Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Mass.: Nissan denied summary judgment on statute of limitations defense against automobile dealer's lawsuit, (Sep 5, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Dealer had claimed that dealership locator on Nissan's website had misdirected customers living in dealer's designated geographical area to other dealers based upon improper coordination of zip codes.

The federal district court in Boston, Massachusetts has denied Nissan summary judgment in a case alleging violation of the Massachusetts car dealer bill of rights statute. Nissan had asserted the statute of limitation defense, but the court found that questions of fact remained as to whether the statute had been tolled. The court did, however, grant Nissan summary judgment on the dealer's injunctive relief request (W.N. Motors, Inc. v. Nissan North America, Inc., No. 1:21-cv-11266-ADB (D. Mass. Sept. 4, 2024)).

Background. The Japan-based Nissan Motor Corporation manufactures vehicles at facilities located in Japan, the United States, and Mexico; its activities in the United States, including sales, are overseen and coordinated by its wholly-owned subsidiary Nissan North America, Inc. (NNA).

W.N. Motors, Inc. d/b/a Coastal Nissan (Coastal) is a NNA franchisee based in Norwell, Massachusetts. NNA's franchise agreements with its franchisee dealers, including Coastal, require the dealers to proactively sell and service Nissan vehicles in the dealership's designated geographic area, known as the dealer's Primary Market Area (PMA). NNA designates its PMAs based upon to the U.S. Census Bureau's census tracts. There are many so-called "open points," census tracts not included in any Nissan franchisee dealer's PMA but which NNA desires to assign to a dealer's PMA; these "open points" can come into existence under various circumstances, including instances where NNA has yet to engage a replacement dealer for a discontinued franchisee dealership operation.

The metrics by which NNA evaluates its franchisee dealers' performances under their franchise agreements are based upon sales within the dealers' respective PMAs; the sales objectives are based upon average dealer performances within the state. NNA also has implemented various incentive programs based upon dealers' sales performances. These programs effectively place all Nissan franchisees within the state as competitors with one another, notwithstanding geographic territorial assignments.

Coastal found what it considered to be a disfavorable distortion in NNA's evaluation of Coastal's sales performances and consequential rewards under NNA's sales incentive programs. Specifically, Coastal had reason to believe that dealer sales in certain "open point" census tracts were included in the numerator of the dealer's market penetration calculation, while the denominator, total vehicle registrations per the Massachusetts Department of Transportation, excluded registrations in those census tracts; this artificially elevated Coastal's (and other Nissan dealers') sales penetration expectations.

Coastal made its objections known to NNA, but following NNA's audit that Coastal requested, NNA insisted that no adjustment of Coastal's PMA was warranted.

Coastal brought suit in Massachusetts state court in July 2021, alleging violations of the state's so-called "Dealers' Bill of Rights". The case was removed to federal court, after which two counts remained: (1) unfair practices by a motor vehicle franchisor and (2) to permanently enjoin NNA "from using improper 'stair-step' volume-based sales incentive programs... if such programs are derived from vehicle registration data drawn from a dealer’s unilaterally assigned PMA. NNA moved for summary judgment on those two remaining counts.

Statute of limitations. The court denied NNA's motion for summary judgment on Coastal's unfair motor vehicle franchisor practices claim. Here, NNA had contended that Coastal's claim was time-barred by the 4-year statute of limitations in the Massachusetts "Dealers' Bill of Rights". NNA contended that Coastal's cause of action here accrued in 2015, when NNA informed Coastal that it had no intention to change Coastal's PMA, and that even prior to that, Coastal should have known of NNA's methodologies behind its various incentive programs.

Coastal countered that the limitations period was tolled because it was not sufficiently informed of all the facts necessary to formulate its claim. Among other things, NNA had an internal slide deck presentation, not shared with Coastal (or any other franchisee dealers) regarding how NNA determined its dealers' sales penetration numbers.

Whether Coastal was sufficiently kept in ignorance was a question of fact which a reasonable jury might or might not find in Coastal's favor. Summary judgment was accordingly denied.

Injunctive relief. The court granted NNA's motion for summary judgment on Coastal's claim for injunctive relief. All of the harm allegedly incurred by Coastal from NNA's alleged actions could be remedied through monetary damages. The harm was not irreparable, so injunctive relief was not warranted.

The Case is No. 1:21-cv-11266-ADB.

Judge: Burroughs, A.

Attorneys: Sara Decatur Judge (ArentFox Schiff LLP) for W.N. Motors, Inc. d/b/a Coastal Nissan. Brandon L. Bigelow (Seyfarth Shaw, LLP) for Nissan North America, Inc.

Companies: W.N. Motors, Inc. d/b/a Coastal Nissan; Nissan North America, Inc.

Cases: FranchisingDistribution MassachusettsNews