STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LINDER TRUCK CENTER, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 87-5007

)

GENERAL MOTORS CORPORATION/ )

GMC TRUCK COACH DIVISION, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before Diane D. Tremor, Hearing Officer with the Division of Administrative Hearings, on November 14 and 15, 1988, in Tampa, Florida. The issue for determination in this proceeding is whether petitioner's franchise agreement with the respondent was discontinued, cancelled, not renewed, modified or replaced in an unfair or prohibited manner, in violation of Section 320.641, Florida Statutes.

APPEARANCES

For Petitioner: Stanley H. Eleff and Richard

M. Hanchett Attorneys at Law

Trenam, Simmons, Kemker, Scharf, Barkin, Frye & O'Neill, P.A.

2700 Barnett Plaza Post Office Box 1102 Tampa, Florida 33601

For Respondent: Dean Bunch, Esquire

Rumberger, Kirk, Caldwell, Cabaniss, Burke & Weschler, P.A. North Monroe Street

Tallahassee, Florida 32301 INTRODUCTION

In support of its position that respondent, General Motors Corporation/GMC Truck Coach Division (GMC), violated Section 320.641, Florida Statutes, when it cancelled the heavy duty truck motor vehicle addendum to Linder's Dealer Sales and Service Agreement with GMC, petitioner Linder offered the testimony of Richard Michael Munday and Carey Webb. The respondent GMC presented the testimony of Kenneth Kaczmarek and Elmo Sergo. The parties stipulated to the admissibility and receipt into evidence of Exhibits 1 through 23.

Subsequent to the hearing, counsel for the parties submitted proposed findings of fact and proposed conclusions of law. To the extent that the parties' proposed factual findings are not included or incorporated in this Recommended Order, they are rejected for the reasons set forth in the Appendix hereto.

FINDINGS OF FACT

Upon consideration of the oral and documentary evidence adduced at the hearing, as well as the parties' stipulations of fact, the following relevant facts are found:

1. In 1985, petitioner Linder Truck Center, Inc. (Linder) purchased Lakeland Frame and Axle, which was then a General Motors Corporation (GMC) Truck dealer in Lakeland, Florida. In July of 1985, Linder entered into a Dealer Sales and Service Agreement with GMC, and thereafter, entered into a replacement Agreement effective November 1, 1985. Under the terms of the Dealer Agreement and various addenda, Linder was granted a non-exclusive right to buy, sell and service certain specified light duty, medium duty and heavy duty trucks marketed by GMC. The provisions of the Agreement between Linder and GMC provide that GMC may discontinue any product at any time and its only obligation is to manufacture and deliver to the dealer accepted orders which the dealer does not elect to cancel.

   
   

2. The Dealer Agreement and addenda delineate Linder's areas of primary responsibility (APRs) for the three types of trucks. The APRs are different for light, medium and heavy duty trucks because of the different volume base for each category. Since the volume base for heavy duty trucks is smaller, the APR for such trucks is larger in order to provide the dealer with sufficient volume base to make economically viable the dealer's heavy duty marketing and after- market support.

   
   

3. On or about November 1, 1985, GMC certified to the Florida Department of Highway Safety and Motor Vehicles (DHSMV) that Linder was authorized as a dealer to sell and service new motor vehicles commonly known and designated as GMC Trucks.

   
   

4. On or about September 10, 1986, GMC notified all its truck dealers of the anticipated creation by AB Volvo and GMC of a joint venture company which would manufacture and distribute heavy duty trucks.

   
   

5. On or about November 7, 1986, Linder received from GMC four Motor Vehicle Addenda to the Dealer Sales and Service Agreement which superseded prior addenda. At the same time, GMC delivered a letter informing Linder that GMC had agreed to form a joint venture with AB Volvo which would manufacture, assemble and distribute heavy duty trucks in the United States, and that GMC would discontinue and no longer distribute or market heavy duty trucks in the United States. The letter also stated that it was anticipated that Linder's Heavy Duty Motor Vehicle Addendum would be cancelled no later than December 31, 1987. This same letter was sent to all GMC truck dealers.

