Instructional Syst. Inc. v. Computer Curric. Corp.

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

9-16-1994

Instructional Syst. Inc. v. Computer Curric. Corp.
Precedential or Non-Precedential:

Docket 93-5490

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 UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 93-5414

INSTRUCTIONAL SYSTEMS, INC.,
a Corporation of the State of New Jersey

v.

COMPUTER CURRICULUM CORPORATION,
a Corporation of the State of Delaware

INSTRUCTIONAL SYSTEMS, INC.,
Appellant

DEBORAH T. PORITZ,*
Attorney General of New Jersey,
Intervenor
(per the Court's
Nov. 19, 1993 order)

No. 93-5490

INSTRUCTIONAL SYSTEMS, INC.,
a Corporation of the State of New Jersey

v.

COMPUTER CURRICULUM CORPORATION,
a Corporation of the State of Delaware

v.

HON. ALFRED J. LECHNER, JR.,
United States District Judge
for the District of New Jersey,
Nominal Respondent

DEBORAH T. PORITZ,*
Attorney General of New Jersey,

*
. Caption amended pursuant to Fed. R. App. P. 43(c).
Petitioner
 No. 93-5635

INSTRUCTIONAL SYSTEMS, INC.,
a Corporation of the State of New Jersey,
Petitioner
v.

COMPUTER CURRICULUM CORPORATION,
a Corporation of the State of Delaware

HON. ALFRED J. LECHNER, JR.,
United States District Judge
for the District of New Jersey,
Nominal Respondent

No. 93-5722

INSTRUCTIONAL SYSTEMS, INC.,
a Corporation of the State of New Jersey

v.

COMPUTER CURRICULUM CORPORATION,
a Corporation of the State of Delaware

INSTRUCTIONAL SYSTEMS, INC.,
Appellant

No. 94-5048

INSTRUCTIONAL SYSTEMS, INC.,
a Corporation of the State of New Jersey

v.

COMPUTER CURRICULUM CORPORATION,
a Corporation of the State of Delaware

DEBORAH T. PORITZ,
Attorney General of New Jersey,
 Intervenor in D.C., Appellant

On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 89-00502)

Argued July 11, 1994

Before: SLOVITER, Chief Judge,
ROTH, Circuit Judge, and POLLAK,** District Judge

(Filed September 16, 1994)

Nicholas deB. Katzenbach (Argued)
Douglas S. Eakeley
Sigrid S. Franzblau
Anne M. Patterson
Jeffrey J. Miller
Debra H. Azarian
Riker, Danzig, Scherer, Hyland
& Perretti
Morristown, N.J. 07962-1981

John J. Gibbons
Crummy, Del Deo, Dolan,
Griffinger & Vecchione
Newark, N.J. 07102-5497

Warren S. Robins
Robert E. Rochford
Dunn, Pashman, Sponzilli, Swick
& Finnerty
Hackensack, N.J. 07601

Counsel for Appellant/Petitioner Instructional
Systems, Inc.

*
*. Hon. Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.
Sidney S. Rosdeitcher (Argued)
Paul, Weiss, Rifkind, Wharton & Garrison
New York, N.Y. 10019-6064

A. Leon Higginbotham, Jr.
Jay Greenfield
Gary Stein
Marcella David
Of Counsel

Andrew T. Berry
McCarter & English
Newark, N.J. 07101-0652

Counsel for Appellee/Respondent Computer
Curriculum Corp.

Bertram P. Goltz, Jr. (Argued)
Deputy Attorney General
Joseph L. Yannotti, Jr.
Assistant Attorney General
Office of Attorney General of N.J.
Newark, N.J. 07101

Counsel for Intervenor/Petitioner Attorney
General of New Jersey

OPINION OF THE COURT

SLOVITER, Chief Judge.

In a far-reaching opinion, the district court limited
the application of the New Jersey Franchise Practices Act to the

activities of a New Jersey franchisee within New Jersey on the

ground that giving the Act extraterritorial effect would conflict

with the dormant Commerce Clause. Before we reach this issue of

first impression, we must wind through the present status of the

law on Pullman abstention and an England reservation.
 I.
FACTS AND PROCEDURAL HISTORY

The relevant facts are not disputed. Computer

Curriculum Corporation (CCC), a Delaware corporation

headquartered in Palo Alto, California, produces and markets an

integrated learning system that uses computer technology to teach

and monitor a student's progress. Since 1975, Instructional

Systems, Inc. (ISI), a New Jersey corporation,1 was CCC's

exclusive distributor in the northeastern United States, subject

to limited reservations by CCC. The parties entered into an

agreement in 1984 that provided that ISI would be CCC's exclusive

reseller in Connecticut, Delaware, Maine, Maryland,

Massachusetts, New Hampshire, New Jersey, Rhode Island, Vermont

and Washington D.C., and that for its part ISI would sell only in

those states and would deal only in CCC products. The Agreement

provided that it would continue in effect until July 31, 1989.

Finally, the Agreement provided that it "shall be construed and

interpreted, and the legal relations created by it shall be

determined, in accordance with the laws of the State of

California." Jt. App. at 934.

As 1989 approached, CCC decided not to extend its

relationship with ISI for the entire territory covered by the

1
. Originally, CCC's arrangement was with ISI's predecessor,
Educomp of New Jersey. The principal of both corporations was
the same, Phyllis Kaminer.
1984 Agreement because, it claims, ISI was not aggressively

marketing in some of the states. Instead, it offered ISI a two-

year contract which limited ISI's market territory to New Jersey,

New York and Massachusetts, thereby allowing CCC to distribute

its products directly in the other (former ISI) states. ISI

executed the 1989 Agreement under protest on January 30, 1989,

and simultaneously filed its complaint in the Superior Court of

New Jersey, Chancery Division.

The complaint contained seven counts. Count One

alleged that the 1984 Agreement constituted a "franchise" for

purposes of the New Jersey Franchise Practices Act ("NJFPA" or

"Act"), N.J. Stat. Ann. § 56:10-3,2 10-4,3 and that CCC violated

the NJFPA by (a) failing to renew without good cause in violation

2
. Section 10-3(a) of the NJFPA defines a "franchise" as a:

written arrangement for a definite or indefinite
period, in which a person grants to another person a
license to use a trade name, trade mark, service mark,
or related characteristics, and in which there is a
community of interest in the marketing of goods or
services at wholesale, retail, by lease, agreement, or
otherwise.

