A Volkswagen dealer near Los Angeles is a step closer to halting construction of a franchised VW store less than nine miles away.
The California New Motor Vehicle Board, in a 4-0 decision on Dec. 13, ruled that Ontario, Calif., Volkswagen dealer Gary Sherman's protest of a proposed new dealership in Montclair, Calif., was valid.
The decision by the board overrides a previous decision by an administrative law judge that said Sherman's protest lacked merit.
"It's not very common to win these kinds of cases," said Mike Flanagan, Sherman's lawyer. "In the history of the statute, probably less than 10 percent of all dealers who file a protest in a case like this win it."
Sherman is using a California Motor Vehicle statute stating that when a manufacturer wants to put a dealership in within 10 miles of a dealership, the existing dealership has a right to protest.
In a highly publicized case this fall, the California Department of Motor Vehicles ordered Chrysler Group to sell a glitzy new company-owned store in Los Angeles, and the company agreed to a $955,000 fine, to settle a complaint the its store was competing unfairly with several other franchised dealerships within 10 miles.
Volkswagen, which has 45 days to appeal the ruling, declined to say if it would exercise that option. But Flanagan said VW has taken the first step in filing an appeal by requesting the New Motor Vehicle Board prepare a certified copy of the administrative record of the case.
"I was unhappy to get involved with this to begin with," Sherman said in a phone interview. "But it was a matter of fact. We didn't have a choice, in my opinion."
Volkswagen spokeswoman Jeannine Ginivan said in an e-mail: "Each of our dealerships is operated by an independent business person. As a matter of practice we do not comment on or provide information to the public regarding business dealings with our dealers."
Dating back to 2006
Volkswagen's interest in establishing a site in Montclair dates back to 2006, court documents say. But an issue of available real estate held up the matter until 2010.
In late August 2009, two officials with the company met with Sherman to discuss their interest in adding dealerships in the surrounding areas of Montclair, San Bernardino and Redlands, the document says.
Despite his attempts to assure officials there was no need for an additional site in Montclair, Sherman submitted an application as a "defense measure," the document states. Penske Automotive Group, the nation's second-largest dealership group, and Southern California-based Metro Autogroup also submitted applications.
If he won the bid, Sherman had hoped to place the new dealership on property he already owned in Montclair. But it was not the location Volkswagen wanted.
Metro Autogroup won the bid. It was not available for comment.
Volkswagen contended it was unaware of Sherman's concerns over the potential Montclair dealership until an e-mail dated May 24, 2010 -- after Sherman learned he had not been awarded the point in Montclair, the document says.
Less than two weeks after Volkswagen informed Sherman that it planned to establish the dealership in Montclair, Ontario Volkswagen filed a protest with the Motor Vehicle Board.
Volkswagen also has plans to establish dealerships in Victorville, to Ontario's northeast, and Redlands, to his dealership's east.
"Those three areas make up 50 percent of my business," Sherman said. "I'm not arguing about Victorville and Redlands, but if you add that on top of Montclair, it would be difficult to survive."