––––––––––––––––––– ON APPEAL FROM THE QUESTIONS CERTIFIED BY THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT IN DOCKET NOS. 13-4066-CV AND 13-4310-CV BRIEF FOR AMICUS CURIAE GREATER NEW YORK AUTOMOBILE DEALERS ASSOCIATION, INC. PUTNEY, TWOMBLY, HALL & HIRSON LLP Attorneys for Amicus Curiae Greater New York Automobile Dealers Association, Inc. 521 Fifth Avenue New York, New York 10175 Tel.: (212) 682-0020 Fax: (212) 682-9380 Date Completed: October 14, 2015 DISCLOSURE STATEMENT The Greater New York Automobile Dealers Association, Inc. ("GNY ADA") is a New York not-for-profit corporation organized and operating as a New York trade association. GNYADA does not have any parent corporation. GNY ADA's subsidiaries and affiliates are: Greater New York Automobile Services, Inc., The Center for Automotive Education and Training, Inc., and GNY ADA Insurance Brokerage LLC. TABLE OF CONTENTS Statement of Interest .................................................................................................. 1 Preliminary Statement ................................................................................................ 5 Argument ................................................................................................................... 8 I. VTL §463(2)(gg) .......................................................................................... 9 II. VTL §463(2)(ff) ........................................................................................ 17 Conclusion ............................................................................................................... 23 TABLE OF AUTHORITIES Page(s) Cases Action Nissan, Inc. v. Nissan North America, 454 F.Supp.2d 108 (S.D.N.Y. 2006) .................................................................. 13 Beck Chevrolet Co. v. General Motors LLC, 787 F.3d 663 (2d Cir. 2015) ........................................................................ passim Bloomfield v. Bloomfield, 97 N.Y.2d 188 (2001) ......................................................................................... 20 Compania De Inversiones Internacionales v. Industrial Mortgage Bank of Finland, 269 N.Y. 22 (1935), amended on other grounds, 269 N.Y. 602 ....................................................................................................... 20 F.A. Straus & Co. v. Canadian Pacific Railway Co., 254 N.Y. 407 (1930) ..................................................................................... 19, 20 Finger Lakes Racing Ass 'n, Inc. v. New York State Racing & Wagering Board, 45 N.Y.2d 471 (1978) ........................................................................................... 9 Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) ................................................................................................ 8 New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978) .............................................................................................. 12 Matter of OnBank & Trust Co., 90 N.Y.2d 725 (1997) ......................................................................................... 16 People v. Gowasky, 244 N.Y. 451 (1927) ............................................................................................. 8 Rangolan v. County of Nassau, 96 N.Y.2d 42 (2001) ........................................................................................... 16 Matter of Rodriguez v. Perales, 86 N.Y.2d 361 (1995) ......................................................................................... 15 11 Matter of Smathers, 309 NY 487 (1956) ............................................................................................. 16 South & Central American Commercial Co., Inc., v. Panama Railroad Co., 237 N.Y. 287 (1923) ................................................................................... 19 Sternaman v. Metropolitan Life Ins. Co., 170 N.Y. 13 (1902) ....................................................................................... 18, 19 Statutes 1 McKinney's, Statutes §95 ..................................................................................... 16 1 McKinney's, Statutes §98(a) ................................................................................ 15 62A McKinney's, Vehicle & Traffic Law §466(1) ................................................. 13 62A McKinney's, Vehicle & Traffic Law §469(1) ................................................. 14 62A McKinney's Vehicle & Traffic Law §463(2)(ff) and (gg) ....................... passim Other Authorities 97 N.Y.Jur.2d, Statutes § 17 at 25 .............................................................................. 8 N.Y. Mem. in Support, Bill Jacket, 2008 S.B. 8678, ch. 490 .............................. 