N.J. Stat. Ann. § 56:10-3(a) (West 1989) (emphasis added).
3
. Section 10-4 limits the scope of the NJFPA by providing that
"[t]his act applies only to a franchise . . . the performance of
which contemplates or requires the franchisee to establish or
maintain a place of business within the State of New Jersey."
N.J. Stat. Ann. § 56:10-4 (West 1989 & Supp. 1994) (emphasis
added). The NJFPA defines a "place of business" as a "fixed
geographical location at which the franchisee displays for sale
and sells the franchisor's goods or offers for sale and sells the
franchisor's services. Place of business shall not mean an
office, a warehouse, a place of storage, a residence or a
vehicle." Id. § 56:10-3(f).
of Section 10-5,4 and (b) attempting to impose unreasonable

standards of performance upon ISI in the formation of the 1989

Agreement in violation of Section 10-7.5 Counts Two through

Seven alleged a variety of state common law claims.6 As a remedy

for each count, ISI sought an injunction restraining CCC from

terminating its relationship with ISI and damages.

CCC removed the case to federal court on the basis of

diversity of citizenship. In June 1989, following discovery, ISI

moved for a preliminary injunction and partial summary judgment

on the issue of whether the 1984 Agreement constituted a

franchise agreement under the NJFPA. CCC opposed ISI's motions

and filed a cross-motion for partial summary judgment, arguing

that (1) California, not New Jersey, law applied to the 1984

4
. Section 10-5 of the NJFPA, which sets forth the requirements
for the termination of a franchise, provides in part:

It shall be a violation of this act for any franchisor
to terminate, cancel or fail to renew a franchise
without good cause. For the purposes of this act, good
cause for terminating, canceling, or failing to renew a
franchise shall be limited to failure by the franchisee
to substantially comply with those requirements imposed
upon him by the franchise.

N.J. Stat. Ann. § 56:10-5 (West 1989) (emphasis added).
5
. Section 10-7 of the NJFPA prohibits franchisors from
"impos[ing] unreasonable standards of performance upon a
franchisee." N.J. Stat. Ann. § 56:10-7(e) (West 1989).
6
. Specifically, Count Two alleged a breach of contract; Count
Three, a breach of the implied covenant of good faith and fair
dealing; Count Four, tortious interference with prospective
economic advantage; Count Five, a breach of a covenant of non-
competition; Count Six, unjust enrichment; and Count Seven, a
breach of fiduciary duty.
Agreement; (2) application of the NJFPA to the franchise

territory outside New Jersey would violate the dormant Commerce

Clause; (3) the 1984 Agreement was not a franchise as defined by

the NJFPA; and (4) CCC's actions were not in violation of the

NJFPA. ISI responded by petitioning the district court to

abstain pursuant to Railroad Commission v. Pullman, 312 U.S. 496

(1941), so that the NJFPA claim could be considered by the New

Jersey courts.

The district court granted ISI's request for abstention

over CCC's objection that the case could be resolved without

reaching the constitutional questions raised by its motion for

partial summary judgment. The court reasoned that "[i]f the New

Jersey courts determine ISI does not fit within the definitional

requirements of a franchise or that the Franchise Practices Acts

is inapplicable to States other than New Jersey, then the need to

address the commerce clause question in this matter will be

eliminated." Jt. App. at 577.

ISI filed a suit for declaratory judgment in the New

Jersey Superior Court, Chancery Division on July 27, 1989. After

additional discovery, both parties moved for summary judgment.

The court entered a declaratory judgment in favor of ISI, holding

(1) that New Jersey law applied to the 1984 Agreement despite the

choice-of-law provision of the Agreement; (2) that the 1984

Agreement was a "franchise" for purposes of the NJFPA, and (3)

that the NJFPA applied even though the agreement encompassed a

multistate territory. See Instructional Sys., Inc. v. Computer
Curriculum Corp., No. C-4116-89E (N.J. Super. Ct. Ch. Div. Oct.
30, 1989) (ISI I). The Appellate Division of the Superior Court

reversed, see Instructional Sys., Inc. v. Computer Curriculum

Corp., 578 A.2d 876 (N.J. Super. Ct. App. Div. 1990) (ISI II),

but the New Jersey Supreme Court reversed the Appellate Division

and reinstated the judgment of the Chancery Division in October

1992, see Instructional Sys., Inc. v. Computer Curriculum Corp.,

614 A.2d 124 (N.J. 1992) (ISI III).

The Supreme Court analyzed the issues before it in a

series of questions. First, it decided what a franchise was

under the NJFPA. Then it proceeded with the threshold choice-of-

law question, holding that although "a close question," the trial

court had not erred in applying New Jersey law because New Jersey

has a strong policy in favor of protecting its franchisees and

because the franchisee is located in New Jersey, the majority of

its employees reside in New Jersey, the investments relate

primarily to assets in New Jersey, and the goodwill was developed

for CCC by New Jersey residents. Id. at 135.

The Court then proceeded to determine whether the

evidence was sufficient to find the statutory requirements for

the existence of a franchise, which depended on whether ISI had a

"place of business" in New Jersey, a "license," and a "community

of interest" with CCC. Finding that these were all satisfied,

see id. at 136-46, the Court then turned to the question whether
the Act has "extraterritorial reach to the franchise activities

in states other than New Jersey." Id. at 146. The Court

reasoned that at its core, the NJFPA "is meant to deal with the

unconscionable business practices affecting New Jersey
franchises," id. at 147, but that in meeting that purpose, the

application of the Act did not stop at New Jersey's border. In

its consideration of this issue, the Court discussed whether the

application of New Jersey law in this manner would be consistent

with the Commerce Clause. It reasoned that "New Jersey has no

power, and therefore no interest, to regulate commerce that

occurs entirely beyond its borders," but that this statute was

regulating only "in-state conduct that has out-of-state effects."

Id. at 146. The Court thus saw no unconstitutionality under the

Commerce Clause or Due Process Clause "despite some incidental

extraterritorial effects." Id. at 148.

The case then returned to the district court. CCC

moved for partial summary judgment as to that portion of Count

One that was based on application of the NJFPA outside of New

Jersey. The district court gave notice of the attack on the

constitutionality of the NJFPA to the Attorney General of New

Jersey, see 28 U.S.C. § 2403(b) (1988), who chose to participate

but did not formally intervene. On June 2, 1993, the district

court granted CCC's motion for partial summary judgment as to the

portion of Count One that sought to enjoin CCC from terminating

ISI's franchise in states other than New Jersey. The district

court's ruling was based on its determination that application of

the NJFPA outside New Jersey was a per se violation of the
Commerce Clause. See Instructional Sys., Inc. v. Computer
Curriculum Corp., 826 F. Supp. 831, 848 (D.N.J. 1993) (ISI IV).

