Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mass. Sup. Jud. Ct.: Chrysler had no duty to defend dealership under Massachusetts motor vehicle dealer law, (Jun 13, 2014)

By Greg Hammond, J.D.

Chrysler Group LLC did not have a duty to defend a motor vehicle dealer against claims of misrepresentation and failure to repair a vehicle under the Massachusetts motor vehicle dealer law, the Massachusetts Supreme Judicial Court decided. In affirming the appellate court’s dismissal of the dealership’s cross claims, the state high court determined that neither a manufacturer nor a dealership are liable for the other’s defense, under the Massachusetts statute, if the underlying action involved a consumer’s allegations that both companies were at fault (Ferreira v Chrysler Group LLC, June 11, 2014, Gants, R.).

Background. Matthew Ferreira purchased a new Jeep Wrangler from Somerset Auto Group in 2007. The vehicle was manufactured by a predecessor of Chrysler and was subject to Chrysler’s limited warranty. However, Ferreira’s attorney sent a demand letter to Somerset and Chrysler, stating that the vehicle was repaired six or more times and was out of service for 42 days. He further alleged that Chrysler’s and Somerset’s inability to fix the Jeep constituted breach of warranty and unfair and deceptive trade practice, in violation of Massachusetts’ consumer protection act. Consequently, Ferreira, through his attorney, requested that Chrysler and Somerset repurchase the vehicle and pay his attorney’s fees and legal costs.

Ferreira subsequently filed a seven-count complaint, seeking a refund for the purchase price of the vehicle, attorney’s fees, and costs. In addition, Somerset filed cross claims against Chrysler for reimbursement of attorney’s fees and court costs, as well as indemnification for any liability incurred. The trial court granted Chrysler summary judgment on both Ferreira’s complaint and Somerset’s cross claims, noting that Ferreira failed to submit any expert evidence supporting his allegations and that Somerset was not entitled to a defense or indemnification under Massachusetts’ motor vehicle dealer law. The appellate court affirmed, and the case was appealed to the Massachusetts Supreme Judicial Court.

Motor vehicle dealer law. The issue on appeal was: “under what circumstances does a motor vehicle manufacturer owe a duty under [the Massachusetts motor vehicle dealer law], to defend a motor vehicle dealer against a claim ‘predicated upon the negligent design or manufacture of a new vehicle, or any part or component thereof?’” According to the court, the dealer law works in two ways and is similar to common-law indemnity. First, a manufacturer would have a duty to defend a motor vehicle dealer against negligent design or manufacturing claims involving a new vehicle, if the complaint alleged no fault or neglect by the dealer. Likewise, a motor vehicle dealer would have a duty to defend a manufacturer if a complaint alleged negligent acts or omissions by the dealer, but not the manufacturer. However, in the event that a complaint alleges negligent acts or omissions by the dealer and the manufacturer, then neither party is required to assume the defense of the other.

Because Ferreira alleged that Chrysler was at fault for manufacturing a defective product and Somerset was at fault for its failure to repair the vehicle, the court concluded that neither Chrysler nor Somerset had a duty under the motor vehicle dealer law to defend the other, as the complaint was based on both of their conduct. Consequently, the appellate court’s dismissal of Somerset’s cross claim was affirmed.

The case number is SJC-11450.

Attorneys: Daniel G. Ruggiero for Matthew Ferreira. Sara A. Decatur (Burns & Levinson LLP) for Somerset Auto Group. Keith B. Rose (The Rose Law Firm, PLLC) for Chrysler Group LLC.

Companies: Somerset Auto Group; Chrysler Group LLC

Cases: FranchisingDistribution StateUnfairTradePractices MassachusettsNews