A Ford-Sterling truck dealership in Broderick, Calif., can contest the termination of its franchise with Sterling Truck Corp. before the California New Motor Vehicle Board, the Ohio Court of Appeals has ruled.
Sterling's franchise agreement recognizes the availability of state dealer laws and thus empowers dealers to protest terminations rather than go through the contract's mandatory arbitration procedure, the court said in a unanimous decision.
Sterling spokeswoman Debi Nicholson said the company does not comment on lawsuits. Sterling is a subsidiary of Freightliner LLC.
In December 1999, Sterling sent a termination notice to Sacramento Valley Ford Truck Sales. The dealership's lawyer, Mark Wallach of Cleveland, said the letter alleged failure to meet sales objectives.
The dealership filed its protest with the board, which has authority to decide whether there is good cause to support termination.
Sterling of Willoughby, Ohio, then sued in Cuyahoga County Court of Common Pleas to enforce the arbitration provision. It argued that the mandatory arbitration language in the dealership's standard franchise agreement trumps the California law.
The dealership countered that although the franchise agreement included a mandatory arbitration provision, a clause provides that conflicting state laws take precedence.
The judge sided with the dealership without trial. So did the three-member appeals panel.
Sterling claims that potential franchisees were told that all disputes under their franchise agreements would be subject to binding arbitration. Even so, the court held, 'California law permitting an administrative protest for the termination of a franchise controls over the arbitration clause.'