Judge: Axed Nissan dealership had time to improve but didn't
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A Detroit-area Nissan store has lost its fight against termination by the automaker.
A federal judge in Detroit has ruled that Nissan North America had sufficient grounds to terminate Superior Nissan in Dearborn, Mich., the worst-performing dealership in Nissan's North Central region, after giving the store ample time to improve its sales and customer satisfaction.
After a nonjury trial, U.S. District Judge Marianne Battani rejected arguments that Nissan acted in bad faith when it terminated the dealership. Superior's lawsuit had been filed jointly by Walter Schwartz and Superior Pontiac-Buick-GMC Inc., doing business as Superior Nissan.
An appeal is likely, dealer lawyer Jonathan Kaplansky of suburban Detroit said.
Superior and Nissan executed a sales and service agreement in March 2003. Schwartz signed the agreement as principal owner of Superior, the decision says. Nissan issued its first poor performance letter to Superior in 2003 when Superior Nissan's sales penetration ranked 187th among 191 dealerships in Nissan's North Central region, which includes Detroit. In 2004, the store ranked 187th in sales out of 187 dealerships in the region.
Nissan sent a notice of default in 2005, giving Superior 180 days to improve sales performance. It extended the cure period by 180 days in 2006 and again in 2007 before issuing a termination notice effective in March 2008.
Superior sued for breach of contract and violation of the federal Automobile Dealers' Day in Court Act and state dealer law. Superior Nissan has remained open during the litigation.
In siding with Nissan, the judge acknowledged several factors that impaired Superior Nissan's sales but said the store had been on notice of the need to improve for two years.
The judge noted, for example, that "the demographics in Superior's primary market area are the worst in the metro Detroit Nissan market," with the lowest median household and per capita income. In addition, she said, Superior's market "is challenged because of the diverse cultures and languages" of residents in the primary market area and by the "special local marketing condition" stemming from the heavy presence of the Detroit 3, especially Ford Motor Co., whose world headquarters is in Dearborn.
Superior cited testimony that Nissan had failed to provide sufficient inventory of high-demand vehicles and claimed that Nissan was trying to force it to relocate. However, the judge said that the dealer and his staff hadn't participated in training seminars on the allocation system and that Nissan had distributed vehicles "in a fair and consistent manner" as the dealer agreement required.
She also noted that Superior had cut its annual Nissan advertising budget and displayed General Motors' ads more prominently. The judge listed other factors as well, such as untrained sales staff, poor customer service and turnover of sales managers. The store also had higher average gross profits per new vehicle than other metropolitan Detroit dealerships, indicating that customers paid more at Superior Nissan than they would have at other Detroit-area dealerships despite the fact that the buyers were economically less well off. Thus, Superior's pricing was also a determent to better sales performance. The judge also said she did not find evidence that Nissan was wrongfully trying to force store relocation.
"Nissan gave Superior a reasonable opportunity to carry out its obligations under the dealer agreement," the judge said.
Dealer lawyer Kaplansky differs. "The judge got it wrong," he said. "We disagree with the judge's findings and feel our proofs are strong."
A Nissan spokesman said he couldn't comment on the case.
Where it stands: Federal judge says no, finding enough evidence of poor performance to justify termination. An appeal is likely, the store's lawyer says.
You can reach Eric Freedman at freedma5@msu.edu.
