A federal judge in Detroit has ordered a trial to determine whether American Suzuki Motor Corp. acted in good faith when it terminated a Michigan dealership's franchise in December 2010.
The decision by U.S. District Judge Sean Cox provides an opportunity for Stephen Michaels LLC, which does business as Consumers Suzuki in Brighton, Mich., to prove that the termination of its 2005 dealer agreement violated the state's dealer law.
But the judge threw out Consumers Suzuki's $6.9 million demand for damages, saying the company failed to provide evidence to support its alleged economic loss. Dealership lawyer Peter Albertins of Troy, Mich., said that ruling will be appealed.
Suzuki spokesman Jeff Holland said the company and its lawyers were not willing to comment on the case.
Court papers show that after repeated requests to bring the dealership into compliance with its agreement, Suzuki issued a 90-day termination notice.
Specifically, Suzuki said the dealership failed to employ at least two Suzuki-trained technicians; to submit mandatory monthly financial reports for a year; and to buy required tools.
Suzuki also said the dealership had no new-vehicle inventory and sold only one new vehicle in 2010.
In response to the store's lawsuit, Suzuki asserted that Consumers Suzuki wrongfully refused to give up the brand after the termination took effect and filed counterclaims for breach of contract.
A trial also would address Suzuki's counterclaims.
The judge ruled that there are unresolved factual issues of whether Suzuki acted in good faith and had good cause for termination, including the fact that it knew for five years that Consumers Suzuki never had the required trained technicians.
He also cited evidence that Suzuki had never terminated a franchise for lack of trained technicians, although other dealerships also did not meet that requirement.
Dealership lawyer Albertins said Consumers Suzuki is operating while the litigation continues, although Suzuki doesn't allow the dealership to purchase new vehicles or parts and isn't reimbursing it for warranty work. As a result, it is doing nonwarranty service.
"My client is hoping to get the contract back in place," Albertins said, both to sell vehicles and to handle warranty work from Suzuki dealerships that have closed.