A Texas store has broken free from a contract requiring it to use National Credit Center Inc., known as NCC, as its exclusive credit reporting agency.
Clay Cooley Nissan in Dallas isn't bound by a service agreement that NCC signed with an unrelated dealership that had operated at the same location, a unanimous California Court of Appeal panel ruled June 13. A contract provision specified that disputes were to be litigated in California.
The decision overturned a $257,686 award against Clay Cooley Nissan, which is part of the Clay Cooley Auto Group, for lost profits, attorney fees and legal costs.
NCC buys credit reports in bulk from TransUnion, Equifax and Experian and resells them at a discount to its client dealerships.
According to court documents, the original 2007 service agreement was in the name of Fernandez GMC-Pontiac-Buick but was signed by a Clay Cooley F&I director about a week before Clay Cooley GMC acquired Fernandez GMC's assets. It included an "evergreen" provision automatically renewing the contract for additional three-year terms unless the store canceled at least 60 days before a term ended.
In 2010, Clay Cooley GMC closed and sold its remaining assets to a nearby Chevrolet dealership but kept the real estate. The dealer group then established a Nissan store at the same site.
The Nissan store purchased credit reporting services from NCC until 2013, when it started pulling credit reports directly from the three bureaus.
NCC then sued, claiming the services contract had automatically renewed for three more years because Clay Cooley Nissan hadn't canceled it in time.
After a nonjury trial, a San Diego County Superior Court judge awarded NCC $141,756 for lost profits, $105,866 for attorney fees and $10,064 for court costs.
In overturning the award, the court of appeal said although Clay Cooley Nissan had accepted benefits — namely credit reports — under the NCC contract, it wasn't bound by the contract because it hadn't signed it and hadn't assume legal liability under it.
In addition, the fact that Clay Cooley Nissan operated at the previous location of Fernandez GMC and Clay Cooley GMC doesn't lock it into the contract, the court said in an opinion written by Justice Cynthia Aaron. And even if Clay Cooley Nissan knew the terms of the original agreement as NCC contended, that knowledge isn't enough to hold it responsible under the contract, it said.
NCC attorney H. Douglas Galt of Los Angeles said his client hasn't decided whether to appeal.