DaimlerChrysler Financial Services was justified in terminating floorplanning for three suburban New York dealerships, a federal judge in Manhattan ruled.
As a result, U.S. District Judge Colleen McMahon dismissed a suit by Lazar's Auto Sales Inc., Lazar's Motor Car Corp. and Jimmy Lazar's GMC Truck Center Inc. against DaimlerChrysler Financial and DaimlerChrysler Corp. under state dealer, franchise and vehicle laws. She also found no basis for their breach-of-contract or other claims.
DaimlerChrysler had asserted the case illustrates it is crucial for vehicle financing companies to be able to exercise their contractual rights when dealerships fail to live up to their obligations.
Lazar's Auto Sales Inc., a Jeep dealership, and the GMC truck dealership are in Peekskill; Lazar's Motor Car Corp. is a BMW dealership in Highland Falls.
The president of the three Westchester County dealerships, Charles Cartalemi, contended that Chrysler Financial Corp. and Chrysler Corp. pressured him to transfer his Jeep franchise to a competitor and responded to his refusal by unjustified floorplan audits, contract rejections, cutting off his financing and other retaliatory measures.
The dealerships are obtaining floorplanning elsewhere, according to their lawyer, John Ciulla of Mineola, N.Y.
Ciulla also said his clients are appealing to the 2nd U.S. Circuit Court of Appeals. 'We believe there are substantial issues of fact that the judge ignored,' he said.
In March 1999, McMahon denied the dealerships' request for a preliminary injunction, finding that Chrysler Financial had acted as a 'reasonable lender' to protect itself from 'questionable financial practices.'
NO BASIS FOR SUIT
The new decision reached the same conclusion and found no basis for the suit.
'Lazar's has not turned up any evidence to support its speculation that Chrysler used CFC to try to put it out of business so it could transfer the lucrative Jeep-Eagle franchise to its favored dealer as part of the implementation of Chrysler's Project 2000,' McMahon said.
And she found Chrysler Financial had legitimate business reasons for every action it took: 'When Cartalemi breached the security agreement by refusing to give Chrysler Financial access to the dealer's books and records, Chrysler Financial had a contractual right to refuse to extend credit. When Lazar's bounced checks, Chrysler Financial had a contractual right to step up its bank audits of the dealer's finances. When Chrysler Financial received contracts that failed to comply with the truth-in-lending laws, it had the right to bounce the contracts until the errors were corrected. When a book audit showed Chrysler Financial was not being paid on a timely basis for the vast majority of cards sold by all three dealerships, Chrysler Financial had the conceded right to perform more frequent inventory audits.'
McMahon also said financing institutions don't violate their duty of good faith and fair dealing when they exercise a contractual right to terminate financing.