9, 11 111 Statement of Interest The Greater New York Automobile Dealers Association, Inc. ("GNY ADA") was established more than 1 00 years ago to provide support to the franchised new car dealers in the New York Metropolitan Area. Today, GNYADA is a not-for- profit trade association of more than 415 members, including new car dealers as well as allied members that serve the dealership industry, that seeks to promote, among other things, ethical practices by its dealer members, diversity within the dealer industry, and a level playing field between manufacturers/franchisors and dealers/franchisees to better enable dealers to succeed in the very competitive automobile retail market. GNY ADA has a long standing interest in the economIC stability of its dealer-members. For years GNYADA has been instrumental in responding to attempts by manufacturers to exercise their superior economic power in the franchise relationship. When the manufacturers have asserted unreasonable economic pressure on their dealers, who had invested millions of dollars in manufacturer-dictated dealership facility requirements, GNY ADA, together with the New York State Automobile Dealers Association and other regional dealer associations, have promoted legislation to bring the manufacturer-dealer relationship back into balance. 1 GNY ADA, by its officers, its counsel and its Government Relations Committee, frequently meets with New York State legislators and representatives of the Commissioner of the Department of Motor Vehicles with respect to legislation and rule making that affects GNYADA's members. GNYADA has drafted and proposed regulations and legislation, including the initial drafts of the 2008 amendments to Article 17 of the New York Vehicle & Traffic Law, known as the Franchised Motor Vehicle Dealer Act (the "Dealer Act"). Two provisions of the Dealer Act -- VTL §463(2)(ff) and (gg) -- are at the core of the two questions certified by the Second Circuit Court of Appeals and to be answered by this Court: (1) Is a performance standard that requires "average" performance based on statewide sales data in order for an automobile dealer to retain its dealership "unreasonable, arbitrary, or unfair" under New York Vehicle & Traffic Law section 463(2)(gg) because it does not account for local variations beyond adjusting for the local popularity of general vehicle types? (2) Does a change to a franchisee's Area of Primary Responsibility or AGSSA constitute a prohibited "modification" to the franchise under section 463 (2)(ff), even though the standard terms of the Dealer Agreement reserve the franchisor's right to alter the Area of Primary Responsibility or AGSSA in its sole discretion? Beck Chevrolet Co. v. General Motors LLC, 787 F.3d 663, 682 (2d Cir. 2015). GNY ADA, as the trade association for the franchised automobile dealers in the Greater New York Metropolitan Area, including plaintiff/appellant Beck Chevrolet Co., Inc. ("Beck"), on behalf of its members has a very real interest in 2 how these questions are answered and respectfully urges this Honorable Court to answer each question in the affirmative. In the years leading up to the passage of the 2008 Amendments, it was becoming very apparent to GNY ADA and its members that manufacturers were creating and enforcing unreasonable, unfair and arbitrary sales performance standards on their dealers. These standards were being used not only to determine whether a dealer was in compliance with the franchise agreement, but also to terminate a dealer's franchise. Not infrequently, the manufacturer did not even give its franchisee advance warning or a clear and concise statement of the formula for determining whether the dealer was meeting these performance standards. As the complaints began to mount, GNY ADA determined that the best way to remedy the situation was through amendments to the Dealer Act. GNY ADA and its counsel prepared a set of proposed amendments and presented them not only to the New York State Senate and Assembly, but to the manufacturers and their association, the Alliance of Automobile Manufacturers. After excessive lobbying, negotiations and meetings, the provisions that ultimately became Sections 463(2)(ff) and (gg) of the New York Vehicle & Traffic Law were included in GNY ADA's proposed amendments. Two major goals of GNY ADA-and the New York State Dealers Association and other regional dealers associations-were, (1) as set forth in VTL 3 §463(2)(ff), to give the dealer the means to protest and defeat unfair franchisor modifications to a franchise that were not undertaken in good faith or for good cause or would adversely and substantially alter a dealer's "rights, obligations, investment or return on investment. .. "; and (2) as set forth in VTL §463(2)(gg), to prohibit franchisors from using "unreasonable, arbitrary or unfair sales or other performance standard[s] in determining ... " whether a dealer was in compliance with the franchise agreement and, therefore, entitled to continue to maintain its franchise or to benefit from manufacturer incentives. GNY ADA's members are the auto dealers In the Greater New York Metropolitan Area. The regional consumer preferences and market conditions are vastly different for the Greater New York Metropolitan Area than for the State as a whole. If GM is permitted to terminate Beck's dealership based on state-wide sales averages which fail to take into account those regional consumer preferences and market conditions, the franchise of virtually every downstate Chevrolet