Judge: Mitsubishi within its rights to terminate N.Y. dealership

Mitsubishi Motors North America had sufficient grounds to terminate a New York City dealership after it pleaded guilty to committing "at least 7,939" consumer protection violations in the sale of used vehicles, a federal court has ruled.

U.S. Magistrate Judge James Wicks refused to nullify the termination of Brooklyn Mitsubishi's franchise, finding ample evidence the dealership violated its sales and service agreement. He cited provisions about impairment to Mitsubishi's reputation, submissions of false reports to customers, license suspensions and failure to maintain good customer relations.

In June 2022, the dealership signed a consent agreement with the New York City Department of Consumer and Worker Protection that included financial penalties and a one-week prohibition from acquiring and selling used vehicles, the Aug. 14 decision said. In addition, the settlement covered violations by Brooklyn Volkswagen, also owned by Charalambos Charalambous. The two dealerships paid more than $500,000 in civil fines and $304,902 in restitution for their consumer protection violations. 

The store failed to notify Mitsubishi of the civil action, and the manufacturer learned of the consent order from an Automotive News article, according to a court filing. After receiving the termination notice sent in July 2022, Brooklyn Mitsubishi sought to sell the dealership, but Mitsubishi didn't approve the asset purchase agreement.

"It is undisputed that the dealership engaged in deceptive practices," Wicks said.

Those included false advertising, falsely stating that vehicles needed repairs, failing to provide customers with legally required documents, misrepresenting warranty terms and concealing financing terms, court documents show.

The dealership argued that the sales and service agreement applied only to new-vehicle sales.

The judge disagreed, writing, "Nowhere in the agreement does it suggest that Brooklyn Mitsubishi does not have the same obligations to both used and new car customers. It would be absurd for Dealership to think it could defraud used car customers just because they are not covered in the agreement."

He held that Mitsubishi had acted in good faith and showed good cause to terminate the dealership.

A lawyer for Mitsubishi declined to discuss the case. The dealership and its lawyers did not respond to requests for comment.

Editor’s note: Brooklyn Mitsubishi’s affiliated Volkswagen store was partly responsible for paying the more than $500,000 in civil fines and $304,902 in restitution for their consumer protection violations. An earlier version of this story did not refer to the VW store as part of the fines and restitution.