Court: Wash. franchise law is for dealers only
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Washington state's franchise law doesn't cover prospective purchasers of dealerships, an appeals panel has ruled in a suit accusing Nissan North America Inc. of wrongfully refusing to approve a franchise transfer.
The law was intended to protect dealers, not would-be buyers, such as Tacoma Auto Mall Inc., the Washington Court of Appeals held.
Tacoma Auto Mall's lawyer, James Krueger of Tacoma, said the decision means a prospective buyer "has no remedy whatsoever" even if a manufacturer is "totally unreasonable" in rejecting a transfer and "even if it can establish the manufacturer has broken the franchise law."
Tacoma Auto Mall's petition for state Supreme Court review is pending, he said.
But a Nissan spokesman said: "It would be contrary to the interests of existing authorized dealers to allow prospective purchasers to decide whether to challenge a manufacturer's decision on a proposed transfer."
Tacoma Auto Mall is the former Tacoma Dodge Inc., a longtime Dodge dealership that lost its franchise after Chrysler's bankruptcy. In 2009 the store changed its name and negotiated to buy Puyallup Nissan Inc. in Puyallup, Wash. Puyallup's dealership agreement required Nissan's approval of any franchise transfer, a requirement acknowledged in the asset purchase agreement between Puyallup and Tacoma Auto Mall, the court said.
Nissan declined to approve Tacoma Auto Mall as a Nissan franchisee, citing Chrysler's termination of Tacoma Dodge's sales and service agreement and asserting that Tacoma Auto Mall didn't meet Nissan's standards to be an authorized dealer.
Puyallup didn't file an administrative protest or sue, and the store is still operating.
Tacoma Auto Mall sued under the franchise law, alleging that Nissan acted unreasonably because it was a qualified buyer with a demonstrated history as a profitable, successful Dodge dealership. The suit also included contract-related and tortuous interference with a business relationship claims.
A lower-court judge dismissed the franchise law claim and several other claims without trial.
The entire suit should be tossed out, the Court of Appeals held.
The goal of the franchise law was to "regulate the relationship between manufacturers and 'their dealers' to protect those dealers and benefit the car-buying public," Court of Appeals Judge Marywave Van Deren wrote for the unanimous three-member panel.
"Because the purpose and design of the Franchise Act is to protect selling dealers rather than prospective purchasers, TAM is not in the zone of interest and does not meet this requirement for standing under the act," Van Deren said.
The court said the franchise law isn't the exclusive remedy for would-be purchasers whose applications are denied, but it found no basis to let Tacoma Auto Mall's other claims go forward.
For example, it said there was no evidence that Nissan intended to assume a direct obligation to Tacoma Auto Mall, and the franchise agreement disavowed any benefit to third parties such as Tacoma Auto Mall.
Where it stands: Appeals court says no, ruling state's franchise law protects “selling dealers,” not would-be buyers. The store has asked the state Supreme Court for review, its lawyer says.
You can reach Eric Freedman at freedma5@msu.edu.
