Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—4thCir: Auto Dealership Not Entitled to Reasonable Rental Value Payments, (Nov 5, 2012)

By Jody Coultas, J.D.

Automobile dealership Elkins Subaru, Inc. was not entitled to reasonable rental value payments from Subaru of America, Inc., according to an unpublished opinion of the U.S. Court of Appeals in Richmond, Virginia (Elkins Subaru, Inc. v. Subaru of America, Inc., November 2, 2012, Per Curiam).

The dealership shared ownership and management with a General Motors dealership and the two dealerships operated out of the same facility and had shut down business operations. Elkins then sought reasonable rental value payments under West Virginia law concerning reasonable compensation to dealers.

Under West Virginia law, a distributor is not liable for any reasonable rental value payments if the dealership owns, manages, or establishes another make of new motor vehicles in the same dealership facilities and the dealership is terminated because the dealership lost its floor plan financing or failed to substantially comply with its dealership agreement with the distributor.

The court upheld a district court’s holding that Elkins Subaru breached the terms of the franchise agreement with Subaru of America and was therefore not entitled to any damages. The franchise agreement had been terminated by Subaru of America because the dealership breached the portion of the agreement requiring the dealership to maintain floor plan financing and conduct standard business operations during customary business hours. Because the dealership was a multi-line automobile dealership and breached the agreement, it was not entitled to any damages under the reasonable compensation for dealers law.

The case is No. 12-1454.

Daniel C. Cooper (Cooper Law Offices, PLLC) for Elkins Subaru, Inc. Christopher S. Dodrill (Thomas Combs & Spann, PLLC) for Subaru of America, Inc.

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