The Issue Whether Respondent, Maserati North America, Inc.’s ("MNA"), proposed 2017 Commercial Policy Program ("2017 Program") is a modification of the franchise agreement between MNA and Petitioner, New Country Motor Cars of Palm Beach, LLC, d/b/a Maserati of Palm Beach ("Palm Beach"), or Petitioner Recovery Racing, LLC, d/b/a Maserati of Ft. Lauderdale ("Fort Lauderdale"); and, if so, whether it is fair and not prohibited by section 320.641(3), Florida Statutes (2016). Whether MNA’s proposed modifications to the Existing Franchise Agreements with Petitioners are fair and not prohibited under section 320.641(3).
Findings Of Fact Based on the evidence presented, the Pre-hearing Stipulation of the parties and the record as a whole, the following relevant and material Findings of Fact are made2/:
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that: A final order be entered by the Department of Highway Safety and Motor Vehicles: (1) DISMISSING Petitioners’ claims regarding MNA’s 2017 Commercial Policy Bonus Program; and (2) GRANTING, IN PART, AND DENYING, IN PART, Petitioners’ claims regarding modifications in the Proposed New Agreement, as set forth above. DONE AND ENTERED this 23rd day of January, 2018, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 23rd day of January, 2018.
The Issue The issue is whether Petitioners are entitled to motor vehicle dealerships that are proposed to be located in Orange County, Florida.
Findings Of Fact Based on the Notices of Publication, Respondent's protest letters which were forwarded to DOAH, and the testimony presented at the final hearing, the following Findings of Fact are made: Respondent is an existing franchised dealer for motorcycles manufactured by Benzhou Vehicle Industry Group Company, Ltd. Petitioners have proposed the establishment of new dealerships to sell the same line-make of motorcycles as those sold by Respondent. Respondent's dealership is located at 3838 John Young Parkway, Orlando, Orange County, Florida. Petitioners' dealerships are proposed to be located in Orange County, Florida, at: 4535 34th Street, Orlando, Florida (Case No. 09-3489); and 2650 West Fairbanks Avenue, Winter Park, Florida (Case Nos. 09-3499 and 09-4750). The proposed dealerships are within a 12.5-mile radius of Respondent's dealership. Respondent has standing to protest the establishment of the proposed dealerships. No evidence was presented showing that Respondent was "not providing adequate representation" of the same line-make vehicles in the community or territory.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order denying the establishment of Petitioners' proposed franchise dealerships for Case Nos. 09-3489, 09-3499, and 09-4750. DONE AND ENTERED this 12th day of November, 2009, in Tallahassee, Leon County, Florida. S JEFF B. CLARK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 12th day of November, 2009. COPIES FURNISHED: Electra Theodorides-Bustle, Executive Director Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Robin Lotane, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Jennifer Clark Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-308 2900 Apalachee Parkway Tallahassee, Florida 32399-0635 Jude A. Mitchell Jude's Cycle Service Post Office Box 585574 Orlando, Florida 32858 Beverly Fox Red Streak Scooters, LLC 427 Doughty Boulevard Inwood, New York 11096 Randy Lazarus Scooter City USA, LLC 4535 34th Street Orlando, Florida 32811 Bobbette Lynott Classic Motorcycles and Sidecars, Inc. Post Office Box 969 Preston, Washington 98050 Lou Ronka Scooter City USA, LLC 2650 West Fairbanks Avenue Winter Park, Florida 32789
The Issue Whether Stella Chevrolet, Inc., should be granted a license to establish and operate a new Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida, because of inadequate representation by existing Chevrolet dealers in the relevant territory or community.
Findings Of Fact Stella filed an application with the Department for a license to establish and operate a Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida. Roberts and Nimnicht filed a letter with the Department protesting Stella's application. Stella's proposed location is within an area designated by Chevrolet as the Jacksonville multiple dealer area (hereinafter referred to as "MDA"). The Jacksonville MDA is comprised of Duval County and parts of Clay, Nassau and St. Johns Counties. The Jacksonville MDA is an appropriate starting point in determining the appropriate "community or territory" which will govern in this case. There are five Chevrolet dealerships located within the Jacksonville MDA: Nimnicht Chevrolet, Conrad Hawkins Chevrolet, Jerry Hamm Chevrolet, Steve Hull Chevrolet and Moore Chevrolet. There are seven Chevrolet dealerships located in the area which surrounds the Jacksonville MDA: Roberts Chevrolet (located in Green Cove Springs), Wilson Chevrolet (located in St. Augustine), St. Johns Chevrolet (located in Palatka), Ken Reagh Chevrolet (located in MacClenny), Wells Chevrolet (located in Starke), Gasgarth Chevrolet (located in Fernandina Beach) and Bennett Chevrolet (located in Kingsland, Georgia). The Jacksonville MDA is divided by Chevrolet into six "Areas of Geographic Sales and Service Advantage" (hereinafter referred to as "AGSSA"). AGSSA's are comprised of census tracts. If a census tract cannot be used in determining the boundaries of an AGSSA, the AGSSA's boundaries are designated by Chevrolet based upon other geographic descriptions such as zip codes, C-towns and NTC's. Five of the six AGSSA'S in the Jacksonville MDA have a Chevrolet dealership located within the AGSSA's boundaries: AGSSA Chevrolet Dealership Hull Hawkins Nimnicht Hamm Moore The Chevrolet dealerships located within the Jacksonville MDA are given a competitive advantage within the AGSSA that the dealership is located in because of the geographic location of the dealership. AGSSA 6 does not have a Chevrolet dealership located within its boundaries. Stella is proposing to operate a Chevrolet dealership within AGSSA 6. Roberts has been assigned primary responsibility by Chevrolet for servicing Clay County. When consumer buying habits, as evidenced by vehicle sales and registration locations, are considered, Roberts is the only dealer located on the fringes of the Jacksonville MDA whose market area should be considered as part of an interconnected homogeneous shopping area with the Jacksonville MDA. The area surrounding Roberts should be included as part of the relevant "community or territory" in this case. Taking into account geographic factors which are considered in defining an AGSSA, an area identified by GM as "Area 14" should be assigned to Roberts for inclusion as part of the relevant "community or territory" in this case. GM and the Chevrolet dealerships located within the Jacksonville MDA have entered into Dealer Sales and Service Agreements (hereinafter referred to as the "Dealer Agreement"). The Dealer Agreement establishes the terms of the business relationship between GM and a dealer. Among other things, a Dealer Agreement provides the following general explanation of the purpose of the Dealer Agreement: The purpose of this Agreement is to establish Dealer as an authorized dealer for Chevrolet motor vehicles, to establish the location from which Dealer will operate and to identify the individual Dealer Operator and owner(s) of Dealer on whom General Motors relies in entering into this Agreement. This is a personal service contract setting forth the rights and obligations of Dealer and its approved Dealer Operator and owner(s) and of General Motors relating to the sale and service of Chevrolet motor vehicles and related Parts and Accessories. Among other things, the Dealer Agreement establishes a method of evaluating the performance of a dealer for purposes of determining the dealer's compliance with the Dealer Agreement. The Dealer Agreements entered into with the Respondent dealers do not specifically deal with the question of what constitutes the "community or territory" for purposes of this case or provide that the Jacksonville MDA should be considered the "community or territory" in this case. Nor did the evidence presented in this case establish that the relevant "community or territory" in this case should be limited to the Jacksonville MDA. GM conducted a survey of the Jacksonville MDA. The results of the survey were issued in 1987. In the survey GM concluded that an additional dealership was needed in AGSSA 6. The geographic area of AGSSA 6 for purposes of the survey was different from the geographic area of AGSSA 6 relied upon by GM during the formal hearing of this case. The evidence failed to prove, however, that AGSSA 6 as defined by GM during the formal hearing was not a proper designation for purposes of this case. AGSSA 6 as defined during the formal hearing was proper and should be included within the relevant "community or territory." AGSSA's 1 through 6 and Area 14 constitute a single interconnected market for Chevrolets, based upon consumer buying habits. Based upon this fact and a consideration of vehicle shopping areas and road networks, AGSSA's 1 through 6 and Area 14 (hereinafter referred to as the "Territory"), constitutes the "community or territory" for purposes of the this proceeding. GM has not contended nor proved that the dealers in the Territory have not complied with the terms of their Dealership Agreements with GM. Instead, GM has contended and proved that existing dealers are not providing adequate representation in AGSSA 6. Chevrolet's market penetration in the nation as a whole is represented by national averages. Chevrolet's national averages include adequately and inadequately represented markets. National average market penetration rates are an appropriate starting point to develop a standard to determine whether Chevrolet dealers located in the Territory are providing adequate representation. The Respondents have argued that use of national average penetration rates is improper. Although it is true that Single Dealer Areas, which are included in determining national penetration rates, have a higher penetration rate than MDAs such as the Jacksonville MDA, the evidence proved that national averages are a proper standard to apply in this case. National averages include adequately and inadequately represented Single Dealer Areas and MDAs. Approximately one-half of Chevrolet's Florida markets exceeded national average penetration rates during 1987 and the first six months of 1988. National averages are therefore achievable by Florida Chevrolet markets. AGSSA 6 ranked near the bottom of all Florida markets in penetration rates for cars and trucks. The Territory also ranked in the bottom half. The market penetration rates for AGSSA 6 and the Territory during 1987 and the first six months of 1988 were below national average: AGSSA 6's rate during 1987 was only 59% of national average for cars and 77% for trucks; AGSSA 6's rate during the first six months of 1988 was only 55% of national average for cars and 75% for trucks. Any given market, including the Territory and/or AGSSA 6, can have unique characteristics which affect the buying habits of the population of the market. GM presented evidence concerning a number of these characteristics: product popularity, age and income. Product preference, age and income statistics of AGSSA 6 and the Territory are not significantly different from product popularity, age and income nationally. This supports a conclusion that national averages are an appropriate standard to apply in this case. The relative popularity of various types of vehicles in AGSSA 6 and the Territory is almost the same as popularity of the same vehicles nationally. This fact suggests that unique demographic characteristics in AGSSA 6 or the Territory do not justify or explain the difference in penetration rates for AGSSA 6 and/or the Territory compared with national averages. When the various age groups of new vehicle buyers are compared with the same age groups nationwide, there is no significant difference which explains the lower penetration rate of AGSSA 6 and/or the Territory. This supports a conclusion that national averages are an appropriate standard to apply in this case. A comparison of the income of residents of AGSSA 6 and the Territory with incomes nationwide also supports a conclusion that national averages are an appropriate standard to apply in this case. Various parts of the Territory have equaled or exceeded national penetration rates, supporting application of national averages as the appropriate standard. AGSSA 6 has ranked last in the Territory since 1985. AGSSA 6's averages have been below the national averages, Florida averages and the Territory's averages. A significant difference between AGSSA 6 and the rest of the Territory is the difference in the distances which residents of AGSSA 6 have to travel to a Chevrolet dealership compared to the distances other residents of the Territory must travel. AGSSA 6 residents must travel, on average, almost twice as far. When AGSSA 6's performance is compared with national averages, AGSSA 6's efficiency from 1985 through the first six months of 1988 was only 65 to 70%. Increases in truck penetration during 1987 and the first six months of 1988 were offset by decreases in car penetration. If fleet opportunities, expected penetration, Florida averages, or Territory averages are taken into account the same lack of efficiency is evidenced in AGSSA 6. The population in the Territory has steadily increased since 1970. Households have nearly doubled. In AGSSA 6 households have increased four times. The density of the registration of vehicles generally follows the density of population and households. Between 1982 and 1987, new vehicle registrations have increased 74% in the Territory and 84% in AGSSA 6. During 1988 household income in the Territory generally exceeded $15,000.00. AGSSA 5, an AGSSA with a Chevrolet dealership, had the highest household income of $38,844.00. AGSSA 5 also had the highest penetration rate for Chevrolet. AGSSA 2 was the lowest AGSSA with a Chevrolet dealership with household income of $24,237.00. AGSSA 2 still had the second highest penetration rate for Chevrolet. AGSSA 6, without a Chevrolet dealership, had household income of $39,874.00. Despite its high household income, AGSSA 6 had the lowest Chevrolet penetration rate. Since 1980, the employment rate for an area roughly equivalent to the Territory increased 42%. The employment rate for an area roughly equivalent to AGSSA 6 increased 69%. The increases in population, households and employment in AGSSA 6 represent greater opportunity for vehicle sales. Despite this growth in AGSSA 6 and the population, household and employment increases in the Territory, the number of Chevrolet dealerships in the Territory has remained the same since 1960: six (five in the Jacksonville MDA). When all Florida markets are looked at, the number of markets in which Chevrolet has exceeded national averages has decreased if industry registrations as a whole increased above 6,000 retail industry registrations per dealer. In markets between 1,500 and 6,000 retail industry registrations per dealer, Chevrolet registrations are slightly above national average. Using 6,000 retail registrations as a guideline supports a conclusion that there is need for an additional Chevrolet dealership in the Territory. Looking at just AGSSA 3 and 6 and Area 14 supports the same finding. Competition in the Territory is extremely high. Chevrolet dealers in the Jacksonville MDA maintain one of the largest advertising budgets of any group of Chevrolet dealers. The boundaries of the AGSSA's within the Territory do not prevent the existing dealers from selling Chevrolets to residents of other AGSSA's or even from outside the Territory. The distance of residences from a dealership, however, does affect the ability of a dealer to effectively penetrate those residences. The distances from existing dealerships to the proposed new Chevrolet dealership in AGSSA 6 range from ten miles to over twenty miles. These distances adversely affect Chevrolet's ability to penetrate AGSSA 6. Locating a new Chevrolet dealership in AGSSA 6 would significantly improve the convenience in AGSSA 6 for Chevrolet over competing brands and improve its market share. AGSSA 6 is an identifiable plot. AGSSA 6 is not receiving adequate representation by existing dealers. GM presented evidence of four markets in Florida where the introduction of a new dealership was followed by an increase in Chevrolet penetration rates: Crystal River, Eustis, West Palm Beach and Hudson. The introduction of a new Chevrolet dealership into AGSSA 6 should increase Chevrolet's penetration rate in AGSSA 6. There are sufficient lost sales opportunities in AGSSA 6 to warrant an additional Chevrolet dealership. The Respondents unsuccessfully attempted to prove that there was no lost opportunity. The Respondents' evidence failed to take into account truck lost opportunities. The Respondents presented evidence in an effort to prove that Chevrolet performs well in areas where the population has certain characteristics and that AGSSA 6's population does not have those characteristics. The Respondents conclude from their analysis that Chevrolet sales in AGSSA 6 are as high as can be expected because of the characteristics of the residents of AGSSA 6. The Respondents' position is rejected. The Respondents identified an area as AGSSA 6 which was different from the area designated as AGSSA 6 for this proceeding. The Respondents also assumed that Stella would be located at a site different from the site it is proposing. The Respondents presented evidence concerning efforts by other Chevrolet dealerships to relocate within the Jacksonville MDA. Whether there are better methods of improving Chevrolet's performance in AGSSA 6 is not at issue in this proceeding. The only issue is whether existing Chevrolet dealerships are providing adequate representation in the Territory for Chevrolet. The Respondents also presented evidence in an effort to prove that Stella was selected to provide the new dealership because of Mr. Stella's relationship with officials at Chevrolet. The Respondents' continued arguments concerning this point ignore the evidence in this case and are rejected.