WASHINGTON - Car dealers, self-styled Davids who grapple with Goliath carmakers, have used political cunning like a slingshot to enact franchise laws in 49 states but say they also need some federal muscle on their side.
The National Automobile Dealers Association again is seeking a federal law that would ban mandatory binding arbitration clauses from franchise agreements. It would still allow a dealer and a carmaker to agree voluntarily to use arbitration to settle a dispute.
NADA officials, who unsuccessfully sought similar legislation in four prior congressional sessions, say the issue is becoming urgent because they believe more manufacturers want the clauses in agreements to help them terminate dealers.
As a result of the national proliferation of all kinds of lawsuits, mandatory arbitration appears in more business contracts, from consumer credit to investment counseling to other kinds of franchising.
NADA, however, seeks a narrow bill that deals only with car dealers and automakers. NADA's chief lobbyist, Tom Greene, said a broader bill would attract more foes as well as allies.
The legislation has been introduced in the House by Rep. Mary Bono, R-Calif., and in the Senate by Sen. Charles Grassley, R-Iowa.
NADA does not have a guarantee that the bill will fare any better this time, and the Clinton administration has not weighed in yet. But NADA lobbyists say they sense heightened interest, especially when lawmakers hear the clauses can be attached at any time to existing agreements.
'The members' mouths fall open,' said lobbyist Ivette Rivera.
TAKE IT OR LEAVE IT
NADA officials say mandatory arbitration clauses added to take-it-or-leave-it franchise agreements undermine the protection their members gained with those state franchise laws over the past several decades.
They also fear that manufacturers bent on eliminating dealerships view mandatory binding arbitration as a tool to limit the legal options of a dealer facing termination.
'When you lose your franchise, you're just out of business,' said Jim Willingham, NADA's 1999 chairman.
While concern about manufacturers cutting dealers is the main reason NADA is pushing the issue to the front burner in Washington, having a chairman with personal experience in arbitration also is a factor.
In a story he tells wherever and whenever he can, Willingham said he learned in 1995 that Ferrari of North America wanted to terminate his Ferrari franchise in Monterey, Calif.
Yes, he said, sales had fallen sharply - the federal luxury tax had discouraged buyers, and the closing of the Fort Ord military base had battered the local economy - but Willingham did not think the buyout offer was fair. He took his case to the California Motor Vehicle Board, which overturned the termination.
Ferrari, insisting the arbitration clause in its franchise agreement took precedence, filed suit in federal court in New York and won an order that the dispute be arbitrated.
At that point, Willingham said, he settled rather than prolong the fight, but he is now leading the charge for a federal law. He still has franchises with Buick, Pontiac-GMC, Jaguar, Rolls-Royce, Infiniti, Saab and Audi.
Besides Ferrari, NADA says mandatory binding arbitration clauses are used by American Suzuki Motor Corp., Saturn Corp. and most commercial-truck builders, and it believes other automakers are interested.
Jill Lajdziak, Saturn's vice president of sales, service and marketing, said she was not aware of the proposed legislation but believes mediation and arbitration work well for her company and its dealers.
She said the company's two-step dispute resolution system - using mediation first, then binding arbitration if necessary - was developed with dealers and should continue.
'We have a desire to solve our problems within the family. That is first and foremost,' Lajdziak said. Staying out of court also avoids costs and prevents delays in settling differences, she added.
SAVES TIME, MONEY
NADA officials agree that binding arbitration can be a time- and money-saving way to resolve a dispute, but they say both sides should agree to arbitration when a dispute arises, not be forced to make a blanket commitment in advance.
'You sign it, or you don't get the sign or the building or the cars,' Willingham said of the nonnegotiable terms of franchise agreements.
Without mandatory binding arbitration, disputes would go to an administrative panel, such as the California board, or to the state courts.
In arbitration, a dealer has limited ability to force a manufacturer to disclose company information. The dealer may be judged by an arbitrator with no expertise in the automotive field and may not receive an opinion explaining its rationale. And the dealer's right to further appeal is limited to incidents of fraud or collusion, NADA officials said.
Dealer groups in some states succeeded in revising their state laws to prohibit mandatory arbitration in franchise agreements, but federal courts, relying heavily on a 1984 U.S. Supreme Court ruling, have said that federal law controls arbitration.
Said James Moors, NADA's director of franchising and state law: 'We litigated, and we lost.'