Was A Jury Used In Stock-Purchase Agreement Lawsuit For Facebook Automobile Dealers – Do You Really Have a Right to Refuse New Vehicles?

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Automobile Dealers – Do You Really Have a Right to Refuse New Vehicles?

According to a recent NY Times article:

Chrysler Group said Monday it has yet to count tens of thousands of vehicles in its inventory numbers, which are already high by industry standards. Chrysler said it routinely removed billions of dollars worth of vehicles from its unsold list of cars and trucks because they had not yet been assigned to a specific dealer or ordered by a customer. (New York Times, October 24, 2006)

When I started studying the auto industry, dealers and manufacturers had a name for cars that were produced but not ordered. That name was: “sales bank”. “Sales bank” is a practice that manufacturers say they abandoned after the system was destroyed during the oil crises of the 1970s.

By the early 1980s, when the dust settled, Automotive News featured articles like:

Ernest D’Agostino of Rhode Island filed a lawsuit in U.S. District Court against the Chrysler Corporation, alleging that Chrysler terminated his franchise because he refused to buy “gas guzzlers,” large cars with little gas mileage. A federal jury verdict against Chrysler and Chrysler, in an unregistered case, has appealed. Chrysler agreed to drop the appeal and paid D’Agostino a settlement (Automotive News, October 1982); and

Fred Drendall of Drendall Lincoln-Mercury/Pontiac sued the Ford Motor Company, alleging that when he tried to cancel orders, he was intimidated by Ford representatives, and that when he caved to the pressure and ordered the cars, high floor costs forced him to refinance his dealer center. He was eventually stopped and suffered a heart attack. (Automotive News, December 1982).

Times were hard in the car business.

Today, most sales and service agreements have provisions such as:

2. (D) SHARES. Dealer shall maintain an inventory of current models of such lines or series of VEHICLES in an assortment and in quantities consistent with Company GUIDELINES therefor, or sufficient to meet Dealer’s share of current and anticipated demand for VEHICLES at DEALER’S LOCATION. The Dealer’s maintenance of VEHICLE inventory is subject to the Company’s fulfillment of the Dealer’s orders. (Ford Motor Company, Mercury Sales and Service Agreement, Standard Provisions.)

However, most states have dealer day laws with provisions such as:

art. 4413(36), SUBSECTION E. PROHIBITIONS. Section 5.02. manufacturers; Distributors; Representatives. (b) It shall be unlawful for any manufacturer, distributor or representative to: (1) require or attempt to require a dealer to order, take delivery of or pay anything of value, directly or indirectly, for any vehicle, appliance, part, accessory or any other goods unless voluntarily ordered or contracted for by such dealer. (Texas Motor Vehicle Commission Code)

It shall be unlawful and a violation of this code for any manufacturer, manufacturer’s affiliate, distributor, or distributor’s affiliate licensed under this code to compel or attempt to compel any dealer in this state to: (a) Order or take delivery of any vehicle, part or accessory, appliance, equipment or any other item not required by law to be voluntarily ordered by the dealer. (California Transportation Code Section 11713.2)

In addition to state laws, the National Dealer Day Act in court also prohibits manufacturers and distributors from forcing a dealer to accept “vehicles, parts, accessories or consumables that the dealer does not want, need, or feel the market can absorb.” ” 1956 US Code & Admin.News, page 4603.

But the law is always a double-edged sword, and there is usually a fine line between what is right and what is wrong. For example, it has long been established that a dealer’s refusal to carry a manufacturer’s entire line of vehicles, choosing instead to sell competitors’ models, is grounds for termination. See, for example: Randy’s Studebaker Sales, Inc. v. Nissan Motor Corporation, 533 F.2d 510 (10th Cir. 1976), at 515.

Therefore, before accepting or rejecting delivery of vehicles, a dealer should consult with a competent automobile attorney who is familiar with the laws in the jurisdiction where the vehicles are to be delivered as they apply to his or her particular circumstances.

Note: This article is not intended to provide legal advice and should not be construed as such.

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