By Jeffrey May, J.D.
Volvo Cars of North America, LLC was entitled to dismissal of an Ohio automobile dealer’s lawsuit, challenging a program of bonus payments to Volvo dealers called the "Facility Investment Initiative" (FII), the federal district court in Columbus, Ohio, has ruled. The court granted Volvo’s motion for summary judgment on the dealer’s price discrimination claims under the Robinson-Patman Act and Ohio Motor Vehicle Franchise Act, as well as other claims under Ohio state law, and judgment was entered in favor of the car maker (Brentlinger Enterprises v. Volvo Cars of North America, LLC, August 25, 2016, Smith, G.).
Price discrimination. The complaining dealer alleged it was the victim of price discrimination under the Robinson-Patman Act and Ohio law based on the FII program. Under the FII program, the complaining dealer was classified in a tier below another area dealer, which was designated "Exclusive." Bonus payments for car sales were directly linked to a dealership’s classification under the program. As a result, the complaining dealer might receive only $250 per qualified car sale, while an exclusive dealer received $500. Ranking under the program also impacted the availability of certain high-demand models.
The price discrimination claims failed because Volvo represented that a higher dealership designation under the FII program was reasonably and functionally available to all franchisees and the complaining dealer did not meet its burden to establish the proximate cause between the damages allegedly caused and the alleged violation. The court rejected the complaining dealer’s argument that the program was not functionally available because it would have to incur substantially higher costs to qualify for the full FII bonus by making improvements to its facility in order to be accepted into a higher tier of dealerships. Also rejected was the dealer’s suggestion that local zoning laws made it impossible to comply with Volvo’s requirements for a higher tier. The court also ruled that the program was available on a "proportionately equal basis," was based on the sales of cars, and was increased only for a reasonable performance standard.
Constructive termination. The complaining dealer’s claims that the FII program amounted to a constructive termination also were rejected. Because the FII program was functionally available to the plaintiff, the plaintiff could not show that the FII would proximately cause the destruction of its business such that it constituted a constructive termination.
Good faith. The dealer unsuccessfully argued that Volvo’s use of the FII program constituted a failure to act in good faith on the ground that it required dealers "to become Exclusive or be left behind to suffer adverse economic consequences arising from the disparity in the amount of incentive payments . . . ." The dealer did not meet its burden to provide evidence that the FII program was commercially unjustifiable, as was required under Ohio law. Only 20 percent of Volvo’s American dealers were deemed exclusive under the program. "No reasonable jury could find that Volvo intended to drive 80% of its dealers out of business by providing an incentive for new branding based on the available evidence," according to the court. The court also noted that there was evidence that customer satisfaction ratings regarding dealership appearance justified a program which supported and rewarded dealers who invested in new facilities. With respect to a claim of breach of the good faith requirement under the Automobile Dealer’s Day in Court Act (ADDCA), the dealer presented no evidence to satisfy the ADDCA’s specialized definition of good faith. Claims of coercion and predatory practices under the Ohio franchise law also were rejected.
Fiduciary duty. While it was undisputed that there was no statutory basis for a fiduciary relationship in this case, the dealer argued that it could pursue a common law breach of fiduciary duty claim because it was reliant on the car maker for parts and inventory. However, the court found no fiduciary relationship between the parties.
The case is No. 2:14–CV–360.
Attorneys: Christopher M. DeVito (Morganstern MacAdams & DeVito Co. LPA) and Leonard A. Bellavia (Bellavia Blatt Andron & Crossett, PC) for Brentlinger Enterprises. Steven David Forry (Ice Miller LLP) and John J. Sullivan (Hogan Lovells US LLP) for Volvo Cars of North America, LLC.
Companies: Brentlinger Enterprises; Volvo Cars of North America, LLC
MainStory: TopStory Antitrust FranchisingDistribution OhioNews
Interested in submitting an article?
Submit your information to us today!Learn More