LEGAL FILE

Would-be Mahindra dealers lose class-action bid

The Mahindra pickup: The U.S. franchise deal fell apart in 2010.
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A group of aspiring dealers who paid for the right to distribute Mahindra vehicles in the United States and didn't get refunds when the Indian company scrapped its U.S. sales plans won't be able to pursue collective relief.

U.S. District Judge Thomas Thrash Jr. in Atlanta ruled March 14 that a class-action suit is inappropriate because the plaintiffs' relationships with Mahindra & Mahindra Ltd. and its exclusive distributor, Global Vehicles U.S.A. Inc., "varied greatly."

Global Vehicles U.S.A. spent several years putting together a U.S. franchise to sell a compact diesel pickup truck built in India. But the deal fell apart in 2010. The company has ceased operations.

About 20 dealers had filed their own lawsuits before the ruling, and about 30 more have expressed interest in doing the same, said plaintiffs' lawyer Stuart Talley of Sacramento, Calif.

Letters have been sent to all prospective dealers explaining their options, Talley said. He predicted that 100 or more will sue separately in their own states.

In a statement, Mahindra called the decision "a significant achievement for Mahindra in defense of these claims" and said the company "remains convinced that the dealer claims brought against it in this and other suits have no merit."

A Mahindra spokeswoman said she couldn't discuss the status of other litigation.

According to Thrash's decision, Mahindra began marketing SUVs and light trucks for entry to the U.S. market in 2006 and collected about $32 million in appointment or franchise fees from about 340 dealers.

Prospective dealers paid varying amounts ranging up to $250,000, court papers show. The suit claims the Indian automaker promised to start vehicle delivery in 2009 but canceled its plans and terminated its dealer agreements in 2010.

The suit seeks restitution and damages on behalf of the would-be dealers. The plaintiffs sought class-action treatment for four claims, including violations of the Automobile Dealers Day in Court Act and Georgia franchise law.

In denying class-action status, Thrash found insufficient "commonality" among the dealers and said "individual determinations" are necessary to resolve claims.

"The 340 potential class members signed a myriad of additional documents ranging from letters of intent to informational memoranda to background authorizations," and not all signed dealer sales and service agreements, he said. "Additionally, potential class members in some states were unable to enter into agreements concerning Mahindra vehicles before Mahindra's vehicles were certified in the United States."

Thrash also cited differences in franchise fees and store-renovation costs that dealers incurred. In addition, he said, some dealers had a prior relationship with Global's predecessor for rights to sell Cross Lander vehicles manufactured by a Romanian company, another unsuccessful deal.

Thrash's ruling appears to make pursuing claims against Mahindra more difficult.

In court papers, the dealers argued that separate suits will be "cost-prohibitive" because "in almost every instance the cost of litigation and collection will far exceed the amount that any individual dealer could obtain. The time and expense of litigating this case in an international setting simply cannot be overstated."

Talley said the way to cover such high expenses is "getting lots of dealers" to sue. "If there are 50 to 100, it makes sense to fly to India and around the world to take depositions. The goal is to accumulate enough individual dealers to share the costs."

Lindsay Chappell contributed to this report.

You can reach Eric Freedman at freedma5@msu.edu.

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