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Auto Dealer Can Bring 'Bad Faith'
An appellate court recently ruled that an automobile dealership that could not file suit to enjoin an additional dealership under the statute's specific additional “add-point” statute could nevertheless file an administrative proceeding based on a “generic” statute that prohibits conduct by a manufacturer that is “capricious, in bad faith, or unconscionable.” See Parktown Imports, Inc. v. Audi of America, No. 2008 WL 2651175 (Mo. Ct. App. W.D. July 8, 2008). The Missouri Administrative Hearing Commission dismissed the dealer's application for review, but the court of appeals reversed the dismissal. The appellate decision (which is on further appeal) sets a precedent with potentially serious implications for automobile manufacturers and other franchisors or distributors because it allows actions to block network changes on a mere claim of “bad faith” even when there is no standing to bring suit under a specific provision governing network changes.
The protesting dealer, Parktown Imports, Inc. (one of two Audi dealerships in the St. Louis area), filed an application for review contesting Audi's decision to establish a new motor vehicle dealership within 10 miles of Parktown's dealership. The application alleged that Audi engaged in conduct that was capricious, in bad faith, or unconscionable and therefore violated '407.825(1) of the Missouri Revised Code. Parktown further claimed that in 2004, Audi had invited Parktown to submit an application to acquire a new stand-alone dealership west of St. Louis. Parktown responded that it did not want to relocate and that it did not think the market could support three Audi dealerships. Audi then sent a letter explaining that the third dealership location was not a final decision and that it would base its decision on the proposals received from area dealerships. Parktown also asserted that in May 2005 Audi suggested that if Parktown were to replace its current facility with a new stand-alone facility of Audi's design, the manufacturer would not establish the third dealership. At a subsequent meeting, Audi proposed that if Parktown were willing to buy Plaza Motors (the other St. Louis dealership), Audi would grant Parktown a right of first refusal to open a new sales point in the area west of St. Louis. Parktown did not accept the proposal and claimed that in the fall of 2005 Audi told Parktown that it was no longer pursuing a third dealership.
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