dealer is in jeopardy. This is especially true where, as in the instant case, the manufacturer uses these standards to selectively terminate a few dealers from among the 19 downstate dealers (out of 23) who fail to meet GM's unfair, unreasonable and arbitrary performance standard. See A 1263-65. Accordingly, the interpretation and enforcement of the statutory language "unreasonable, 4 arbitrary or unfair" is of the utmost interest and importance to GNY ADA's members. Indeed, their livelihoods depend on it. In the view of GNY ADA and its members, it is imperative that this Court determine that the 2008 amendments mean what they say, and that the Court reject the misguided interpretations of GM and the Southern District of New York that "only unjust, deceptive, irrational, or capricious standards run afoul of Section 463' s protections ... " and imposing a heightened "egregiousness" requirement. Beck, 787 F.3d at 673. Preliminary Statement GM argued below that VTL §463(2)(gg),which makes it unlawful to use any "unreasonable, arbitrary or unfair sales or other performance standard," in reality only prohibits a manufacturer-imposed performance standard that is "unjust, deceptive, irrational, or capricious." Beck,787 F.3d at 673. Those words, "unjust, deceptive, irrational, or capricious," however, appear no place in Section 463(2)(gg). Furthermore, the Southern District of New York read into the "unreasonable, arbitrary or unfair" standard of proof contained in VTL §463(2)(gg) an additional requirement that the manufacturer's performance standard must be "egregious or deceptive ... " for a court to overturn it. Id. The terms "egregious" and 5 "deceptive", however, did not find their way into the 2008 Amendments. The "unreasonable, arbitrary or unfair" standard in § 463(2)(gg) requires no showing of irrationality, capriciousness, deception or egregiousness. As demonstrated below, the law of New York is well-settled, that where the language of a statute is clear and unambiguous, a court may not interpret that statute to add extra stringencies. Indeed, a court may not even look to the legislative history where there is no ambiguity in the language of the statute. Unreasonable, unfair and arbitrary are common words with well-understood meamngs. If the legislature creates a burden of proof of "a preponderance of the evidence," a court may not interpret that burden as requiring proof by "clear and convincing evidence." Likewise here, it was improper for the District Court to impose an "egregiousness" standard when New York State had legislated that a dealer had only to prove that the manufacturer's performance standard was unreasonable, arbitrary or unfair. By imposing its own standard requiring that Beck demonstrate that GM's performance standards were egregious or that its formula was deceptive, the Southern District came to the wrong conclusion when determining whether those GM performance standards were reasonable or fair. Can a performance standard possibly be "fair" or "reasonable" when it requires every dealer to be at or above the state-wide average for sales of Chevrolet 6 vehicles? Practically speaking, it is impossible for every dealer to be at or above the state-wide average market share. Some portion of the dealers will always be below and some above the average. If every dealer must be at or above the average, then there can be no average and the performance standard is by definition unreasonable and its imposition unfair. To impose a state-wide performance standard when it is a conceded fact that downstate, metropolitan car owners prefer foreign-made vehicles while upstate drivers prefer domestic-made vehicles is unquestionably arbitrary, although it might not be capricious or irrational. GNY ADA as amicus curiae primarily addresses herein the concern stated by the Second Circuit regarding the intended effect of "the 2008 Amendment that created 463(2)(gg) was intended to have .... " Beck, 787 F.3d at 674. 7 Argument The two statutory provisions of the Dealer Act at issue are both contained in Section 463(2) of the Vehicle Traffic Law. These provisions are plainly mandatory and not permissive: "It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract .... " (Emphasis added.) "This word 'shall' as thus used .. .leaves no discretion in this particular to the court or judge." People v. Gowasky, 244 N.Y. 451,466 (1927). "The word 'shall' is ordinarily the language of a command and is considered mandatory unless qualifying language indicates otherwise." 97 N.Y.Jur.2d, Statutes § 17 at 25. "The .. .instruction comes in terms of the mandatory 'shall,' which normally creates an obligation impervious to judicial discretion." Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35 (1998). It is therefore plain that enforcement of the provisions in VTL §463(2)(ft) and (gg) is mandatory and not permissive. Thus, with respect to VTL §463(2)(gg), it is unlawful to "use an unreasonable, arbitrary or unfair sales or other performance standard in determining a franchised motor vehicle dealer's compliance with a franchise agreement." And with respect to VTL §463(2)(ft), it is unlawful to "modify the franchise of any franchised motor vehicle dealer ... " if the modification is unfair, and a "modification is deemed unfair if it is not undertaken in good faith; is not undertaken for good cause; or would adversely and 8 substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer. ... " Because there is nothing ambiguous or confusing in the words of the statute, they must be enforced as enacted: It is an elementary principle of statutory construction that courts may only look behind the words of a statute when the law itself is doubtful or ambiguous (Johnson v. Hudson Riv. R. R. Co., 49 N.Y. 455,462). If, as here, the terms of a statute are plain and within the scope of legislative power, it declares itself and there is nothing left for interpretation. To permit a court to say that the law must mean something different than the common import of its language would make the judicial superior to the legislative branch of government and practically invest it with lawmaking power. Finger Lakes Racing Ass 'n, Inc. v. New York State Racing & Wagering Board, 45 N.Y.2d 471,480 (1978). I. VTL §463(2)(gg) Despite the lack of any ambiguity, the Second Circuit nevertheless expressed some concern regarding the legislative history of VTL §463(2)(gg), and quoted from a letter/memorandum in support that Mark Schienberg, President of GNY ADA, sent regarding the statutory provisions in question and contained in the bill jacket. Beck Chevrolet Co. v. General Motors LLC, 787 F.3d 663,667 (2d Cir. 2015), quoting from N.Y. Mem. in Support, Bill Jacket, 2008 S.B. 8678, ch. 490, at 44. The Second Circuit stated that Mr. Schienberg "explained that section 9 463(2)(gg) will 'prevent misunderstandings' and override performance standards that are too complicated and insufficiently communicated." Id. at 667. The court queried whether it may be "that the statute was designed only to ensure that franchisors' performance standards are transparent and comprehensible, and that their substantive requirements are not egregious." Id. As explained hereafter, the Second Circuit's supposition was never the intent of Mr. Schienberg or GNY ADA in sending the letter/memorandum and is contradicted by the plain, unambiguous language of the statutory provisions and the rules of statutory construction discussed above. On or about July 21, 2008, Mr. Schienberg sent on behalf of GNY ADA a letter-memorandum to then-Governor David A. Paterson, containing the following language: Finally, franchisors [manufacturers] often impose performance standards on dealers in order to measure the success and worth of a franchise. However, these standards are often extremely complicated and are frequently not sufficiently communicated to the dealers upon whom they are imposed. In an effort to prevent misunderstandings and provide greater openness, this legislation prohibits unreasonable, unfair, and arbitrary sales standards and requires that sales standards be communicated to the franchisees [dealers] in writing in a clear and concise manner. The transparency, fairness, and accountability this legislation provides for will benefit all New Yorkers whether they manufacture, sell, service, or buy 10 automobiles and will help the automobile industry maintain its integral role in New York's economy. See Bill Jacket on Senate Bill 8678, Laws of 2008, Chapter 490 at 44. Then and now, GNY ADA saw this as a three-step process: "transparency, fairness, and accountability." GNY ADA and the legislation required "transparency" in order for the dealers to determine whether their manufacturers were imposing fair and reasonable sales performance standards and to hold them accountable in the event the standards were not fair and reasonable. Thus, the first step was for the manufacturer to develop a fair, reasonable and non-arbitrary standard. The second step was for the manufacturer to be open, clear and concise in communicating to its dealers these fair, reasonable and non-arbitrary performance standards it intended to impose. If a dealer determined that the performance standards the manufacturer was imposing were not fair and reasonable, the dealer could proceed with the third step and seek to hold the manufacturer accountable. Open communication from manufacturers to dealers, therefore, is only one step in what was ultimately passed as Chapter 490 of the Laws of 2008, but a necessary one for the dealer to know if the manufacturer was complying with the 11 key statutory requirement precluding unreasonable, arbitrary or unfair performance standards. In other words, the key substantive aspect of the amendment was to create a balanced playing field. I The New York Legislature and Governor accepted GNY ADA's arguments and enacted the amendment GNY ADA proposed which is now codified in the New York Vehicle & Traffic Law in §463(2)(gg): 2. It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract: (gg) To use an unreasonable, arbitrary or unfair sales or other performance standard in determining a franchised motor vehicle dealer's compliance with a franchise agreement. Before applying any sales, service or other performance standard to a franchised motor vehicle dealer, a franchisor shall communicate the performance standard in writing in a clear and concise manner. 