Dealership wins right to sue GM in franchise dispute

LEGAL FILE
Franchise feud
At Issue: Dealership sues General Motors after failing to obtain GMC franchise.

Where it stands: Trial court dismisses suit, but appeals panel reinstates some claims.


You can send e-mail to Eric Freedman at

LANSING, Mich. - The legal rights of a Pontiac-Buick dealership that failed to secure a GMC franchise are not limited by its sales and service agreement, the Michigan Court of Appeals has ruled.

The decision means that Bero Motors of Escanaba, Mich., can pursue its multimillion-dollar lawsuit against General Motors, which awarded the GMC franchise to another party.

Bero offered to acquire the GMC franchise from Town and Country Motors, which also sold Olds-mobiles, Cadillacs and Toyotas, but the dealerships couldn't agree on a price, according to the appeals court.

Later, GM representatives allegedly made an oral promise that GM would assign to Bero its right of first refusal to buy Town and Country Motors and allow Bero to match any other offer for the line. But GM sold it to another buyer, Dagenais Enterprises, which sells GMC, Cadillac and Toyota vehicles as Riverside Town and Country. Bero sued GM, alleging the company failed to fulfill its oral agreement. Dagenais and Riverside are not parties to the lawsuit.

Panel restores claims

Delta County Circuit Judge Stephen Davis dismissed Bero's lawsuit, but the appeals panel voted to reinstate some of the claims.

"GM cannot claim the protections of the existing (franchise) contract to protect itself from an oral agreement concerning a proposed new dealership," the court said by a 3-2 vote, noting that the language of Bero's dealer agreement was "specific to the sale of Pontiac and Buick automobiles."

The majority also said that although the franchise agreement prohibits oral modifications, it was separate from and did not govern GM's undertaking to assist Bero in the purchase of Town and Country Motors.

As a result, the majority said, Bero is entitled to a trial to determine whether GM had made and broken an oral contract to assist Bero in buying the GMC dealership. The trial also should decide whether Bero had reasonably relied on such a commitment. The dissenting opinion, though, said the dealer agreement "read as whole" binds both sides in all of their dealings with each other. Therefore, the dissent said, oral statements by GM representatives are unenforceable.

GM explores options

The appeals court upheld dismissal of claims for negligence and breach of fiduciary duty, the latter because the parties' relationship "is driven by profits" and not upon the trust and reliance necessary for a fiduciary relationship such as that between guardians to wards or attorneys to clients.

Bero's lawyer, Vincent Petrucelli of Iron River, Mich., said the decision means that when a dealer-maker dispute is unrelated to an existing line, "your normal legal remedies are available." In this case, that meant a lawsuit for damages "in the mid-seven figures" for lost profits from GMC truck sales, service and parts, as well as the enhanced value of having the franchise.

GM spokesman Jay Cooney said, "GM believes the bottom line is that this issue is clearly covered by its dealer agreement's prohibition on oral contracts." He said the automaker "is exploring all of its options, including seeking a rehearing in the appeals court because of significant errors of fact or law echoed by a lengthy dissenting opinion."

You can reach Eric Freedman at freedma5@msu.edu

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