   
   

6. By letter dated December 23, 1986, GMC notified Linder that GMC would cease offering heavy duty trucks for sale in North America on December 31, 1987, and that, consequently, the current Heavy Duty Motor Vehicle Addendum would expire on that date. The Department of Highway Safety and Motor Vehicles was

   likewise informed of this action. During the period ending December 31, 1987, GMC manufactured and distributed three heavy duty truck products: the Brigadier, the Astro and the General.

   
   

7. Prior to the early 1980's, GMC held a relatively strong position in the heavy duty truck industry, with its market share being in excess of 16 percent. Its share of the market for heavy duty trucks declined precipitously to 8 percent thereafter and the manufacture and sale of its heavy duty truck models became increasingly unprofitable for GMC. It balanced the alternative of completely liquidating its hard assets formerly devoted to the manufacture and distribution on its heavy duty truck models against that of utilizing those assets as contribution with another manufacturer in a joint venture operation. Considering that it then had approximately 170,000 heavy duty trucks on the road and desiring to assure coverage and availability of service parts, GMC determined to contribute its heavy duty truck assets and other assets to form a joint venture with AB Volvo, to be known as the Volvo GM Heavy Truck Corporation.

   
   

8. As it did with Linder, GMC provided to all its heavy duty truck dealers approximately a year's notice of the joint venture agreement with Volvo, as well as notice that GMC would cease offering heavy duty truck products for sale in North America on December 31, 1987. It also notified its dealers that a priority for the joint venture would be the selection of a dealer network to sell and service the joint venture's products. GMC's heavy duty truck dealers were advised that not all would obtain a dealer agreement for heavy duty trucks from the joint venture. At the time of the joint venture, Volvo had approximately 200 to 210 dealers for heavy duty trucks, and GMC had approximately 350 heavy truck dealers. In January of 1988, approximately 240 dealerships were awarded on behalf of the joint venture.

   
   

9. While Linder actively sought to be selected as a Volvo GM Heavy Truck Corporation dealer, it was notified by letter dated July 30, 1987, from Volvo GM that it had not been selected as a joint venture dealer. There was no evidence adduced at the hearing to establish how many of the dealerships awarded by the joint venture were formerly GMC or formerly Volvo heavy duty truck dealers. Likewise, there was no evidence as to whether or not a dealership was awarded for Linder's former area of primary responsibility for the sale and/or service of heavy duty trucks.

   
   

10. Pursuant to the joint venture agreement, GMC owns a 24% stock interest in Volvo GM Heavy Truck Corporation, and the remaining 76% interest is owned by Volvo North America Corporation. GMC has the option to purchase an additional 11% of the stock in 1993. GMC is a Class B stockholder, and holds 3 of the 10 seats on the Board of Directors. By majority vote of the GMC Directors, GMC does have veto powers over some 18 out of the ordinary-type decisions, such as a change in the vehicle nameplates, waivers of dividends and a sale of the company.

    
    

11. The business of Volvo GM is to manufacture and market Class 8 vehicles (heavy duty trucks) and to sell the Volvo Line of medium duty trucks. The joint venture calls for the discontinuance by GMC of the manufacture of all heavy duty truck models, with the temporary exception of the Brigadier model. Had the Brigadier model not been manufactured during 1988, Volvo GM would not have been able to meet the demand for heavy duty trucks in 1988. That model was manufactured by GMC during 1988 under exclusive contract to the joint venture, Volvo GM Heavy Truck Corporation, for distribution by the joint venture under its own nameplate (White GMC Brigadier) and warranty. The manufacture of the

    Brigadier trucks was discontinued on or about December 16, 1988. Thereafter, the joint venture will design, produce and market a completely different vehicle as a replacement to sell into the market that the Brigadier previously sold into.