ISI and the Attorney General appealed.7

CCC then moved for summary judgment on the six

remaining common law claims as well as the remainder of Count

One. The district court granted partial summary judgment on the

common law claims on November 9, 1993, leaving for trial only

7
. On June 16, ISI petitioned the district court for
certification of an interlocutory appeal under 28 U.S.C. §
1292(b), and the Attorney General asked for a certification under
either Federal Rule of Civil Procedure 54(b) or § 1292(b) on June
18. ISI also filed a notice of appeal (docketed in this court as
No. 93-5414) on July 2, arguing that this court had jurisdiction
because the district court had denied its motion for an
injunction. On July 22, the district court denied the parties'
requests under § 1292(b) and Rule 54(b), reasoning that ISI's
notice of appeal deprived it of jurisdiction to certify the order
under either of the sections.

The Attorney General filed a petition for mandamus on

August 12 (No. 93-5490) asking this court to order the district

court to consider the certification requests, and a motions panel

of this court remanded the case to the district court on

September 20 "so that it may consider whether to grant motions

for certification under 28 U.S.C. § 1292(b) or Fed. R. Civ. P.

54(b) free of its concern as to jurisdictional restraint by

reason of the interlocutory appeal." Jt. App. at 1301. After

the district court denied the motions on the merits on October 5,

ISI filed a petition for mandamus on October 25 to vacate the

June 2 district court order (No. 93-5635) and the Attorney

General filed a supplemental petition for mandamus on November 10

seeking the same.
that portion of Count One that which alleged that CCC has imposed

unreasonable terms and conditions on ISI in the 1989 Agreement as

regards to New Jersey. See Instructional Sys., Inc. v. Computer

Curriculum Corp., No. 89-502(AJL) (D.N.J. Nov. 9, 1993) (ISI V).

ISI appealed.8

On appeal, this court granted the Attorney General's

motion to intervene in No. 93-5414, and consolidated the five

related appeals and petitions for disposition. We have

jurisdiction over the appeals docketed at Nos. 93-5414, 93-5722

and 94-5048 pursuant to 28 U.S.C. § 1291 (1988).9 Because the

questions on appeal are legal, we exercise plenary review.

8
. ISI filed a notice of appeal on November 24, 1993 (No. 93-
5722), claiming jurisdiction under 28 U.S.C. § 1292(a)(1). In
mid-December CCC moved to certify the summary judgment orders as
final under Rule 54(b). After ISI withdrew its opposition, the
district judge to whom the case had been reassigned certified the
summary judgment orders of June 2 and November 9 under Rule 54(b)
on December 27. The Attorney General then filed a timely appeal
from this order on January 25, 1994 (No. 94-5048). The remaining
claim under the NJFPA, that the 1989 Agreement imposed
unreasonable conditions of performance, was stayed pending the
appeal.
9
. While there is some question whether we would have had
jurisdiction over the appeals docketed at Nos. 93-5414 and 93-
5722 because the action was still pending below and the orders
may not have met the requirements laid out in Carson v. American
Brands, Inc., 450 U.S. 79, 83-84 (1981), the district court's
certification of these orders as appealable under Rule 54(b)
resolves this issue. We have held that even after a notice of
appeal has been filed, a proper Rule 54(b) certification will
cure any jurisdictional defect of a premature appeal. See
Feather v. United Mine Workers of America, 711 F.2d 530, 535 (3d
Cir. 1983). Since we have jurisdiction over all the district
court's relevant orders to date, we will deny the petitions for
mandamus in Nos. 93-5490 and 93-5635. See Helstoski v. Meanor,
442 U.S. 500, 506 (1979) (mandamus inappropriate when direct
appeal immediately available).
 II.
DISCUSSION

A.

Abstention, Reservation and Preclusion

ISI contends that we are bound to accept not only the

New Jersey Supreme Court's decision on the scope of the NJFPA and

its application to its arrangement with CCC but also that Court's

conclusion that such an application did not violate the dormant

Commerce Clause, as CCC had argued. CCC would limit not only the

effect of the New Jersey courts' interpretation of the federal

constitutional issue, but also their interpretation of the state

law issues. These contentions require that we examine the

circumstances surrounding the district court's Pullman

abstention.

In deciding to abstain, the court stated that it was

"remitt[ing]" to the state courts: "(a) Whether the Act has

extraterritorial reach beyond the State of New Jersey . . . ; and

(b) What are the definitions and standards of 'community of

interest,' 'license' and 'place of business' under the Act?" Jt.

App. at 587. It reserved to itself the "[a]pplication of the

principles of law determined by the state court to the facts of

this case"; "[a]ny constitutional challenge to the Act"; and

"[a]ny application for injunctive or other interim relief." Jt.

App. at 588. On ISI's request for clarification, the court

explained that it expected the parties to file a declaratory

judgment action. It recognized that to avoid giving an advisory

opinion, the state court would have to look at the facts of this
case in order to render its decision on the state law issues, but

reiterated that it was maintaining fact-finding jurisdiction over

the constitutional question.

Neither party presently challenges the propriety of

abstaining per se.10 However, the parties vigorously dispute the

scope and effect of the district court's abstention.

1.

Pullman Abstention

It is a general rule that "federal courts lack the

authority to abstain from the exercise of jurisdiction that has

been conferred." New Orleans Pub. Serv., Inc. v. Council of New

Orleans, 491 U.S. 350, 358 (1989). There are a small number of

"exceptional circumstances" which justify deviation from this

rule. See Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp.,

460 U.S. 1, 14 (1983). "Abstention . . . is the exception and

not the rule. The federal courts' obligation to adjudicate

claims within their jurisdiction is virtually unflagging." Marks

v. Stinson, 19 F.3d 873, 881 (3d Cir. 1994) (quotations and

citation omitted).

The abstention doctrine that stems from Railroad
Commission v. Pullman, 312 U.S. 496 (1941), provides that "when a

10
. No party took an appeal from the order abstaining and
staying the federal proceedings. See Hovsons Inc. v. Secretary
of the Interior of the U.S., 711 F.2d 1208, 1211 (3d Cir. 1983)
(the Court of Appeals has jurisdiction over appeal from district
court's order to stay federal proceedings on Pullman grounds).
federal court is presented with both a federal constitutional

issue and an unsettled issue of state law whose resolution might

narrow or eliminate the federal constitutional question,

abstention may be justified under principles of comity in order

to avoid needless friction with state policies." Marks, 19 F.3d

at 882 n.6 (quotation and citation omitted); see also Chez Sez

III Corp. v. Township of Union, 945 F.2d 628, 631 (3d Cir. 1991)

(describing three-step analysis of Pullman abstention), cert.

denied, 112 S. Ct. 1265 (1992).

