Mass. dealership lawsuit against Nissan can proceed, federal judge rules

A Massachusetts dealership can pursue claims that Nissan North America's sales performance metrics and use of volume-based sales incentive programs were arbitrary and unfair, a federal judge ruled.

The decision by U.S. District Judge Allison Burroughs allows Coastal Nissan, in Norwell, to proceed on allegations the automaker violated the state's dealer law.

However, Burroughs dismissed the store's fraudulent concealment claim and request for a permanent injunction.

For almost a decade, Coastal had been wrangling with Nissan over its primary market area, including the methodology used to assign those, the decision said.

For example, Coastal complained in 2015 it wasn't listed as the primary dealership on Nissan's website for some zip codes in its primary market area. It quotes a 2016 letter to Nissan asserting that "surrounding dealers are being provided enhanced and preferred marketing support in the form of increased visibility on your website's dealer locator. Coastal Nissan is expected to somehow capture the sales for the very prospects you are directing to our competing dealers."

In a follow-up letter in 2018, Coastal complained that failure to assign it a "proper" primary market area "negatively impacted the dealership's ability to achieve 100% [State Sales Effectiveness Represented]." The letter said that formula didn't consider local market conditions and other demographic factors.

Nissan declined to modify Coastal's primary market area after a 2018 audit but did so in 2022 by adding and removing census tracts.

The suit also challenged performance metrics used in three former incentive programs: Nissan 10 Sales Growth Program, Nissan Sales Rewards and the Dealer Volume Bonus Program.

Nissan declined to comment because the case is pending, said Kyle Bazemore, corporate communications director.

The suit contends that Nissan's metrics gave an unfair advantage to stores abutting open market areas while artificially inflating the number of sales other dealerships had to meet, said dealership lawyer Sara Judge of Boston.

"One-size-fits-all across the nation doesn't work," and automakers should look at how local market conditions affect their sales incentive programs, Judge told Automotive News.

Burroughs's Sept. 4 decision rejected Nissan's argument the case should be dismissed because Coastal waited too long to sue under the state's four-year statute of limitations. A jury might conclude Coastal couldn't have known the impact of the formula before the 2018 audit, she said.

At the same time, Burroughs found no evidence Nissan fraudulently concealed its formula from its dealerships or intended to deceive them.

In addition, she dismissed the dealership's request for a permanent injunction because "the purported harm resulting from [Nissan North America's] conduct" can be remedied with monetary damages if Coastal prevails at trial.

The dealership has retained an expert to testify about the economic impact of the incentive programs, Judge said, adding, "There's money in play here. There were lost profits as a result of those unfair acts and deceptions."

She said the next steps in the case are scheduling pretrial proceedings and the trial.