Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Fla.: Adding automobile dealership within current dealer’s market did not violate Florida Dealers Act, (Jun 13, 2014)

By Edward L. Puzzo, J.D.

It was not a violation of the Florida Automobile Dealers Act for a Porsche distributor to add a new dealer in the same geographic area as an existing dealer, the federal district court in West Palm Beach, Florida has ruled (Copans Motors, Inc. v. Porsche Cars North America, Inc., June 11, 2014, Hurley, D.). However, the existing dealer may have an unfair trade practices claim against the distributor.

Copans Motors d/b/a Champion Porsche (Champion) had been a Porsche automobile dealership in Boward County, Florida since 1988. In 2013, its distributor, Porsche Cars North America (Porsche), informed Champion that it intended to add another Porche dealer, Penske, to Boward County. Subsequently, Champion brought claims against Porsche alleging, among other claims, that Porsche violated the Florida Automobile Dealers Act (FADA) and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). Champion sought an injunction and damages. Porsche moved to dismiss.

Champion alleged that when Porsche added an additional Porsche franchised dealer in the same county, Porsche had violated Section 320.64(18) of FADA, which prohibits a dealership from implementing a system of motor vehicle distribution to its franchised dealers which is "unfair or inequitable."

FADA exclusivity and exhaustion. Under the FADA, when a distributor seeks to add a new dealer, it must first notify the Florida Department of Highway Safety and Motor Vehicles, which publishes the notice. Dealers then have 30 days to protest the addition. Here, Porsche claimed that, since it followed this procedure and Champion did not file a protest, the dealer had waived its exclusive remedy for the addition of a new dealership.The court disagreed, finding that the remedy under the FADA was not exclusive.

Although Florida courts have not directly addressed whether the Motor Vehicle Department's procedures for challenging a new dealership were exclusive, the Florida appellate court has ruled that an analogous procedure for the termination of a dealership was non-exclusive. The Barry Cook Ford court ruled that the FADA did not expressly confer exclusive jurisdiction on the Motor Vehicle Department. That court also ruled that a dealer seeking damages need not exhaust its administrative remedies, since that is a remedy the Department could not provide.

The court found that the Barry Cook Ford reasoning regarding challenges to the termination of dealerships should also apply to challenges to the addition of new competing dealerships. Therefore, Section 320.64(18) of the FADA was not exclusive, nor did it require exhaustion. However, whether adding a new dealership violated Section 320.64 was a separate question.

FADA violation. Champion claimed that Porsche's system of distributorship was unfair under FADA because there was insufficient demand to support both it and the Penske dealership, each offering the same brand car in the same geographic market.

But the court noted that Champion was not alleging that Porsche would distribute a benefit to Penske that it would not distribute to Champion, nor that Porsche would replenish Penske's inventory more quickly than Champion's inventory, nor that Porsche would supply more cars over time to Penske than to Champion.

Instead, Champion was alleging that it was unfair because any cars sold by the new dealer Penske were cars that Champion would have sold. Under this argument, the court stated, in any saturated market, any decision to distribute a car to one dealer and not another would be unfair, as every car sold by one dealer is a car another dealer could have sold. The court rejected this line of reasoning. Porsche's conduct in adding a new dealer was insufficient to establish an unfair distribution system prohibited by Section 320.64(18) of the FADA, the court ruled.

FDUTPA. Champion also alleged that Porsche committed various unfair or deceptive trade practices in violation of the FDUTPA. Champion alleged that adding a dealership was such a practice, but the court stated that adding a dealership was an act permitted by state law, and the FDUTPA exempted any act specifically permitted by state or federal law. Champion also alleged that Porsche's filing of a separate misappropriation lawsuit against it violated FDUTPA, but the court countered that the filing of a lawsuit, even with an improper motive, is not part of the conduct of trade or commerce, and thus not an unfair trade practice under FDUTPA.

Finally, Champion alleged that was an unfair trade practice for Porsche to cause it to spend millions of dollars to improve its dealership and denying it additional inventory, while intending to add a new dealer. These claims, stated the court, may be enough to be a FDUTPA violation, if Champion is able to show a deceptive act, causation and actual damages. As these were questions for the finder of fact, the court permitted these claims to go forward.

The case is Civil Action No. 14-60413-CV-HURLEY/HOPKINS.

Attorneys: Albert Edward Quinton, III (Quinton & Paretti, PA), and Roy Alan Diaz (Smith Hiatt & Diaz) for Copans Motors, Inc.Andrew E. Nieland (Barack, Ferrazzano, Kirschbaum & Kagelberg, LLP), andJames C. Cunningham, Jr. (Berger Singerman LLP) for Porsche Cars North America, Inc.

Companies: Copans Motors, Inc.; Florida Dept. of Highway Safety and Motor Vehicles; Porsche Cars North America, Inc.

Cases: FranchisingDistribution StateUnfairTradePractices FloridaNews