Georgia Supreme Court goes out of its way to find that cronyism is specifically enshrined in the Georgia Constitution


Courts typically avoid ruling on constitutional issues unless it is necessary to decide a case. There are several reasons for this practice, not the least of which is that ruling on controversial constitutional matters when the case can be resolved on less controversial statutory grounds can make the court look political, or lend credence to suspicions that the court has an agenda. The Georgia Supreme Court’s ruling this week in WMW, Inc. v. American Honda Motor Co. ignored this valuable advice.

At issue in the case was the scope of a Georgia law that requires potential new car dealerships to seek the permission of any existing dealerships within eight mile radius before opening for business. The case arose when Honda made the mistake of placing a new dealership within eight miles of an offsite service center of a preexisting Honda dealer- WNW Honda. Rather than compete with the new dealership in the marketplace, WMW decided to take Honda to court, claiming its right to enjoin the creation of any new dealership in its “market area” that might adversely affect its profit margin.

On appeal,  the Court was asked to answer the limited question of whether or not the eight mile restriction on new dealerships should apply only to “dealerships” or should be expanded to include offsite service centers associated with dealerships as well. The Court found that the plain language of the statute precluded reading it to include offsite service centers and therefore that the statute did not grant WMW the right to prevent Honda from opening its proposed dealership.

That should have been the end of the discussion. But in an unusual move, the Court took the opportunity to opine on the Constitutionality of franchise laws in general. According to the Court, the Georgia Constitution was amended in 1992 expressly to allow the legislature to pass laws specifically favoring existing car dealerships at the expense of their competitors. Therefore, the legislature was within its rights to pass the protectionist law at issue in the case.

Not only is the Court wrong as matter of law, but it is strange that the Court would feel the need to raise the issue in the first place. As a general rule, courts try to avoid raising constitutional questions unless it is necessary. Here, neither party challenged the Constitutionality of the law. Accordingly, unless the Court found that the law was unconstitutional and unenforceable on its face, it had no reason to discuss the issue.

What’s more troubling, however, is that the Court’s statement of the law is clearly wrong.  As we explained in our brief , the Due Process Clause of the Georgia Constitution forbids laws which are designed merely to protect “special groups” from legitimate competition. While the 1992 Amendments to the Georgia Constitution do expressly allow the legislature to  to regulate new motor vehicle dealers “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses upon its citizens[,]” nothing in those amendments grants the legislature carte blanche to pass regulations, like the one at issue in here, which are designed merely to protect existing companies from legitimate competition.

Indeed, even if such laws were permissible under the Georgia Constitution, they would nonetheless be barred by the Due Process and Equal Protection clauses of the US Constitution. As the Sixth Circuit Court of Appeals explained,”protecting a discrete interest group from economic competition is not a legitimate governmental purpose.”  The Ninth Circuit echoed this sentiment six years later in Merrifield v. Lockyer, holding that “economic protectionism for its own sake, regardless of its relation to the common good, cannot be said to be in furtherance of a legitimate governmental interest.”

Yet, the Georgia Court chose to ignore those precedents and hold that special favors and cronyism are expressly enshrined in the Georgia Constitution. Worse, it announced that legal conclusion in a case that did not call for it. It is a strange sign of the times when a court will go so far out of its way to announce to the world that blatant cronyism is constitutionally protected in its state.