A federal court has ruled that Reynolds and Reynolds Co. cant force auto dealers to buy new computer servers to run upgraded Reynolds software.
The ruling upholds the decision of an arbitration panel that dealers can only be required to have a server capable of handling the new software. The panel said dealers could modify, without necessarily replacing, their servers -- and added that the new software should have worked on the old servers but did not.
The Dec. 22 ruling by the U.S. District Court in Houston upholds the arbitration panels award of nearly $300,000 to a Connecticut Ford dealership, according to court documents.
Reynolds, of Dayton, Ohio, had no comment on the court ruling.
Reynolds is one of the two largest suppliers of dealership management systems in the United States.
The court ruling strengthens the position of about 70 dealerships involved in a class-action lawsuit against Reynolds, says Dallas lawyer Richard Faulkner. Those dealers dont want to buy a new $100,000 computer system from Reynolds to run the latest version of the suppliers software.
In March, an arbitration panel awarded Hammonasset Ford-Lincoln-Mercury Inc., of Madison, Conn., $297,568 in damages and fees after concluding that Dealer Computer Services Inc. breached its contract with the dealership by requiring it to buy a new computer system to run upgraded software. Dealer Computer Services is a wholly owned unit of Reynolds.
In June, Dealer Computer Services sued in U.S. District Court in Houston to toss out the Hammonasset award.
The federal court ruled that the arbitration panel reasonably interpreted the contract and that the award is well within the panels authority, according to court documents.
Reynolds requires its dealership customers to resolve disputes through nonbinding arbitration. The company chose to go to court after the arbitration panel ruled against the Reynolds unit.
Hammonasset contended that Dealer Computer Services breached its contract by demanding that the dealership replace its Reynolds 7000 MP computer system with a 9000 MPX2 system at a cost of $100,000, in exchange for continued service and maintenance.