Pullman abstention is "virtually prohibited in

diversity cases where the only difficulty is the unsettled

posture of state law." Urbano v. Board of Managers of N.J. State

Prison, 415 F.2d 247, 253 (3d Cir. 1969), cert. denied, 397 U.S.

948 (1970); see also McNeese v. Board of Educ., 373 U.S. 668, 673

n.5 (1963); Meredith v. Winter Haven, 320 U.S. 228, 236 (1943).

However, there are some situations for abstention even when the

suit is brought under diversity jurisdiction. In Clay v. Sun

Insurance Office Ltd., 363 U.S. 207, 212 (1960), the Court held

that abstention was appropriate in a diversity suit when the

defendant had raised doubts about the constitutionality of the

statute relied upon by the plaintiff and the court "could not, on

the available materials, make a confident guess how the [state]

Supreme Court would construe the statute." Under these

conditions, the Court found that abstention was justified "where

a federal constitutional question might be mooted [by securing]

. . . an authoritative state court's determination of an

unresolved question of its local law." Id.
 This court has also recognized such a situation under

precisely the same statute at issue here. In Consumers Oil Corp.

v. Phillips Petroleum Co., 488 F.2d 816, 819 (3d Cir. 1973), we

held that abstention was appropriate in a diversity suit claiming

a violation of the NJFPA because state law was unclear as to

whether the Act applied to the agreement at issue and, if it did,

"substantial constitutional questions" would need to be faced.

But see Mariniello v. Shell Oil Co., 511 F.2d 853, 860-61 (3d

Cir. 1975) (abstention inappropriate in adjudicating

constitutional objections to New Jersey common law analog to the

NJFPA).
 2.

England Reservation

A party displaced from federal court under Pullman does

not lose its right to a federal forum for all its claims. In

England v. Louisiana State Board of Medical Examiners, 375 U.S.

411 (1964), the Supreme Court was presented with a case in which

the plaintiffs sued in federal court, were sent to the state

courts under Pullman abstention, litigated all their claims

there, lost, and then returned to federal court in an attempt to

litigate their federal claims anew. Plaintiffs argued that they

felt compelled to litigate their federal claims in state court by

the Court's decision in Government & Civic Employees Organizing

Committee, CIO v. Windsor, 353 U.S. 364, 366 (1957), which

required parties remitted to the state courts under Pullman to

inform those courts what their federal claims were so that the

state courts had the opportunity to construe the statute "in

light of" those claims.

In England, the Court sought to balance the parties'

rights to a federal forum with the federalism concerns inherent

in rendering a constitutional judgment on an unclear state

statute. It held that a party may preserve its right to return

to federal court by making an express reservation in the state

court that "he is exposing his federal claims there only for the

purpose of complying with Windsor, and that he intends, should
the state courts hold against him on the question of state law,

to return to the District Court for disposition of his federal

contentions." 375 U.S. at 421. Such a reservation of federal
claims may be made by any party to the litigation. See id. at

422 n.13.

In this case it is clear that the federal question of

whether the NJFPA could be constitutionally applied to the 1984

Agreement was explicitly reserved by CCC throughout the course of

the state proceedings. Indeed, when the case was reactivated in

the district court, it was ISI which submitted a letter to the

district court that "concluded that the record supports CCC's

contention that it entered a proper England reservation." Jt.

App. at 1746.11

Although ISI now seeks to recant its conclusion,12 it

is clear from the record that CCC properly preserved its England

reservation. At every stage of the state court proceedings, one

11
. While noting several times when CCC had discussed the issue,
ISI stated that "[t]he record can be interpreted to indicate that
CCC presented the constitutional issue to the state courts in
order to inform those court of its existence, as required by
Windsor and England. We have therefore concluded that CCC
reserved its right to a determination by this Court of the
federal constitutional issue." Jt. App. at 1747.
12
. ISI claims for the first time in its brief in No. 93-5722
that its concession was "mistaken," and suggests that despite its
waiver of the issue, because there was no valid reservation the
district court lacks subject matter jurisdiction over the claim
under the Rooker-Feldman doctrine. See Port Auth. Police
Benevolent Ass'n v. Port Auth., 973 F.2d 169, 177 (3d Cir. 1992)
(Rooker-Feldman doctrine provides that "lower federal courts lack
subject matter jurisdiction to engage in appellate review of
state court determinations or to evaluate constitutional claims
that are 'inextricably intertwined with the state court's
[decision] in a judicial proceeding.'" (citation omitted)). It
concedes that Rooker-Feldman does not apply if we find the
England reservation to be properly preserved. See Ivy Club v.
Edwards, 943 F.2d 270, 284 (3d Cir. 1991), cert. denied, 112 S.
Ct. 1282 (1992). Because we do so find, we need not consider the
effect of ISI's waiver.
party, if not both, stated that any constitutional questions were

reserved for the district court and were being raised only to

comply with the Supreme Court's Windsor decision.13 We therefore

reject ISI's claim that the fact that the New Jersey Supreme

Court discussed the Commerce Clause issue in rendering its

13
. In the Chancery Division of the Superior Court, CCC
expressly reserved its federal claims both at a hearing, Jt. App.
at 1583-84, and in its brief, Supp. App. at 833-34. At the
Appellate Division of the Superior Court, CCC noted that the
district court had reserved jurisdiction to rule on any
constitutional claims. Supp. App. at 1094. Its reference to the
Commerce Clause was in the context of disputing the Chancery
Division's statutory construction and arguing that interpreting
the statute as the Chancery Division did would violate the
Commerce Clause. Supp. App. at 1107-09.

The parties took the same position before the New
Jersey Supreme Court. There was no dispute, as ISI noted in its
submissions to the Supreme Court, that "the federal
constitutional issue arising under the Commerce Clause . . . is
reserved for the federal court." Supp. App. at 1455; see also
Supp. App. at 1461 n.2, 1492-93. CCC also made that point clear.
Supp. App. at 1481.

