Automotive News Canada - June 2019 - v2 - F31

FIXED OPS JOURNAL

LEGAL LANE
Kia franchise termination
upheld for understaffing
Kia Motors America justifiably terminated a
franchisee that repeatedly failed to staff the dealership's service and parts department adequately, the New Hampshire Supreme Court ruled.
The court upheld the automaker's right to
terminate for "good cause" under its 2007
dealer sales and service agreement with Kia of
Somersworth. The dealership is now closed,
said Kevin Fitzgerald, a lawyer for Kia in Manchester, N.H.
Starting in March 2011, Kia notified the
dealership about "perceived staffing and
training deficiencies," including "failure to
meet technician training requirements, to adequately staff and train personnel in its parts
and service department and to meet the minimum number of technicians required to participate in Kia's Optima Hybrid Program," the
court said.
In November 2014, at a time when the dealership had no service manager, service adviser or parts counter staff member, Kia gave the
store 60 days to "cure the staffing breach." In
February 2015, Kia sent a 90-day termination
notice, saying the dealership "did not have a
single position filled in its parts and service
department that was required under the dealer agreement," according to the court ruling.
The New Hampshire Motor Vehicle Industry
Board rejected the dealership's protest of the
franchise termination. It noted that the store
had four service managers during one sixmonth period, and said Kia management had
worked with the dealership to try to correct
deficiencies.
The dealership unsuccessfully argued that it
couldn't hire staff "due to an unprecedented
tight labor market for automobile service
workers in the area," the court said. Fitzgerald
told Fixed Ops Journal that other Kia franchisees in northeast New England haven't had
that problem.

Dealership, not insurer,
must pay arbitration award
A Texas dealership that didn't notify its insurer of an arbitration demand by its fired collision
center manager is on the hook for a $334,992
arbitration award, a federal judge ruled.
U.S. District Chief Judge Lee Rosenthal rejected the argument that Central Houston
Nissan wasn't required to tell Federal Insurance Co. that Chris Singleton had filed for ar-

bitration of wrongful termination and breach
of contract claims. The store had an employment practices liability policy with Federal.
According to the decision, Singleton became the body shop manager in February
2016. It said he allegedly discovered the shop
was "fraudulently billing auto insurers" for repairs and was fired a day after conveying his
suspicions to his supervisor. Singleton later
reported his concerns to the state insurance
department, said his lawyer, Brannon Robertson of Houston.
The dealership notified Federal when Singleton sued it in state court and again when he
voluntarily dropped the lawsuit. However, the
store failed to notify Federal about the subsequent arbitration until after the arbitrator
concluded that Singleton was wrongfully fired
for refusing "to participate in illegal and
fraudulent activity" and awarded damages for
lost earnings.
Siding with the insurer, Rosenthal said Central Houston Nissan failed to give timely notice of the arbitration demand, as Federal's
policy required.
Robertson said the Texas Court of Appeals is
reviewing the store's challenge to the arbitration award. Lawyers for the dealership and insurer didn't respond to requests for comment.

Negligent-repair suit against
dealership nixed on appeal
An appeals court refused to reinstate a negligence suit against a Ford dealership in
Charleroi, Pa., by a customer whose conversion van caught fire after undergoing warranty work.
Carl Miller claimed Davies Ford negligently
repaired his 1993 Ford E150 after a 2009 recall.
The recall notice warned that a speed control
deactivation switch could start a fire in the engine compartment.
Five days after the repair, Miller's unattended
van caught fire while the engine was off, damaging the interior and the engine compartment,
the suit claimed.
Miller offered a report from a mechanic who
concluded that the fire started in an area of the
compartment where the switch was located.
But because the mechanic didn't testify, the trial judge dismissed the case before jury deliberations could begin.
In a unanimous decision, a Pennsylvania
Superior Court panel sided with Davies Ford,
saying: "A defect or mechanical failure in an
automobile is a case involving special skills

and training which requires expert testimony
to prove negligence. Whether the [switch] was
correctly serviced and whether [it] malfunctioned are determinations beyond the skills
and training of an ordinary layperson."
Donald McCormick, a lawyer for Davies
Ford, told Fixed Ops Journal that the dealership's fire expert "determined that the part replaced by the dealer did not cause the fire,
and furthermore, this part wasn't even in the
area of the fire.
The investigator was of the opinion that the
fire was intentionally set in another portion of
the engine."

Federal judge tosses
suit over seized grilles
A federal judge in Delaware dismissed a
lawsuit accusing U.S. Customs and Border
Protection of wrongfully seizing repair grilles,
ruling that aftermarket parts importer LKQ
Corp. followed the wrong procedures when it
sued the Department of Homeland Security.
U.S. District Judge Maryellen Noreika said her
court lacks authority to review the agency's rejection of LKQ's petitions to force CBP to release the grilles.
The suit challenged more than 165 allegedly
"unlawful seizures" of grilles since April 2017
at three ports: International Falls, Minn.; Long
Beach, Calif.; and Savannah, Ga. It disputed
CBP's claim that the grilles were counterfeit or
violated automakers' trademarks.
Noreika said LKQ should have taken steps to
force the agency to refer the dispute to the U.S.
attorneys' offices where the grilles were
seized, and then go to court for a review of applicable trademark laws.
LKQ's attorney, Barry Irwin of Chicago, said:
"For nearly a year, the government was seizing
LKQ's grilles and refusing to initiate forfeiture
proceedings. As the result of the Delaware litigation, and more than a year after the seizures
began, the government began referring the
matters to the local U.S. attorneys - as it
should have already done - and local U.S. attorneys finally initiated the government's first
forfeiture proceedings."
Irwin said LKQ "looks forward to finally obtaining judicial review of the government's
unlawful seizure of its repair grilles, most of
which it has been importing without incident
for more than a decade."
-----Eric Freedman
foj@autonews.com

JUNE 2019

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