The Florida Supreme Court has ruled that manufacturers can block the sale of corporately owned dealerships for business reasons if the transaction also involves a change in executive management. In doing so, it rejected the argument that state law allows manufacturers to protest the transfer of the full equity in a corporate dealership only on the basis of poor moral character.
The dispute dates from 1994, when Wilson Davis Sr. and Wade Bodiford notified Ford Motor Co. of plans to sell all their interest in Wilson Davis Ford Inc. of Plant City to Dwayne Hawkins and Millard Ripley. At the time, Davis was the 80 percent stockholder and president while Bodiford was a 20 percent shareholder and general manager.
Davis and Bodiford also notified Ford that Hawkins would acquire an 80 percent interest and become chairman, while Ripley would buy 20 percent and be designated as the new dealer-operator.
FORD BLOCKS TRANSACTION
According to the Florida Supreme Court, Ford concluded that the transaction was unacceptable and filed a complaint with the state Department of Highway Safety and Motor Vehicles to block it. Ford based its protest on alleged deficiencies in the buyers' financial qualifications and in performance deficiencies at a Lincoln-Mercury dealership in which Hawkins had an ownership interest.
Ford didn't question Hawkins' or Ripley's moral character.
The sale fell through after Ford filed its complaint. With Ford's approval, Bodiford and two other investors later acquired all the stock in the dealership, which now operates as Jarrett-Bodiford Ford. Inc.
Hawkins and Ripley sued Ford in U.S. District Court in Tampa, Fla., contending the state dealer law allows manufacturers to object to a 100 percent stock transfer only if the purchasers lack good moral character. They sought triple damages based on alleged lost profits of up to $9 million.
The new dealers were not part of the lawsuit.
A federal judge in Tampa sided with Ford, however, and dismissed the suit, ruling that manufacturers can consider business experience as well as character under a separate provision of the dealer law that governs changes in executive management. The judge also held that, based on the facts, Ford had a valid business reason to block the transfer.
FLA. COURT INTERPRETS LAW
Hawkins and Ripley took the case to the 11th U.S. Circuit Court of Appeals, which asked the Florida Supreme Court to interpret the state dealer law.
The South Florida Automobile and Truck Dealers Association and the Greater Tampa Bay Automobile Dealers Association filed a friend-of-the-court brief on the side of Hawkins and Ripley. 'The associations support free transfer of dealerships with as few obstacles as possible,' said their lawyer, James Adams of Boca Raton.
Ford litigation counsel William Zolbert said the ruling strengthens the role of manufacturers in reviewing proposed transfers of dealership stock because they are entitled to consider business qualifications in such situations.
A lawyer for Hawkins and Ripley, Walter Forehand of Tallahassee, said the decision 'paints a road map for how to do a stock deal if you have any notion that the manufacturer' might protest.
As for Hawkins and Ripley, Forehand said their case now returns to the federal appeals court, possibly for a new round of arguments and briefs to resolve any unanswered issues and to decide whether to reinstate their case against Ford.
Zolbert said the appeals court could uphold the dismissal of the suit or order a trial to decide whether Ford had a valid business reason to block the transfer.