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be issued approving the application of Stella to establish a new Chevrolet dealership at 1180 South Blanding Boulevard, Orange Park, Clay County, Florida. DONE and ENTERED this 30th day of January, 1990, in Tallahassee, Florida. LARRY J. SARTIN 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 30th day of January, 1990. APPENDIX TO RECOMMENDED ORDER GM and Roberts and Nimnicht have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. GM's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 3-7. 2 12. 3 8-9 and 13. 4 19. 5 22. 6 23. 7 24. 8 25. 9 Hereby accepted. 10-11 26. 12 27. 13 29-30. 14 See 44. 15 29. 16 29-30. 17 See 31. 18-19 32. 20 33. 21 34. 22 35. 23 See 36-37. 24 See 39. 25 See 38-40. 26-27 See 44. Not supported by the weight of the evidence. See 43. Hereby accepted. See 44. 32 See 14-17. 33 45. See 18. 34 Hereby accepted. 35 See 21. 36-43 Hereby generally accepted. Dr. Matthews' analysis was not persuasive. 44 45. 45 Statement of a witnesses position or not supported by the weight of the evidence. 46 See 18 and 45. 47-48 Hereby accepted. 49-50 Summary of testimony and argument. 51-54 Although partially true, the issue in this case is not whether there is a better way for GM to achieve greater representation through the existing dealers. These proposed findings of fact are not relevant to the issue in this proceeding. Roberts' and Nimnicht's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1-2 No proposed findings of fact were identified as paragraphs 1 or 2. 3 See 14-17. The last sentence is not relevant to this proceeding. 4 4. 5 See 14-17. The last sentence is not relevant to this proceeding. 6 18. 7-8 Not relevant. 9-10 Not supported by the weight of the evidence. 11 Although the second sentence is correct, the weight of the evidence does not support this proposed finding of fact. 12-17 Although there are portions of Dr. Ostlund's and Dr. Matthews' testimony that was acceptable, the overall finding of facts which the Respondent's argue Dr. Ostlund's and Dr. Matthews' testimony proved are rejected in favor of Mr. Anderson's testimony. 18-20 Not supported by the weight of the evidence. Although generally true, Chevrolet's penetration in the Territory and AGSSA 6 is still below national averages. Although generally true, this proposed finding of fact does not prove the ultimate facts it is suggested it proves. Not supported by the weight of the evidence. The first sentence is accepted. The last sentence is not supported by the weight of the evidence. 25 38. 26 6-7. 27 Hereby accepted. 28-29 Not relevant to this proceeding. 30 See 38. The last two sentences are not relevant. 31-33 Although generally true, not relevant to this proceeding. 34-35 Not supported by the weight of the evidence. 36-38 Not supported by the weight of the evidence. Not relevant. Not relevant or supported by the weight of the evidence. 41-42 Not supported by the weight of the evidence. 43-44 Although generally true, the conclusion reached by the Respondents is not supported by the weight of the evidence. 45-48 Not supported by the weight of the evidence. 49--50 Although partially true, the conclusion reached by the Respondents is not supported by the weight of the evidence. 51 Although GM did make such an argument, it was not a "fallback position." Nor was the argument "unavailing." 52-53 Not supported by the weight of the evidence. See 21. 54 Not relevant or not supported by the weight of the evidence. 55-59 See 21. Not supported by the weight of the evidence. Summary of GM position or not supported by the weight of the evidence. Does not prove the position advanced by the Respondents based upon the weight of the evidence. 62-68 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 69 Hereby accepted. 70-71 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 72-73 Not supported by the weight of the evidence. 74-78 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. 79 Not supported by the weight of the evidence. 80-89 The conclusions reached by the Respondents based upon regression analysis were not supported by the weight of the evidence. 90-101 Although these proposed findings of fact may be generally true, the issue in this case is not whether there is a better way for GM to achieve greater representation through the existing dealers. These proposed findings of fact are not relevant to the issue in this proceeding. 102 Not supported by the weight of the evidence. 103-113 Not supported by the weight of the evidence. Although parts of these findings of fact were proved, the conclusion that the Respondents' argue should be reached ignores the reality of the evidence presented. 114-116 Although partially true, the conclusions reached by the Respondents are not supported by the weight of the evidence. COPIES FURNISHED: Charles J. Brantley, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Room B-439, Neil Kirkman Building Tallahassee, Florida 32399-0500 William Kelley, Esquire David Brown, Esquire 55 East Monroe Street Suite 4620 Chicago, Illinois 60603 Dean Bunch, Esquire 101 North Monroe Street Suite 900 Tallahassee, Florida 32301 Edward W. Risko, Esquire Office of General Counsel General Motors Corporation New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232 Stephen J. Calvacca, Esquire Vasilis C. Katsafans, Esquire Post Office Box 1873 Orlando, Florida 32802 Louis H. Anders, Jr., Esquire D. Frank Davis, Esquire Joseph W. Letzer, Esquire Robert H. Rutherford, Esquire Burr & Forman 3000 Southtrust Tower Birmingham, Alabama 35203 Michael J. Alderman, Esquire Office of General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500 Dealer License Section Room A310 Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
The Issue 1. Whether the applications which are the subjects of DOAH Case Nos. 96-4970 and 96-4971 should be granted. 2a. Whether the respondents in DOAH Case No. 96-5525 committed the violations alleged in the Amended Administrative Complaint issued in that case. 2b. If so, what sanctions should be imposed.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: The Department is a state government licensing and regulatory agency, which, among other things issues motor vehicle retail installment seller (MVRIS) licenses. Jack Bowshier Buick-Pontiac-GMC Trucks, Inc. (Bowshier Buick) is a corporation organized under the laws of the State of Florida. Bowshier Buick formerly operated an automobile dealership at 2445 Southeast Federal Highway in Stuart, Florida, and held a MVRIS license issued by the Department. At all times material to the instant cases, Jack A. Bowshier, Sr., in his capacity as owner/director/president, and Jack D. Bowshier, Jr., in his capacity as general manager/director, exercised control over the policies and practices of Bowshier Buick. On or about October 25, 1995, the Department began an investigation into the business affairs of Bowshier Buick. The Department's investigation revealed, among other things, that Bowshier Buick engaged in the practice of reselling "trade-ins" without timely satisfying the existing liens on the vehicles. Such practice, which was the product of cash flow problems the dealership was experiencing, adversely affected the credit ratings of those who had "traded-in" these vehicles and prevented the ultimate purchasers of the vehicles from timely obtaining new certificates of title. In the "deal jackets" that the dealership created to place the paperwork relating to the transactions involving these "traded-in" vehicles, the Department's investigators found copies of checks which were made payable to those who held the liens on these "trade-in" vehicles. The investigators subsequently discovered, however, that these checks had not been timely sent to the lienholders, but instead had been placed in the desk drawer of the dealership's office manager, Christine Casale. On several occasions, when customers who had "traded-in" vehicles complained to the dealership that the liens on their vehicles had not been satisfied, they were told by Casale that the checks to satisfy the liens had been mailed to the lienholders, when in fact they had not been. Such misrepresentations were made in an effort to mislead and deceive these complaining customers. In making these fraudulent misrepresentations, Casale acted pursuant to instructions that had been given to her by Jack A. Bowshier, Sr., and Jack D. Bowshier, Jr. On November 3, 1995, the Department issued an Emergency Immediate Temporary Final Order to Cease and Desist and Suspension of [Bowshier Buick's] Motor Vehicle Retail Installment Seller's License (Emergency Order) in Administrative Proceeding Nos. 4287-F-11/95, 4287a-F-11/95, and 4287b-F-1195. Bowshier Buick, Jack A. Bowshier, Sr., and Jack D. Bowshier, Jr., were named as respondents in the Emergency Order. The Department alleged in the Emergency Order that they had committed the following violations of the law for which they are subject to the penalties as set forth in Section 520.995, Florida Statutes: Violation of Section 520.995(1)(b), Florida Statutes, in that they have perpetrated fraud, misrepresentation, deceit, or gross negligence in retail installment transactions, regardless of reliance by or damage to the buyer. Violation of Section 520.995(1)(b), Florida Statutes, in that they have committed criminal conduct in the course of their Motor Vehicle Retail Installment Sellers business. Violation of Section 520.995(3)(d), Florida Statutes, in that they have demonstrated a lack of financial responsibility. On November 13, 1995, an Administrative Complaint for Imposition of Sanctions was filed against Bowshier Buick, Jack A. Bowshier, Sr., and Jack D. Bowshier, Jr. Jack A. Bowshier, Sr., subsequently engaged in negotiations with William Chamberlain, the owner and president of WAFC Holdings, Inc. (WAFC) concerning the sale of the assets of Bowshier Buick to WAFC in return for, among other things, the assets of two Chamberlain-owned corporations, South Florida Auto Exchange, Inc., d/b/a Palm Beach Motors, and Stuart Motors, Inc., d/b/a Stuart Motors, that were in the business of selling pre- owned motor vehicles in the West Palm Beach and Stuart areas, respectively. On December 5, 1995, Jack A. Bowshier, Sr., and Chamberlain signed paperwork (Sale/Purchase Agreements) in which their corporations agreed to consummate such a transaction. On that same date, they also, on behalf of their corporations, executed Interim Management Agreements, pursuant to which WAFC took over the management of Bowshier Buick's dealership at 2445 Southeast Federal Highway in Stuart and Bowshier Buick assumed responsibility for the management of Palm Beach Motors and Stuart Motors, effective December 5, 1995. Later that month, WPAS, Inc. (WPAS) and DAB, Inc. (DAB) were formed. At all times material to the instant case, Jack A. Bowshier, Sr., has been the sole owner, president and director of WPAS, and, as such, has directed the operations of the corporation. At all times material to the instant case, WPAS maintained its principal place of business at 2815 Okeechobee Boulevard in West Palm Beach, the location of Palm Beach Motors. At all times material to the instant case, Jack D. Bowshier, Jr., was the general manager of Palm Beach Motors. At all times material to the instant case, Jack A. Bowshier, Sr., has been the sole owner, president and director of DAB, and, as such, has directed the operations of the corporation At all times material to the instant case, DAB has maintained its principal place of business at 2695 Southeast Federal Highway in Stuart, the location of Stuart Motors. At all times material to the instant case, Todd Bowshier, has been the general manager of Stuart Motors. A Stipulation for Settlement and Consent to Final Order in Administrative Proceeding Nos. 4287-F-11/95, 4287a-F-11/95, and 4287b-F-1195 (Stipulation) was executed by Jack A. Bowshier, Sr., on behalf of Bowshier Buick and on his own behalf, and by Jack D. Bowshier, Jr., on January 31, 1996, and by Thomas Stouffer, the Regional Director of the Department's Southeast Florida Regional Office, on behalf of the Department, on February 2, 1996. It provided as follows: The State of Florida, Department of Banking and Finance, Division of Finance (hereinafter "Department"), and Respondents Jack Bowshier Buick-Pontiac-GMC Trucks, Inc. (hereinafter "Bowshier Buick"), Jack A. Bowshier (hereinafter "JA Bowshier"), and Jack D. Bowshier (hereinafter "JD Bowshier"), in consideration of the mutual promises herein contained and other good and valuable consideration hereby agree to enter into this Stipulation for Settlement and Consent to Final Order as follows: At all times material hereto Bowshier Buick has been a Florida corporation with its principal place of business located at 2445 SE Federal Highway, Stuart, FL 34994. On or about December 25, 1988 Bowshier Buick was issued a Motor Vehicle Retail Installment Seller's License by the Department, which remains active to date. At all times material hereto JA Bowshier has been a Director, owner and control person of Bowshier Buick. In these capacities JA Bowshier creates, controls, formulates, directs and personally participates in the acts, practices and affairs of Bowshier Buick. At all times material hereto JD Bowshier has been a Director and General Manager of Bowshier Buick. In these capacities JD Bowshier creates, controls, formulates, directs and personally participates in the acts, practices and affairs of Bowshier Buick. On or about October 25, 1995, the Department received information that it believed indicated that Bowshier Buick had accepted motor vehicles as "trade-ins" and resold these vehicles without first satisfying their existing liens. The Department was concerned that purchasers of these motor vehicles could not be issued Certificates of Title. As a result of this information, Department examiners/investigators, on three occasions, visited Bowshier Buick's principal office pursuant to Section 520.996, Florida Statutes. They concluded that Bowshier Buick was engaging in acts and/or practices constituting violations of Chapter 520, Florida Statutes. On November 3, 1995, the Department filed an Emergency Immediate Temporary Final Order to Cease and Desist and Suspension of Motor Vehicle Retail Installment Seller's License (hereinafter "Emergency Order") which was followed, on November 13, 1995, with an Administrative Complaint for Imposition of Sanctions and Notice of Rights (hereinafter "Complaint"). Respondents agree that they have been duly served with both the Emergency Order and Complaint and that the Department has jurisdiction over them and this case. The Department agrees that Respondents timely filed their Answer, Affirmative Defenses and Petition for Formal Proceedings in response to the Complaint. The Department herein makes the following findings of fact, upon which the penalties imposed are based, but which findings Respondents neither admit nor deny: There were approximately thirty trade-ins taken by Bowshier Buick for which the dealership had not satisfied existing liens. Some of these vehicles were resold without first