Mitsubishi Motor Sales of America Inc. was justified in terminating a franchise because a Cincinnati dealer violated the company's 'separate and exclusive' policy, a federal appeals court has ruled.
The court said Joseph Imports Inc. failed to comply with an agreement to stop selling Oldsmobiles in the same store. The court rejected arguments that Mitsubishi violated state dealer law and breached its franchise contract with Ronald Joseph.
No further appeal is likely, said the dealership's lawyer, James Burke of Cincinnati.
Joseph Imports acquired a Mitsubishi franchise in 1989. In 1991, it added an Oldsmobile franchise in the same facility without Mitsubishi's permission. When Mitsubishi notified Joseph of its intention to terminate the franchise, Joseph petitioned the Ohio Motor Vehicle Dealers Board, challenging Mitsubishi's right to sever the contract and asserting that the company's 'separate and exclusive' policy could not be enforced because it was not written into the franchise agreement.
After negotiations, the two sides settled their dispute in 1993 with Joseph's commitment to stop selling Oldsmobiles at the same store by Aug. 1, 1995, unless Mitsubishi changed its anti-dualing policy before that date.
When Joseph missed the deadline, Mitsubishi terminated the franchise.
'We thought he would take care of it, but he didn't,' said Mitsubishi attorney Elizabeth McNellie of Columbus.
The termination was based solely on a violation of the 'separate and exclusive' policy, she said, and there were no allegations of service, sales or capital deficiencies.
Joseph unsuccessfully sued for an injunction and more than $1 million damages, she said.
The 6th U.S. Circuit Court of Appeals ruled in favor of the manufacturer and rejected the argument that other dealers had received better treatment in such situations.
The court unanimously noted that Joseph failed to exercise the option of opening a so-called common-wall facility that would allow it to sell both lines if a separating wall was built. Mitsubishi had selectively allowed qualifying dealerships to convert to common-wall facilities since 1982, it said.
'Mitsubishi properly terminated its franchise relationship with Joseph in accordance with the settlement agreement after Joseph failed to eliminate the Oldsmobile line, even though there had been no change in Mitsubishi's policy,' Appeals Judge Eric Clay said.
'The franchise agreement obligated Joseph to operate its dealership as a Mitsubishi-only facility, even though the words 'separate and exclusive' do not appear in the agreement,' the court added. 'From the inception of its relationship, Joseph knew its dealership was to be operated as a Mitsubishi-only facility.'
Burke, the dealership attorney, said the decision conflicted with 'clear evidence that there had been a change in the Mitsubishi policy in the post-1993 time frame,' including testimony by a former Mitsubishi district manager and a former facilities consultant for the company.