7

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEAN'S KAWASAKI, INC., d/b/a ) DEAN'S HONDA-KAWASAKI-SUZUKI, )

)

Petitioner, )

)

vs. ) CASE NO. 86-0293

)

U.S. SUZUKI MOTOR CORPORATION, ) and DEPARTMENT OF HIGHWAY SAFETY ) AND MOTOR VEHICLES, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William J. Kendrick, held a public hearing in the above-styled case on May 30, 1986, in Vero Beach, Florida.

APPEARANCES

For Petitioner: George Glenn, Esquire

Chester Clem, P.A. 2525 20th Street

Vero Beach, Florida 32960

For Respondent: Peter C. Freeman, Esquire

U. S. Suzuki DUFFERN H. HELSING, INC. Motor Corporation 315 Centennial Way

Tustin, California 92680

For Respondent: No appearance Department of

Highway Safety and Motor Vehicles

PRELIMINARY STATEMENT

At issue in this proceeding is whether the cancellation by Respondent, U.S. Suzuki Motor Corporation (Suzuki) of its dealer agreement with Petitioner is an unfair cancellation. Section 320.641, Florida Statutes.

At hearing, Petitioner called Martyn T. Haynes and Lorre Dean Mays as witnesses. Petitioner's Exhibits 1-2, 5-7, 11, and 13-16 were received into evidence. Respondent, Suzuki, called Martyn Haynes and Charles Barrett as witnesses. Respondent's Exhibits 1-3 and 5 were received into evidence.

Petitioner and Respondent, Suzuki, have submitted proposed findings of fact and conclusions of law, and they have been reviewed and considered. A ruling has been made on each proposed finding of fact in the appendix to this Recommended Order.

FINDINGS OF FACT

1. Petitioner, Dean's Kawasaki, Inc., d/b/a Dean's Honda-Kawasaki-Suzuki (Dean's), is an authorized dealer for Suzuki brand motorcycles, all terrain vehicles (ATV's) and generators in Vero Beach, Indian River County, Florida. Dean's is also an authorized dealer for similar Honda and Kawasaki products.

   
   

2. Lorre Dean Mays is the president and owner of Dean's. Mr. Mays purchased the dealership, then known as Suzuki of Vero Beach, on July 31, 1981, for approximately $80,000. The purchase price reflected consideration of all assets of the business, except motorcycles, 1/ and included $7,238 of Suzuki parts and accessories and $5,690 of other accessories. Dean's currently has approximately $8,000 worth of Suzuki parts and accessories in inventory.

   
   

3. At the time of its acquisition, the Vero Beach dealership sold exclusively Suzuki products and had been, for the year preceding July 1981, one of the top one hundred sales producers in the United States. At hearing, Mr. Mays claimed to have won this award from Suzuki, however, the evidence is clear that such award was not attributable to Mr. Mays' efforts in the dealership. While the award was given to the dealership, it was based on the dealership's performance prior to its purchase by Mr. Mays. Although not an award winning dealer, there is no suggestion that Dean's performance prior to the 1985 model year (October 1, 1984, through September 30, 1985) was anything short of satisfactory.

   
   

4. On February 12, 1985, Suzuki's district sales manager, Charles Barrett, made his semi-annual visit to Dean's. During the course of that 31 hour visit, Mr. Barrett inventoried Dean's product lines and reviewed, with Mr. Mays, Dean's sales figures.

   
   

5. Mr. Barrett's inspection revealed that Dean's had in stock 19 Suzuki units (11 old model motorcycles, 4 current model motorcycles, and 4 current model ATV's), and no Suzuki units on order. Comparatively, Dean's had on hand

   20 Kawasaki units and 100 Honda units.

   
   

6. Dean's Suzuki sales figures and market share for Indian River County were substantially below those of the previous year. Since the commencement of the 1985 model year on October 1, 1984, Dean's had sold only 7 Suzuki units, 2/ compared with 45 units the previous year. During the same time period, Dean's had sold 25 Kawasaki units and 150 Honda units. Nationally, Kawasaki and Suzuki enjoy about the same percentage of the market.

