Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Ohio: Motor vehicle warranty reimbursement claim not reconsidered, (Feb 12, 2014)

By John W. Arden, J.D., LL.M.

The U.S. District Court for the Southern District of Ohio has refused to reconsider a decision granting summary judgment against an automobile dealer claiming that Chrysler Group failed to reimburse it for warranty work at the appropriate rate in violation of the Ohio motor vehicle dealer law (Kings Dodge, Inc. v. Chrysler Group, LLC, February 10, 2014, Black, T.). The court found that the dealer failed to identify any newly-discovered evidence, intervening change in the law, or clear error of law that would result in manifest injustice if not correct.

Kings Dodge, Inc. brought this action to compel Chrysler to pay more money for warranty repairs and service on its vehicles. The dealer sought to recover damages for violations of the warranty reimbursement provision of the Ohio motor vehicle dealer law (Ohio Revised Code Section 4517.52) and for unjust enrichment. It claimed that Chrysler violated the warranty reimbursement provision by (1) failing to pay the same hourly rate for warranty labor that Kings Dodge charges its retail customers for nonwarranty labor, (2) failing to pay the same amount for parts used in warranty work that Kings Dodge charges its retail customers for nonwarranty work, and (3) failing to pay “fixed time” for each warranty repair and service that Kings Dodge provides its warranty customers. Chrysler moved for summary judgment, maintaining that the plain language of the statute provided nothing about repair and service times.

The court found the following facts, presented by the dealer, were undisputed. The franchise agreement and Chrysler’s dealer policy manual required all dealers to perform warranty repairs on behalf of Chrysler, regardless of whether the dealer sold the particular vehicle. Chrysler’s policies further prohibited the dealer from charging the customer for warranty repairs. Chrysler arrived at the flat times assigned to each warranty repair base on time studies it performed on its vehicles. To calculate labor charges on warranty work, Kings Dodge used time guide published by Motor Information Systems and Alldata, Inc. The times allotted by the time guide averaged twice as long as Chrysler’s warranty times. Chrysler was aware that dealers throughout the country used the guide and that it was an “industry approved and recognized labor time guide.”

The court found the following facts, presented by Chrysler, were undisputed. The dealer policy manual provided that Chrysler would reimburse a dealer for labor and parts to fulfill warranty obligations and provided that a dealer may establish its labor rate for warranty work by requesting a specific rate and supporting that request with 200 consecutive customer pay repair orders showing that the rate was actually charged to nonwarranty customers. Prior to November 27, 2011, the dealer’s hourly labor rate was $77. The dealer requested a labor rate increase from $77 to $92 in an August 30, 2011 letter to Chrysler. Chrysler asked the dealer to provide 200 consecutive customer pay service repair orders to support this request, and the dealer submitted such documentation with a cover letter asking for a labor rate increase to $84.78. Chrysler unilaterally increased the dealer’s labor rate to $84.50 and then $86.19. The dealer asked for an increase to $95 for the first time in the complaint and later submitted documentation.

The parties made cross-motions for summary judgment. The court found that the statute required manufacturers to compensate dealers for labor and parts “at rates not less than the rates charged by the franchisee to its retail customers for like service and parts for nonwarranty work.” Kings Dodge read the statute to require that a manufacturer compensate a dealer at equal “rates” and also equal “allotments of time” to other work performed. However, the court found that the statute did not contain those terms. Kings Dodge cited no authority to establish that the labor “rate” meant both the rates charged per hour and the amount of time required to perform a specific service. “Moreover, such a reading, based on the plain language of the statute, would be nonsensical.”

“Rate” typically means the ratio between two differing units (here, dollars per hour), whereas “amount” is defined as a fixed price (the total charged for a repair), the court held. If the legislature had intended to require a manufacturer to pay a dealer for whatever fixed time a dealer applied to a repair, it would have said so in the plain language of the statute. Thus, the court held, as a matter of law, that Section 4517.52 did not regulate the length of time it takes to complete a repair.

Even if the statute could be interpreted to govern repair time, Kings Dodge failed to submit the type of particularized claim necessary to put Chrysler on notice of the claim and enable Chrysler to evaluate and verify the claim, according to the court. “Before a dealer is entitled to increase the hourly rate for warranty labor, the dealer is required to declare the increased hourly rate that it wants and provide the manufacturer with reasonable verification of that rate.” The court found that dealer’s communications with Chrysler did not provide a reasonable verification of the claimed time repair.

On November 27, 2013, the court entered an order granting Chrysler’s motion for summary judgment and denying Kings Dodge’s motion for summary judgment.

In its motion for reconsideration, Kings Dodge argued that the district court erred in finding that Section 451.52 did not regulate the length of time it takes a franchisee to complete warranty repairs, maintaining that the legislative history of the statute indicated an intent to strengthen the obligations of franchisors towards franchisees. Kings Dodge raised this identical argument in its prior briefing and therefore could not use the reconsideration process to repeat its arguments, the court said. The majority of the documents that Kings Dodge characterized as “legislative history” were considered by the court before it rendered its order. Thus, there was no reason for the court to review these identical orders. Because the documents existed at the time of Kings Dodge’s summary judgment briefing, they cannot be “newly-discovered evidence” justifying reconsideration.

An argument that the court erroneously found that the word “rate” did not include the time spent by dealers in performing warranty repairs was rejected. The court found that the 1987 amendment to the statute deleted a provision that regulated “repair time” and that Kings Dodge failed to present any new information.

The case is No. 1:12-cv-445.

Attorneys: Curtis L. Cornett (Cors & Bassett LLC) for Kings Dodge, Inc. Kurt Reinhold Hunt (Dinsmore & Shohl, LLP) for Chrysler Group, LLC.

Companies: Kings Dodge, Inc.; Chrysler Group, LLC

Cases: FranchisingDistribution OhioNews