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Newsbriefs 6/30/17

2017 2nd Q. Vol 38

2017 2nd Q. Vol 38 – Newsbriefs 6/30/17

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Another Victory Against Manufacturer Sales Performance Standard

For the second time in less than 12 months, a manufacturer’s sales performance standard has been declared unreasonable. FCA attempted to terminate the Dependable Dodge Ram dealership in California arguing that the dealership failed to meet FCA’s Minimum Sales Responsibility (“MSR”) standard. Similar to the conclusion reached by the New York court in the recent Beck Chevrolet decision, the California New Motor Vehicle Board found that the MSR standard failed to take into account unique local circumstances which were out of the dealership’s control. In the Beck Chevrolet case, the court held that General Motors’ Retail Sales Index requirement was unreasonable as it failed to take into account brand preferences in the dealership’s local market.   The Dependable Dodge ruling follows the California New Motor Vehicle Board ruling in 2014 against Nissan North America in its efforts to terminate Santa Cruz Nissan for a failure to meet NNA’s sales performance requirement (SSER).

This string of favorable rulings is very good news for dealers who have been arguing for years that the sales performance standard used by almost all manufacturers (i.e. 100% of average market share) is inherently unreasonable because every dealer’s market is unique and different from the markets in the remainder of the state or region against which the dealer is being compared.

BSM Prevails in Both Connecticut and North Carolina Against Tesla

BSM partners, Jason Allen and Shawn Mercer, represented the Connecticut Automobile Retailers Association (“CARA”) in its effort to prevent Tesla from skirting the Connecticut law prohibiting any vehicle manufacturer from selling direct to retail customers. In order to avoid this prohibition, Tesla opened a “Gallery” dealership location at which Tesla claimed no sales activity was occurring but instead only the display of Tesla vehicles. CARA filed a complaint with the Connecticut Department of Motor Vehicles arguing that the Gallery location amounted to an “unlicensed” sales location which was in fact selling direct to retail customers.

Messrs. Allen and Mercer obtained testimony at the final hearing that Gallery employees were speaking to customers concerning the purchase of a Tesla vehicle and were, in fact, paid a commission for each vehicle a customer purchased. The Hearing Officer’s opinion, which was adopted by the Department, found that the Tesla Gallery location was engaged in the prohibited activity of selling Tesla vehicles even if that did not include consummating the final paperwork at the Gallery location.

In a similar case, BSM partner Shawn Mercer, represented several franchised dealers in North Carolina challenging Tesla’s intention to open a store in the State. North Carolina’s law prohibits a vehicle manufacturer from selling direct to a retail customer as long as there are independent dealers willing and able to sell those vehicles. The Firm’s dealership clients presented significant evidence that they were willing and able to operate a Tesla sales location. Tesla presented no credible evidence in rebuttal that it was uniquely suited to sell its all-electric vehicles to the consuming public in North Carolina. As a result, the North Carolina Division of Motor Vehicles ruled that Tesla should not be permitted to operate its own dealership as long as there were independent dealers willing and able to do so.