Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.H. Sup. Ct.: Honda dealership not entitled to attorney fees over warranty chargebacks, (Aug 26, 2014)

By Greg Hammond, J.D.

A Honda dealership could not collect attorney fees after the New Hampshire Motor Vehicle Industry Board found moot the issue of whether American Honda Motor Co., Inc. violated the New Hampshire Dealership Act. In affirming the lower court’s order of summary judgment in favor of American Honda, the Supreme Court of New Hampshire determined that a recent amendment to the Dealership Act concerning “chargebacks,” could not be retroactively applied in this case (Autofair 1477, L.P. v. American Honda Motor Co., Inc., August 22, 2014, Lynn, R.).

Background. American Honda is a manufacturer and distributor of Honda automobiles, and Autofair 1477, L.P. is an authorized Honda dealer located in Manchester, New Hampshire. Under an Automobile Dealer Sales and Service Agreement, Autofair is obligated to conduct warranty work on Honda vehicles according to American Honda’s Service Operations Manual, and American Honda later reimburses Autofair for that work. However, American Honda—according to the Agreement—can also charge back any amount paid for warranty repairs if it is found that Autofair did not follow the manual of policies and procedures.

In November 2010, American Honda announced its intention to collect over $45,000 in chargebacks and a potential escrow reversal of over $54,000 for warranty work that allegedly deviated from American Honda’s policies and procedures. The New Hampshire Motor Vehicle Industry Board later reduced the charge back claims to just over $1,000, and found the issue of whether American Honda violated the Dealership Act moot.

Pursuant to the Dealership Act—which states that a prevailing party is entitled to reasonable attorney’s fees and costs when the Board finds that the other party violated the Act—Autofair filed a petition for attorney’s fees and costs in January 2012. The trial court granted American Honda’s motion for summary judgment, finding that the Board did not find a violation of the Dealership Act, as American Honda never actually charged back the dealership. Autofair appealed the decision to the New Hampshire Supreme Court.

Dealership Act. While Autofair’s appeal was pending, the state legislature amended the Dealership Act, by providing a new definition for “chargeback.” According to the court, “‘Chargeback’ means a manufacturer induced return of warranty, incentive, or reimbursement payments to a manufacturer by a dealer. The term includes a manufacturer drawing or an announced intention to draw funds from an account of a dealer.” Because the amendment could have a direct impact on the issues in this case, the court was first required to determine whether the legislature intended to apply the amendment retroactively. It determined that American Honda would not have violated the Dealership Act prior to the amendment, but would have violated the Act after the amendment, as it announced its intention to draw funds from Autofair’s account. Because the amendment would adversely affect American Honda’s substantive rights, the court did not apply it retroactively.

Having found that the chargeback amendment did not apply retroactively, the court turned to Autofair’s arguments that the trial court erred by denying its petition for attorney’s fees. Specifically, Autofair argued that: (1) the trial court misconstrued the Dealership Act and the Board’s order when concluding the Board did not find American Honda violated the statute; and (2) the court’s construction of the Dealership Act is inconsistent with its statutory purpose. Neither argument was persuasive, the court noted, as it already concluded that American Honda’s proposed chargebacks did not violate the Dealership Act prior to the amendment. Since the Board’s order could not constitute an implicit finding of a statutory violation, the court affirmed the lower court’s ruling in favor of American Honda.

The case number is 2012-914.

Attorneys: Gregory A. Holmes (Holmes Law Offices PLLC) for Autofair 1477, LP. James M. Campbell (Campbell Campbell Edwards & Conroy PC) for American Honda Motor Co.

Companies: Autofair 1477, LP; American Honda Motor Co.

Cases: FranchisingDistribution NewHampshireNews