February 17, 2026|Franchise Frontlines
February 17, 2026 | Supreme Court of Georgia | Published Opinion
Executive Summary
In a published decision, the Supreme Court of Georgia partially vacated and partially affirmed the dismissal of constitutional claims brought by Lucid Group USA, Inc. challenging Georgia’s statutory prohibition on direct sales of new motor vehicles by manufacturers and franchisors. The case required the Court to interpret a 1992 constitutional amendment authorizing the General Assembly to regulate the new motor vehicle industry “notwithstanding” due process and equal protection protections. Lucid argued that Georgia’s Direct Sales Prohibition and related 2015 amendments violated the Due Process Clause, Equal Protection Clause, and constitutional limits on special legislation. The State contended that the constitutional amendment immunized the statute from those challenges. The Court rejected the trial court’s broad reading of that immunity, holding that the amendment authorizes only those regulations enacted “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses,” and remanded for further analysis. The Court affirmed dismissal of certain “special law” challenges but allowed others to proceed.
Relevant Background
Georgia’s Motor Vehicle Franchise Practices Act regulates the relationship among manufacturers, distributors, and franchised dealers. At issue were two provisions commonly described as the “Direct Sales Prohibition.” First, OCGA § 10-1-664.1(a) generally prohibits a manufacturer or franchisor from owning, operating, or controlling more than a 45 percent interest in a dealer or dealership. Second, OCGA § 10-1-664.1(c) provides that no manufacturer or franchisor may sell a new motor vehicle directly to a consumer in Georgia except through a franchised new motor vehicle dealer.
Lucid, an electric vehicle manufacturer affiliated with an entity that manufactures zero-emission vehicles, sought to obtain a dealer license in Georgia in order to sell directly to consumers. The Georgia Department of Revenue denied the application based on the Direct Sales Prohibition. Lucid filed suit seeking declaratory and injunctive relief, arguing that the statutory framework, as applied, violated Georgia’s Due Process Clause, Equal Protection Clause, and constitutional provisions prohibiting certain special laws.
Central to the dispute was Article III, Section VI, Paragraph II(c) of the Georgia Constitution, a 1992 amendment adopted after earlier versions of Georgia’s franchise statutes were struck down. That provision authorizes the General Assembly, “[n]otwithstanding” the Due Process and Equal Protection Clauses and certain anti-competition provisions, to regulate new motor vehicle manufacturers, distributors, and dealers “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses upon its citizens.” The trial court dismissed Lucid’s constitutional claims, reasoning that Paragraph II(c) categorically insulated the Direct Sales Prohibition from due process and equal protection review.
Decision
The Supreme Court of Georgia rejected the trial court’s expansive reading of Paragraph II(c). While acknowledging that the amendment authorizes certain regulations “notwithstanding” the Due Process and Equal Protection Clauses, the Court emphasized that the constitutional text includes an operative limitation: the General Assembly may regulate the motor vehicle industry “in order to prevent frauds, unfair business practices, unfair methods of competition, impositions, and other abuses.”
The trial court had treated that language as a mere statement of purpose. The Supreme Court disagreed, holding that courts must give operative effect to all constitutional text and avoid rendering language surplusage. Properly read, the “in order to” clause limits the scope of regulations that are immune from due process and equal protection challenges. In other words, the constitutional amendment does not provide blanket immunity to any statute regulating manufacturers or franchisors; rather, immunity applies only to regulations enacted for the specified purposes. Because the trial court dismissed the claims without analyzing whether the Direct Sales Prohibition satisfied that standard, the Supreme Court vacated the dismissal of the due process and equal protection claims and remanded for further proceedings.
The Court separately addressed Lucid’s arguments under Article III, Section VI, Paragraph IV, which governs general and special laws. As to the Direct Sales Prohibition itself, the Court concluded that the statute constitutes a general law that operates uniformly throughout the state. The classifications at issue—manufacturers and franchisors—were deemed sufficiently broad and rationally related to the subject matter of the legislation. Accordingly, the Court affirmed dismissal of the claims to the extent Lucid directly challenged the core Direct Sales Prohibition under the “general law” provisions.
However, the Court vacated dismissal of Lucid’s challenge to the 2015 amendment as a whole. That amendment both broadened the definition of “new motor vehicle,” thereby reinforcing the Direct Sales Prohibition, and created a narrow exception allowing certain zero-emission manufacturers operating in Georgia as of January 1, 2015, to continue direct sales. Although the Court held that Lucid lacked standing to challenge the carveout provision in isolation, it remanded for consideration of whether the 2015 amendment as a whole could constitute impermissible special legislation under Paragraph IV.
Looking Forward
For franchisors and brands operating in regulated industries, this decision offers both reassurance and caution.
First, the Court did not invalidate Georgia’s Direct Sales Prohibition. The core statutory structure requiring manufacturers and franchisors to utilize independent franchised dealers remains intact. The Court also reaffirmed that broadly framed statutes regulating identifiable classes within an industry may qualify as general laws with uniform application.
At the same time, the opinion clarifies that constitutional “notwithstanding” clauses do not necessarily provide categorical insulation from judicial review. Where a constitutional amendment authorizes regulation for specified purposes, courts may require some connection between the legislation and those purposes before concluding that due process or equal protection challenges are foreclosed. The practical effect of that clarification will depend on how trial courts apply the standard on remand and in future cases. The analysis is likely to be highly fact specific.
Franchisors should not read this decision as signaling a retreat from legislative authority to regulate franchise systems. Rather, it underscores the importance of legislative findings, statutory purpose, and record development when defending regulatory frameworks. In jurisdictions where franchise statutes are rooted in articulated public welfare rationales—such as preventing fraud, protecting dealers, or promoting fair competition—those stated purposes may assume greater significance in future constitutional challenges.
Finally, the Court’s treatment of the 2015 amendment suggests that narrowly tailored exceptions benefiting specific market participants can invite additional scrutiny. Although the Court did not reach the merits of that issue, the remand signals that special-law challenges may arise where amendments simultaneously tighten a regulatory regime and create limited carveouts.
For franchisors operating within dealer-distribution models, the case serves as a reminder that statutory protections for franchise systems remain powerful but may not be immune from evolving constitutional arguments. Careful statutory drafting, consistent regulatory purpose, and disciplined adherence to legislative objectives may help preserve those protections over time.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
