Independent distributor Subaru Distributors Corp. won a $2.9 million judgment against Subaru of America Inc., the U.S. sales and marketing arm.
Chief among the distributor's complaints was that Subaru of America in Cherry Hill, N.J., implemented a new policy in June 1999 that forced the distributor to pay for cars imported from Japan before they were delivered to the distributor's port facility in Boston. The lawsuit did not include cars built at Subaru-Isuzu Automotive Inc., a joint venture in Lafayette, Ind.
In a March 18 ruling, U.S. District Judge Colleen McMahon sided with the Orangeburg, N.Y., distributor, calling Subaru's early payment policy "commercially unreasonable." The policy accounted for the most expensive part of the judgment against Subaru of America - about $2 million.
The distributor had filed a lawsuit in August 1998 in U.S. District Court in White Plains, N.Y., over aspects of its distribution contract. Among other issues, the distributor asked for a preliminary injunction that would prevent Subaru of America from terminating its agreement with the company, even though Subaru of America had made no such threat.
The court turned down that request in April 1999 and recommended that the parties negotiate a new contract. The two sides kept wrangling instead. The case continued, with a new set of complaints added to the original ones.
After the April 1999 ruling, Subaru of America changed its requirements for the distributor to order cars. Those changes took effect in June 1999.
Under the new system, to exceed its annual quota Subaru Distributors had to submit its order five months before delivery and post a letter of credit covering the order at the same time. Before the changes, the distributor submitted orders three months ahead and did not have to pay until the factory confirmed it could fill the order.
Subaru Distributors argued the 1999 changes deprived the company of profits on extra cars that it would have ordered but did not because it would have needed additional financing.
The missed-profit aspect of the case accounted for about $1.7 million, corresponding to the missed profit on about 2,100 cars. With interest, that amounted to about $2 million.
In a sharply worded opinion, the judge ruled that aspects of Subaru's conduct in the case amounted to what she called bad faith, a lack of candor and an effort by Subaru of America to deal unfairly with Subaru Distributors Corp. The judge said the factory still can require the five-month lead time, but it cannot take payment before delivery.
Subaru Distributors refused to comment on the ruling. In a written statement, Subaru of America, which has paid the judgment, said: "Both parties are pleased with the court's decision. We're happy to get it behind us, and we're looking forward to the future together."