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Posted: June 5, 2015

Court of Appeals Accepts Certified Questions Regarding Interpretation of New York’s Franchised Motor Vehicle Dealer Act

On June 4, 2015, the Court of Appeals accepted two certified questions from the Second Circuit in Beck Chevrolet Co., Inc. v. General Motors LLC, concerning the interpretation of New York’s Franchised Motor Vehicle Dealer Act (the “Dealer Act”). In Beck Chevrolet, a Chevrolet dealer in Westchester County brought suit against GM alleging: (1) that a performance metric used by GM to determine whether the plaintiff would retain its dealership was “unreasonable, arbitrary or unfair” under the Dealer Act because it did not take account of “local brand popularity”; and (2) that changes to the plaintiff’s “area of primary responsibility” (which, among other things, impacted its expected sales) constituted a “modification” of its franchise agreement with GM, and could therefore be challenged as “unfair,” under the Dealer Act, despite the fact the franchise agreement reserved GM’s right to make such changes “in its sole discretion.”

The federal district court granted summary judgment to GM on both issues. On appeal, the Second Circuit noted the lack of New York case law interpreting the relevant provisions of the Dealer Act, and the “substantial impact” of the decision “not only on the relationship between [GM] and its franchisees, but also on other franchisor/franchisee relationships in New York State.” Accordingly, the court certified two questions to the New York Court of Appeals:

(2) Is a performance standard that requires “average” performance based on statewide sales data in order for an automobile dealer to retain its dealership “unreasonable, arbitrary, or unfair” under New York Vehicle & Traffic Law section 463(2)(gg) because it does not account for local variations beyond adjusting for the local popularity of general vehicle types?

(2) Does a change to a franchisee’s Area of Primary Responsibility or AGSSA constitute a prohibited “modificationʺ to the franchise under section 463(2)(ff), even though the standard terms of the Dealer Agreement reserve the franchisor’s right to alter the Area of Primary Responsibility or AGSSA in its sole discretion?

The Court of Appeals accepted the certified questions and ordered briefing and argument.

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