Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Ohio App. Ct.: Auto dealer was successor in interest for determining unemployment compensation contribution rate, (Jul 29, 2015)

By Linda O’Brien, J.D., LL.M.

An automobile dealership was properly found to be the successor in interest to another dealership from which it acquired all of the property integral to the dealership business through an asset purchase agreement for purposes of determining the acquiring dealership’s unemployment compensation contribution rate as an Ohio employer, the Ohio Court of Appeals has ruled. The trial court order, affirming a decision by the Unemployment Compensation Review Commission, was upheld (Jeff Schmitt Chevrolet, Ltd. v. Ohio Dept. of Job & Family Services, July 28, 2015, Horton, T.).

In September 2010, Jeff Schmitt Chevrolet (JSCL) entered into an asset purchase agreement with Serra Chevrolet to acquire Serra’s new car inventory, equipment, telecommunications systems, and all other fixed assets as well as Serra’s customer lists, books, records, and goodwill. JSCL did not acquire Serra’s used car inventory, General Motors (GM) franchise license, cash, or accounts receivable. In October 2010, the day Serra closed its operations and terminated its GM franchise license, JSCL opened its operations as a GM dealership at the same location.

In October 2011, the Unemployment Compensation Review Commission (UCRC) notified JSCL that JSCL was determined to be the successor in interest to Serra and was assigned a contribution rate of 6.6 percent for both 2010 and 2011. The Ohio Department of Job & Family Services affirmed the UCRC finding and noted that all assets related to the on-going business were transferred to JSCL under the asset purchase agreement. In October 2014, the trial court affirmed the UCRC finding and JSCL appealed.

The appellate court determined that the trial court did not err in affirming the UCRC’s finding that JSCL was a successor in interest to Serra. There was reliable, probative, and substantial evidence that Serra transferred all of the property integral to its business to JSCL through the asset purchase agreement.

State law provided that a transferee shall become a successor in interest where there is a transfer of all of the transferor’s trade or business. As a successor in interest, the transferee shall assume all of the resources and liabilities of the transferor’s account and the contribution rates of the transferee shall be revised to reflect the result of the transfer.

JSCL’s argument that it did not acquire all of Serra’s trade or business because it did not acquire Serra’s used car inventory, cash, accounts receivable, franchise license, and all of Serra’s former staff was rejected. According to the appellate court, under the asset purchase agreement, JSCL acquired all of Serra’s tangible assets and nearly all of Serra intangible assets. The assets not acquired by JSCL were only a small part of the business and were not integral to the business operation. Moreover, cash and accounts receivable were normally not included in a dealership acquisition and GM franchise licenses were not transferable. Finally, JSCL retained most of Serra’s employees and remained at the same physical location. Thus, there was sufficient evidence to support the UCRC’s determination that JSCL acquired all of the property integral to Serra’s business and was the successor in interest.

The case is No. 14AP-917.

Attorneys: Thomas M. Green and Jonathan F. Hung (Green & Green) for Jeff Schmitt Chevrolet, Ltd. Michael DeWine, Attorney General, for the Oho Dept. of Job & Family Services.

Companies: Jeff Schmitt Chevrolet, Ltd.

Cases: FranchisingDistribution OhioNews