satisfying their existing liens. Some customers who traded in their motor vehicles suffered adverse credit ratings because of the failure of Bowshier Buick to pay off the existing lienholders. Bowshier Buick was experiencing severe cash flow problems. For the month of September, Bowshier Buick incurred a monthly bank charge of $5,000 for dealership bank overdrafts. A total estimated amount of $125,000 in outstanding insufficient funds checks was evident as of November, 1995. Bowshier Buick did not remit premiums collected to the insurance company for credit life, accident & health insurance policies which had been purchased by Bowshier Buick customers. They had not forwarded said premiums for policies purchased by customers since January, 1995. Bowshier Buick records were misleading in that copies of checks made payable to lienholders and in the amount due to satisfy liens were contained within the files for months, when the checks were never delivered and/or funds were never disbursed to the payee. Respondents maintain that subsequent to the Department's filing of its Emergency Order, Bowshier Buick has cooperated with the Department to resolve the lien, title, and premium problems. In an effort to avoid litigation and costs associated therewith, the Department and Respondents now voluntarily agree to enter into this Stipulation for Settlement and Consent to Final Order (hereinafter "Stipulation") addressing the violations raised by the Emergency Order and the Complaint. The Respondents and the Department agree as follows: Respondents will bring and keep all books and records up to date and maintain them accurately and in compliance with the law. Respondents will maintain and keep current all forms required by the automobile dealer's manual, Department of Motor Vehicles and the Department, including the title log. Respondents will keep all title work and registrations current and in compliance with the law. Respondents will write any and all insurance policies and remit all premiums in compliance with the law, including but not limited to credit life, accident and health insurance. Respondents will dismiss with prejudice any and all actions pending in Circuit Court and the District Court of Appeal, not file any further actions in any court which in any fashion or respect arise or tend to arise out of the facts presented by the Emergency Order or the Complaint (see paragraph 6 herein) and, indemnify and hold the Department harmless if such further actions are filed. Respondents shall, within 30 days from the date of execution of this stipulation, reimburse any and all customers who made payment(s) on past due liens which they did not owe. Within 45 days, verifiable proof of reimbursement shall be provided to the Department. Respondent shall, within 90 days from the date of execution of this stipulation, assist any and all customers who have been affected by Respondents untimely payment of liens in repairing their credit. Their assistance shall include, but shall not be limited to, sending letters to lenders wherein Respondents assume all responsibility for the late lien payments. Within 105 days, verifiable proof of such assistance shall be provided to the Department. Respondents shall, within 30 days from the date of execution of this stipulation, reimburse any and all customers due refunds on credit life, accident and health insurance. Within 45 days, verifiable proof of such assistance shall be provided to the Department. Respondents shall, immediately upon execution of this stipulation, pay off any and all outstanding past due customer liens, as well as all liens that have been improperly levied upon customers. Upon repayment, verifiable proof thereof shall be provided to the Department. Respondents shall operate the dealership, at all times in compliance with the law. Respondents shall pay to the Department by cashiers check, within 30 days of the date of execution of this stipulation, $5,000, representing costs of the Department's examination/investigation in this case. Respondents agree to sell Bowshier Buick to WAFC Holdings, Inc., its agents, nominees or assigns. If the sale is cancelled or not consummated within 6 months from the date of the Final Order herein, for any reason: 1.) Respondents will immediately notify the Department, Diane Leeds, Esq., in writing via certified mail, return receipt requested, of that fact. 2.) Respondents' Departmental license(s) shall be placed upon and remain on probation for a period of three (3) years, commencing on the date the sale is cancelled or not consummated. For the duration of the probationary period, Respondents agree to: Provide the Department, on a monthly basis, prior to the 10th day of each month, a copy of the dealership "finance log" attached hereto and made a part hereof as Exhibit "A." Allow the Department to make unannounced visits to the dealership, as frequently as the Department deems necessary, to assure that Respondents are operating in compliance with the law. Prior to the termination of the probationary period the dealership shall have, in reserve, a minimum of three (3) weeks supply of operating capital, to be computed based upon the operating expenses of the dealership at that time, and provide verifiable proof thereof to the Department. The Final Order incorporating the terms of this stipulation constitutes final agency action by the Department for which the Department may seek enforcement pursuant to the provisions of Chapters 120 and 520, Florida Statutes, and Respondents knowingly and voluntarily agree to waive any right to: 1. A formal hearing; 2. To contest the finality of the Final Order; 3. To contest the validity of any term, condition, obligation or duty created hereby; 4. To separately stated Findings of Fact and Conclusions of Law; and 5. To administrative or judicial review hereof. Respondents acknowledge, concur and stipulate that their failure to comply with any of the terms, obligations and conditions of this stipulation and the Final Order adopting it, shall result in their being deemed to be in violation of a written agreement and Final Order issued pursuant to the provisions of Chapters 120 and 520, Florida Statutes, and Respondents stipulate and agree to the issuance of an emergency suspension of their license(s) and a cease and desist order. Respondents waive all rights to prior notice and hearing before entry of such order. However, nothing herein limits Respondents' right to contest any finding or determination made by the Department concerning their alleged failure to comply with any of the terms and provisions of this stipulation or of the Final Order. Respondents waive and release the Department and its agents, representatives, and employees from any and all causes of action they may have including without limitations, any right to attorney fees arising out of this proceeding; libel; slander; violation of a constitutionally protected right; intentional tortious interference with advantageous contractual relationship and the like; arising prior to or out of the filing of the Complaint, Emergency Order, the execution of the stipulation and entry of the Final Order. The Department agrees to accept this release without acknowledging, and expressly denies, that any such causes of action may exist. Respondents further agree that nothing contained herein shall be construed to waive or restrict the Department's right to initiate any legal action based upon facts or information which come to the Department's attention subsequent to the execution of this stipulation and the Department further agrees that nothing contained herein shall be construed to waive or restrict the Respondents' rights to defend any subsequent legal action. The Department and Respondents each agree to bear their own costs and attorneys' fees incurred in connection with this proceeding and entry of the Final Order, except as stated in paragraph 11k. herein. The Department and Respondents represent that the officer(s) executing this stipulation are authorized to act on behalf of the corporations and agency for settlement purposes. The Department and Respondents acknowledge that they have read this stipulation and fully understand the rights, obligations, terms, conditions, duties, and responsibilities with respect to its contents. Execution of this stipulation by the Department shall not be construed as a final acceptance of its terms and conditions absent entry of a Final Order by the Comptroller adopting same, however, the existing Emergency Order shall be null and void immediately upon entry of the Final Order by the Comptroller. The undersigned parties hereby acknowledge and agree to the terms and conditions of the foregoing stipulation by written consent on the last date executed below, subject to final approval by the Comptroller. On February 16, 1996, a Final Order was issued in Administrative Proceeding Nos. 4287-F-11/95, 4287a-F-11/95, and 4287b-F-1195 adopting the parties' Stipulation and requiring the parties to comply with the Stipulation's terms and conditions. The purchases of the assets of Bowshier Buick, South Florida Auto Exchange, Inc., and Stuart Motors, Inc., were finalized in March of 1996. On March 18, 1996, WPAS filed with the Department an Application for Motor Vehicle Retail Installment Seller License (WPAS's Application). In its Application, WPAS indicated that it was doing business as Palm Beach Motors at 2815 Okeechobee Boulevard in West Palm Beach. In response to Question 10 on the application form, which read as follows, WPAS answered "yes" and appended to its completed Application a copy of the Stipulation filed in Administrative Proceeding Nos. 4287-F-11/95, 4287a-F- 11/95, and 4287b-F-1195: Has the applicant, any of the persons listed herein, or any person with power to direct the management or policies of the applicant had a license, registration, or the equivalent, to practice any profession or occupation revoked, suspended, or otherwise acted against? Yes No (If yes, list such persons, give details, and provide a copy of the allegations and documentation of the final disposition of the case.) WPAS's Application was signed by Jack A. Bowshier, Sr. On April 8, 1996, DAB filed with the Department an Application for Motor Vehicle Retail Installment Seller License (DAB's Application). In its Application, which was signed by Jack A. Bowshier, Sr., DAB indicated that it was doing business as Stuart Motors at 2695 Southeast Federal Highway in Stuart. In response to Question 10 on the application form, DAB mistakenly answered "no." Neither a copy of the Stipulation filed in Administrative Proceeding Nos. 4287-F-11/95, 4287a-F-11/95, and 4287b-F-1195, nor a copy of the Final Order entered in these proceedings, was appended to DAB's completed Application. The Department granted DAB's Application and issued DAB a MVRIS license, effective April 11, 1996. On May 1, 1996, Jack A. Bowshier, Sr., sent the following letter to the Department: I am voluntarily surrendering my license from the Department of Banking and Finance issued to DAB, Inc., D/B/A Stuart Motors to you today due to the fact that we have made an honest mistake in the application for the license. I apologize for this mistake. I am reapplying for the license for this corporation. I ask that you please reconsider your position. On that same day, May 1, 1996, Jack A. Bowshier, Sr., on behalf of WPAS, and William Chamberlain, on behalf of South Florida Auto Exchange, Inc., executed an agreement (WPAS Use of License Agreement), which provided as follows: AGREEMENT made this 1st day of May, 1996 by and between SOUTH FLORIDA AUTO EXCHANGE, INC., DBA PALM BEACH MOTORS, INC., a Florida corporation ("PBM") AND WPAS, INC., a Florida corporation ("Operator"). WHEREAS, PBM and Operator, or Operator's affiliate, entered into an agreement for sale and purchase of assets dated December 5, 1995 (the "Asset Purchase Agreement") for the purchase and sale of certain assets of PBM located at 2815 Okeechobee Blvd., West Palm Beach, Florida (the "Dealership"); and WHEREAS, PBM and Operator closed on the sale and purchase on or about the 19th day of March, 1996; and WHEREAS, Operator has submitted an application (the "Application") to the State of Florida, Comptroller's Office, Department of Banking (the "Department") for a license to originate financing in connection with the sale of automobiles at the Dealership, which Application remains pending with the Department; and WHEREAS, Operator has not yet received a license from the Department pursuant to the Application; and WHEREAS, Operator has requested PBM to allow Operator to continue to use PBM's license (the "PBM License") from the Department at the Dealership pending the Department's action on Operator's Application; and WHEREAS, PBM, after obtaining the verbal approval of the Department, has agreed to allow Operator to utilize PBM['s] License at the Dealership on a temporary basis. NOW, THEREFORE, for and in consideration of Ten dollars ($10.00) paid by Operator to PBM, as well as other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged by PBM, the parties agree as follows: The foregoing recitals are true and correct and incorporated herein by reference. PBM hereby authorizes Operator to originate finance paper under the PBM license at the Dealership until the earlier of: PBM notice to Operator of the revocation of such authority, which notice may be given [by] PBM, in PBM's sole and absolute discretion, at any time upon three (3) days prior notice to Operator, upon the Department's disposition of Operator's application, whether such disposition is a granting of a license or the denial of a license, any demand by the Department that Operator cease the use of the PBM license, upon the infraction of any rule or regulation by Operator applicable to the PBM License. Operator agrees to utilize the PBM License only in strict compliance of all applicable rules and regulations, including, but not limited to the rules and regulations of the Department. Operator does hereby agree to indemnify and hold PBM harmless against any claim arising out of the Dealership or Operator's use of the PBM License. This Agreement contains the entire understanding of the parties and may not be changed or modified orally, but only by written instrument signed by the parties hereto. Any notice required or permitted to be given under this Agreement shall be in writing, delivered by certified mail, return receipt requested, or by a national overnight courier service, such as Federal Express, and mailed to the parties at the following address: PBM: c/o Stuart Buick Pontiac GMC 2445 S.E. Federal Highway Stuart, Florida 34994 Operator: 2815 Okeechobee Blvd. West Palm Beach, Florida 33409 This agreement shall be binding upon the parties, their successors and assigns. This Agreement shall be governed by the laws of the State of Florida. In the event litigation is instituted in connection with the enforcement of the terms of this Agreement, the prevailing party shall be entitled to an award of costs and attorneys fees, including attorneys fees and costs on appeal. The "PBM License" referenced in the WPAS Use of License Agreement had an "expiration date" of December 31, 1996. An agreement between DAB and Stuart Motors, Inc. (DAB Use of License Agreement) containing provisions substantially identical to those in the WPAS Use of License Agreement was executed by Jack A. Bowshier, Sr. (on behalf of DAB) and Chamberlain (on behalf of Stuart Motors, Inc.) also on May 1, 1996. The MVRIS license which was the subject of the DAB Use of License Agreement, like the "PBM License," had an expiration date of December 31, 1996. The WPAS and DAB Use of License Agreements were both drafted by Chamberlain's attorney, Michael Botos. Before drafting these agreements, Botos had spoken to Diane Leeds, an attorney with the Department. Botos erroneously believed that Leeds, acting on behalf of the Department, had given the "verbal approval" referenced in the agreements. On May 6, 1996, Jack A. Bowshier, Sr., filed a corrected Application for Motor Vehicle Retail Installment Seller License on behalf of DAB (DAB's Second Application). Department investigators visited Palm Beach Motors on July 19, 1996. They discovered, from an examination of WPAS's records, that WPAS (acting through Jack D. Bowshier, Jr., the general manager of Palm Beach Motors) had been involved in retail installment transactions with retail buyers of its vehicles, notwithstanding that it did not have a license from the Department authorizing it to engage in such activity. Ten retail installment contracts (signed by Jack D. Bowshier, Jr., on behalf of WPAS) were found and reviewed. In four of these ten retail installment