   
   

7. At the conclusion of his visit, Mr. Barrett advised Mr. Mays, orally and in writing, that Dean's sale of two wheel products was poor, that better sales efforts needed to be made, and that more Suzuki units needed to be ordered and stocked. Mr. Barrett recommended that Dean's place an order for twenty 1985 model motorcycles, which would represent sixteen different models in Suzuki's current product line, as well as an advance order for fourteen 1986 model motorcycles. As of September 1985, Suzuki's records reflect that Dean's had not ordered any Suzuki units, and had made only one additional sale of a Suzuki product. At the time of hearing, Dean's had only two Suzuki units in stack.

8. By letter of September 23, 1985, Respondent, Suzuki, notified Dean's that its dealer agreement was cancelled. The letter of termination provided in pertinent part:

   
   

   This action is being taken based on the following:

   
   

   You have failed to maintain a sales volume which is comparable to other similarly situated dealers within your region.

   
   

   You have failed to maintain a sufficient level of Suzuki inventory to adequately represent the line of Suzuki products.

   
   

   You have failed to use Suzuki advertising programs to promote Suzuki products in your sales area.

   
   

   Dean's timely filed a verified complaint with Respondent, Department of Highway Safety and Motor Vehicles (Department), alleging that its sales volume exceeded that of similarly situated dealers, that it maintained a sufficient inventory to supply its region, that it had participated in all Suzuki promotions available to it, and that the proposed cancellation was an unfair cancellation under Section 320.641, Florida Statutes.

   
   

9. To compare Dean's sales performance with "similarly located Suzuki dealers in comparable trade areas," Suzuki identified its dealers situated in Florida counties with similar populations and similar total industry sales. During the period from December 31, 1984, through October 1, 1985, sales of Suzuki products by Dean's (Indian River County), compared with the dealerships in the other counties, were as follows:

   
   

   Citrus County	62
   Clay County	112
   Hernando County	13
   Indian River County	5
   Martin County	59
   Monroe County	18
   Osceola County	40
   Putnam County	36
   St. Johns County	17

   
   

10. While Dean questioned whether some of the counties selected by Suzuki were truly comparable to Indian River County, it offered no proof that would detract from the probative value of Suzuki's comparison. The sale of five Suzuki units in a nine-month period was significantly below that of similarly located Suzuki dealers, and Dean's did not suggest or attempt to show otherwise. Rather, Dean's sought to show that its sales performance was greater than that reflected by Suzuki's records because Dean's registered all purchases and sales through Mr. May's Okeechobee County dealership.

    
    

11. In 1984 Mr. Mays had acquired Suzuki of Okeechobee. He avers that upon its acquisition he undertook to "improve" the Okeechobee franchise by

    purchasing for both franchises, and registering sales for both franchises, under his Okeechobee dealership number. According to Mr. Mays, he adopted this approach to "establish" the Okeechobee dealership and, thereby, assure its "allocation" of Suzuki products. Mr. Mays' testimony is not credited. 3/

    
    

12. During the 1985 and 1986 model years, there was no shortage of Suzuki products and Suzuki had no "allocation" policy. Mr. Mays was specifically advised by Mr. Barrett on February 12, 1985, that the Vero Beach dealership had a poor sales record and that it needed to stock more units to promote the Suzuki line. The evidence establishes that Dean's did not improve its sales record and that it did not stock for display, demonstration, or sale an inventory adequate to promote Suzuki's product line. 4/ The proof is consistent with Mr. Mays' concession that over the last two years he did not pay as much attention to his business as he should have paid.

    
    

13. Consistent with its low inventory and poor sales performance, Dean's participated in little or none of Suzuki's cooperative advertising programs during the 1985 model year, nor did it otherwise specifically support the Suzuki product line through newspaper or billboard advertising. 5/ Dean's advertising efforts were restricted to the expenditure of $2,000 to promote Honda-Kawasaki- Suzuki at three fairs and radio "live remotes," the "sponsorship" of a Suzuki ATV racer, and occasional seasonal displays of a Suzuki product at a local shopping mall. 6/

    
    

14. The dealership agreement executed by Dean's and Suzuki on December 5, 1984, provides in pertinent part:

    
    

    PURPOSE

    * * *

    Suzuki expects, and Dealer in executing

    this agreement acknowledges, that Dealer will actively, aggressively and honestly promote the sale of Suzuki products to retail customers . . .