62A McKinney's, Vehicle and Traffic §463(2)(gg) (2008). Section 466( 1) of the VTL already made it "unlawful for a franchisor directly or indirectly to impose unreasonable restrictions on the franchised motor vehicle dealer relative to transfer, sale, right to renew or termination of a franchise, I The goal of leveling the playing field because of the great disparity in bargaining power is not new. The United States Supreme Court expressly recognized this purpose of state dealer franchise laws more than 35 years ago. See New Motor Vehicle Bd. v. Orrin W Fox Co., 439 U.S. 96, 100-101 (1978) ("The disparity in bargaining power between automobile manufacturers and their dealers prompted Congress and some 25 States to enact legislation to protect retail car dealers from perceived abusive and oppressive acts by the manufacturers"). 12 · .. [and] compliance with subjective standards ... with respect to its franchise or dealership." 62A McKinney's, Vehicle and Traffic §466(1) (1983). By 2007, however, it had become apparent that this provision needed to be substantially strengthened with respect to purportedly objective but nevertheless unfair sales performance standards being used by certain manufacturers to determine whether a dealer was in compliance with its franchise agreement. The burden of proof had to be, and by VTL §463(2)(gg) was, shifted to the franchisor to demonstrate that its means of assigning sales performance standards were fair, reasonable and non- arbitrary. GNYADA's proposal of what became the 2008 Amendments, including VTL §463(2)(gg), came on the heels of a Southern District of New York decision in which the court accepted Nissan's use of a Northeast region sales area in determining a dealer's sales penetration despite the dealer's objections to use of a regional basis as opposed to a measurement within the dealer's local area. Action Nissan, Inc. v. Nissan North America, 454 F.Supp.2d 108, 121-24 (S.D.N.Y. 2006). The court did not concern itself with the fairness of the sales performance standard, only with whether it was permissible under the franchise agreement. Id. Thus, the thrust of VTL §463(2)(gg) was to enhance and clarify the restrictions on the franchisor, "notwithstanding the terms of any franchise contract," by explicitly creating an "unreasonable, arbitrary or unfair" standard of 13 proof with respect to a manufacturer's imposition of sales performance requirements on dealers-as opposed to an egregious or arbitrary and capricious standard as OM would like to impose. The unreasonable, arbitrary or unfair standard was designed to even the playing field between the manufacturer and the dealer with respect to a formula for sales performance by the dealer. In order for a dealer to be able to bring a private action, as authorized by §469 of the VTL (62A McKinney's, Vehicle & Traffic Law §469(1)), the 2008 amendment required the franchisors to be open, clear and concise in disclosing the performance standards, including the underlying formula used to arrive at the sales target. If a franchisor wishes to Impose sales performance standards on its franchisees, it must satisfy both obligations of VTL §463(2)(gg): Its standards must be fair, reasonable and non-arbitrary, and it must communicate those standards to its franchisees in a clear, concise, understandable manner. Otherwise, the sales performance standard is unlawful and unenforceable. To read the statutory provision as simply requiring the manufacturer to communicate its standard clearly is to emasculate the first sentence of §463(2)(gg). "All parts of a statute must be harmonized with each other as well as with the general intent of the whole statute, and effect and meaning must, if possible, be 14 given to the entire statute and every part and word thereof" 1 McKinney's, Statutes § 98( a) (emphasis added). The intent of the amendment GNY ADA proposed that ultimately became §463(2)(gg) was to require both that the standard be fair to the dealer and that it be clearly communicated. They are separate requirements, and one has no meaning to a dealer without the other. A clear communication is a necessity in order for the dealer to determine whether the manufacturer's performance standard was unfair or unreasonable or arbitrary so that the dealer in such circumstance may proceed under §469 to hold the manufacturer/franchisor accountable. The clear communication requirement was never meant to lessen or modify the specific requirement that the sales performance be fair and reasonable and non-arbitrary. Likewise, if a manufacturer's business judgment in administering sales performance standards was presumptively fair and reasonable, as G:i\1 argued in federal court, there would be no reason to pass an amendment making it unlawful to impose unfair and unreasonable sale performance standards. As stated by this Court in l'vlatter of Rodriguez v. Perales, 86 N.Y.2d 361, 366 (1995): "Respondents' construction is unsatisfactory because it would render the first three words of the phrase 'determined to be due' superfluous--a result that the rules of statutory construction disfavor. 