transactions, the buyer was charged a simple interest rate in excess of 18 percent per annum. By letter mailed on July 19, 1996, the Department notified WPAS of its intention to deny WPAS's Application for a Motor Vehicle Installment Seller License. In its notice, the Department advised that its proposed denial was based upon, among other things, WPAS's engaging in the business of a motor vehicle retail installment seller without a license, in violation of Section 520.03(1), Florida Statutes. Department investigators visited Stuart Motors on July 22, 1996. They discovered, from an examination of DAB's records, that DAB (acting through Todd Bowshier, the general manager of Stuart Motors) had been involved in retail installment transactions with retail buyers of its vehicles, notwithstanding that it did not have a license from the Department authorizing it to engage in such activity. Ten retail installment contracts (signed by Todd Bowshier on behalf of DAB) were found and reviewed. In all of these ten retail installment transactions, the buyer was charged a simple interest rate of 19.95 percent per annum. On or about July 26, 1996, Jack A. Bowshier, Sr., met with Department representatives, including Diane Leeds, to discuss the Department's proposed action. At the meeting, Jack A. Bowshier, Sr., was told that "he could not finance without a license at that time under anybody's license." Nonetheless, following the meeting, WPAS (doing business as Palm Beach Motors) and DAB (doing business as Stuart Motors), relying on the legal advice of their attorney (and acting through their general managers), continued to operate as motor vehicle retail installment sellers without having MVRIS licenses of their own (as they had done since May of that year, following the execution of the WPAS and DAB Use of License Agreements). In addition, they continued to knowingly charge buyers simple interest rates in excess of 18 percent per annum. Jack A. Bowshier, Sr., was at all material times aware of these activities, which continued at Palm Beach Motors until approximately September or October of 1996, when the used car operation was sold,1 and continued at Stuart Motors until early 1997. By letter mailed on October 1, 1996, the Department notified DAB of its intention to deny DAB's Second Application for a Motor Vehicle Installment Seller License. In its notice, the Department advised that its proposed denial was based upon, among other things, DAB's engaging in the business of a motor vehicle retail installment seller without a license, in violation of Section 520.03(1), Florida Statutes. Department investigators returned to Stuart Motors on October 6, 1996, to examine DAB's records. Their examination revealed nine retail installment contracts that DAB had entered into since the investigators' July 22, 1996, visit. These contracts were signed by Todd Bowshier on behalf of DAB. In all but one of these retail installment transactions, the buyer was charged a simple interest rate of more than 18 percent per annum. In late January of 1997, personnel from the Office of the State Attorney, 19th Judicial Circuit, assisted by Department personnel, conducted a search (pursuant to a search warrant) of the records maintained by DAB at Stuart Motors. Sixty-four retail installment contracts (signed by Todd Bowshier on behalf of DAB) that DAB had entered into from August 10, 1996, to January 25, 1997, (including eight of the nine contracts that Department investigators had discovered during their October 6, 1996, visit to Stuart Motors) were seized. Thirty-seven of these 64 retail installment transactions took place from August 10, 1996, to October 16, 1996. In all but one of these 37 transactions, the buyer was charged a simple interest rate of more than 18 percent per annum. In all of the post-October 16, 1996, transactions (including eight which occurred after the expiration of the MVRIS license which was the subject of the DAB Use of License Agreement), the buyer was charged a simple interest rate of 17.99 percent. It was not until the Bowshiers received a copy of the following letter, dated February 13, 1997, the Office of the State Attorney, 19th Judicial Circuit, sent to the Department regarding the "Jack Bowshier investigation" that DAB stopped engaging in the business of a motor vehicle retail installment seller: This letter is in response to your investigation of DAB, Inc. d/b/a Stuart Motors etc. As you are aware I have spent the last three weeks reviewing the events between your Department, which began on March 18, 1996, and the above named suspect. It is apparent from the outset of your investigation that Mr. Bowshier and associates have done everything in their power to continue operating a business and finance automobiles without the appropriate Retail Installment Sellers license. However, it is my opinion that I would have insurmountable proof problems in a criminal prosecution based on the events that have occurred to date. Mr. Bowshier maintains that he can continue writing installment loan contracts because the validity of the denial of his application continues to be the subject of litigation. Mr. Bowshier continues to suggest that this is his position at the advi[c]e of his attorney, Mr. Ronald LaFace. After speaking with Mr. LaFace regarding the above I can see why the suspect would reasonably rely on his attorney's advice. Even to me, Mr. LaFace continues to maintain the position that the denial of the licensure application is "nonfinal." While we know this position is irrelevant to both the Department of Banking and Finance, and the criminal prosecution, it still creates the appearance of a defense which would remove the "criminal intent" aspect of our case. I have an ethical obligation to only prosecute cases in which I believe, based on my training and experience, there is a reasonable chance for a conviction at trial. Because this case has become so diluted in "my attorney told me" and "my understanding was . . .," I cannot ethically go forward with a criminal prosecution and still meet my burden of proof at trial. However, I understand the frustration in wanting to go forward in a case of this nature. With that in mind this letter will serve two purposes. While my declination to prosecute this case up through the date of this letter is final, it is not absolute. This letter will be sent to both Mr. Bowshier (and associates) and Mr. Ronald LaFace. In doing so, it will serve a very particular purpose. It will inform the above (including Mr. LaFace), that I will not prosecute the criminal acts that Mr. Bowshier and associates have committed to date because of the above explained proof problems. However, I will prosecute from this date forward any and all financing that occur[s] by the suspect and his associates without a license. I should make it perfectly clear to Mr. Bowshier and his attorney that it does not matter what their position is regarding the "appeal" of the denial of license, they cannot finance automobiles. Mr. Bowshier and associates should also know that the advice of their attorney to continue writing contracts during the pendency of the licensure "appeal" is wrong. If the suspect and his associates continue to write contracts, it will constitute a criminal act despite the advice of his attorney. I will prosecute Mr. Bowshier and associates if he continues to write contracts without the appropriate licenses pr[e]scribe[d] by law. The "appeal" referenced in the letter was taken after the Department, by letter mailed October 1, 1996, advised DAB of its intention to deny DAB's Application for a Motor Vehicle Installment Seller License. In its letter, the Department advised that its proposed denial was based upon, among other things, DAB's engaging in the business of a motor vehicle retail installment seller without a license, in violation of Section 520.03(1), Florida Statutes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order (1) finding the Bowshiers guilty of the violations alleged in the Amended Administrative Complaint; (2) directing the Bowshiers to cease and desist from committing such violations; (3) imposing jointly and severally upon WPAS, Jack A. Bowshier, Sr., and Jack D. Bowshier, Jr., an administrative fine in the amount of $7,000.00; (4) imposing jointly and severally upon DAB, Jack A. Bowshier, Sr., and Todd Bowshier an administrative fine in the amount of $61,500.00; and (5) denying WPAS's and DAB's applications for licensure. DONE AND ENTERED this 28th day of May, 1998, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 28th day of May, 1998.
Findings Of Fact On July 31, 1986, Petitioner Chevrolet World, Inc. (hereinafter "Chevy World"), filed an application for licensure with the Department of Highway Safety and Motor Vehicles (hereinafter "Department"), seeking to become a licensed Chevrolet dealer in Orlando, Orange County, Florida. Chevy World is owned by Don Mealey, who also owns another Chevrolet dealership in Orlando known as Don Mealey Chevrolet, Inc. The new dealership would be located in a development known as "Lee Vista Center," immediately north of the Orlando International Airport. The Jacksonville Zone for the Chevrolet Division of General Motors (hereinafter "GM"), is divided by GM into MDAs (Multiple Dealer Areas) and SDAs (Single Dealer Areas). There are five MDAs in the Jacksonville Zone: West Palm Beach, Miami, Orlando, Jacksonville, and Tampa. The Orlando MDA consists of all of Orange and Seminole Counties plus two census tracts in the extreme southern portion of Volusia County which are immediately adjacent to Seminole County. There are four Chevrolet dealers currently operating within the boundaries of the Orlando MDA as established by GM: (a) Roger Holler Chevrolet in Winter Park, (b) Don Mealey Chevrolet in Orlando (owned by the owner of the applicant in this case), (c) Century Chevrolet (hereinafter "Century"), in Winter Garden, and (d) Ken Rummel Chevrolet in Sanford. Within each MDA, GM further subdivides the area into AGSSAs (areas of geographic sales and service advantage) and places one dealer in each AGSSA. GM designates five (5) AGSSAs for the Orlando MDA. The open point is located in AGSSA 5. Theoretically, each dealer is supposed to have the greatest opportunity for sales and service in his own AGSSA when compared to other Chevrolet dealers. Although GM lists only four Chevrolet dealers in the Orlando MDA, it is undisputed that more than those four dealers advertise in and serve the Orlando market area. For example, the Southern Bell telephone directory yellow pages for Orlando lists six Chevrolet dealers who advertise in Orlando, and this list does not include Ken Rummel's Chevrolet dealership, which GM does include in the Orlando market area. Additionally, John Larkin, the owner and president of Century and one who is familiar with the competition among dealers in Orlando, testified that there are ten Chevrolet dealerships which advertise in and serve the Orlando market. These include Bill Seidel Chevrolet in Clermont, Florida; Vanganoway Chevrolet in Eustis, Florida; Cecil Clark Chevrolet in Clermont, Florida; Fred Bonson Chevrolet in Deland, Florida; Ken Rummel Chevrolet in Sanford, Florida; Roger Holler Chevrolet in Winter Park, Florida; Don Mealey Chevrolet in Orlando, Florida; Burchfield Chevrolet in St. Cloud, Florida; Sterling Chevrolet in Kissimmee, Florida; and Century in Winter Garden, Florida. This evidence was not disputed by GM. Given this large number of dealers which impact the Orlando market, the market in Orlando for Chevrolet cars is highly competitive. The critical substantive question in this case is whether the existing dealers are adequately serving the market. A proper definition of the market is obviously important. GM failed to prove that its MDA properly defines the relevant market area for this proceeding. It offered no explanation as to why the relevant market is not the Orlando statistical metropolitan area which encompasses a three-county area: Seminole, Orange, and Osceola Counties. In fact, one of GM's own witnesses, Dr. Ronald Rubin, testified that the boundaries of the Orlando statistical metropolitan area would be appropriate parameters for the Orlando market area. Dr. Rubin could not state that the Orlando MDA accurately defines or describes the Orlando market or that AGSSA 5 would actually be the marketing area or community with respect to a new dealer located therein. Given the facts that GM offered no explanation other than its own discretion why its MDA should be smaller in area than the Orlando statistical metropolitan area and that many Chevrolet dealers outside the boundaries of GM's MDA have a significant impact on Chevrolet sales in Orlando, the relevant territory or community is the Orlando statistical metropolitan area and not only the Orlando MDA. The smaller artificially-configured market areas established by GM (Orlando MDA and AGSSA 5) are specifically rejected because they are only a portion of the market area impacted by the Chevrolet dealers in the Orlando statistical metropolitan area and because there was no competent showing by GM that the Orlando MDA and AGSSA 5 bear scrutiny. While an MDA or AGSSA might in an appropriate case be the proper area of scrutiny, GM has not carried its burden of proving that this is such an appropriate case. Because the relevant community or territory is the Orlando statistical metropolitan area, the sales performances and penetration rates for the Chevrolet dealers in Kissimmee, St. Cloud, Eustis, Deland, and Clermont, in addition to the four dealers located in the Orlando MDA, must all be considered in determining whether the existing dealers in the Orlando statistical metropolitan area are adequately representing Chevrolet in that market. GM presented no credible evidence as to the penetration rates in the Orlando statistical metropolitan area by all the dealers who compete there. Consequently, GM has not carried its burden of proving that the existing Chevrolet dealers are not providing adequate representation for GM in the relevant market area. GM's evidence that there were 552 new car in-sells within the Orlando MDA by outside Chevrolet dealers supports a conclusion that the MDA is not the real or relevant market; it does not prove the propositions for which it is cited--(a) that the Chevrolet dealers within the Orlando MDA are not adequately serving the market and/or (b) that the customers are or were dissatisfied with those dealers. There is no evidence in the record to support a conclusion that these 552 customers, or any one of them, were displeased with the Orlando MDA dealers; for example, there was no polling data or other information from those customers offered by GM which would have indicated such displeasure. The number of in-sells into the MDA is more likely the result of dealers within the metropolitan statistical area but outside GM's artificial MDA (e.g., the Chevrolet dealer in Kissimmee, Florida) competing with MDA dealers. Thus, the number of in-sells is probative of a conclusion that GM's artificially- drawn MDA boundaries are skewed and are not indicative of the relevant territory or community for purposes of this proceeding, thereby casting doubt on substantially all of GM's studies and conclusions that penetration rates in the Orlando market area are disproportionately low. Additionally, as proven by the uncontroverted testimony of Dr. Ostlund, the AGSSAs established by GM for the Orlando MDA were not drawn in accordance with GM's own established guidelines. First, AGSSAs are supposed to be determined by and drawn in accordance with natural and man-made barriers or boundaries; however, none of the AGSSAs in the Orlando MDA are divided by or established in accordance with natural or man- made boundaries or barriers. Second, the AGSSAs established by GM are supposed to account for and be established in accordance with shopping patterns; however, there is no analysis in the AGSSA documents for the Orlando MDA concerning non-automotive shopping patterns, and the information concerning automotive shopping patterns does not support the AGSSA lines drawn by GM. Third, contrary to GM's own guidelines, there is no evidence that any of the AGSSA boundaries have been drawn with the factor of traffic flow taken into account. Moreover, the evidence presented by GM clearly indicates that the statistical relationship between the residence of each dealer's customers and the AGSSA boundaries is weak. In other words, each dealer is located within an AGSSA and, according to GM's AGSSA guidelines, is expected primarily to impact the sales area within that AGSSA; however, the actual sales figures for each of the dealers reveal little if any correlation between