Although CCC did mention the Commerce Clause issue in
its merits brief, Supp. App. at 1543-44, it did so once again in
the context of arguing that the Court should not construe the
NJFPA to apply extraterritorially because that construction would
impermissibly burden interstate commerce. At the original oral
argument and on rehearing, CCC and ISI both noted at various
times that the Commerce Clause question was reserved for the
district court. Supp. App. at 1662, 1666, 1837, and a member of
the Court noted during the argument that "[t]he Commerce Clause
issue is reserved." Supp. Ap. at 1807.

In post-argument briefs, ISI suggested for the first
time that CCC violated the England command not to "affirmatively
argue" the constitutional issue because CCC had discussed the
Commerce Clause issue in its brief and at oral argument. Supp.
App. at 1740-41. CCC responded that "CCC has merely informed the
Court, for its assistance in construing the New Jersey statute,
of the serious constitutional problem presented by ISI's
construction." Supp. App. at 1772.
decision about whether the Act applied extraterritorially, see

ISI III, 614 A.2d at 146-48, precludes the federal courts'

consideration of the issue, which was properly preserved.14 As

the Supreme Court noted in England, "the parties cannot prevent

the state court from rendering a decision on the federal question

if it chooses to do so." 375 U.S. at 421; see also 17A Charles

A. Wright et al., Federal Practice and Procedure § 4243 (1988).

It is the actions of the displaced litigant which are controlling

and thus, after reviewing the parties' actions, we agree with the

Attorney General that "the Commerce Clause issue did remain

pending before the District Court, and the District Court was

obligated to adjudicate it." Attorney General's Br. at 25.

ISI insists that even if CCC made a proper England

reservation, we are bound by the factual findings and legal

conclusions of the New Jersey courts by the full faith and credit

statute, 28 U.S.C. § 1738 (1988), which requires that federal

courts give "full faith and credit" to "judicial proceedings of

14
. Parsons Steel, Inc. v. First Alabama Bank, 474 U.S. 518
(1986), which ISI cites, is inapposite. In Parsons, the parties
had concurrent actions pending in state and federal court
regarding events arising out of the same conduct, the defendants
first won in federal court, but the state court rejected the
defenses of res judicata and collateral estoppel, and the
defendants were found liable in that forum. The federal court
then enjoined enforcement of the state court judgment because it
determined that the state action was barred by res judicata.
The Supreme Court held that the district court erred in failing
to apply state preclusion law and remanded for a determination of
whether the state court's resolution of the res judicata issue
would be given preclusive effect in another court of the same
state. It did not hold, as ISI implicitly suggests, that a state
court's consideration of an issue precludes a federal court from
doing so.
any court of any State." It is true that a federal court is

normally bound to extend preclusive effect to state proceedings

to the same extent that courts of that state would do so. See

Migra v. Warren City School Dist. Bd. of Educ., 465 U.S. 75, 84

(1984); Allen v. McCurry, 449 U.S. 90, 99 (1980); cf. Township of

Washington v. Gould, 189 A.2d 697, 700 (N.J. 1963) (declaratory

judgments given preclusive effect under New Jersey law).

However, the Supreme Court noted in both those cases

that when a party sought to adjudicate his claims in a federal

forum and then was involuntarily remitted to state court, the

party "can preserve his right to a federal forum for his federal

claims by informing the state court of his intention to return to

federal court on his federal claims following litigation of his

state claims in state court." Migra, 465 U.S. at 85 n.7 (citing

England); see also Allen, 449 U.S. at 101-02 n.17 (distinguishing

England reservations as having "no bearing on the present case").

As we noted in Kovats v. Rutgers, 749 F.2d 1041, 1046 (3d Cir.

1984), "in its major preclusion decisions the [Supreme] Court has

sought to distinguish the England situation." Thus the

traditional rules of res judicata and collateral estoppel as

applied by section 1738 do not apply to state proceedings that

follow Pullman abstention and an England reservation. See

Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1072 (3d Cir.

1990) (claim preclusion does not apply to state court proceedings

when proper England reservation made); see also Fields v.
Sarasota Manatee Airport Auth., 953 F.2d 1299, 1302 n.1, 1306
(11th Cir. 1992) (Pullman/England situation is an exception to

full faith and credit requirements).

CCC argues that notwithstanding the England

reservation, the New Jersey decisions are binding only on

discrete facts found, i.e. the existence of a "place of

business," "community of interest," and "license," but not on the

ultimate facts, such as whether the relationship was a franchise

under New Jersey law. It relies on the emphasis given in England

to federal fact-finding. See 375 U.S. at 416-17 ("How the facts

are found will often dictate the decision of federal claims . . .

[Therefore,] in cases where, but for the application of the

abstention doctrine, the primary fact determination would have

been by the District Court, a litigant may not be unwillingly

deprived of that determination.").

We believe that the state law issues determined in the

state court proceedings must be viewed as more than merely

persuasive authority. We held in Kovats that a "state court's

resolution of the state law question that required Pullman

abstention clearly must be given some preclusive effect;

otherwise abstention would be a meaningless procedure." 749 F.2d

at 1046. The Supreme Court did not expect the state courts to

issue abstract opinions of law, removed from the facts of the

case, or resolve factual disputes only to have them treated as

advisory opinions. Instead, the Court anticipated that the state

court decision might resolve the suit entirely. See England, 375
U.S. at 421; see also Phillips v. Pennsylvania Higher Educ.
Assistance Agency, 657 F.2d 554, 560 n.9 (3d Cir. 1981)
(suggesting that state court decision under Pullman could

definitively resolve the suit, even if resolution of legal issue

was fact-intensive), cert. denied, 455 U.S. 924 (1982). Implicit

in that assumption is the acknowledgement that the state courts

will be rendering judgments based on a factual record.

While some states have certification provisions which

may permit obtaining a state court's views on state law with only

a sketchy factual context, see John B. Corr & Ira P. Robbins,

Interjurisdictional Certification and Choice of Law, 41 Vand. L.

Rev. 411, 421-22 (1988), New Jersey is not such a state. In

fact, New Jersey has expressed a strong policy against issuing

advisory opinions. See New Jersey Ass'n for Retarded Citizens,

Inc. v. New Jersey Dep't of Human Servs., 445 A.2d 704, 707 (N.J.

1982) ("We will not render advisory opinions or function in the

abstract."); Civil Serv. Comm'n v. Senate of New Jersey, 397 A.2d

1098, 1101 (N.J. Super. Ct. App. Div.), certif. denied, 405 A.2d

811 (N.J. 1979); Biegenwald v. Fauver, 882 F.2d 748, 753 (3d Cir.

1989).

