Pub. 1 2012-2013 Issue 2

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S S U M M E R 2 0 1 2 22 23 new jersey auto retailer W W W . N J C A R . O R G new jersey auto retailer EisnerAmper LLP Accountants & Advisors Independent Member of PKF International www.eisneramper.com Charles A. Diegel Partner, Automotive Dealerships Group charles.diegel@eisneramper.com 215.881.8800 GROW. WISELY. Auto dealerships today are looking to drive growth. How can you safely steer your business through the demands of a turbulent marketplace? How can you plan effectively for the future? And what assistance do you need today to reach your financial goals? To grow wisely, you need an advisor who really knows the automotive business...and knows you. Who can deliver tailored solutions that create opportunities, maximize efficiency and help your bottom line. EisnerAmper is that advisor. We roll up our sleeves to get to the bottom of your toughest challenges, so you get the advice and strategies you need to create sustainable growth. DEALER BEWARE BY ERIC L. CHASE, ESQ. 99 Wood Avenue South ▪ Woodbridge, NJ 07095 ▪ 732.549.5600 75 Livingston Avenue ▪ Roseland, NJ 07068 ▪ 973.535.1600 www.greenbaumlaw.com Automotive Dealership & Franchise Law Practice Group Transactions ▪ Business Counseling ▪ Litigation Alan E. Davis Hal W. Mandel Joseph M. Oriolo Marc J. Gross Eric H. Melzer Christopher J. Ledoux — Specialized Experience to Meet the Needs of Modern Dealerships — Sales & Purchases of Dealerships Facility Upgrade Disputes Financing Shareholder Agreements Business Succession Planning Management Transitions Distressed Dealerships Franchise Protests Franchise Terminations Compensation and ERISA Factory Relations Contract Negotiations Employment Law Tax and Estate Planning Real Estate and Land Use Environmental Compliance Regulatory Law Class Action Lawsuits DEALER BEWARE  continued on page 25 N ew Jersey auto dealers have long enjoyed expansive legal protections from many kinds of overreaches by their fran- chisors. With recent amendments to State law, the standards by which an automaker may seek to involuntarily terminate or not renew a dealer agreement are now even better crafted to as- sure that dealers’ franchises are not arbitrarily or unreasonably taken from them. Among other improvements in the law, when a dealer opposes the factory’s notice of termination or nonrenewal in a formal dispute, the burden of proof now lies squarely with the manufacturer, and there is an automatic stay during the proceedings. Nevertheless, despite the formidable reaches of a very strong statute, all dealers want to avoid any legal confrontation that leads to personal anxiety and great expense, including litigation. Since the effective date of comprehensive amendments to the New Jersey Franchise Practices Act in May 2011, many franchisors have deployed new or more refined tactics and initiatives that challenge dealers of most brands. The purpose of this short article is to com- ment on one prominent kind of ongoing abuse, and, perhaps, give dealers some encouragement in coping with or resisting practices that could jeopardize their busi- nesses. Here’s the scenario. Your factory rep arrives with an agreement in hand and says something like this: “Sign here, agree that you are deficient [in sales or facilities], and agree to correct these deficiencies.” Around the country, any number of auto brands ask dealers – supposedly “under- performing” dealers – to sign agreements confessing material deficiencies that amount to breaches of the dealer agreement. This tactic usually refers to either “deficient” sales performance or “deficient” facility space. Often, “deficient” CSI is also cited. Some of these proposed “agreements” commit the dealer to prospective above-average perfor- mance in sales and CSI. They frequently set dates for designing and building “compliant” facilities. Some would even obligate the dealer to acquire additional realty to come up to the factory’s “guide.” A besieged dealer may be tempted to sign such an insidious document – confessing breaches – because, at least for a time, the franchisor will leave you alone. Sometimes, the dealer is actively misled by the rep’s (verbal) comment that, without a signature, the dealer agreement will not be renewed. In New Jersey – and now in all other states – such a statement flatly contradicts ap- plicable franchise law which treats involuntary termination and non-renewal identically. In either case, the factory is obligated to issue written advance notice to show good cause for either termination or nonrenewal, and must follow rigorous procedural requirements, firmly set in the law.