Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Ga.: Discovery stay not warranted in auto dealer’s racial discrimination suit against GM, (Nov 5, 2014)

By Linda O’Brien, J.D., LL.M.

In an action by an automobile dealership against auto manufacturer General Motors for allegedly engaging in racial discrimination by preventing its purchase of a local automobile dealership in preference to a minority-owned business, the defendant’s pending motion to dismiss was not clearly meritorious to warrant a stay of discovery, the federal district court in Savannah, Georgia has ruled (Southern Motors Chevrolet v. General Motors, LLC, November 4, 2014, Smith, G.).

Southern Motors operates a family of automobile dealership and formed Southern Motors Chevrolet in an attempt to purchase a Chevrolet dealership in Georgia. Southern Motors filed suit against General Motors (GM), alleging that the auto maker engaged in racial discrimination by disapproving its application to purchase the local dealership and approving of the application of a minority-owned business instead, in violation of the Georgia Motor Vehicle Franchise Practices Act. While General Motor’s motion to dismiss was pending, the company filed a motion to stay discovery until the motion to dismiss was ruled upon.

The court determined that the issue of whether there was actual discrimination was close enough to support a finding that sufficient facts have been pleaded to justify denial of GM’s motion to dismiss. A stay should be granted only where the motion to dismiss appears, upon preliminary review, to be clearly meritorious and case dispositive. According to the court, while GM’s motion to dismiss was not wholly insubstantial, it was not so clearly meritorious to warrant a stay of discovery. Dealership minority preference plans could violate federal discrimination law.

In this case, the plaintiff cited circumstantial facts that supported a reasonable inference that GM was unlawfully motivated by race in preferring a minority applicant over the plaintiff. Actionable discrimination is easily concealed so a claim may be proven by circumstantial evidence, in the court’s view. Weighing the cost of delaying discovery against the probability that the pending motion to dismiss would eliminate the need for discovery, the scale tips in favor of allowing discovery to proceed, the court concluded.

The case is No. 4:14-cv-00152-WTM-GRS.

Attorneys: Inman Gregory Hodges (Oliver Maner, LLP), and Thomas A. Withers (Gillen Withers & Lake, LLC) for Southern Motors Chevrolet, Inc. Jennifer Bunting-Graden (Jones Day) for General Motors, LLC.

Companies: Southern Motors Chevrolet, Inc.; General Motors, LLC

Cases: FranchisingDistribution GeorgiaNews