Thus, the judgment the parties have received from the

New Jersey courts on the state law claims binds them, absent

any federal impediment. This is so even in the rare Pullman
abstention case such as this, where the state court must resolve

factual disputes or engage in a totality-of-the-circumstances

analysis in reaching its conclusions. In Ivy Club v. Edwards,

943 F.2d 270, 283 (3d Cir. 1991), cert. denied, 112 S. Ct. 1282

(1992), this court held that "[u]pon return to federal court

[after Pullman/England], the federal plaintiff may fully litigate
his federal claims, including the factual issues that may be

identical to those underlying the state law question." However,

in recognition of the nature of the state court proceedings as

authoritative, we also held that "issue preclusion applies . . .

to the state law question decided by the state court." Id.

This modified application of the preclusion doctrine to

the state law claims is consistent with the policies underlying

not only the full faith and credit statute, but also the Rules of

Decisions Act, 28 U.S.C. § 1652 (1988). The Rules of Decision

Act, as interpreted by the Supreme Court in Erie Railroad v.

Tompkins, 304 U.S. 64 (1938), and its progeny, requires as a

matter of federalism that a federal court sitting in diversity

attempt to apply state law as if it were a state court. In this

case, for example, the district court needed to determine which

state's law a New Jersey court would apply to the 1984 Agreement.

See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487 (1941). A

New Jersey court, in fact the highest New Jersey court, has

definitively answered that question. As long as the parties had

a full and fair opportunity to litigate the issue in the state

proceeding, cf. Kremer v. Chemical Constr. Corp., 456 U.S. 461,
481-82 (1982), it would offend all notions of comity and common

sense to permit relitigation of that issue. Thus we hold that

the New Jersey courts were entitled to resolve the state law

issues presented in the context of the declaratory judgment suit

(whether the parties' agreement was covered by the NJFPA), and we

are bound to accept their answer (yes), as well as the factual

and legal findings necessary to that answer.
 B.

Commerce Clause

We thus turn to the district court's holding that,

accepting the New Jersey Supreme Court's decision that the 1984

Agreement was governed by the NJFPA, that statute violates the

dormant Commerce Clause when applied to activities of a New

Jersey franchise outside New Jersey.15

The Commerce Clause provides that "Congress shall have

Power . . . To regulate Commerce . . . among the several States."

U.S. Const., art. I, § 8, cl. 3. The Supreme Court "long has

recognized that this affirmative grant of authority to Congress

also encompasses an implicit or 'dormant' limitation on the

authority of the States to enact legislation affecting interstate

commerce." Healy v. Beer Institute, 491 U.S. 324, 326 n.1

(1989).16 The Commerce Clause reflects "the Constitution's

15
. CCC does not claim that New Jersey's choice-of-law holding
itself violates the Commerce Clause and thus we do not reach that
distinct question. See Harold W. Horowitz, Comment, The Commerce
Clause as a Limitation on State Choice-of-Law Doctrine, 81 Harv.
L. Rev. 806, 813-24 (1971).
16
. ISI seems to argue that if application of the NJFPA to the
1984 Agreement meets the requirements of due process, there can
be no Commerce Clause problem. It is clear, however, that the
"[l]ocal regulations which would pass muster under the Due
Process Clause might nonetheless fail to survive other challenges
to constitutionality that bring the Supremacy Clause into play.
Like any local law that conflicts with federal regulatory
measures, state regulations that run afoul of the policy of free
trade reflected in the Commerce Clause must also bow." Bibb v.
Navajo Freight Lines, 359 U.S. 520, 529 (1959) (citations
omitted); see also Quill Corp. v. North Dakota, 112 S. Ct. 1904
(1992) (distinguishing application of due process and commerce
clauses).
special concern both with the maintenance of a national economic

union unfettered by state-imposed limitations on interstate

commerce and with the autonomy of the individual States within

their respective spheres." Id. at 335-36.

The Supreme Court has articulated two tiers of scrutiny

in analyzing statutes that regulate interstate commerce:

When a state statute directly regulates or
discriminates against interstate commerce, or when its
effect is to favor in-state economic interests over
out-of-state interests, we have generally struck down
the statute without further inquiry. When, however, a
statute only has indirect effects on interstate
commerce and regulates evenhandedly, we have examined
whether the State's interest is legitimate and whether
the burden on interstate commerce clearly exceeds the
local benefits.

Brown-Forman Distillers Corp. v. New York State Liquor Auth., 476

U.S. 573, 579 (1986) (citations omitted). In the end, the

crucial consideration is "the overall effect of the statute on

both local and interstate commerce." Healy, 491 U.S. at 337

n.14.

1.
Per Se Violations

"The principal objects of dormant Commerce Clause

scrutiny are statutes that discriminate against interstate

commerce." CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69,

87 (1987). Such statutes are virtually per se invalid. See C &

A Carbone, Inc. v. Town of Clarkstown, 114 S. Ct. 1677, 1683

(1994); Philadelphia v. New Jersey, 437 U.S. 617, 627-28 (1978).

However, both parties agree that as the NJFPA does not
differentiate between in-state and out-of-state franchisors,

there is no discrimination against interstate commerce. Instead,

the district court treated the statute as a "direct" regulation

of interstate commerce.

CCC argues, and the district court agreed, that

imposing the NJFPA upon a multistate contract is per se invalid

because it has the practical effect of regulating

extraterritorially.17 The Supreme Court has noted on more than

one occasion that "the Commerce Clause precludes the application

of a state statute to commerce that takes place wholly outside of

the State's borders, whether or not the commerce has effects

within the State," and that the "critical inquiry is whether the

practical effect of the regulation is to control conduct beyond

the boundaries of the State." Healy, 491 U.S. at 336 (quotation

and citations omitted); see also Brown-Forman, 476 U.S. at 582

("Forcing a merchant to seek regulatory approval in one State

before undertaking a transaction in another directly regulates

interstate commerce."); Edgar v. MITE Corp., 457 U.S. 624, 643

(1982) ("[A]ny attempt 'directly' to assert extraterritorial

jurisdiction over persons or property would offend sister States

and exceed the inherent limits of the State's power." (quotation

17
. At least one commentator has suggested that
"extraterritoriality is not a dormant commerce clause problem"
but acknowledges that the "[Supreme] Court has frequently treated
extraterritorially, when it has arisen in the context of a
dormant commerce clause case, as if it were a dormant commerce
clause problem." Donald H. Regan, Siamese Essays: (I) CTS Corp.
v. Dynamics Corp. of America and Dormant Commerce Clause
Doctrine; (II) Extraterritorial State Legislation, 85 Mich. L.
Rev. 1865, 1873 (1987).
and citation omitted)); Baldwin v. G.A.F. Seelig, Inc., 294 U.S.

