Court: Honda dealer lacked basis to protest new point
When American Honda Motor Co. proposed adding a point in Cumming, Ga., in 2010, an existing dealership challenged the franchise award under the anti-encroachment provision of the state's Franchise Practices Act.
The act defines relevant market area as the area located within an eight-mile radius of an existing dealership.
The protesting store, WMW Inc.'s Honda Carland in Roswell, Ga., argued that since the new point was within eight miles of its service-only operation in Alpharetta, Ga., the new point infringed on its relevant market area.
But the Georgia Supreme Court ruled that that wasn't a good-enough basis for a protest. A relevant market area is calculated solely from a location where new vehicles are sold, the court held, affirming decisions by two lower courts.
Honda lawyer Steven McKelvey Jr. of Columbia, S.C., said: "The ruling was in Honda's favor at all three levels."
WMW had sued Honda and the proposed new dealership, Sobh Automotive of Cumming Inc., to block the designation, alleging a violation of the franchise act. The new point would "undermine its multi-million dollar investment" in the service center, WMW asserted, arguing that the purpose of the law is to "protect WMW where it conducts its dealership business."
A lower-court judge and the Court of Appeals rejected the suit, saying WMW lacks legal standing to bring the case.
The Supreme Court unanimously agreed.
"A car-selling dealer's relevant market area does not extend to other locations where the dealership performs repairs or engages in other corporate activities because those activities are not what makes a car-selling dealer a dealership under the franchise act," Justice David Nahmias wrote in the court's opinion.
"The phrase 'relevant market area' cannot fairly be read to protect locations where a dealer markets nothing," including corporate headquarters and service-only facilities, Nahmias said.
After the appeal was argued but while it was under consideration by the Georgia Supreme Court, Honda announced that it no longer intended to appoint a new dealer at the proposed location but didn't rule out the possibility of doing so in the future.
The Georgia Automobile Dealers Association filed a friend-of-the-court brief supporting WMW's position.
Association President Bill Morie said he is unaware of any similar situations arising in the state and said the association is reviewing the ruling.
"We are taking a look and deciding whether there should be a next step and, if so, what it should be," Morie said.
The dealership's lawyer did not return requests for comment.
You can reach Eric Freedman at email@example.com.