    To achieve the purposes set forth above and the mutual obligations of the parties to each other, it is agreed as follows:

    
    

    Dealer's Responsibility

    Subject to the terms and conditions hereof, Suzuki will sell Suzuki products to Dealer and Dealer will use its best efforts to sell Suzuki products at retail . . .

    * * *

    
    

    GENERALS CONDITIONS

    * * *

    1. Dealer Sales Responsibility. Dealer will maintain annual sales volume mutually agreed upon each year by Suzuki and Dealer. Dealer will establish a target growth factor which it will strive to achieve through aggressive marketing and promotion of Suzuki

       products. Dealer agrees that the best method of measuring its market area share is by comparison of its Suzuki sales against the national, state, county and local area Suzuki

       sales percentages in the motorcycle industry7 as determined by a recognized reporting organization. Dealer also agrees that comparison of its sales to similarly located Suzuki dealers in comparable trade areas is a proper criteria to measure its sales performance.

    2. Inventory Responsibility. Dealer

    must maintain the level of Suzuki motorcycle inventory recommended by Suzuki . . .

    * * *

    2.10 Inventories. Dealer shall main- tain at all times a minimum inventory of

    Suzuki motorcycles for display, demonstration and sale. A minimum inventory is the quantity, and models, necessary for a sixty- day supply, based on the current Dealer sales plan but subject to availability.

    * * *

    8.1 Advertising Suzuki Products.

    Dealer acknowledges his responsibility to use advertising programs to promote Suzuki products in his sales area.

    * * *

    8.4 Cooperative Advertising Program.

    Dealer will participate in Suzuki's cooperative advertising program in accordance with Suzuki's Co-op Policy and advertising bulletins published from time to time.

    * * *

    1. Termination

       1. Written Notice. If Dealer does

          not conduct its business in accordance with the requirements set forth herein, Suzuki may terminate this agreement by giving to Dealer written notice of termination.

          * * *

          9.3 Sixty Days Written Notice. Suzuki

          may terminate this agreement with sixty (60) days written notice after the occurrence of any of the following events:

          (1) Failure of the Dealer to maintain the sales volume established for the

          dealership by mutual agreement of Suzuki and Dealer.

          * * *

          (6) Failure to carry an adequate

          inventory of Suzuki motorcycles and genuine Suzuki parts.

          
          

15. The dealership agreement expressly requires that Dean's maintain an annual sales volume mutually agreed upon between the parties. In this case there was no such agreement nor evidence of any attempt to reach such an agreement. Absent such proof, cancellation of Dean's dealership agreement because of "inadequate sales" would be contrary to the dealer agreement and unfair.

16. With respect to inventory, section 2.10 of the agreement provides that

    
    

    Dealer shall maintain at all times a minimum inventory of Suzuki motorcycles for display, demonstration and sale. A minimum inventory is the quantity, and models, necessary for a sixty-day supply, based on the current Dealer sales plan . . .

    
    

    Because it had no "Dealer sales plan," Dean's asserts it is not in violation of the agreement's inventory requirements, and therefore, cancellation would be unfair. Dean's assertion is unpersuasive.

    
    

17. While section 2.10 of the dealership agreement does establish a minimum level of inventory based on a "Dealer sales plan," it does not preclude Suzuki from requiring, pursuant to section 2.8, that a dealer maintain a higher or more diverse inventory to promote Suzuki's product line. Absent a showing that the level of inventory recommended by Suzuki was unreasonable, cancellation of the dealership agreement for failure to maintain such an inventory level is not unfair. 7/

    
    

    CONCLUSIONS OF LAW

    
    

18. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings.