the location of its customers and the AGSSA boundaries. Again, the appropriateness of the AGSSAs is contraindicated. An AGSSA could, of course, in an appropriate case be a submarket appropriate for scrutiny. The burden of showing the appropriateness is on GM. In a case such as this where GM not only fails to meet its burden but the evidence shows that GM's own standards for drawing AGSSAs have not been followed, it cannot be concluded that the use of any particular AGSSA suggested by GM is appropriate. Consequently, GM's calculations and conclusions, premised upon these AGSSAs, are not supported by credible evidence. Aside from this failure by GM to prove that it properly analyzed the relevant market area, GM failed to take other factors into account in assessing the adequacy of the existing dealers' representation. One of these factors was the closing of one of the four Orlando MDA dealers for most of 1985. From February 1, 1985 to November 1, 1985, Chevrolet was without a dealership in Sanford, Florida, because Ken Rummel was in the process of moving the Chevrolet dealership located there to a new location. While Mr. Anderson admitted that he was aware of Ken Rummel's closure and the probable negative effect this closure would have on market penetration efficiency, his studies did not account for this fact. As testified by Dr. Matthews, a primary flaw in GM's use of national penetration rates to conclude that inadequacy exists in the Orlando market is the lack of any comparative analysis of the different MDAs to determine whether factors peculiar to the Jacksonville Zone or the Orlando MDA are causing the alleged shortfall in penetration rates. The closure of Ken Rummel Chevrolet for most of 1985 illustrates that a comparative analysis of markets was not performed by Mr. Anderson or GM. The closure of one of the four Chevrolet dealers in the Orlando MDA for most of 1985 would have a significant negative impact on market penetration for that year, but GM apparently made no correction or adjustment in its analysis to take this important fact into account. Another factor which GM did not take into account before asserting that poor penetration efficiency of the Orlando MDA dealers indicated that an additional Chevrolet dealer was needed in the Orlando market is the extensive leasing of new Chevrolets which occurs in Orlando and the heavy sales of "brass- hat" cars by the Chevrolet dealers and current-model, low-mileage fleet cars by fleet rental companies. As defined by GM for sales and registration purposes, a fleet customer is any person or company who purchases ten or more cars or trucks of any brand anywhere in the country during a twelve-month time period. In 1985, 29.9 percent of industry car registrations in the Jacksonville Zone were fleet registrations. The national rate was 17 percent. For Chevrolet, 49 percent of all car registrations in the Jacksonville Zone in 1985 were fleet registrations, while nationally the rate for Chevrolet was only 21.8 percent. Stated differently, the dealers in the five MDAs in the Jacksonville Zone (3 percent of the total of all MDAs) accounted for over sixteen percent of all fleet sales in the United States. It is uncontroverted that the Orlando market has significantly higher levels of fleet sales than other parts of the country. GM has itself concluded that the extraordinary number of passenger car and truck fleet sales into the Orlando market area has a negative effect on passenger car and truck sales and registration effectiveness. In spite of this, none of the studies presented by GM took this into consideration. GM cannot properly do what it seeks to do here, that is, compare Orlando to national or regional or so called "typical" markets while admitting this difference without accounting for the impact of these fleet sales in the market. Additionally, many of these fleet companies who purchase new fleet cars from the dealers and manufacturers (e.g., Avis, Hertz, National, Budget, etc.) in turn sell those cars to consumers in the Orlando area. Typically, these rental cars sold by the large fleet companies are current-model, low- mileage cars, many of which are Chevrolets. Because there is no difference in the profile of a typical new car customer and a customer who will buy a current- model, low-mileage car from a fleet company, the sale of these fleet rental cars in Orlando diminishes the market demand for new retail Chevrolets. The reason for this deleterious effect on market demand for retail Chevrolets is that the current-model, low- mileage rental units can be sold by the rental companies for lower prices. This fact was admitted by Jacksonville Zone Manager Hall when he testified that sales of current model rental cars by rental companies has an adverse impact on new car sales. As further evidence that the heavy concentration of fleet sales by Chevrolet dealers and sales of current-model, low-mileage rental cars by fleet companies negatively affect new car retail penetration rates, Century introduced a letter from Don Mealey to R. J. Bresnahan (the former Jacksonville Zone Manager for Chevrolet) dated May 29, 1984. In this letter, Don Mealey, an existing dealer in the Orlando MDA and the owner of the applicant herein, delineated the problems of market penetration caused by fleet companies selling current-model, low-mileage rental cars. Mr. Mealey stated in his letter that prospective new car customers in Orlando have a "multitude of options available to them. They can shop a franchised new car dealer or they may choose from one of many outlets retailing low mileage, current models at a price considerably less than normal dealer invoice. The net effect of this second level system on the total market is incalculable." This observation by Mr. Mealey is consistent with GM's own admissions and the testimony of Century's officials during this hearing. Mr. Mealey further highlighted in his letter the large number of Chevrolet cars operating in Orlando which are registered elsewhere but which do not appear on the sales and registration reports for Orlando. "[C]ertain major rental companies purchase or lease Chevrolet's [sic] which are registered in Dade, Broward, or other Florida Counties. These vehicles are rented in Orlando, serviced in Orlando, and most often are sold in Orlando but do not appear as new vehicle sales or registrations. If these phantom units appeared on the R.L. Polk report, the overall Chevrolet market share would improve Again, Mr. Mealey's observations are consistent with other evidence adduced in this case. Despite these admissions by Petitioner GM and Mealey (an agent of Petitioner Chevy World), regarding fleet sales, Mr. Anderson denied that the large volume of fleet sales in the Orlando market has had a negative impact on the retail car penetration rates for Chevrolet dealers in the Orlando MDA. He offered no evidence in support of his conclusion. Mr. Anderson's position is unsupported by the facts in the record and belies common sense. Mr. Anderson's and GM's failure to properly account for and to factor into their analysis the impact of fleet sales on Chevrolet penetration rates discredits their contention that the present dealers are inadequately representing the market. Initial fleet sales impact retail penetration, as do resales of current model cars. Potential new car purchasers will generally not view current-model, low-mileage rental cars sold by fleet companies as distinguishable from new cars offered for sale by a Chevrolet dealer. Perceiving these two groups of automobiles as essentially similar, a customer in the new car market would ignore industry labelling differences between these groups of cars. In short, as established through GM's own witnesses, the Orlando market area, given its heavy concentration of fleet sales, is significantly different from the national market viewed as a whole. This heavy influx of fleet sales into the Orlando market area is strong evidence why penetration rates in the artificial Orlando MDA are lower than the national average. The typical customer is most interested in low prices. To attract these customers, Century advertises for sale "brass-hat" cars, which are vehicles used previously by GM officials and sold at GM auctions. There is no difference in the profile of a typical new car customer and a customer who will, and often does, buy a brass-hat vehicle. Brass-hat vehicles are purchased by Century at GM auctions to serve as price leaders in advertisements and sticker sales to encourage customers to visit Century's facilities. During 1986, Century sold an average of forty-three brass-hat vehicles per month, a large portion of which were Chevrolets. The local Chevrolet dealers in the Orlando market buy a large number of the brass-hat vehicles sold at the auctions conducted by GM in Orlando. Brass-hat vehicles, regardless of the model or mileage, are not treated as new cars by GM; thus, Chevrolet dealers, such as Century, do not get credit from GM for a new car sale when a customer purchases a brass-hat vehicle. Moreover, the Chevrolet dealers do not receive credit with respect to R. L. Polk registrations for the sale or registration of brass-hat vehicles. As is the case with current-model, low-mileage rental cars sold by fleet companies, it is unlikely that, if the physical attributes of the brass- hat vehicle are the same or substantially similar to the attributes of a new car, a potential customer will view those two classes of cars differently. Consequently, brass-hat vehicles are competitive with new retail cars in the marketplace and decrease the sales rates for the new cars because the brass-hat vehicles are priced lower. GM did not account for the significant levels of brass-hat vehicles sold in the Orlando market. No study was performed by GM to analyze what effects brass-hat sales had on new car sales effectiveness and penetration rates. Accordingly, GM's studies and conclusions are flawed insofar as they attempt to support a finding that the present Chevrolet dealers are providing inadequate representation in the Orlando market. Century and other Chevrolet dealers lease a large number of new cars. The leasing of new Chevrolets in Orlando diminishes the demand for the sales of new Chevrolets because the same profile of customers is involved, and at times leasing has financial advantages over purchasing. GM does not regard the lease of a new car as a retail sale. Again, Mr. Anderson's studies are flawed because they did not assess the negative effects which extensive leasing (as occurs in the Orlando market) has on penetration rates for new Chevrolet cars. In addition to the failure of GM to analyze the negative impact which Ken Rummel's closure in 1985 and the heavy concentration of leasing, fleet sales, brass-hat sales, and sales of current-model, low-mileage cars by fleet companies had on Chevrolet retail penetration rates in Orlando, the studies actually performed by GM were statistically and quantitatively suspect in many respects. Because the thrust of GM's proof focused on Mr. Anderson's five-point test, the five-point test must be analyzed in order to determine whether it is an accurate, reliable, and statistically proper analysis of the Orlando market, in general, and the adequacy of the existing dealers' representation, in particular. First, nearly every witness agreed that the mere fact that new car registrations in a particular market area fall short of national or Zone registration rates does not indicate, without further examination, that the existing dealers are not providing adequate representation in that market area. In determining whether the Orlando market is being adequately represented, Mr. Anderson testified that he would first ascertain whether the market penetration for Chevrolet in the Orlando MDA exceeded or fell below Zone and national retail penetration rates. Then, Mr. Anderson employs a five-point test to determine what is a reasonable level of market penetration for the particular market area. The first two steps in this five- point test entail a comparison of the demographic characteristics in terms of age and household income of the Orlando market area vis-a-vis the nation as a whole. The third step in the five- point test is an analysis of product popularity, i.e., an analysis which seeks to determine whether the particular line- make is popular in a certain market area. The fourth step is an assessment of the market to determine whether national or Zone penetration rates are being achieved or exceeded in certain defined areas within that market. Finally, the penetration rates for the areas surrounding the market in question are analyzed to determine whether national penetration rates are being achieved in these outlying areas. This five-point test for assessing local market penetration effectiveness is flawed in several respects and thus is an unreliable and inaccurate analysis. While GM did present demographic evidence that Orlando, compared to national statistics, was underrepresented in the 0-15 and 65-over age categories, there was no proof offered by GM that this population age data proved that Chevrolet sales potential was in any way enhanced. There were no Chevrolet customer age profiles submitted by GM, or any quantitative analyses performed by GM indicating that Chevrolet penetration rates varied in accordance with the age of the customers. Accordingly, GM's demographic evidence concerning age distributions in Orlando vis-a-vis the nation is statistically unpersuasive and proves nothing. The same finding is compelled with respect to the income levels in the Orlando market area. There was no evidence offered by GM that income levels relate in any way to Chevrolet retail penetration or can be analyzed as a determinant of interbrand competition. GM's use of product popularity statistics is not persuasive because it also failed to consider line-make popularity by model. Without such additional studies it cannot be accurately concluded that the Orlando market area can be compared, in a statistically acceptable manner, to the national market in terms of product popularity. The fourth factors analyzed by Mr. Anderson--whether certain census tracts within the Orlando MDA have retail Chevrolet penetration rates which meet or exceed the national average--is likewise a statistically unacceptable test for adequacy of representation or for the use-of national figures to demonstrate inadequacy. As established by the uncontroverted testimony of Drs. Ostlund and Matthews, this condition will undoubtedly exist in any market. Given the small total penetration numbers present in any census tract, it is not unrealistic to expect that some census tracts might have Chevrolet penetration rates which exceed a national average. Random penetration rates of one or two cars could mean the difference between exceeding or falling below national rates in a given census tract. Thus, the mere fact that one or more tracts have Chevrolet penetration rates above the national average does little to address the question whether there is adequate representation throughout a defined market area encompassing numerous census tracts. Stated otherwise, it would not be unusual to find census tracts in any defined market which exceed or fall below national penetration averages. Customers living in different census tracts are not homogeneous in terms of age, income, line- make preference, etc. Thus, the fact that there may be some census tract areas within a defined market area where penetration rates exceed some national penetration average is not a proper basis to infer that the entire market area should be able to achieve or exceed the same penetration rates. The fifth and final factor analyzed by Mr. Anderson and GM to support their assertion that the existing Chevrolet dealers in the artificial Orlando MDA are not providing adequate representation because they are not achieving national retail penetration rates is whether the market area outside the MDA but inside the Orlando metropolitan statistical area has higher penetration rates than the rates in the MDA. GM has concluded that higher penetration rates have been achieved in the areas outside the MDA boundaries. The inference which GM seeks to draw from this fact is that the Chevrolet dealers, located within the MDA, are not making adequate sales. The flaw in this argument is that such a shortfall will ordinarily (if not always) exist where the MDA is not coextensive with the SMSA, irrespective of whether the existing dealers within the MDA are adequately representing Chevrolet in the market. The reason for the discrepancy in the penetration rates is twofold. First, the SMSA is generally larger than the MDA and encompasses more rural and