Pub. 17 2018-2019 Issue 4

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 I S S U E N O . 1 , 2 0 1 9 12 new jersey auto retailer should see an attorney and plan for the next generation in wills, trusts and other appropriate legal devices. 15. The Continuing Vitality of State Franchise Laws This trend overlaps with at least a couple of other trends in this ranking. Nevertheless, this separate point about the significance of franchise laws to dealers cannot be overstated. Every dealer should actively support their state association and NADA in the furtherance of maintaining the ability of franchised dealers to withstand the overwhelming bargaining power of the automakers. 16. Involuntary Termination: Threats, Realities and Dealer Responses It is true that involuntary terminations are extremely rare. But the threats of termination are plentiful. The factories are not shy about the obvious coercion that comes with mentioning the possibility of termination in correspondence. Every deal- er needs to know their rights when they are faced with such a threat. Every state in America has substantial protection against coercion, intimidation, and threats of franchise termi- nation. Whenever a dealer receives a threat, whether actual or implied, they must respond promptly in writing, in a civil tone, and with facts and persuasion that make sense. 17. Buy-Sell Activity The dealership buy-sell marketplace is strong, and such transac- tions may exceed those of even a strong 2018. Blue sky values are up – especially values of highline makes such as Mercedes, BMW, Lexus and Audi. Values are at a premium, and will likely stay that way for the balance of 2019. At some point, of course, the inevitable cycle will land upon more difficult times, and many economists are predicting that such a downturn is likely to happen between now and the end of 2020. For poten- tial buyers, a downturn may be welcome, but trying to time the buy-sell market is a fool’s errand. 18. Rights of First Refusal (“ROFRs”) I have long advocated that factory Rights of First Refusal should be prohibited by state law. To date, only five states have such a prohibition. ROFRs clearly have a negative impact on potential buyers who fear expending time and resources, only to be frustrated by a factory exercise of the right. Statutes that allow recovery of actual costs do not compensate a potential buyer for the work and effort involved. An especially troubling development is factory attempts to “cherry pick” their partic- ular franchise out of a deal that includes multiple brands. The ROFR controversies will continue until and unless there are prohibitions enacted everywhere. 19. Alternate Dispute Resolution: Some Progress in Arbitration The main issue in the ADR field today is whether and how re- tail purchasers may be bound to arbitrate disputes with dealers and whether arbitration clauses may preclude mass or class ac- tions. Lately, the trend has been in favor of allowing well-craft- ed and fair arbitration language, and dealers must be up-to-date on what is permissible in their jurisdictions. Best practices dictate that consumers do not bear the cost of such proceedings. This issue is an enduring one, and dealers must stay current in legal developments if they choose to have arbitration agreements available in consumer transactions. 20. The Importance of Dealer Associations I advocate the ability of state associations to bring lawsuits on behalf of their memberships. This avenue enables dealers, as a collective body, to challenge perceived harmful initiatives by factories without the need to have specific dealers as plaintiffs in lawsuits, where they may fear reprisals by their franchisors. 21. Workforce Issues For dealers, compliance with regulations affecting employees is a paramount responsibility. Topics like wage and hour, over- time and on-the-job treatment are important in every business workplace. Dealers must stay current in their knowledge of what laws and case authorities demand. 22. Warranty Reimbursement Dealers need to make sure they are current on their rights to proper reimbursement for both warranty labor and parts sold in warranty work. Unfortunately, some auto franchisors still play games with their obligations in defiance of applicable law, and dealers should regularly assure proper and timely payments. 23. Natural Disasters, Terrorism and Unrest The horrific impact of catastrophic events during the past several years upon businesses in proximity to them is appar- ent to everyone. Hurricanes, tornadoes, earthquakes, floods, terroristic attacks and even rioting and looting have all caused billions of dollars in damage, not to mention the human dislo- cation and suffering. Today, it is incumbent on every car dealer to consider these possibilities and plan for them. Every dealer should have plans communicated to the workforce that would attempt to ease at least some of the burdens of what do to, where to go and how to cope. Dealers should investigate, and where possible, obtain insurance for business disruption and for losses occasioned by such events. It is especially important to careful- ly search for the kind of insurance that does not exclude these kinds of events. 24. Encroachment and Franchise Modification Most states now have detailed provisions in their dealer laws to allow for challenges by same line dealers against the establish- ment or relocation of a competitive same line dealer into the challenging dealers’ market area. In most such situations, the affected dealer is well-advised to quickly ascertain the potential impact, and to file an appropriate action if the establishment or relocation would predictably cause material injury. This is a situation where the dealer needs experienced counsel. 25. Factory Audits In most situations, audits by the factory of dealership records cannot be reasonably challenged. However, in a few kinds of cases, it sometimes appears that such actions are retaliatory or for purposes forbidden by statute (i.e. when the factory wants to review warranty payments outside a statutory timeline). For the most part, dealers are best advised to cooperate with factory audits, because, usually, resistance is not warranted, and it might invite more meticulous scrutiny during the audit. Eric L. Chase is an attorney and a member of Bressler, Amery & Ross, P.C. He devotes a significant part of his practice to the representation of franchised auto - motive dealers and he has been lead counsel in numerous landmark decisions. Eric can be reached at 973.514.1200 or, via email at echase@bressler.com. LEGAL TRENDS  continued from page 11