    
    

12. During 1988, GMC had no involvement in the marketing of the Brigadier heavy duty truck. The joint venture had the responsibility for everything beyond production. Approximately 4,000 Brigadiers were produced in 1988, as compared with 7,000 or 8,000 during 1986 and 1987.

    
    

13. Linder's GMC Dealer Sales and Service Agreement continues in effect, and Linder remains an authorized dealer of General Motor's light duty and medium duty trucks.

    
    

    CONCLUSIONS OF LAW

    
    

14. This cause arises pursuant to Section 320.641, Florida Statutes. That statutory provision, subsection (1), requires automobile manufacturers, such as GMC, to give motor vehicle dealers and the DHSMV written notice of intention to cancel or modify a franchise agreement when such modification would adversely alter the rights or obligations of a dealer under its existing franchise agreement or would substantially impair the sales, service, obligations or investment of the dealer. After such notification, the dealer may file a verified complaint with the DHSMV for a determination of whether "such action is an unfair or prohibited discontinuation, cancellation, nonrenewal, modification or replacement." Section 320.641(3), Florida Statutes.

    
    

15. The respondent General Motors first contends that petitioner has no cause of action under Section 320.641, Florida Statutes, inasmuch as that section applies only to the cancellation or modification of "franchise agreements." It is urged that the section does not apply when an individual product or product line is discontinued, since the franchise agreement only granted Linder the right to buy certain specified vehicles produced and marketed by GMC. Rather than providing a ground for dismissal based upon jurisdictional grounds, respondent has simply framed the issue to be determined in this proceeding.

    
    

16. There can be no doubt that petitioner's rights under its franchise agreement with GMC have been modified, cancelled or terminated with respect to heavy duty trucks. As such, the Department of Highway Safety and Motor Vehicles, and thus the Division of Administrative Hearings, has jurisdiction to render the determination contemplated pursuant to Section 320.641, Florida Statutes. Whether the cancellation, termination or modification of petitioner's franchise agreement with respect to heavy duty trucks was "unfair" or "prohibited" is the determination which must be made in light of the terms of the franchise agreement, including its addenda, and the facts presented at the hearing.

    
    

17. As the complainant in this proceeding, petitioner Linder bears the initial burden of proof to show by a preponderance of the evidence the unfairness of or prohibition against GMC's decision to terminate or cancel its heavy duty truck addendum. This burden contemplates a prima facie showing of bad faith on the part of GMC. International Harvester Co. v. Calvin, 353 So.2d 144 (Fla. 1st DCA, 1978).

    
    

18. The evidence establishes that the action by GMC in cancelling its dealers' heavy duty truck addenda was not directed solely or even related to

    petitioner Linder. Rather, the same nondiscriminatory action was taken with respect to all GMC dealerships in the United States having heavy duty truck addenda.

    
    

19. That action was not motivated by any bad faith on the part of GMC, but was instead based upon legitimate business concerns on the part of GMC regarding the profitability of remaining in the heavy duty truck industry. No bad faith on the part of respondent having been shown, petitioner has failed to demonstrate that GMC's actions were "unfair" within the meaning of Section 320.641(3), Florida Statutes.

    
    

20. In order to show that GMC's cancellation or termination of Linder's heavy duty truck addendum was "prohibited" within the meaning of Section 320.641(3), it was incumbent upon petitioner to demonstrate some statutory or contractual violation on the part of GMC. Petitioner has cited and the undersigned has discovered no statutory prohibition against a manufacturer's discontinuance of a product line or exit from the marketplace. Surely, in its efforts to insure fair dealing at all levels between manufacturers, dealers and the consuming public, the Legislature, through the enactment of Chapter 320, Florida Statutes, did not intend to coerce manufacturers to continue to produce or market products determined not to be economically viable. There being no statutory prohibition against a business decision to cease production and marketing of a product line, the franchise agreement itself must be examined.

