On Oct. 19, U.S. District Court Judge Hovland ruled on the motions for summary judgment filed by the Association of Equipment Manufacturers (AEM) and Manufacturer Plaintiffs, and North Dakota and Intervenor NDIDA, in our case challenging the legality of Senate Bill 2289 (“SB 2289”), amending the North Dakota farm equipment dealer protection law. The ruling was mostly favorable for AEM and its member companies.
The ruling means that the restrictions in SB 2289 cannot legally apply to farm equipment dealer agreements in effect on or before Aug. 1, 2017 due to an unconstitutional impairment of contracts. Specifically, SB 2289’s ban on arbitration clauses in dealer agreements is unlawful for any existing and future agreements. Other than arbitration, the remainder of SB 2289 will apply to post Aug. 1, 2017 dealer agreements.
Nearly three years ago, on Dec. 14, 2017, the federal court in Bismarck entered a preliminary injunction preventing enforcement of SB 2289 in its entirety. The State of North Dakota and the Pioneer Equipment Dealers Association (then known as “NDIDA,” short for North Dakota Implement Dealers Association) appealed that ruling to the U.S. Court of Appeals for the Eighth Circuit. They lost—decisively. On Aug. 2, 2019, the Eighth Circuit upheld the district court’s preliminary injunction, ruling in favor of AEM and its member companies on the merits of their claim that Senate Bill 2289 is unconstitutional. Even before the Eighth Circuit considered their appeal, the State and the dealers association had conceded that Senate Bill 2289’s attempted ban on arbitration clauses is preempted by the Federal Arbitration Act.
Following their loss in the appeals court, the State of North Dakota and the dealers association argued on summary judgment that SB 2289 could still be applied to dealer agreements that were signed after the law had been introduced in the North Dakota legislature but before it took effect. The district court’s Oct. 19, 2020 ruling rejected that argument as well.
As a result of the Oct. 19, 2020 decision, nearly every provision of Senate Bill 2289 has been found to violate either the Contract Clause of the U.S. Constitution or the Federal Arbitration Act. While the district court did not rule in favor of AEM’s alternative theories, the State and the dealers association have failed in their effort to have the North Dakota legislature rewrite the existing dealer contracts between farm equipment manufacturers and their North Dakota dealers.
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