Automotive News reports that the Ohio Court of Appeals has affirmed a ruling allowing AutoSmart Chevrolet to sell its dealership to Mount Orab Chevrolet in 2021. The deal stipulates that AutoSmart would manage the dealership in Hamler, Ohio for 15 months, after which it would move to Mount Orab, almost 200 miles away. GM had a problem with that.
GM approved the sale but disapproved of the dealership’s relocation. AutoSmart brought the case to the Ohio Motor Vehicle Dealers Board, which conducts hearings regarding the issuance, revocation, and suspension of dealer licenses in the Buckeye State. It also interprets relevant laws to help car dealerships deal with situations like these. Luckily for the dealers involved, Ohio’s Franklin County Court ruled against GM.
Under the language of the purchase agreement, “approval of the proposed relocation was a material term of the purchase agreement, and that completion of the proposed relocation was contingent on GM’s approval of the proposed relocation,” the court said in an opinion written by Judge Julia Dorrian.
Ohio has laws on the books applying to exactly this kind of agreement. The state’s dealer law “prohibits a franchisor-manufacturer from denying the sale of a dealership solely because the proposed buyer plans to relocate the dealership,” it said.
The dealer board, lower court, and now the Court of Appeals “have correctly ruled that the text of the Ohio Dealer Franchise Act means what it says – that manufacturers cannot be permitted to achieve through a back door what they are prohibited from achieving through the front door,” according to dealership lower David Brown of Dublin, Ohio. “Relocation, standing alone, does not constitute good cause for refusing a proposed dealership transfer.”
GM North American Communications Sabin Blake declined to comment on the case when asked for a comment by Automotive News.
This ruling by the Ohio Court of Appeals should help set a precedent for what GM franchisees and car dealerships, in general, can and can’t do with their franchises.
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