Downstate Dealer Wins Case on Unfair Sales Goal

Aerial view of overlapping highways
A downstate dealer scored a victory in a franchise law case that could have major implications on how automobile brokering affects manufacturers’ performance metrics.

The dealer successfully challenged the legality of FCA’s Minimum Sales Responsibility (MSR) sales performance standard.  The case was based primarily on key Franchise Law protections GNYADA lobbied the State Legislature to enact in 2008. The case was tried by Russell McRory and Michael McMahan of Arent Fox, GNYADA Allied Members.

     The DMV administrative law judge found that the MSR did not take into account the impact of local sales conditions, which were severely disrupted by brokering, and that the factory unfairly distributed incentive payments as a result of those sales. The judge also made another, extraordinary finding: that the manufacturer failed to act in “good faith” by facilitating selling cars through automobile brokers, a practice that is clearly prohibited by New York’s Franchise Law.   

     The main charges against the manufacturer – that its performance standard was unreasonable and that it acted in bad faith – were based on dealer rights GNYADA lobbied hard to add to the Franchised Motor Vehicle Dealer Act eleven years ago. 

     In 2016, another GNYADA dealer sued its manufacturer for threatening to not renew its franchise agreement for failure to meet new, unreasonable sales goals. In that case, Beck Chevrolet Co., Inc. v. General Motors LLC, the court found that GM used an arbitrary sales standard that ignored local market factors. The Beck case was also handled by Mr. McRory of the Arent Fox law firm.  Both of these decisions serve as the foundation for future dealer legal arguments that factory sales standards and incentive program objectives cannot ignore the severely disruptive force of brokering activity.

    Brokering activity is completely out of control in New York State, with brokers regularly flouting consumer protection laws that require brokers to register with the state, buy a bond and follow advertising rules. Sadly, there has been no enforcement to address the problem. That is why GNYADA has been working this year with other stakeholders on a new legislative effort to protect consumers from unscrupulous brokers and to protect franchise dealers’ businesses.

This was originally published by Greater New York Automobile Dealers Association (GNYADA) Legislative Update


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