'It is well settled that in the interpretation of a statute we must assume that the Legislature did not deliberately 15 place a phrase in the statute which was intended to serve no purpose ... and each word must be read and given a distinct and consistent meaning' (Matter of Smathers, 309 NY 487,495 [1956] ... )." In Rangolan v. County of Nassau, 96 N.Y.2d 42,48 (2001), this Court stated that "a construction, 'resulting in the nullification of one part of the [statute] by another,' is impermissible [citations omitted] .... " See also, Matter of OnBank & Trust Co., 90 N.Y.2d 725, 731 (1997) ("We decline to read the amendment in such a way as to render some of its terms superfluous"). The rules of statutory construction and interpretation require that the "courts in construing a statute ... consider the mischief sought to be remedied by the new legislation, and they should construe the act in question so as to suppress the evil and advance the remedy." 1 McKinney's, Statutes § 95. The mischief here was the franchisors' imposition of unreasonable, arbitrary and unfair performance standards. Clearly, a performance standard that requires average performance based on a sales performance standard that uses as its basis an unadjusted, non-comparable selling area is by definition unreasonable, arbitrary and unfair under VTL §463(2)(gg). 16 II. VTL §463(2)(ff) With respect to VTL Section 463(2)(ff), GM's unilateral modification to its franchisee's Area of Primary Responsibility or AGSSA is "unfair" and prohibited because it "would adversely and substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer under an existing franchise agreement." VTL §463(2)(ff)(3). Most manufacturers measure their dealers' sales performance based on a dealer's sales against the same segment vehicle sales within the dealer's assigned territory (GM utilizes the acronyms "APR" and "AGSSA" to define a dealer's territory). Thus, if a dealer is unfairly assigned territory within which reside customers who would find other same line-make competing dealers more convenient from which to purchase or service vehicles, the subject dealer's sales performance will be negatively affected. Likewise, if a dealer has territory removed that would otherwise be properly assigned to that dealer, the subject dealer may lose certain benefits under the manufacturer's policies such as a prohibition on direct marketing to customers in that territory, removal from the manufacturer's dealer-locator webpage as the most convenient dealership to the customer's location, reduction in vehicle allocation, and reduction of incentive payments tied to selling within the dealer's own market area. 17 The Second Circuit did not question that a "modification is deemed unfair if not undertaken in good faith; is not undertaken for good cause; or would adversely and substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer under an existing franchise agreement." VTL §463(2)(ft)(3). The Dealer Act continues: "In any action brought by the dealer, the franchisor shall have the burden of proving that such a modification is fair and not prohibited." The question posed by the Second Circuit is whether a manufacturer's change to its dealer's AGSSA constitutes a modification of the franchise if the franchise agreement reserves to the manufacturer the right to make such change. 787 F .3d at 677. "If the agreement expressly reserves to GM the power to unilaterally revise the Area of Primary Responsibility, such a revision might not constitute a contract modification. The district court concluded that the exercise of contractually conferred discretion generally does not constitute a modification of the contract." Id. The answer is clearly yes, the change in the AGSSA is a modification of the franchise. If the party with the greater economic clout inserts a provision in an agreement nullifying the dictate of a statute, that contractual provision is itself a nullity and unenforceable. "Parties cannot make a binding contract in violation of law or of public policy." Sternaman v. Metropolitan Life Ins. Co., 170 N.Y. 13, 19 18 (1902). For example, parties "cannot bind themselves by agreeing that a loan in fact void for usury is not usurious, or that a copartnership which actually exists between them does not exist." Id. It is the black-letter law of this State that a contract or provision of a contract that violates New York's public policy is unenforceable, and the laws of New York are its public policy. Public policy "is evidenced by the expression of the will of the Legislature contained in statutory enactments. Whatever the term may imply in other jurisdictions, in this State 'The courts have often found it necessary to define its juridical meaning, and have held that a state can have no public policy except what is to be found in its Constitution and laws. * * * Therefore, when we speak of the public policy of the state, we mean the law of the state, whether found in the Constitution, the statutes or judicial records. '" F.A. Straus & Co. v. Canadian Pacific Railway Co., 254 N.Y. 407, 413 (1930) (citation omitted). "The power to determine what the policy of the law shall be rests with the Legislature within constitutional limitations, and when it has expressed its will and established new policy, courts are required to give effect to such policy. (South & Central American Commercial Co., Inc., v. Panama Railroad Co., 237 N.Y. 287, 291.)" Id. at 413-14. 