511, 521 (1935) ("New York has no power to project its

legislation into Vermont by regulating the price to be paid in

that state for milk acquired there."); see also Old Bridge

Chems., Inc. v. New Jersey Dep't of Envtl. Protection, 965 F.2d

1287, 1293 (3d Cir.) ("The Supreme Court has invalidated state

statutes where a state has 'projected' its legislation into other

states and directly regulated commerce therein, thereby either

forcing individuals to abandon commerce in other states or

forcing other states to alter their regulations to conform with

the conflicting legislation."), cert. denied, 113 S. Ct. 602

(1992).

The fact that application of the NJFPA is triggered by

in-state activity does not in itself insulate it from scrutiny

under the dormant Commerce Clause, for not all in-state activity

is sufficient to justify a law which regulates out-of-state

transactions of an interstate actor. Compare Brown-Forman, 476

U.S. at 580 ("The mere fact that the effects of New York's ABC

Law are triggered only by sales of liquor within the State of New

York . . . does not validate the law if it regulates the out-of-

state transactions of distillers who sell in-state.") and MITE,
457 U.S. at 641-42 (fact that corporation has some contacts with

Illinois insufficient to permit Illinois to regulate its

takeovers) with CTS, 481 U.S. at 93 (fact that corporation was

incorporated in Indiana and has a substantial number of Indiana

shareholders sufficient to permit Indiana to regulate its

takeovers).
 On the other hand, it is inevitable that a state's law,

whether statutory or common law, will have extraterritorial

effects. The Supreme Court has never suggested that the dormant

Commerce Clause requires Balkanization, with each state's law

stopping at the border. See Donald H. Regan, Siamese Essays: (I)

CTS Corp. v. Dynamics Corp. of America and Dormant Commerce

Clause Doctrine; (II) Extraterritorial State Legislation, 85

Mich. L. Rev. 1865, 1878 (1987) ("prohibition [of all state laws

that have substantial extraterritorial effects] would invalidate

much too much legislation."). In traditional contract

litigation, courts must apply some state's law to interpret the

contract. While a contract which covers multiple states may

raise a difficult choice-of-law question, once that question is

resolved there is nothing untoward about applying one state's law

to the entire contract, even if it requires applying that state's

law to activities outside the state.

CCC does not dispute this, but attempts to distinguish

the NJFPA, a "state regulation," from an ordinary state contract

rule. We see no basis for any such dichotomy. The construction

of a contract, including the interpretive policies embodied in

common law and statutory enactments, is no more or less

regulatory than the NJFPA, which imposes on franchises governed

by New Jersey law certain provisions designed to promote fairness

between the parties.

This is not to say that New Jersey would have a right

to apply the NJFPA to any franchise agreement in the country, as

long as suit is brought in New Jersey. But nothing in the text
of the NJFPA reaches that far. Indeed, the New Jersey Supreme

Court noted that "[b]y definition, the Act, and particularly its

community-of-interest requirement, is intended to protect

business parties who made a franchise-specific capital investment

of either goods or services in New Jersey. Thus the statute's

own terms . . . will allow the application of the Act only in

situations in which there are 'contacts' with the forum [and]

'interests' arising out of those contacts." ISI III, 614 A.2d at

148 (citation omitted); see also N.J. Stat. Ann. § 56:10-4 (West

1989 & Supp. 1994) (statute limits itself to franchises "the

performance of which contemplates or requires the franchisee to

establish or maintain a place of business within the State of New

Jersey"). Furthermore, under generally accepted choice-of-law

analysis, the courts measure whether New Jersey has sufficient

interests with the franchise as to make it appropriate to apply

the NJFPA.

In this case the record is clear that it was the

parties, not New Jersey, who contemplated that the franchisee

maintain a place of business in New Jersey. And it was the

parties, not New Jersey, who bound themselves to an exclusive

multistate distribution agreement. Therefore, it is the parties'

own agreement which operated to project the New Jersey law

outside of New Jersey's borders, a result which CCC will find

ironic but which inevitably follows from the choice-of-law

analysis.

This factor distinguishes this situation from the cases

relied on by the district court. In those cases, the state laws
that were held to burden interstate commerce operated independent

of any party's agreement. In Healy and Brown-Forman, the states

enacted price-affirmation statutes for beer and liquor, requiring

suppliers to affirm that their prices in-state were no higher

than the lowest price they would charge for their product in

border states. These laws were designed in such a way that a

supplier's price in other states would be dependent on the prices

it posted in the state enacting the regulation. However, in

these cases it was the state, operating independently of any

parties' contract, which dictated the extraterritorial effect.

As noted, the situation here is distinguishable.

Of course, if the parties were subject to "inconsistent

legislation" from different states, a law's "practical effect"

might lead to a Commerce Clause violation. See, e.g., Healy, 491

U.S. at 336-37; CTS, 481 U.S. at 88-89; Brown-Forman, 476 U.S. at

582-83; MITE, 457 U.S. at 642-43. On the other hand, state laws

which merely create additional, but not irreconcilable,

obligations are not considered to be "inconsistent" for this

purpose. See Buzzard v. Roadrunner Trucking, 966 F.2d 777, 784

n.9 (3d Cir. 1992).

In this case, there is no indication that any other

state will impose demands on ISI or CCC which would require them

to violate New Jersey law or vice versa. And while the laws of

other states might permit CCC to conduct its franchise

relationship with ISI under a different framework than that

imposed by the NJFPA, that difference in approach by different

states is not sufficient to require per se invalidation. See Old
Bridge Chems., 965 F.2d at 1293 (must show "actual conflict among

state regulations" in order to demonstrate per se invalidity).

Thus the essence of CCC's objection, despite its

assurance to the contrary, goes to New Jersey's decision on

choice of law. Having accepted that decision, as we must, we see

no facial conflict between the NJFPA and the dormant Commerce

Clause.

2.

Pike Balancing

Because the district court decided the NJFPA was per se

invalid, it never considered whether the NJFPA passes the

balancing test enunciated in Pike v. Bruce Church, Inc., 397 U.S.