    
    

19. Pertinent to this proceeding, Section 320.641(3) provides:

    
    

    Any motor vehicle dealer whose franchise agreement is discontinued, canceled, not renewed, modified, or replaced may, within the 90-day notice period, file with the department a verified complaint for a determination of whether such action is an unfair or prohibited discontinuation, cancellation, nonrenewal, modification, or replacement . . .

    
    

    Accordingly, the only criterion for agency review is whether Dean's franchise agreement was unfairly cancelled. International Harvester Co. v. Calvin, 353 So.2d 144 (Fla. 1st DCA 1978).

    
    

20. Suzuki's decision to terminate its dealership agreement with Dean's was, On balance, in accordance with the dealership agreement entered into between the parties, and was not unfair.

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order dismissing Dean's

complaint with prejudice.

DONE AND ENTERED this 25th day of July, 1986, at Tallahassee, Florida.

WILLIAM J. KENDRICK

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of July, 1986.

ENDNOTES

1/ Motorcycle inventory was removed from the existing dealer's floor planning arrangement and placed on Dean's floor planning.

2/ Dean's sales included 4 motorcycles (2 old models and 2 current models) and

3 ATV's (1 old model and 2 current models).

3/ Mr. Mays also testified that Suzuki's sales manager, Mr. Barrett, was aware of his activity. To support his assertion, Mr. Mays points to the Dealer Contact Report of February 12, 1985, which states "Discussed need to improve dealership in Okeechobee . . . ." Mr. Barrett denied any knowledge of Mr. Mays practice. On balance, Mr. Mays' testimony is not credible. Facially both dealerships needed improvement. To disregard the performance of the Vero dealership in order to promote the Okeechobee dealership evidences a disregard of Dean's obligation to promote the Suzuki product line in Indian River County. Adding the fact that the Okeechobee dealership is currently for sale raises a more disquieting specter.

4/ Mr. Mays testified that when he first undertook his practice of purchasing through the Okeechobee dealership, he would move some Suzuki products from the Okeechobee store to the Vero store as needed, but this practice was discontinued upon the objection of his floor planner. At hearing, Mr. Mays could show no proof from the books and records of Dean's or the Okeechobee franchise that any additional sales of Suzuki products were produced at the Vero Beach store. Mr. Mays' estimate that 19-20 Suzuki units sold for calendar year 1985 were attributable to the Vero Beach dealership is not credited.

5/ Dean's asserted that it had advertised the Suzuki product line but had not applied for cooperative funding because Suzuki would not provide reimbursement where a dealer's name, such as Dean's, included another product line. Dean's assertion is not credited since no proof of newspaper advertising for the 1985 model year was offered at hearing, and Suzuki does not refuse reimbursement merely because a dealer's name includes another product line.

6/ Dean's also maintains in-store displays sponsored by or purchased from Suzuki such as signs, logo chairs and Suzuki video tapes, as well as Suzuki promotional items for resale such as helmets, hats, and belt buckles. These items do not, however, equate with participation in Suzuki's cooperative advertising program.

7/ There was no showing in this case that the inventory levels recommended by Mr. Barrett were unreasonable.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-0293

Dean's amended proposed findings of fact consisted of 23 unnumbered paragraphs which the Hearing Officer has numbered 1-23 and addressed as follows:

23. Not relevant.

Suzuki's proposed findings of fact are addressed as follows:

1. Addressed in paragraph 14.

2. Addressed in paragraph 9.

COPIES FURNISHED:

George Glenn, Esquire CHESTER CLEM, P.A.

2525 20th Street

Vero Beach, Florida 32960

Peter C. Freeman, Esquire DUFFERN H. HELSING, INC.

315 Centennial Way Tustin, California 92680

Michael J. Alderman, Esquire Department of Highway Safety

and Motor Vehicles Neil Kirkman Building

Tallahassee, Florida 32301

Leonard R. Mellon, Executive Director Department of Highway Safety

and Motor Vehicles Neil Kirkman Building

Tallahassee, Florida 32301

Docket for Case No: 86-000293

Orders for Case No: 86-000293