semi-rural areas. Historically, customers from rural or semi-rural areas have favored traditional domestic line-makes like Chevrolet over other line-makes. Second, import manufacturers do not have as extensive a dealer organization as traditional domestic manufacturers such as GM and have tended to concentrate their sales efforts in larger urban areas, thereby increasing the options of urban customers and decreasing the penetration rates for domestic line-makes such as Chevrolet. Consequently, the fact that Chevrolet may have achieved greater market penetration within the Orlando SMSA but outside the Orlando MDA proves little if anything about the adequacy of representation of Chevrolet by the existing dealers. In addition to the flaws existing in each of Mr. Anderson's five factors, the entire five-point test is significantly flawed and statistically unreliable. Curiously, this is not disputed by GM. The question of-the propriety of the five-point test arose as follows. Mr. Anderson testified first, saying not that this is a proper test but only that this is the test he used, admitting he knew of no authoritative text which supported its use. Drs. Ostlund and Matthews testified the test was inappropriate to judge the question presented. Mr. Anderson never denied this conclusion, and GM by offering no rebuttal evidence on this point and chose to leave the inappropriateness of the five-point test unrebutted. Thus, no conclusion can be reached except that it is inappropriate. Moreover, the test was not applied to the other Chevrolet MDAs in the United States to determine the accuracy and relevancy of the test. Neither in the five-point test nor in any of his other studies did Mr. Anderson address the quantity of dealer facilities that already exist in the Orlando market, a factor which is highly important on the adequacy-of representation issue. Finally, Mr. Anderson did not testify that he had used this test consistently in his testimony in other Florida cases before the Division of Administrative Hearings. To support its contention that an additional Chevrolet dealer is needed in Orlando, GM placed great emphasis on the fact that the population in Orlando had experienced significant growth over the years. However, the mere fact that Orlando has experienced a population growth is not evidence that an additional Chevrolet dealer is needed in the market, nor does it explain alleged low penetration rates. In fact, rapid growth in a market indicates that many people are moving to the market area. People who have recently arrived in the market area may have less desire to purchase a new car, or less income available for a new car purchase because of moving and new dwelling expenses. Nowhere in the testimony of, or the studies and reports prepared by, Mr. Anderson or any other GM witness is it indicated that this condition in the Orlando market was examined. Indeed, while Mr. Anderson testified that the Orlando area has experienced a high rate of migratory growth, he admitted that he did not analyze the question whether people who recently moved into the Orlando area would more or less likely be in the market for a new car. Moreover, the mere fact that population in the Orlando area has increased while the number of Chevrolet MDA dealers has remained the same (four) does not necessarily indicate the need for an additional dealer. Mr. Anderson's testimony was offered by GM to prove that the population growth in Orlando over the last fifty (50) years has been so large that four dealers can no longer adequately serve the increased number of customers. However, no analysis was conducted whether there exists a corresponding increase in sales and service facilities and operating investments. Moreover, an equally plausible inference to be drawn is that there were too many Chevrolet dealers in 1930. No analysis or study was performed by GM to account for this equally plausible inference. GM also presented evidence concerning the location of the existing dealers and the effectiveness of those dealers to attract customers residing at varying distances from the dealerships, seeking to prove that a dealer's market penetration success bears an inverse relationship with the distance a potential customer must drive to reach that dealership. However, GM's analysis is flawed in several respects. First, this analysis does not take into account the specific geographical location of a dealer in the Orlando market area, and particularly with respect to whether the dealer location is close to areas where few or no customers reside. For example, a dealer like Century is near farmland and a large lake, thereby reducing the possibility that cars will be sold to or registered by customers living in a geographical area closer to that dealership. Furthermore, all MDA dealers will be partial servants of a geographical area because there will always be other same line-make dealers serving that market. Thus, the analysis used by GM does not address the question whether the existing dealers are adequately serving the market. Finally, GM's position in this proceeding that the location of a dealership is not relevant leaves it little room to complain of locations. GM .offered no persuasive evidence that any traffic patterns or congestion in the Orlando market area indicated the need for an additional Chevrolet dealer. In fact, the evidence was to the contrary; there is no significant traffic congestion in the vicinity of the proposed new dealer point location to justify the addition of a dealer. In any event, traffic congestion is generally not an important factor in determining whether an additional dealership is needed in a market because traffic congestion usually occurs during rush hours; typically, potential customers do not shop for new cars during rush hour. GM presented evidence in the form of graphs and charts which allegedly established that the dealers in the Orlando MDA must service a higher number of potential customers than dealers in other Jacksonville Zone MDA's. The inference sought to be established by GM from this data is that there are too few Chevrolet dealers in the Orlando MDA to properly service the larger number of potential customers. However, GM's evidence does not support this inference. First, this analyis is fundamentally flawed because it is premised upon there being only four Chevrolet dealers in the Orlando market area; the evidence presented in this case establishes that ten Chevrolet dealers compete heavily in the Orlando area market. Second, the population/dealer data actually supports Century's position. According to Dr. Matthews' statistically correct computations, each dealer in the Orlando MDA services a population of 206,542; however, the average population serviced by the dealers in the entire Jacksonville Zone is 209,691. Consequently, the Orlando MDA dealers service less population than the average of the other Chevrolet dealers in the Jacksonville Zone. This fact obviously does not compel the conclusion that a new dealer is needed in the Orlando MDA; in fact, it is strong evidence that the present dealers are adequate in number to represent the Orlando market. Mr. Anderson's conclusions regarding registration rates per dealer in the Jacksonville Zone suffer from similar statistical flaws. After removing the Pensacola registration figures from this study and adjusting the Tampa MDA figures to accurately reflect the number of existing Chevrolet dealers, the average number of registrations per dealer point is 9,658. Thus, because the Orlando MDA Chevrolet dealers' registrations per dealer point (8,587) are below average Jacksonville Zone figures, this study also does not prove the need for an additional Chevrolet dealer in Orlando. If another Chevrolet dealer were added in Orlando, the number of registrations per dealer in the Orlando MDA would fall to 6,869, or only 72 percent of the average registrations per dealer in the Jacksonville Zone. Therefore, the studies performed by Mr. Anderson and GM reveal that an additional dealer in Orlando is contraindicated. In this proceeding, Mr. Anderson admitted that the total registrations for the Orlando MDA might vary by nearly twenty percent from the reported sales by the Orlando MDA Chevrolet dealers. Mr. Anderson conceded that this variation could have resulted from an error in R. L. Polk statistics. At no time has Mr. Anderson investigated to determine whether R. L. Polk actually used statistically proper and reliable procedures to gather and verify the registration data. Additionally, Anderson testified that he has personally found R. L. Polk data to be unreliable. Accordingly, the R. L. Polk registration reports and computations utilized by GM throughout its studies and reports have not been proven to be reliable. GM sought to establish that Chevrolet truck penetration rates in the Orlando MDA fell below national penetration rates. From this premise partially flowed GM's argument that an additional dealer was needed to increase Chevrolet penetration rates in the Orlando market area. However, as illustrated by Dr. Ostlund, the use of truck penetration statistics is not probative of inadequacy- of the existing dealers. Commercial customers of trucks, even those purchasing less than ten units per year (thereby not qualifying as a fleet customer by GM's standards) are a substantial portion of the truck market. Generally, these multi-unit, commercial truck customers are not concerned about the location of a dealer. Dr. Ostlund's testimony on this issue was not controverted by GM. The last full year from which GM evaluated sales and registration data was 1985, the year during which one Orlando MDA dealer was closed. GM only used nine-month data in 1986. However, GM's use of nine-month data for calendar year 1986 did not take into account any seasonal factors which could indicate that year-end sales figures would be significantly different. Proper statistical tools, such as regression analysis and exponential smoothing, could have been used to properly interpret the nine-month data and to extrapolate that data over a twelve-month time frame; however, no such commonly accepted statistical devices were used by Mr. Anderson or GM, thereby raising serious doubts as to the statistical accuracy of their conclusions. Moreover, no showing was made by GM that Mr. Anderson could provide competent testimony on such statistical techniques. Furthermore, it does not appear that Mr. Anderson or GM even considered the effect which any seasonal factors had on market penetration in 1986. There was no evidence offered by GM that seasonality patterns of Chevrolet sales were stable from year to year, particularly 1985 to 1986. Therefore, GM's failure to analyze seasonality factors renders unworthy its interpolation of 1985 data to determine annualized 1986 sales figures and penetration rates. In many of its comparative evaluations of the Orlando market and the Orlando dealers' sales and penetration effectiveness, GM utilized data obtained from the Pensacola MDA which is not a part of the Jacksonville Zone. However, it is clear that neither Mr. Anderson nor anyone else at GM performed any studies to determine whether the Pensacola market area was comparable to the Orlando market area or other multi-dealer markets in the Jacksonville Zone. The only justification for utilizing Pensacola MDA data was that Pensacola was in the State of Florida. Dr. Matthews, based on GM's own evidence, concluded that the inclusion of Pensacola in any of the studies was inappropriate. This was not disputed by GM. In the absence of any showing by GM that Pensacola is a comparable market to Orlando, any conclusions or inferences made by GM which in whole or in part are based upon Pensacola MDA data are unsound. GM offered no evidence that the sales and service facilities of the existing Chevrolet dealers in the Orlando market area are inadequate to represent Chevrolet in that market. In fact, Mr. Anderson admitted that he did not evaluate the sales and service facilities of any of the Orlando MDA Chevrolet dealers prior to concluding that they were not providing adequate representation. GM premised its entire case on a comparison between Chevrolet penetration rates in Orlando and Chevrolet penetration rates nationwide and in the Jacksonville Zone. The flaw in GM's presentation was the complete failure to determine whether the Orlando market is a typical market area from which conclusions as to low penetration rates and inadequacy of representation could be so simplistically drawn. More significantly, GM presented no evidence that other manufacturers, domestic or import, were achieving or exceeding their national or Zone penetration rates in the Orlando market. The absence of any evidence concerning penetration rates for other line-makes is particularly damaging to GM's contention that the Orlando area Chevrolet dealers should be achieving higher penetration rates. GM ranked each MDA in terms of market penetration for passenger cars and trucks. The Orlando MDA ranked 129 in passenger car sales penetration effectiveness and 130 in truck sales penetration effectiveness. The inference GM wishes to be drawn from these rankings is that the Chevrolet dealers in the Orlando MDA are ineffective in terms of market penetration and, thus, are not providing adequate representation for Chevrolet in Orlando. However, GM's rank-ordering of the 157 MDAs in the United States in terms of market penetration is statistically unsound because there is no explanation offered for the penetration discrepancies. There was no statistical analysis performed by Mr. Anderson to explain what factors exist in each of these markets, individually or collectively, to cause the penetration rate variations. The evidence is undisputed that there was no showing by GM that any of these markets were comparable, and, in fact, no adjustments were made for the lack of comparability. The placement of all Florida and California dealers in the bottom portion of the rankings suggests a comparability problem not addressed by GM. The evidence established that Century is not optimally located in the Orlando market area. Century is the only automobile dealership of any line-make in Winter Garden, Florida. All other dealerships, domestic and import, have gone out of business due to poor market demand. In order to attract customers in the Orlando market area, Century purchases advertisements in the Orlando Sentinel and on four Orlando television stations. All told, Century spent in excess of $1.1 million in 1986 on advertising. The amount spent on advertising per retail unit by Century was the highest of any dealers in Orlando and double the Zone average. This high degree of advertising was necessitated by depressed industries and low population figures in Century's assigned area of sales responsibility. Ultimately, there is no reason to disagree with the conclusion of GM's own evaluation done in the ordinary course of its business. As found by GM itself on its most recent evaluation of Orlando dealers, all dealers rated (Rummel was too new) were found to be doing an effective job with respect to car sales. Even accepting GM's MDA as the market, during the last full year, Orlando MDA car sales by Chevrolet were 14.1 percent of industry, which exceeded the Zone's rate of 11.9 percent significantly and was statistically indistinguishable from the national average of 14.35 percent. During the same year (1985) the so-called AGSSA 5 out-performed the MDA by posting a 21 percent share of total. In fact, total penetration by GM in AGSSA 5 during that year was better than in 3 of the 4 other AGSSAs. Chevrolet retail share in AGSSA 5 during the last full year for which statistics were presented was nearly the same as the Zone average of 11.5 percent. Because the evidence is uncontroverted that dealerships are not appropriately added solely based on truck penetration, (this being a small percentage of overall sales and numbers of dealers and location being relatively unimportant), GM's own evidence of better than adequate car sales by the Orlando MDA Chevrolet dealers for the last full year of dealership operations, along with GM's own admitted findings that all the Orlando MDA Chevrolet dealers were effective with respect to car sales during the 1985 ratings, compels the conclusion that GM's case was simply not proved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, A RECOMMENDED THAT a Final Order be entered denying the application of Chevrolet World, Inc., for licensure as a dealer of Chevrolet vehicles in Orlando, Florida. DONE and RECOMMENDED this 5th day of June, 1987, in Tallahassee, Florida. LINDA M RIGOT Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of June, 1987.
