GM loses bid to dismiss racial bias suit

General Motors has lost its bid to dismiss a suit accusing it of racial discrimination for refusing to let qualified white applicants acquire an available Chevrolet franchise in Georgia that instead went to a black dealer.

U.S. District Judge William Moore Jr. in Savannah found that the complaint by plaintiff Southern Motors Chevrolet Inc. pleads sufficient facts to plausibly suggest that GM intentionally discriminated against it because of the race of its owners.

Here's what happened, according to the March 31 decision.

Myron Kaminsky and his sons, Adam and Ross, negotiated a deal to buy Fuller Chevrolet in Rincon, Ga., from the seller in early 2014. The Kaminskys, who are white, already had Chrysler, Honda and Acura franchises in the Savannah area.

Rather than approve the transfer, GM exercised its right of first refusal and awarded the franchise to an African-American Toyota dealer, who also sold Lexus, Scion, Subaru, Ford and Nissan vehicles. That dealer now operates the Chevy store as Rincon Chevrolet Inc.

The company the Kaminskys created for its purchase deal, Southern Motors Chevrolet Inc., asked GM to reimburse its expenses in preparing for the proposed purchase. GM disputed the amount claimed.

Southern Motors sued for compensatory and punitive damages, alleging racial discrimination under federal civil rights laws and violation of the Georgia dealer franchise law.

The judge rejected GM's bid to dismiss the case. He cited, from the suit, public statements made in 2013 by then GM North America President Mark Reuss and Eric Peterson, vice president of diversity dealer relations, about the automaker's diversity outreach efforts. For example, the executives spoke of a goal to add 25 minority-owned dealerships in 2013 and another 25 in 2014.

Peterson further indicated to the media that GM's exercise of its right of first refusal can open the door for a minority buyer.

The suit contends GM's effort came in response to criticism by Jesse Jackson and Rainbow PUSH Coalition about the automaker's small number of minority dealers.

In his decision, the judge found the allegations sufficient "to at least plausibly suggest a discriminatory motive on GM's behalf."

"The purchase was rejected using a mechanism GM had previously suggested could aid in obtaining minority owners," he said. "In addition, Southern Motors has alleged facts to demonstrate that it is a well-qualified purchaser and GM has offered no reason why the contract was denied."

While GM has an undisputed legal right to exercise its right of first refusal, it can't do so arbitrarily, the judge said.

Further, Georgia dealer law requires franchisors exercising their right of first refusal to reimburse reasonable expenses of the would-be purchaser that is passed over. The judge said it will be up to a jury to decide which of Southern Motors' expenses were reasonable.

A GM spokeswoman said the company can't comment because the matter is "still in active litigation."

However, in court papers GM denied the claim that discrimination was "the only reason" it chose a black dealer. That allegation, it said, "ignores the host of alternate explanations for GM decisions, including the most obvious: the candidate chosen is a very successful owner/operator of dealerships for several automobile manufacturers."

"Indeed," GM argued, "if a diversity policy were equal to per se discrimination, most large companies in the United States and even the federal judiciary -- all of which have diversity policies -- would be exposed to liability."

Plaintiff's attorney William Hunter of Savannah said he can't discuss the case.