    
    

21. Linder's Dealers and Service Agreement with GMC granted Linder the non-exclusive right to buy new GMC motor vehicles identified in the motor vehicle addenda to that Agreement. The Agreement provided that GMC may change

    the addenda by furnishing the dealer superseding addenda. The Agreement further provided that GMC could discontinue any product at any time and its only obligation would be to manufacture and deliver to the dealer accepted orders which the dealer did not elect to cancel. In identifying the vehicles subject to the Agreement, the addendum with respect to heavy duty trucks identifies specific vehicles "marketed" by GMC.

    
    

22. Petitioner contends that, at least during the 1988 calendar year, GMC had not withdrawn from the heavy duty market and had indeed continued to manufacture and market the heavy duty Brigadier model truck. The evidence does not support this contention. The evidence demonstrates that at the time petitioner's heavy duty truck addendum was terminated by GMC, GMC had made a legitimate business decision and had taken specific action to exit the heavy duty truck business in the United States. It entered a joint venture with Volvo whereby, during the transition period of 1988, its obligations included only one aspect of the heavy duty truck business -- that of manufacturing one single product for a finite period of one year. By itself, GMC was to have no further duties or responsibilities with respect to heavy duty vehicles. It had no responsibilities beyond production. The joint venture was responsible for all other aspects, including pricing, marketing and selecting dealerships for the vehicles manufactured. Thus, GMC had discontinued the "marketing" of heavy duty vehicles effective December 31, 1987, the date Linder's heavy duty truck addendum was cancelled. Petitioner's claim that GMC continued to produce and market GMC heavy duty trucks under the guise of Volvo GM is simply not supported by the evidence. When it entered into the joint venture agreement with Volvo, the GMC heavy duty truck ceased to exist. The Brigadier model thereafter became a product of the joint venture.

    
    

23. Petitioner further seems to suggest that its agreement with GMC with respect to heavy duty trucks could only be cancelled or terminated for good

cause, i.e., where it had failed to perform its obligations under the agreement while some states do have laws to that effect, Florida does not. Chapter 320, Florida Statutes, speaks only in terms of "unfair" or "prohibited" cancellations, terminations or modifications. Having failed to demonstrate that GMC's cancellation or termination of its heavy duty truck addendum was "unfair" or "prohibited" by statute or contract, petitioner is not entitled to relief pursuant to Section 320.461(5), Florida Statutes.

RECOMMENDATION

Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Department of Motor Vehicles and Highway Safety enter a Final Order determining that GMC's cancellation or termination of petitioner's heavy duty truck addendum to its Dealers Sales and Service Agreement as of December 31, 1987, was not unfair or prohibited, and that petitioner's third amended complaint be dismissed.

Respectfully submitted and entered this 13th of March, 1989, in Tallahassee, Florida.

DIANE D. TREMOR

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1989.

APPENDIX Case No. 87-5007

The parties' proposed findings of fact have been fully considered and are accepted and/or incorporated in this Recommended Order, with the following exceptions:

Petitioner 30 - 49. These proposed findings are accepted as factually correct with respect to the terms of the various agreements and documents, but are not included as irrelevant and immaterial to the ultimate issues in dispute.

73, 74. Rejected as contrary to the greater weight of the evidence.

76. Rejected as an improper factual finding, and discussed in the Conclusions of Law.

Respondent 10. Rejected as irrelevant and immaterial to the issues in dispute.

19. Rejected as irrelevant and immaterial to the issues in dispute.

COPIES FURNISHED:

Stanley H. Eleff and Richard

M. Hanchett, Esqs.

Trenam, Simmons, Kemker, Scharf, Barkin, Frye & O'Neill, P.A.

2700 Barnett Plaza Post Office Box 1102 Tampa, FL 33601

Dean Bunch, Esquire Rumberger, Kirk, Caldwell,

Cabaniss, Burke & Weschler, P.A.

101 North Monroe Street Suite 900

Tallahassee, FL 32301

Charles J. Brantley, Director Division of Motor Vehicles Room B439

Neil Kirkman Building Tallahassee, FL 32399-0500

Docket for Case No: 87-005007

Orders for Case No: 87-005007