Jaguar's refusal of dealer's move ruled OK
A Connecticut dealership group's attempt to sue Jaguar Land Rover North America for rejecting the group's store consolidation plans has failed.
A 2nd Circuit Court of Appeals panel in New York ruled unanimously that the dealer agreement gave the manufacturer wide discretion to review relocation requests. The court also rejected the notion that Jaguar Land Rover acted in bad faith in denying the request.
According to court filings, Miller Automobile Corp., which does business as Darien Automotive Group in Darien, Conn., spent more than $3 million to expand its Jaguar dealership in the 1980s at the insistence of what was then Jaguar Cars. In the early 2000s the group spent another $1.78 million to expand further at the insistence of Ford Motor Co.
After each expansion, new-vehicle sales fell far short of the manufacturer's projections.
In 2009 Jaguar Land Rover North America denied Darien's request to locate Darien's Jaguar business at its Land Rover store 1.8 miles away. That denial, according to the breach-of-contract suit, left Darien "with a facility 15 to 20 times larger than what today's market will support."
Darien later gave up its Jaguar franchise. The group now sells Nissans at the store that once sold Jaguars and continues to operate its Land Rover store.
A lower-court judge dismissed the lawsuit.
In upholding that decision, the three-judge appeals panel said the dealer agreement allowed the manufacturer to exercise its "good faith business judgment" in determining whether a relocation is in the best interests of the dealership and Jaguar owners in the area.
Under the contract, the manufacturer can consider such factors as site adequacy, accessibility for current and potential Jaguar owners and the "type and quality of residential buildings and commercial enterprises" in the neighborhood. Another relevant factor is whether the parties could successfully negotiate a new performance agreement concerning renovations and alterations at the new facility, the court said.
The court said Darien failed to allege that Jaguar Land Rover acted with fraud, improper motive or misrepresentation in unreasonably requiring upgrades at the proposed consolidated store.
Carl Chiappa, a New York lawyer who represented Jaguar, said the court recognized that manufacturers can consider more than a proposed new location, including the facility itself and the interests of the brand, the entire dealer body, the individual dealer and customers. "When Jaguar evaluated the request, it had to evaluate the [Land Rover] facility and to be fair to other dealers who had made investments in their Jaguar franchises," he said.
Dealer lawyer Robert Byerts of Tallahassee, Fla., called the decision a "travesty" and said the court "rubber-stamped the manufacturer's decision" and misinterpreted the agreement by ignoring the dealer's best interests. But he said he expects no further appeal.
You can reach Eric Freedman at firstname.lastname@example.org.