Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Auto dealership sues Audi for suspension of bonus payments, (Aug 20, 2015)

By Michael Menzhuber, J.D., LL.M.

An automobile dealership is seeking damages and injunctive relief against Volkswagen Group of America, Inc., d/b/a Audi of America, Inc., for the unlawful suspension of standard bonus incentive payments it was due under their dealership agreement, according to a complaint filed in the federal district court in New York City (Legend Autorama Ltd. v. Volkswagen Group of America, Inc., August 19, 2015).

Legend Autorama Ltd. operated a franchise dealership of Audi brand vehicles. Like all other Audi franchises, Legend is a party to a dealer agreement with Audi. Pursuant to that agreement, Audi would make standard bonus incentive payments to Legend, provided various requirements were met. The bonus payments are a substantial portion of Legend’s annual profits and, without those payments, Legend would not be profitable, the dealership claimed.

In June 2013, at Audi’s insistence, Legend and Audi entered into facility agreement to construct a new exclusive Audi facility. The facility agreement set forth milestones that Legend was expected to meet in order to continue receiving bonus payments. On several occasions, Legend requested an extension of the milestones. In an April 3, 2015 letter from Audi senior manager Anita Salomon to Michael Siegel of Legend, the construction completion milestone of June 30, 2015 was extended to June 30, 2016.

On August 10, 2015, Audi’s area general manager, Fred Stolle, delivered a letter to Siegel, stating that the Legend had not complied with the construction completion deadline of June 30, 2015 and, therefore, Audi was suspending its bonus payments until the project was completed. Siegel showed Stolle a copy of the extension letter. Stolle claimed that, despite the letter indicating that he had received a copy, this was the first time that he had seen the letter.

After investigating the matter, Stolle responded by letter to Siegel. He stated that the letter was sent by a former Audi employee with no authority to grant the extension and that he had used Salomon’s electronic signature without prior approval. He further stated that Audi’s position had not changed with regards to the construction completion deadline and that bonus payments to Legend would continue to be suspended.

Legend alleged that Audi’s suspension of bonus payments was a breach of the facilities agreement, as modified by the extension letter from Salomon. Consequently, Legend asserted claims for: (1) violation of the New York Franchised Motor Vehicle Dealer Act; (2) breach of contract; (3) declaratory judgment that it had not breached the facility agreement and that Audi had breached the agreement by withholding bonus payments; and (4) injunctive relief enjoining Audi from terminating its bonus payments based on its false assertion that Legend was in breach of the facilities agreement.

The case is 2:15-cv-04890.

Attorneys: Russell P. McRory, James M. Westerlind, and Lee A. Pepper (Arent Fox LLP) for Legend Autorama Ltd.

Companies: Legend Autorama Ltd; Volkswagen Group of America, Inc.

News: FranchisingDistribution NewYorkNews