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How we resolve our disputes

Entries in automobile dealer (3)



In a unanimous decision, the Wisconsin Supreme Court upheld a ruling that Volvo had to rescind a notice terminating the franchise of one of its truck dealers. Initially, the dealer decided to sell its Volvo truck franchise and took steps to eliminate its efforts to sell Volvo trucks. This admittedly violated its franchise with Volvo. However, about a year later, the dealer decided not to sell its Volvo franchise. Nevertheless, Volvo issued a notice to terminate the franchise because sales had decreased dramatically and the dealer’s actions had breached the franchise agreement. As required by state law, Volvo gave the dealer time to cure the breach. The dealer claimed that it complied with the requirements to cure the breach, but Volvo disagreed. The state agency charged with hearing such disputes agreed with the dealer and Volvo appealed. The Wisconsin Court of Appeals affirmed and so did the Supreme Court. Essentially, the dealer claimed that by recommitting itself to promoting Volvo’s trucks, it cured the breach. Volvo argued that the breach was not cured because the dealer had not restored matters to the way they were before the breach. The courts agreed with the dealer, using the technical legal definition of “cured” rather than the dictionary definition that Volvo preferred. Substantial performance — a term all law students learn in law school — is what the law required. The courts found it was unreasonable to expect the dealer to return to the status quo ante, as Volvo desired.

What is curious about this case is that Volvo was not satisfied with getting a longtime successful dealer back in its fold. It wanted to punish the dealer for temporarily straying from the farm. Obviously, the courts agreed that it should have left well enough alone. I wonder if it was worth the time and expense of litigation to resolve this one ambiguity in the law.


Arbitration for Automobile Dealers

About a month ago, I wrote a post on the federal legislation which allows automobile dealers to seek arbitration if their dealership was closed due to the Chrysler and GM bankruptcies.  I noted that the dealers do not merely want arbitration — they want their dealerships to continue (or to reopen).  Recent news reports say that around 800 dealers have filed requests to initiate such arbitration.  Some articles surmise that not all of those requests will result in hearings.  Many dealers are likely to settle before such hearings take place.  Now that dealers have legislation preserving some of their rights post-bankruptcy, along with a forum in which to enforce those rights, negotiating settlements should not be that difficult.  If they cannot reach agreement by direct negotiation, a good mediator should be able to help.  Sounds like a good opportunity for everyone.


All I want for Christmas is . . . Arbitration?

The House of Representatives has passed a measure that provides for binding arbitration for more than 2,000 General Motors and Chrysler dealers to fight company-ordered closings.  Illinois Senator Richard Durbin said he expects the Senate to pass the measure, too.  Durbin added that “This is a fair opportunity to resolve the disputes and to have a fair hearing, which is all these dealers have asked for.” Oh, really?  Automobile dealers just want a fair hearing?  Arbitration?  They don’t want to stay in business and continue to make money selling GM and Chrysler vehicles?  I don’t think so.  First of all, seven years ago, Congress enacted the Motor Vehicle Franchise Contract Arbitration Fairness Act, which exempted auto dealers from the Federal Arbitration Act.  Instead, the Act makes predispute arbitration clauses in motor vehicle franchise contracts unenforceable unless both parties consent after the dispute arises.  Let’s face it.  No one wants to give up their 7th Amendment right to sue in court, and have a jury resolve their case, unless they believe it would enhance their chances of winning.  Secondly, binding arbitration and litigation are the ultimate hammers in dispute resolution.  If the parties cannot negotiate a mutually acceptable settlement agreement, one of them is going to initiate a lawsuit or arbitration.  Forum shopping has long been part of the process of deciding which course to follow.  But let’s not fool ourselves.  No one merely wants a “fair hearing.”  They want to win.  Or, at least, they want leverage to help negotiate or mediate a better settlement.