Texas court knocks down dealer complaint about discretionary allocations

After nearly a decade of litigation involving competing San Antonio dealerships, the Texas Court of Appeals ruled that Hyundai Motor America did not unfairly discriminate in granting discretionary quotas for new vehicles.

A trio of judges upheld the Texas Automobile Commission’s ruling in favor of automakers in a dispute between New World Car Nissan, which owns two Hyundai stores in the city, and New World Car Imports San Antonio. .

By unanimously dismissing New World Car’s challenge, the Court refused to interpret the Dealer Act as requiring manufacturers to make the same allocations to competing dealers in the same market. did.

The lawsuit was a long story born out of economics, supply chain and natural disaster issues.

In 2009 and 2010, New World Car voluntarily reduced its vehicle inventory due to the economic downturn, but its main market competitor, Red McCombs Hyundai, which also has two stores in San Antonio, had a high Maintained inventory levels.

In 2011, the devastating tsunami in Japan disrupted global supply chains, prompting South Korea’s Hyundai to allocate fewer vehicles to US franchisees.

Red McCombs Hyundai, which did not participate in the lawsuit, began selling Equus, Hyundai’s early luxury model, renovated both stores at a cost of about $2.5 million, and joined Hyundai’s service leasing business. , qualified for additional discretionary vehicle assignments. program.

“Despite HMA’s encouragement to do so, New World Car failed to take equivalent action,” the court said. Car North did not complete the renovation until 2014, by which time the inventory shortage was resolved.”

In 2013, New World Cars filed a complaint with the DMV of Texas about arbitrary quotas, and in 2017 it ruled in favor of the dealer.

However, in a subsequent review, the Court of Appeal reversed the DMV Commission’s decision. The DMV has since reconsidered the matter and dismissed World Car’s claims in 2020.

In its latest ruling issued on November 29, the court ruled that Red McCombs “took numerous steps to demonstrate the brand’s commitment to Hyundai. Based on the evidence, the (DMV) Commission ruled that New We have reasonably concluded that World Car has failed to prove that it engaged in unfair discrimination.” .”

Furthermore, Hyundai Motor America’s use of sales efficiency as a metric did not violate its obligations of honesty and fair dealing, the court said, noting that “nearly all” automakers use the sales efficiency metric. It added that it evaluates the performance of dealers.

“Additional matters between (new) Worldcar dealers and HMA have also been ruled in favor of HMA,” Hyundai spokesman Ira Gabriel said in an email.

New World Car attorney Jarrod Stewart of Houston said in a statement: car news “We will continue to fight to ensure that the company and other Texas dealers do not fall victim to similar abuses in this case,” the company said.

Stewart said the ruling “disregards distribution unfairness,” adding that the DMV board made the right decision for the first time in 2017 when it determined New World Cars had been treated unfairly. .

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