| Scenario: A dealer, after decades in the industry, attempted to sell his dealership on several occasions. Each time, the manufacturer rejected the sale; until finally, the dealer decided to just close his doors. He sold his inventory, parts, and customer list, and received some remuneration from the manufacturer. It was the understanding of the surrounding dealers that the dealership simply ceased to exist, and, since the manufacturer never approved a sale, no "new" dealership would enter the market. However, 45 days later, one did. The surrounding dealers argued that it was a "new" dealership; the manufacturer argued it was a successor to the old dealership. What do you think?
Imagine, after years of service, you tell your manufacturer that you’d like to step down. Instead of approving the sale of your dealership, your manufacturer rejects each offer you receive, until you eventually just close your doors. Your manufacturer, as a parting gesture, gives you a fraction of what your dealership was worth. The surrounding dealerships also paid you to close, and obtained your customer lists and new vehicle inventory, and are led to believe, by the manufacturer, that no new dealership will be entering the market. However, it becomes known that the manufacturer had lined up a "replacement" before the doors were closed. It may sound harsh, but that is exactly what happened in the protest argued before the Ohio Motor Vehicle Dealers Board on behalf of Steve Barry Buick, Inc. and Spitzer Buick as Protestants against General Motors Corporation, the Respondent, in Case No. 05-12-MVDB-314-D (in which the author represented Steve Barry Buick, Inc.).
Protestants argued that under R.C. 4517.50(A) (Notice of proposed additional new vehicle dealer or of relocation; protests), a franchisor who seeks to establish an additional new motor vehicle dealer where the same line-make of motor vehicle is then represented, must first notify the Motor Vehicle Dealers Board as well as each franchisee of that line-make in the relevant market area. The franchisee of the same line-make may file a protest within fifteen days after receiving the notice. R.C. 4517.50(B) provides that "no franchisor shall establish an additional new motor vehicle dealer or relocate an existing new motor vehicle dealer before giving notice as required in division (A) of this section or before the holding of a hearing on any protest filed under this section."
Respondent argued that it did not have to comply with R.C. 4517.50(A) because it was not establishing an additional new motor vehicle dealer or relocating an existing motor vehicle dealer closer to other same line-make dealerships but was merely "reopening" the closed dealership. Respondent argued that since R.C. 4517.50(D)(1) provides that "the reopening in a relevant market area of a new motor vehicle dealership that has ceased to operate as a new motor vehicle dealership for a period of forty-five days or longer, irrespective of whether the cessation was voluntary or involuntary, shall be considered to be the establishment of an additional new motor vehicle dealership," its new franchisee should not be considered an additional new motor vehicle dealership because the new franchise was allegedly ready to begin operations within 45 days after Bill Lake Buick ceased operations. Respondent argued that its new franchisee should be considered as merely the "reopening" of Bill Lake Buick’s operations and that it did not have to comply with the notice provisions of R.C. 4517.50(A).
Respondent attempted to circumvent Ohio law as it pertains to motor vehicle dealerships and impede a dealer's ability to sell his franchise and his dealership assets to a qualified buyer. It was argued by the Protestants that Respondent should not be allowed to prevent a dealer from selling his dealership to a third party and receiving financial compensation for his years of hard work and service to the community. If Respondent's actions went unchallenged, every manufacturer would continue to deny its franchisees the opportunity to sell their dealerships and force franchisees to terminate their franchises without compensation. The result would deprive the dealers and their families the opportunity to receive the financial benefit of the dealership’s assets for which they worked so hard to achieve and maintain.
If Respondent's actions had gone unchallenged, then it would have, in all likelihood, become a common practice for the manufacturers to continuously deny the transfer of ownership of an automobile dealership and wait until the dealer is forced to close its doors and grab the franchise for no consideration.
Protestants argued that since there was no buy-sell agreement, operations had not begun, and the prior dealer had totally ceased operation is what the Respondent called it a "reopening"; but was actually the establishment of a new dealer point and that R.C. 4517.50(A) and its notice requirement had to apply.
Fortunately, the Protestants prevailed. The Ohio Motor Vehicle Dealers Board, in a lengthy and well-reasoned opinion, concluded as follows:
Although this Hearing Examiner has occluded that a new motor vehicle dealership that "reopens" under R.C. 4517.50(A) need not be reopened by the same owner that closed or at the same locations, the Hearing Examiner finds under the circumstances of this case that the "new motor vehicle dealership that ceased to operate" is not reopening.
The Board concluded that despite Respondent’s argument that its new franchisee was a "replacement" of the closed dealership, it was simply the establishment of an additional dealer. Accordingly, the other same-line make dealerships in its relevant market area had the right to protest its opening.
As always, these are highlights of the law and are not to be construed as containing the entire law. This is not a legal opinion. Contact your attorney if you need specific information or advice.
®Robert A. Poklar, 2006
ROBERT A. POKLAR & ASSOCIATES
A Limited Liability Partnership
10100 Brecksville Road
Brecksville, Ohio 44141
Telephone: 440-746-1600
Fax: 440-746-1604
e-mail: poklarlaw@poklarlaw.com
website: www.poklarlaw.com
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