A federal judge has decided a Connecticut dealer should lose his Subaru franchise because he moved his Subaru operation to a Chevrolet store. The dealer lost the termination case despite a Connecticut law protecting dualed franchises.
Richard Jaffe, owner of Richard Subaru in Cheshire, Conn., would not discuss the case, including prospects for appealing the decision.
In Richard Subaru Inc. vs. Subaru of New England, the U.S. District Court at New Haven, Conn., ruled that Subaru of New England was reasonable in revoking Jaffe's franchise.
Jaffe had asked permission from the distributor in 1990 to move his Subaru operation to a Chevrolet dealership, and he was turned down. For several months, Subaru of New England negotiated with Jaffe, offering financial help and suggestions about how to keep the Subaru store afloat, according to documents filed with the court.
Jaffe received Chevrolet's permission to dual with Subaru in early 1991, and in April he dualed Subaru with Chevrolet without the distributor's consent, court documents say.
Bob Mahoney, attorney for Subaru of New England, says he won the case because he had the data to support it, and because the distributor negotiated with the dealer.
The laws that protect dualed franchises often say factories can't require single-line representation. 'If you negotiate in good faith, you are not requiring a dealer to have a single-franchise dealership,' Mahoney reasons.
Subaru of New England has had documented success with single-line dealerships. Its dealers had the worst profits and volume among Subaru's 13 distributorships in the early 1970s, when most carried makes besides Subaru. But Subaru of New England jumped to No. 1 in the late 1970s, when most of its dealers operated Subaru-only stores, Mahoney says.
He believes the case could help other manufacturers or distributors pull the plug on dealers who open dual franchise operations.
Many manufacturers are promoting exclusive franchise outlets to give their brands maximum exposure. But they face growing opposition from dealers who lobby for protection from the states.
Sixteen states have some form of protection for multiline dealerships, according to the National Automobile Dealers Association.
Dealer attorneys question Mahoney's legal strategy, saying it would not work in every state.
Dan Myers, a Tallahassee, Fla., dealer attorney, recently defeated an automaker's attempt to yank its franchise from a multiline dealer in West Virginia. 'The statute specifically says you can't terminate a dealer for dualing,' says Myers.
And some say the Jaffe case was an easy victory because the dual was a clear breach of contract. 'A dealer who adds a franchise without getting a factory's permission when the dealer agreement prohibits doing so runs the risk of losing his franchise,' says Jim Moors, a NADA attorney. He says most dealer agreements outlaw dual franchises without factory consent.