An appeals court in San Diego has ruled that California's New Motor Vehicle Board has no authority to decide a dispute that pits creditors and former owners of a failed dealership against General Motors, General Motors Acceptance Corp. and the dealer who acquired the franchise.
The controversy, which includes allegations of fraud and breach of contract, must be decided in court rather than by the administrative board, the California Court of Appeal said.
The multimillion-dollar suit stems from the demise of South Bay Chevrolet Inc. in Chula Vista. The suit alleges GM and GMAC wrongfully caused South Bay to fail, forcing the owners to sell the dealership to Michael Farguson.
According to the complaint, South Bay was consistently one of San Diego County's top three Chevrolet dealerships until GM and GMAC pressured it to relocate to a more expensive location in a new auto park in 1994.
South Bay's creditors, including former owners David Ordway and Travis Reneau, say GMAC and GM used such tactics as changing the dealership's flooring and security agreements, canceling its traditional six-to-eight-day float, scrapping dealership trades, diverting popular new vehicles and failing to disclose the risks of the relocation.
GM, GMAC WILL FIGHT
The owners claimed that they were pressured to sell the dealership to avoid bankruptcy and that GM and GMAC unreasonably withheld approval of their chosen prospective buyers.
GM and GMAC will contest the claims, according to Joe Lines, an in-house attorney for GM. 'The allegations are bogus. This is a litigious dealership,' he said.
The South Bay owners ultimately sold to Farguson, who received a rent reduction, floats on money due to GM and GMAC, more 'hot' vehicles and the ability to buy parts on credit, the suit alleged.
'They were in dire financial straits,' said their lawyer, James Warner of San Diego. He said Farguson Chevrolet Inc. later moved out of the auto park.
San Diego Superior Court Judge Peter Riddle dismissed the case, ruling that the New Motor Vehicle Board has jurisdiction over such disputes.
But the Court of Appeal reversed that decision and ordered the case to proceed in Superior Court. It held that the board lacks jurisdiction.
'NOT EXCLUSIVE ARBITER'
'The legislature never intended the board to be the exclusive arbiter of all disputes between new motor vehicle dealers and manufacturers,' the three-judge panel said.
The suit was filed before a Jan. 1, 1998, change in the law that clarified the limits of the board's authority.
Lines, the GM lawyer, called the decision disappointing but not surprising in light of the legislative change and other appellate decisions restricting the board's jurisdiction.
'We'll go back to civil court for a trial,' he said.
David Radovich of San Diego, a lawyer for Farguson and Farguson Chevrolet, declined to discuss the allegations. He said his clients have not decided on their next step.