19 The 2008 Amendments to the Dealer Law set forth the public policy of New York with regard to the questions certified by the Second Circuit. A change to the geographical boundaries of Beck's franchise is a modification of the franchise and is governed by VTL §463(2)(ff). To the extent that a provision of the GM franchise agreement would permit GM unilaterally to change Beck's Area of Primary Responsibility or AGSSA without complying with the requirements specified in VTL §463(2)(ff), it violates public policy and is unenforceable as a matter of law. It matters not whether the contract or statute came first. "The general principle that the validity of a contract depends upon the law that existed at the time the contract was made does not appertain to variations of the law that are made owing to changes in public policy." Bloomfield v. Bloomfield, 97 N.Y.2d 188, 189 (2001). The public policy to be applied is that existing at the time the contract provision is sought to be enforced. Id. See also, F.A. Straus & Co., supra, at 413-14 (when the Legislature "has expressed its will and established new policy, courts are required to give effect to such policy"); Compania De Inversiones Internacionales v. Industrial Mortgage Bank of Finland, 269 N.Y. 22 (1935), amended on other grounds, 269 N.Y. 602 ("True it is that the applicable substantive law is that existing at the time the contract is entered into, but where a constitutional law has been enacted subsequently, such law if announcing a public 20 policy and intended to apply by the Congress, is also applicable to the contract"). The first two lines ofVTL § 463(2) make clear that it is to be applicable to existing franchise agreements: "It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract .... " (Emphasis added.) The OM franchise contract cannot confer discretion in violation of New York public policy. The test to be applied by the Southern District court was not whether the change in AOSSA constituted a modification or whether the franchise agreement permits a modification, but whether the modification permitted under the franchise agreement is unfair under one of the subsection's three prohibitions, and the burden of proving fairness is on the manufacturer. Indeed, OM recognized that it was bound by the restrictions of (ft) in its April 22, 2011 notice to Beck "provided 'pursuant to New York Vehicle & Traffic Law § 463(2)(ft)(1).'" 787 F.3d at 677. The Second Circuit recognized that "'Modification' is defined as 'any change or replacement of any franchise if such change or replacement may substantially and adversely affect the new motor vehicle dealer's rights, obligations, investment or return on investment.' Id. §463(2)(ft)(2)." 787 F.3d at 676. Under the unambiguous language of the statute and the uncontested facts in this case, OM's change of Beck's AOSSA unquestionably altered adversely and substantially Beck's rights and its return on investment, and OM failed to establish 21 that it acted in good faith and for good cause. The change is a modification of the franchise whether or not contractually permitted. Moreover, as discussed above, a term of the franchise agreement attempting to circumvent the statutory provisions violates the public policy of this State and is void. GNY ADA urges this Court to answer in the affirmative the Second Circuit's questions and hold (a) that a performance standard based on statewide sales data in order for a dealer to retain it dealership is unreasonable and unfair and impermissible arbitrary under VTL §463(2)(gg) because it does not account for local variations beyond adjusting for the local popularity of general vehicle types, and (b) that a unilateral change to a dealer's Area of Primary Responsibility or AGSSA constitutes a prohibited modification to the franchise under VTL §463(2)(ff), despite any contractual right of the franchisor to alter the Area of Primary Responsibility or AGSSA in its sole discretion. As stated above, GNY ADA has a substantial interest in having this Honorable Court answer the two questions posed by the Second Circuit favorable to Beck in that the interpretation of these provisions of the VTL will directly affect not just Beck, but each ofGNYADA's members, their employees and families. 22 Conclusion By reason of the foregoing, GNY ADA respectfully requests that this Court answer in the affirmative each of the two certified questions. Dated: New York, New York October 14,2015 PUTNEY, TWOMBLY, HALL & HIRSON LLP Attorneys for the Greater New York Automobile Dealers Association, Inc., as amicus curiae //) / ~ ~.' By: 1_/ __ L ~_. ---bI--_·--:.1_· ----,~/-=---~-~:---- ( Philip H~ """== ~ pkalban@putneylaw.com 521 Fifth Avenue New York, New York 10175 (212) 682-0020 (phone) (212) 682-9380 (fax) 23