January 2, 2017 — Beck Chevrolet scored another big legal win last week in its five-year battle with General Motors over how it measures sales effectiveness of its dealers and the decision could have a far reaching impact on the overall relationship manufacturers have with their dealers.
The ruling last week by New York’s Second District court reaffirmed New York’s Court of Appeals 5-1 decision in May that said GM’s use of its Retail Sales Index (RSI) is “unreasonable” and “unfair” and thus violates aspects of the state’s 2008 Franchise Motor Vehicle Act.
The decision, although specific to New York and GM, likely will end up restricting how manufacturers overall are able to measure the sales effectiveness of their dealers.
A ruling in a second aspect of the case determined that questions of whether GM is able to change a Area of Geographic Sales and Service Advantage (AGSSA) should be evaluated on a case-by-case basis. According to the court’s decision, changing a dealer’s AGSSA is only prohibited if ʹit is not undertaken in good faith; is not undertaken for good cause; or would adversely and substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer under an existing franchise agreement.”
The plaintiff, Beck Chevrolet of Yonkers, NY, likely will file a second lawsuit to address the issue of whether GM changing its AGSSA adversely affected its business operations.
The case dates back to 2011 when GM almost forced Beck’s owners, Lon and Russell Geller, out of business when it used the RSI to evaluate whether father and son co-owners could keep the franchise. The Gellers argued GM’s use of RSI violated the Franchised Motor Vehicle Dealer Act, designed to prohibit abusive business practices by auto manufacturers against their local franchisees. The issue, according to the Gellers, is that GM applied the RSI against a state wide average while ignoring the low market representation Chevrolet has in the Yonkers market.
The court initially ruled against Beck but kicked it up to the Appeals Court when the Gellers appealed.
After the court determined in May that GM was using an “unreasonable and unfair” standard against Beck Chevrolet when comparing its sales against the state average instead of average sales in Beck’s local geographic area, the Second District Court reaffirmed the decision last week.