A small-town dealer has filed a lawsuit alleging that General Motors unfairly derailed an agreement to sell his dealership.
The complaint, filed Monday, Dec. 28, by dealer Albert Lewin, claims that GM scared away a potential buyer of Lewin Chevrolet-Geo Inc. in Cobleskill, N.Y.
GM told the prospective buyer that it questioned the dealership's potential to remain profitable.
The suit involves GM's Project 2000, which is designed to trim the number of dealerships and relocate dealerships to better sites. Under the plan, GM has told some small, rural dealers their stores are 'not viable' or are 'questionable.' GM shares that information with potential buyers if the dealerships are for sale.
GM is in a tight spot. While the company has been sued for sharing its evaluation of a dealership, GM also could face suits from potential buyers if it remains silent.
'We're damned if we do, and we're damned if we don't,' says GM franchise attorney Larry Buonomo. 'We believe that where we have done a study and made a determination that a dealership is questionable that we have to put those cards on the table.'
Buonomo said he had not seen the Lewin suit and could not comment on specifics. It was filed in the United States District Court for the Southern District of New York. The suit asks for at least $25 million in compensatory and punitive damages.
ASKING FOR TROUBLE?
Dealer attorneys say GM is asking for trouble when it comments on the viability of a dealership.
'This has a chilling effect on the value of the franchise,' says Dan Myers, a Tallahassee, Fla., dealer attorney who specializes in franchise law. 'This is probably the first of many suits to come.'
Lewin typically sold 30 new vehicles a month and stocked 100 new cars and trucks before GM told him his dealership was questionable in May 1996. After he got the notice, Lewin claims GM began to reduce his inventory. He now sells five to 10 new vehicles a month and has only 10 new vehicles in stock at his 10-acre dealership.
The Lewin lawsuit says GM violated the New York franchise law, which bars automakers from hindering the sale of a dealership to a credible buyer. Other states have similar laws, says Lewin's attorney, Leonard Bellavia of Mineola, N.Y.
When GM says a dealership is questionable 'this is like the kiss of death,' says Bellavia. 'No one wants to incur the time and expense of buying a dealership when the manufacturer would rather see the dealership go away.'
The complaint says Lewin became a Chevrolet dealer in 1990, operating a store in Naples, N.Y. In 1991, GM offered him a Chevrolet-Oldsmobile dealership in Cobleskill if he let GM close the Naples store.
Lewin claims GM promised to award him Buick and Pontiac franchises at the Cobleskill location and to give him full authority to select vehicle inventory. Instead, the suit says, he was placed on a 'turn-and-earn' ordering program, in which Lewin had to reach certain sales goals to expand his inventory allocations. GM also never granted Lewin the Buick and Pontiac franchises.
The complaint claims that although the dealership is profitable and has met sales objectives, GM has tried to force Lewin out of business by failing to give him the vehicles he ordered, suspending his wholesale credit line and preventing him from selling the dealership.
In May 1996 and February 1998, GM wrote Lewin that his store's 'future viability is questionable.' Lewin negotiated the sale of his business in June 1997, accepting a letter of intent for the $375,000 purchase of his dealership and a $18,750 deposit.
The deal collapsed when the buyer learned from GM the store's status under the Project 2000 plan, the complaint says. Lewin charges that GM violated state law by interfering with the sale and violated the federal Dealer Day in Court Act because it failed to act in good faith.
'GM should leave the business alone,' says Bellavia. 'I don't think they should volunteer this information. If a dealership has historically been making money, it is viable.'