Not In My Backyard: First Circuit Limits Rhode Island’s Ability to Regulate Dealer Activity in Other States

In a significant July 6, 2026 decision, the U.S. Court of Appeals for the First Circuit held that Rhode Island cannot constitutionally require a motor vehicle manufacturer to notify its Rhode Island dealer and provide an opportunity to protest before establishing a new dealership in Massachusetts.[1] The court concluded that applying Rhode Island’s dealer-protection statute in that manner would violate the Dormant Commerce Clause because it would directly regulate an out-of-state transaction and create interstate regulatory conflicts.

Background

The dispute arose from Rhode Island’s dealer statute governing the addition of new dealerships.[2] The law requires manufacturers to provide notice and an opportunity to protest before establishing a same-line dealership within an existing dealer’s “relevant market area” (RMA). The statute defines the RMA as either a 20-mile radius around the dealership or the dealer’s contractual area of responsibility (AOR), whichever is larger.

Rhode Island Truck Center (RITC), a Freightliner dealer in East Providence, claimed Daimler violated the statute by appointing a new Freightliner dealer in Massachusetts within territory covered by RITC’s contractual AOR.

Prior Cases Suggested Geographic Limits

Earlier cases appeared to limit Rhode Island’s dealer law to activity occurring within the state.

In Fireside Nissan v. Fanning[3], the First Circuit held that a Massachusetts dealer could not use Rhode Island’s protest statute to challenge the establishment of a Rhode Island dealership, reasoning that the law was intended to protect Rhode Island dealers and consumers, not out-of-state dealers.

Similarly, in County Motors v. General Motors[4], a Rhode Island dealer attempted to challenge the relocation of a Massachusetts dealership. The court rejected the effort, concluding that Rhode Island law did not apply to dealership activity occurring in Massachusetts.

Taken together, those decisions seemed to establish a practical understanding that Rhode Island dealers could not use Rhode Island law to challenge dealership actions taking place outside Rhode Island.

Procedural History

After RITC tried to do just that, the Rhode Island Dealer Board dismissed RITC’s protest, viewing it as an improper attempt to apply Rhode Island law extraterritorially. RITC then sued Daimler, but the federal district court granted summary judgment to Daimler, holding that requiring approval from Rhode Island before establishing a Massachusetts dealership would impermissibly regulate out-of-state conduct and raise serious constitutional concerns.[5]

On appeal, the First Circuit first sought to resolve the case through statutory interpretation, hoping to avoid the constitutional analysis. It concluded that the earlier cases did not directly answer whether an RMA could cross state lines and therefore certified the following question to the Rhode Island Supreme Court: Can a relevant market area under Rhode Island law extend beyond Rhode Island’s borders?[6]

Rhode Island Supreme Court: RMAs Can Cross State Lines

The Rhode Island Supreme Court answered unequivocally yes, an RMA may extend beyond Rhode Island’s borders. The court found no geographic limitation in the statutory text and emphasized that Rhode Island’s size makes cross-border market areas inevitable.[7] It also reasoned that limiting RMAs to Rhode Island would undermine the statute’s alternative reliance on contractual AORs to define RMAs and the phrase “whichever is greater.” The court left the constitutional question for the First Circuit.

The Constitutional Analysis

Once the case returned to the First Circuit, the central question became whether Rhode Island could constitutionally apply its dealer law to a manufacturer’s appointment of a dealer in Massachusetts.

The court analyzed the issue under the Dormant Commerce Clause. While acknowledging that the Supreme Court’s recent decision in National Pork Producers Council v. Ross[8] narrowed older “extraterritoriality” doctrines, the First Circuit held that this case was different. The requested relief would not merely affect conduct outside Rhode Island; it would directly regulate Daimler’s franchise relationship with a Massachusetts dealer.

The court also relied on its earlier decision in IMS Health v. Mills[9], which had upheld certain state regulation with out-of-state effects where there was a strong in-state connection and little risk of protectionism or conflicting regulations, but reached a different result based on the facts presented.

Why RITC Lost

The First Circuit identified several reasons why Rhode Island’s statute, as RITC sought to apply it, failed constitutional scrutiny under the test laid out in IMS Health:

• Protectionist Effect. The statute would allow a Rhode Island dealer to challenge the appointment of a competing dealer in another state, while out-of-state dealers receive no corresponding right under Rhode Island law.
• Out-of-State Impact. The requested remedy would directly interfere with dealership operations and vehicle sales in Massachusetts rather than address harms occurring solely within Rhode Island.
• Weak Rhode Island Nexus. The appointment of a Massachusetts dealer lacked the significant inherent connection to Rhode Island that existed in cases where limited extraterritorial regulation was upheld.
• Risk of Conflicting Regulatory Obligations. Daimler could face inconsistent legal requirements if Rhode Island deemed the Massachusetts appointment unlawful while Massachusetts law permitted it.

Because of these concerns, the court concluded that applying Rhode Island’s dealer law to block the Massachusetts dealership violated the Dormant Commerce Clause.

Key Takeaways

The First Circuit’s decision is important, but it is not a blanket prohibition on all applications of Rhode Island’s dealer law that have out-of-state effects. The court emphasized that its ruling was tied to the particular facts of the case and the specific relief RITC sought.

The opinion reaffirms that states may, in some circumstances, regulate transactions with out-of-state components when there is a strong in-state nexus and no significant protectionist or conflicting regulatory concerns, specifically reaffirming the continuing viability of IMS Health.

Perhaps most notably, the remedy mattered. RITC sought removal of the Massachusetts dealership, which the court viewed as direct regulation of an out-of-state franchise relationship. The First Circuit suggested that a narrower claim for damages might have presented a different question, although RITC’s damages argument was deemed waived.

The decision therefore leaves open the possibility that certain cross-border applications of dealer statutes may survive constitutional scrutiny, particularly where the relief sought is less intrusive and the connection to the regulating state is stronger.

Stay tuned to see if RITC seeks en banc review or files a petition with SCOTUS for a writ of certiorari.

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[1] Rhode Island Truck Ctr., LLC v. Daimler Trucks N. Am., LLC, -- F.4th---, 2026 WL 1948541 (1stCir. July 6, 2026).
[2] R.I. Gen. Laws § 31-5.1-4.2.
[3] 30 F.3d 206 (1st Cir. 1994).
[4] 2001 WL 34136693 (D.R.I. Jan. 29, 2001).
[5] Rhode Island Truck Ctr., LLC v. Daimler Trucks N. Am., LLC, 642 F. Supp. 3d 218 (D.R.I. 2022).
[6] Rhode Island Truck Ctr., LLC v. Daimler Trucks N. Am., LLC, 92 F.4th330 (1stCir. 2024).
[7] Rhode Island Truck Center, L.L.C. v. Daimler Trucks North America, LLC, 338 A.3d 1056 (R.I. 2025).
[8] 598 U.S. 356 (2023).
[9] 616 F.3d 7 (1st Cir. 2010), vacated on other grounds sub nom., IMS Health, Inc. v. Schneider, 564 U.S. 1051 (2011).