New York's highest court ruled this week that General Motors violated state law by trying to cancel a Chevrolet franchise for subpar sales, a ruling legal experts say could force automakers to alter how they measure retailers' sales performance.
The legal victory by the owners of Beck Chevrolet in Yonkers, N.Y., centered on GM's use of a benchmark called the retail sales index, or RSI, its version of a commonly used metric that has become a flashpoint between dealers and automakers. Dealers believe the system is unfair because it measures them against a state average but fails to account for market nuances.
Beck co-owners Russell Geller and his father, Leon Geller, sued GM in 2011 over its use of RSI to assess the Gellers' fitness to retain the franchise.
The Gellers' suit argued that their dealership and others in the import-heavy New York City market were unfairly compared with stores in the Buffalo area, for example, where Chevy's market share is about four times greater, partly because of the presence of thousands of GM factory workers.
In last week's 5-1 ruling, the New York Court of Appeals agreed that GM's failure to weigh such local-market factors violated state law.
"It is the equivalent of holding a dealer in New York state to a standard based on the market of a foreign country ... without appropriate adjustments for local differences," the court's ruling said.
The Gellers' lawyer, Russell McRory of Arent Fox in New York, said the ruling "delves directly into the fundamental dispute that dealers and manufacturers have had for years" over measuring sales performance. He said GM's formula is similar to ones used across the industry.
Florida lawyer Richard Sox, who helped draft the portion of the New York dealer-protection law at issue in the Beck case, believes the case "is going to apply to all manufacturer sales-performance formulas in all states when it comes to attempts to terminate dealers."
A GM spokesman said the company is studying the ruling and declined to comment. GM could appeal to the U.S. Supreme Court, which legal experts say is unlikely.
The Beck case took a circuitous route to the New York Court of Appeals. It was sent there by the U.S. Court of Appeals for the 2nd Circuit, which had taken up the Gellers' appeal of a 2013 decision that sided with GM.
The 2nd Circuit asked the New York court for guidance on whether measuring dealer performance using a statewide average -- without taking into account local market variations -- was unfair under state law.
The 2nd Circuit is expected to adopt the New York court's view and side with Beck, lending extra weight to the ruling's legal precedent, legal observers say.
The ruling is vindication for the Gellers. Leon Geller, 89, joined Beck Chevrolet in 1964 and became its owner in the late 1970s. Russell Geller, 50, who has an economics degree from Tufts University, said his family and employees endured "countless uncertainties" during the yearslong legal battle.
"I'm glad that other dealers will be able to turn to our decision in hopes that they will not have to go through the same treatment," Russell Geller said.
"I fought this hard because I love Chevrolet and love being a Chevrolet dealer. No one, including GM, will ever be able to take that away from me."