A Washington state dealer convicted of environmental felonies can challenge Mazda Motor of America Inc.'s termination of his franchise, a federal judge has ruled.
Failure to file an on-time administrative protest to the termination does not prevent Wolfgang Roempke from litigating in court, U.S. District Judge Benjamin Settle said.
Roempke is the principal of Continental Cars Inc., which does business as Auburn Valley Mazda in Auburn, Wash. He pleaded guilty to conspiring to violate the Clean Air Act and defraud the government, making false statements, violating asbestos workplace and safety standards and failing to properly dispose of hazardous waste. The charges involved use of two dealership employees to demolish an empty asbestos-contaminated building he owned. In January, he was sentenced to 30 days in jail, a $50,000 fine and a $50,000 community service assessment.
Based on the conviction, Mazda issued a termination notice under a dealer agreement provision that allows such action if a conviction "results in a significant adverse effect either on dealer's business or on the reputation of dealer, Mazda or Mazda dealers generally."
Termination took effect March 18. Mazda spokesman Jeremy Barnes said Auburn Valley "is no longer a Mazda dealer and has ceased operations, including the purchase of vehicles from Mazda."
Dealer lawyer Brian King of Tacoma said his client is negotiating to keep his Kia franchise at the same site, but that no termination notices were sent for his Mitsubishi and Suzuki franchises.
After Roempke missed the deadline to protest before the state licensing department, an administrative law judge found good cause for Mazda's termination.
Continental Cars then sued Mazda, alleging breach of contract and violation of the state consumer protection law. Mazda asked Settle to dismiss the lawsuit based on the administrative law judge's ruling.
But Settle ruled the suit can go forward because Washington's dealer law isn't the only way to challenge a termination. He also said administrative law judges lack authority to decide whether a conviction seriously harms the business and reputation of a dealer, Mazda or "Mazda dealers generally."
King said the agreement "sets the bar higher" for termination than good cause and there's no evidence the conviction damaged the store or Mazda. Month-to-month sales in 2011 before the termination were higher than in 2010, he added.
Mazda's Barnes said, "This case remains an active litigation matter regarding the dealer's breach-of-contract claim, which we intend to vigorously defend."