The Issue The issue for consideration in this matter is whether Respondent, Michael L. Pappas, Jr., should be granted permission to purchase 20 percent of the stock in Plaza Dodge, Inc., and be recognized as executive management thereof, or whether the purchase should be rejected because of Mr. Pappas's prior conviction of a felony and alleged bad character.
Findings Of Fact At all times pertinent to the issues herein, Chrysler was a motor vehicle manufacturer licensed to do business in Florida; Plaza was a motor vehicle dealer licensed by the state; and Michael L. Pappas, Jr. was an individual seeking to purchase an ownership share in Plaza Dodge. He has been general manager of Plaza Dodge since January, 1993. On May 9, 1994, Plaza notified Chrysler that Mr. Pappas intended to purchase a 20 percent ownership interest in its shares and become executive manager of the dealership. The existing dealership agreement between Chrysler and Plaza reflects Mr. Pappas' father, Michael L. Pappas, is the sole owner and manager of the dealership. This agreement is not assignable without the consent of Chrysler Corporation. In his application submitted to Chrysler, Mr. Pappas indicated he had been convicted in 1987 of several felony counts dealing with his sale and possession of cocaine in 1985. As a result of that conviction, Mr. Pappas was sentenced to four years in prison, fined $50,000, and placed on five years probation. After he had been incarcerated for approximately six months, Mr. Pappas was placed in to a work release program for five months and then released to serve his five years probation. There is some indication this early release was effected because of prison crowding. The probation was terminated in July, 1991, earlier than scheduled. There is no evidence he has been pardoned. Mr. Pappas' civil rights were restored in August, 1992, through the simple process of applying for it. As was previously stated, he has been serving as general manager of Plaza since January, 1993. Since he has been serving in that capacity, Chrysler has been aware of his position and has not complained. In fact, he has, without objection, attended official functions put on by Chrysler in his capacity as the representative of Plaza Dodge. He was identified as an officer of the dealership when it applied to the state for licensure, and revealed his conviction on the licensure application. The application was approved by the Department of Highway Safety and Motor Vehicles Chrysler has rejected Mr. Pappas' application to purchase an ownership share in the dealership and his proposed executive management thereof citing as grounds for its rejection his prior felony convictions as evidence of his bad character. Chrysler contends that Mr. Pappas' conviction would adversely impact on the public confidence in the dealership and would have an adverse effect on sales. It sells and services vehicles only though its dealers and relies upon its dealerships to project its corporate image. Chrysler is also concerned that, since it accepts warranty claims at face value from its dealers, it must be able to rely on the character and integrity of those dealers to insure the warranty service was performed and the vehicles sold as claimed. No evidence exists to indicate this would not be the case here. The only evidence of the potential for problem came in the testimony of Chrysler's own official in explanation of its policy regarding dealership owners was presented and no indication of any dealership misconduct by Plaza under Mr. Pappas' stewardship was shown. Chrysler has adopted a policy prohibiting approval of anyone for ownership of a dealership who has "a prior felony conviction or other derogatory personal or character reputation or background which could be detrimental to or otherwise harm the image of Chrysler, the dealership, other Chrysler dealers of Chrysler products." Chrysler has attempted to enforce that policy uniformly and has taken the position that the conviction of a felony, by itself, will have a detrimental impact on the image of Chrysler Corporation. The evidence of record in this case does not seem to support that position, however. All during the time of his incumbency as Plaza's general manager the dealership's customer relations, as reflected by sales and service performance, has been rated as good, and those ratings have reflected an improvement over previous years. At no time has Chrysler objected to Mr. Pappas' presence at the dealership until now, and Chrysler presented no evidence of a lack of customer satisfaction with dealership performance or of its dissatisfaction with Plaza's share of the market. By the same token, the financial stability of Mr. Pappas or the dealership was not brought into issue. The evidence of record, through the testimony of others including an area Chrysler dealer, indicates that Mr. Pappas is well versed in the intricacies of operating an automobile dealership and has a good reputation for ability as well as character and integrity in the auto sales and service community. In addition to his employment in the management of a popular family restaurant Mr. Pappas has been involved in several other business partnerships and his partners speak well of his character and his business acumen. Mr. Pappas also appears to have earned the confidence of the community at large. Former law enforcement officials who were in office at the time of his arrest indicated there was no evidence of any serious misconduct on his part aside from that for which he was convicted. In the opinion of the former Tarpon Springs Police Chief, he appears to have been rehabilitated. In addition, Mr. Pappas appears to be a concerned parent and is active in community affairs. He shows remorse for his former misconduct and desires to have another opportunity to prove himself. At the time of his arrest, and during the period prior thereto, when he had been heavily into the use of cocaine, Mr. Pappas, along with his two cousins, was employed in the family restaurant in Tarpon Springs and had advanced to a position of responsibility. The three cousins were soon to assume some ownership interest in the establishment, but because of his conviction, Mr. Pappas was determined to be ineligible to be an officer in a corporation which held a liquor license. While using cocaine, Mr. Pappas periodically had it in his possession at work in the restaurant and was using it at least six days a week. He was involved at the time with a woman, Ms. Gleason, a drug and alcohol addict, to whom he supplied cocaine more than half of the times they were together. He sold cocaine to both Ms. Gleason and to others in order to support his own habit. Many of his sales were of large amounts bringing him several thousands of dollars at a time. Even after he was married in 1983, he continued to use cocaine even though he told his wife he had stopped. There is no evidence of his use or possession of cocaine any time after his release from prison, however.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department enter a final order finding that Michael L. Pappas, Jr. is shown to be of good moral character and is qualified to be an equity owner and executive manager of Plaza Dodge, Inc. DONE and ENTERED this 16th day of April, 1996, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 16th day of April, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-3869 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. - 9. Accepted and, as appropriate, incorporated in this Recommended Order. 10. - 15. Accepted. 16. - 21. Accepted and incorporated herein. 22. - 26. Accepted and incorporated herein. 27. & 28. Accepted and incorporated herein. - 37. Accepted. 38. Accepted and incorporated herein. Respondent's Proposed Findings of Fact. Respondent has listed two paragraphs 5 in his Recommended Order. Therefore, all reference to Proposed Findings of Fact numbered 6 and after related to the paragraph numbered one less in the proposal. - 4. Accepted and incorporated herein. 5. & 6. Accepted and incorporated herein. 7. - 11. Accepted and incorporated herein. - 17. Accepted and incorporated herein. Accepted. Accepted. COPIES FURNISHED: Dean Bunch, Esquire Cabaniss & Burke, P.A. 909 East Park Avenue Tallahassee, Florida 32301 Edward Weeby, Esquire Senior Staff Counsel Chrysler Corporation 12000 Chrysler Drive Highland Park, Michigan 48288-0001 Daniel E. Myers, Esquire Walter E. Forehand, Esquire Myers & Forehand 402-B North Office Plaza Drive Tallahassee, Florida 32301 Marie L. Demarco, Esquire D. Scott Douglas, Esquire MacFarlane, Ausley, Ferguson and McMullen 400 Cleveland Street Clearwater, Florida 34615
The Issue Whether Ed Morse Chevrolet should be granted a license to establish a new Chevrolet dealership in Seminole, Florida. If existing Chevrolet dealers are not providing adequate representation in the relevant territory or community the application should be granted.
Findings Of Fact Morse's application seeks a motor vehicle license for a new Chevrolet dealership at 8350 Park Boulevard, Seminole, Pinellas County, Florida. Quinlan and Ross, each a licensed dealer at the time of the filing of the application, separately filed letters of protest to the application and the case was forwarded to the Division of Administrative Hearings for a formal hearing. When Ross was purchased by Mahan, that protest was dropped. The Tampa Bay area is a Multiple Dealer Area (MDA) with each of the existing eight Chevrolet dealers/franchises covering all of Pinellas County and large portions of Hillsborough and Pasco Counties. Four of these dealers, Quinlan, Ross (now Maher), Tarpon and Dimitt are located on U.S. 19 in Pinellas County. Tarpon is located at approximately 21.8 miles north, Dimitt is located approximately 12.4 miles north, Quinlan is located approximately 6.4 miles north, and Maher is located approximately 7 miles southeast, respectively, of the proposed Morse location. It is appropriate to consider the contractual area assigned to multiple dealers, the Tampa MDA, in determining which area they should attempt to service. Since no one from GM ever informed any representative of these dealerships that they would be judged by looking at an area smaller than the Tampa MDA, Respondent contends it would now be unfair to consider other than the entire area in which they contracted to serve to determine whether GM was being adequately represented. GM, on the other hand, points out that dealers surrounding the Tampa MDA are not included within any homogeneous, interconnected shopping area within the Chevrolet, Tampa MDA and are not part of the relevant community or territory. Further, in the Tampa MDA, a natural barrier, Tampa Bay, separates Hillsborough County from Pinellas County and there is little cross-shopping for automobiles between dealers in the areas on opposite sides of Tampa Bay. The Tampa MDA is broken down into Areas of Geographic Sales and Services Advantage, (AGSSA) each representing an area where a dealer enjoys a competitive advantage over other dealers of the same line-make due to geographic locations, viz. proximity to the dealer. AGSSA 1 is the northern part of Clearwater, plus eastern Pinellas and Hernando Counties, in the area of Dimitt Chevrolet. AGSSA 2 is the southern part of Clearwater in the area of Quinlan Chevrolet. AGSSA 3 is the Seminole area of Pinellas County in the area of the proposed Morse dealership. AGSSA 4 is the southern part of Pinellas County, including St. Petersburg, in the area of Maher Chevrolet. AGSSA's 5, 6, 7, and 10 are generally located in Hillsborough County. AGSSA 8 is northern Pinellas and southern Pasco County in the area of Tarpon Chevrolet. AGSSA 9 is northern Pasco County and includes Harbor Chevrolet in Hudson. AGSSA's 3 and 10 are currently open points. AGSSA's are comprised of census tracts or, where census tracts cannot be used, other geographic descriptions, such as zip codes, C-towns and NTC's. Based on customer buying patterns, there are three separate market areas within the Chevrolet Tampa MDA. AGSSA's 1, 2, 3, 4, and 8 (St. Petersburg, Clearwater, Tarpon Springs (on the west side of Tampa Bay) is one distinct market while AGSSA's 5, 6, 7 and 10 (Tampa and Brandon) constitute a separate area. AGSSA 9 (Hudson) constitute a separate but less distinct area than the other two larger areas. GM concedes that Quinlan Chevrolet and the other Chevrolet dealers in Pinellas County have complied with terms of their dealership agreement with GM; that these dealers' sales and service facilities comply with the minimum standards established by GM; and that each is adequately representing the AGSSA in which it is located. The three dealerships closest to the proposed site were each rated effective dealers by GM in 1987. Respondent contends that no "identified plot not yet cultivated" exists in AGSSA 3. To support this position is the fact that only one other AGSSA in the Tampa MDA (AGSSA 7) outperformed AGSSA 3 in 1987; Chevrolet registrations in AGSSA 3 (where no dealer is located) were better than in AGSSA 2 and 4 (where Quinlan and Maher are located); and were better than the Tampa MDA rate. Yet the buy-rate analysis, which refers to the number of households in an area divided by the number of registrations in that area, for AGSSA 3 shows that it takes 131 households before one Chevrolet retail registration occurs, while the buy-rate for the Tampa MDA is 113.89. This fact supports GM's position that the area (AGSSA 3) is underrepresented rather than the populace does not buy as many cars per household or that households in AGSSA 3 are adverse to buying Chevrolet automobiles. Of the five AGSSA'S in Pinellas community or territory, Chevrolet is represented by a dealer located in all but AGSSA 3. Vehicle registration data compiled by R.L. Polk was used by GM and Quinlan in their respective analyses and is accepted as an authoritative source of such data within the automobile industry. The evidence here submitted clearly proves the proposition that statisticians and economists can, by selecting from the same pool of data, arrive at diametrically opposed conclusions and opine that their determination is the only appropriate conclusion to reach. GM contends that the national average retail market penetration is the proper standard by which to compare the penetration in AGSSA 3, while Quinlan contends the Tampa MDA penetration rate is the proper standard. Without detailing the extensive testimony presented to support the opinion of the respective experts, it is sufficient to say the national penetration standard is accepted as the appropriate