137 (1970). The Supreme Court has explained that where the

statute addresses a legitimate local public interest, and its

effects on interstate commerce are only incidental, it will be

upheld unless the burden imposed on such commerce is clearly

excessive in relation to the putative local benefits." Id. at

142.18

Inasmuch as the parties argued the Pike balancing test

in the district court and before us, we will consider whether,

18
. The Supreme Court has continued to recite, even if it has
not applied, the Pike test as late as its last term, see C & A
Carbone, Inc. v. Town of Clarkstown, 114 S. Ct. 1677, 1681
(1994); Oregon Waste Sys., Inc. v. Department of Envtl. Quality,
114 S. Ct. 1345, 1350 (1994), notwithstanding criticism of the
Pike balancing by members of the Supreme Court, see, e.g., CTS,
481 U.S. at 95-96 (Scalia, J., concurring) and commentators, see
Donald H. Regan, The Supreme Court and State Protectionism:
Making Sense of the Dormant Commerce Clause, 84 Mich. L. Rev.
1091, 1106-08 (1986).
again looking at the NJFPA from a facial standpoint only, it

fails to meet requisite balancing. In doing so we do not balance

one state's interests against another, as ISI suggests we should,

but rather we balance the state's interest against the burden on

interstate commerce. See MITE, 457 U.S. at 643; Aldens, Inc. v.

Packel, 524 F.2d 38, 45-50 (3d Cir. 1975), cert. denied, 425 U.S.

943 (1976).

Furthermore, contrary to CCC's argument, we do not look

at the effect of the state regulation on the commerce of other

states when we balance. Instead, "[u]nder this court's

precedent, the only incidental burdens on interstate commerce

that implicate the commerce clause . . . are those that

discriminate against interstate commerce. We have so held

because the commerce clause is concerned with protectionism and

the need for uniformity, and case law demonstrates that

legislation will not be invalidated under the Pike test unless it

imposes discriminatory burdens on interstate commerce. . . .

Thus, where the burden on out-of-state interests rises no higher

than that placed on competing in-state interests, it is a burden

on commerce rather than a burden on interstate commerce." Old

Bridge Chems., 965 F.2d at 1295 (citations omitted, first

emphasis added); see also J. Filiberto Sanitation, Inc. v. New

Jersey Dep't of Envtl. Protection, 857 F.2d 913, 922 (3d Cir.

1988); Norfolk Southern Corp. v. Oberly, 822 F.2d 388, 406 (3d

Cir. 1987).

As we explained in Ford Motor Co. v. Insurance Comm'r,
874 F.2d 926, 942-43 (3d Cir.), cert. denied, 493 U.S. 969
(1989), where we upheld a law prohibiting companies that were

affiliated with savings and loan institutions anywhere in the

country from selling insurance in Pennsylvania, the fact that a

law may have "devastating economic consequences" on a particular

interstate firm is not sufficient to rise to a Commerce Clause

burden. Id. at 943. Instead, the inquiry requires that we

examine whether the state law adversely affects interstate

commerce. "[T]he focus [of the Supreme Court is on] . . . the

manner by which the statute regulated [and] . . . the fact that

the statute regulated indiscriminately compel[s] the conclusion

that the Commerce Clause [has] not been violated." Id. at 944.

Applying this settled law, it is clear that there is no

burden on interstate commerce inasmuch as the NJFPA is facially

neutral as to the interstate nature of the parties' agreement.

CCC claims the NJFPA imposes a straitjacket on its operations and

ultimately harms consumers by prohibiting the creation of an

efficient distribution system. But even assuming this to be

true, it is indisputable that the statute simply does not

differentiate between in-state and out-of-state franchisors. The

limitation on termination of franchises to reasons of good cause

is equally applicable to New Jersey-based franchisors as to those

headquartered elsewhere. Thus, although the NJFPA may burden

commerce, it creates no incidental burdens on interstate commerce

for purposes of Pike balancing. "Once it is clear no such

discrimination has been alleged, the inquiry as to the burden on

interstate commerce should end." J. Filiberto, 857 F.2d at 922
(quotations and citations omitted). In the absence of such a
burden, an analysis of the "putative local benefits" of the NJFPA

is unnecessary.19

In ISI's argument before this court, it expressly

limited itself to the district court's facial analysis. It thus

recognized that the New Jersey Supreme Court's holding did not

purport to consider whether the NJFPA might, when applied, have a

burdensome effect on interstate commerce. That issue, of course,

could not be resolved as a matter of law, and indeed might have

to await the interpretation given to the "good cause" provisions

of the NJFPA. Although the Commerce Clause analysis and the Due

Process analysis are distinct, see supra note 17, ISI's counsel

recognized that there might be due process implications to

certain interpretations of the NJFPA in the context of existing

contracts. That issue was not raised by CCC in its pleadings in

19
. Despite the district court's uncertainty about whether the
New Jersey court's choice-of-law analysis was binding, the court
applied New Jersey law when entering summary judgment for CCC on
Counts Two through Seven. We have reviewed ISI's objections to
the district court's reasoning and agree with the independent
state law grounds articulated by the court.

The district court also entered summary judgment for
CCC on the part of Count One which alleged that CCC "fail[ed] to
renew a franchise without good cause" under § 10-5 of the NJFPA.
See N.J. Stat. Ann. § 56:10-5 (West 1989). Both parties agree
that there may be changes in a franchise agreement that are so
significant that they amount to a constructive nonrenewal of the
franchise. In this case, however, the district court based its
holding that the 1989 Agreement was a "renewal" of the 1984
Agreement on its decision that the elimination of the territory
of eight states followed from the Commerce Clause. See ISI V,
supra, at 80 n.47. In light of our decision, we will reverse the
entry of summary judgment on this ground as well to allow the
district court to evaluate the nonrenewal claim anew.
this case,20 and we consider it as beyond the scope of this

appeal.

III.
CONCLUSION

For the foregoing reasons, we will deny the petitions

for writs of mandamus docketed at Nos. 93-5490 and 93-5635; in

the appeals docketed at Nos. 93-5414 and 94-5048, we will reverse

the district court's judgment declaring the NJFPA

unconstitutional as applied to activities of New Jersey

franchisees outside of New Jersey and remand for further

proceedings consistent with this opinion; and in the appeal

docketed at No. 93-5722, we will affirm the district court's

judgment for CCC on Counts Two through Seven, and reverse its

judgment for CCC on the nonrenewal portion of Count One and

remand for further proceedings consistent with this opinion.

Costs in Nos. 93-5490, 93-5635, 93-5414 and 94-5048 to be

assessed against CCC; costs in No. 93-5722 to be assessed against

ISI.

20
. The New Jersey Supreme Court's decision mentioned the due
process clause, but we did not understand it to make a definitive
ruling in that connection, and view that reference as part of its
general discussion on the interpretation of the NJFPA.