standard. Chevrolet market penetration for both cars and trucks, for the Pinellas community or territory and the Tampa MDA has been substantially lower than the national average since 1986. In comparison to all other Florida markets, both the Pinellas community or territory and the Tampa MDA are generally in the bottom third of all markets while over 40 markets for cars and over 35 for trucks in Florida equal or exceed the national average penetration for Chevrolet. As a general rule, penetration rates are higher in single dealer areas than in multiple dealer areas. Considerable evidence was submitted that Chevrolet sales, i.e. penetration, was higher in inland areas than in coastal areas where foreign imports have had the greatest impact on car sales. Since Tampa MDA is a coastal area, Quinlan contends that the penetration rate in the Tampa MDA and AGSSA 3 should be compared with other coastal areas. Quinlan selected 6 MDA's, of the 11 having the lowest penetration rates by Chevrolet in the entire United States, to prove that the penetration rate in the Tampa MDA and AGSSA 3 is well above the average of those 6 selected and, therefore, AGSSA 3 is not underrepresented. GM, on the other hand, offered the comparison of the Chevrolet penetration rate in Pensacola, which is well above the national average, to the Tampa MDA and AGSSA 3 penetration rates to show AGSSA 3 is underrepresented. Both of these examples represent extremes and confirm the validity of the national average penetration as the appropriate norm. Using this norm, Chevrolet is underrepresented in AGSSA 3. GM presented evidence showing product popularity, age and income statistics of the Pinellas community compared to the nation. By dividing automobiles into five groups comprising subcompact, compact, mid-size, regular and high group, GM presented statistical evidence showing that the differences between the sales of these classes of vehicles in the Pinellas community and nationwide was small during the years 1986, 1987 and the first six months of 1988. Similar evidence was presented regarding truck sales. Respondent points out that the disparity in price of vehicles within each class casts doubt upon the validity of these classifications. For example, expensive sports cars are frequently classed as compact or subcompact, whereas their retail price exceeds the price of many vehicles included in the high group. Statistical evidence was presented by GM comparing the age of residents of the Pinellas community and AGSSA 3 with the population age nationwide to determine if these differences could account for the low penetration of Chevrolet products in the area in question. Again, no statistical difference in resident's ages was found to account for the low penetration rate compared to the national average. Respondent contends these comparisons are invalid and irrelevant because nationwide Chevrolet sales are higher in the 16-24 and 25-34 age groups which age groups are vastly underrepresented in AGSSA 3. GM also presented statistical evidence comparing the income of the residents of the Pinellas community and AGSSA 3 with the national average income. These comparisons are sufficiently close that the low penetration rate in Pinellas County compared to national average cannot be explained by income characteristics. However, those with annual income below $15,000 were omitted in the comparison. Respondent points out that many elderly residents of Pinellas County with incomes less than $15,000 annually could well have substantial savings and be economically capable of purchasing a new automobile. Neither party presented hard evidence to support their opinions regarding the validity of not including those with annual incomes of less than $15,000. However, it is noted that elderly people with substantial assets have some, if not most, of those assets producing income which, when added to social security benefits, could easily exceed $15,000 annually. Between 1970 and 1988, the population of the Pinellas community comprising AGSSA's 1-4 and 8 has increased from 582,232 to 910,310. During the same period, households increased from 222,827 to 417,202. Since 1970, the number of Chevrolet dealers in this area has held steady at four. The growth of these five AGSSA's have leveled off during the past few years and the area is no longer a rapid population growth area. Respondent submitted evidence that AGSSA's 2 and 4, those closest to the proposed new dealer location, have reached a near saturation point in population. However, these were opinions of individuals residing in the area and were not supported by numbers of building permits issued, changes in telephone and cable TV subscribers, etc. Automobile buyers today shop competitively to obtain the best price for a specific car. A 1983 survey by J.D. Power nationwide shows some 58 percent of Chevrolet buyers visited at least one dealer of another brand before buying a Chevrolet. Existing dealers in the Tampa MDA who testified in these proceedings were unanimous that there is keen competition among dealers for the new car buyer and that most buyers visit several dealers looking for the best price for the car they ultimately buy. An additional dealer will, to some extent, increase this competition between dealers. However, this competition is not just between the same line-make dealers. It is between all dealers selling cars in the price range in which the buyer is looking. It is not inconceivable that GM is looking to recapture some of the market share it lost to foreign imports during the last twenty years. By consolidating some of their operations with Japanese car makers, purchasing Japanese developed engines for some GM cars, and manufacturing components overseas for GM cars assembled in this country, GM has positioned itself to compete more effectively against foreign imports. AGSSA 3 is one location that could contribute to this endeavor. Respondent contends the appropriate way to measure the Tampa MDA Chevrolet dealers' performance is to compare their performance, in terms of penetration rates, against other similar MDA's. This is done through regression analysis. The regression analysis performed by Respondent's expert used penetration rates in 158 MDA's nationwide. By selecting MDA's from this group and labeling them comparable to the Tampa MDA, a reasonable penetration rate for the Tampa MDA was found to be 8.51 percent in 1987 and 8.60 percent for the first six months in 1988. Selecting different "comparables" would have resulted in a different "reasonable" penetration rate. By carefully selecting the MDA's to be used as comparables almost any "reasonable" penetration rate can be found. Respondent also challenges GM's use of six months registration data through June of 1988 alleging that it is flawed because seasonal factors were not considered which might influence or alter the penetration rates actually obtained by GM for the entire 1988. While this is true, no evidence was submitted to establish a seasonal pattern of car registrations in the Tampa MDA which would indicate inaccuracy in the use of such six months data. Respondent contends GM should compare penetration rates in Tampa MDA with other coastal MDAs where Chevrolet penetration rates are below the national average and to correct for the penetration rates and markets where GM has manufacturing/assembly facilities for that line-make where the penetration rates are high. If this line of reasoning is followed, GM would never be able to demonstrate need for a new dealer. Respondent attributed road construction along U.S. 19 to loss of business for Quinlan for the past two years this widening of U.S. 19 has been ongoing. While this widening of U.S. 19 undoubtedly disrupted customers coming to Quinlan's showrooms, the construction also affected the other dealers along U.S. 19. No evidence was presented to show the dollar value lost to Quinlan, or the sales drop for new Chevrolets during this construction work. The fact that this road construction slowed and inconvenienced vehicular traffic on U.S. 19 in Pinellas County is not disputed.
Recommendation It is Recommended that the application of Morse Chevrolet, Inc., to establish a Chevrolet dealership at 8350 Park Boulevard, Seminole, Pinellas County, Florida, be GRANTED. DONE AND ENTERED this 19th day of July, 1989, in Tallahassee, Leon County, Florida. K. N. AYERS 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 19th day of July, 1989. APPENDIX Treatment accorded Petitioner's proposed findings. 1-2. Included H.O.#s 1, 2. 3. Included in Preliminary Statement. 4-6. Included in H.O.#4. 7-8. Included in H.O.# 5. Included in H.O.# 6. Included in H.O.# 7. 11-12. Included in H.O.#8. Included in H.O.#9. Accepted. Included in H.O.#12. Included in H.O.#13. 17-18. Included in H.O.#16. Accepted. Included in H.O.#16. 21-22. Included in H.O.#20. 24. Accepted insofar as included in H.O.#20. 25-26. See H.O.# 14 otherwise included in H.O.# 21. Included in H.O.# 22. Included in H.O.#15. Accepted. Included in H.O.# 16. Included in H.O.# 16. Included in H.O.# 16. Included in H.O.# 15. Accepted that one track in AGSSA 3 exceeding national average is near Quinlan location. Accepted. Accepted. 37. See H.O.# 14. Included in H.O.# 19. Accepted. 40-42. Included in H.O.# 23. 43. Accepted. 44. See H.O.# 14. Included in H.O.# 25. Accepted. Included in H.O.# 23. 48-49. Included in H.O.# 24A. 50. See H.O.# 26. 51-52. See H.O.# 14. 53. See H.O.# 14. 54. See H.O.#s 25-26. 55.-57. Accepted. Included in H.O.# 15. Rejected as mere testimony of witness. Included in H.O.# 5. Included in H.O.# 16. Included in H.O.# 5. Included in H.O.# 18. 64-65. Included in H.O.# 28. 66. Included in H.O.# 29. 67. See H.O.# 14. 68. See H.O.# 14. Included in H.O.# 28. Included in H.O.# 28. Included in H.O.# 21. Rejected as recitation of witness testimony. Included in H.O.# 22. Rejected as recitation of witness testimony. 75-76. Rejected as irrelevant. Treatment Accorded Respondent's Proposed Findings Included in H.O.# 4. Included in H.O.# 3. Accepted as grammatically correct. Rejected as opinion. Accepted. Rejected. 9-10. Rejected. Rejected. See H.O.# 11. Included in H.O.# 11. Included except for last sentence which is rejected. Rejected. Included in H.O.# 11. Rejected. 17-18. Accepted insofar as included in H.O.# 24. Rejected as irrelevant. Rejected. Rejected. Accepted as testimony of witness. 23-24. Included in H.O.# 25. Accepted. Accepted. Accepted insofar as included in H.O.# 26. Rejected as immaterial. Included in H.O.# 10. Irrelevant. Included in H.O.# 4. 32-33. Irrelevant. Included in H.O.# 10. Accepted. Accepted. See H.O.#10. Rejected. 38-47. Accepted insofar as included in H.O.# 20, 21 and 22. Rejected. Rejected insofar as inconsistent with H.O.#s 20, 21 and 22. Accepted insofar as included in H.O.# 21, otherwise rejected. Rejected. 52-53. Rejected. Rejected insofar as inconsistent with H.O.# 22. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 62. See H.O.# 14. 63. Rejected. 64. See H.O.# 14. 65. Rejected. See H.O.# 14. 66. See H.O.# 14. Rejected. See H.O.# 14. Rejected. Accepted except for last sentence. 70-71. Included in H.O.# 3. 72. Accepted. 73 Accepted. Rejected. Rejected. Irrelevant. Irrelevant. Irrelevant. Irrelevant. Rejected. 81. See H.O.# 14. 82. See H.O.# 14. Accepted that market share fluctuations are due to many factors. Accepted. Accepted. Rejected. Rejected. Rejected. Rejected. Rejected. 91-92. Rejected as argument - not fact. Rejected. Rejected. 9 5. Rejected. Rejected. Accepted. 98. See H.O.# 14. Included in H.O.# 18. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 104-105. Rejected insofar as inconsistent with H.O.# 29. Accepted insofar as included in H.O.# 19. Accepted insofar as included in H.O.# 19. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. Rejected. See H.O.# 14. 113-116. Rejected. See H.O.# 31. 117. Accepted. 118-121. Rejected as irrelevant. 122. Rejected. Rejected. Rejected. Rejected. COPIES FURNISHED: Dean Bunch, Esquire 101 North Monroe Street Tallahassee, FL 32301 Vasilis C. Kastafanas, Esquire P. O. Box 1873 Orlando, FL 32802 William J. Whalen, Esquire New Center One Building 3031 West Grand Boulevard Detroit, Michigan 48232 Joseph H. Letzer, Esquire Robert H. Rutherford, Esquire 3000 South Trust Tower Birmingham, Alabama 35202 Enoch Jon Whitney General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, FL 32399-0500 =================================================================
The Issue Whether J.S. Imports, Inc. should be granted a new point Mazda dealership at 631 South Military Trail, West Palm Beach, Florida, pursuant to Section 320.642, Florida Statutes.
Findings Of Fact Petitioner, Mazda Motor of America, Inc., is a manufacturer of automobiles and trucks which are distributed and sold through a network of dealerships. Under Florida law Mazda is denoted a "licensee." On January 5, 1996, a notice of publication for a new point franchise motor vehicle dealer was published which announced Mazda intends to allow the establishment of J.S. Imports, Inc., as a dealership for the sale of Mazda vehicles at 631 South Military Trail, West Palm Beach (Palm Beach County), Florida 33415. The notice further provided, in pertinent part: Mazda Motor of America, Inc., intends to engage in business with J. S. Imports, Inc., as a dealership on or after February 1, 1996. The name and address of the dealer-operator and principal investor of J. S. Imports, Inc., is: John Staluppi, Jr., 42 Davidson Lane East, West Islip, New York 11795. * * * Dealerships of the same line-make which can establish standing to protest the establishment of the new point may do so by filing a written petition or complaint with the Florida Department of Highway Safety and Motor Vehicles. Thereafter, on February 1, 1996, Respondents, Stewart Mazda, Delray Mazda, and Jupiter Dodge Mazda, filed a petition or complaint challenging the proposed new point dealer. Respondents are the existing Mazda dealerships located within Palm Beach County. There are no other same line-make motor vehicle dealerships which are physically located so as to meet or satisfy the requirements of Section 320.642(3), Florida Statutes. Thus, all dealers with the potential for standing have participated in this proceeding. Palm Beach County is a county with more than 300,000 population. Respondent, Stewart Mazda, is located at 2001 South Dixie Highway, West Palm Beach, Florida, and is within 12.5 miles of the proposed location for the new point site. In fact, the Stewart dealership is within five miles of the proposed new point. Respondent, Delray Mazda, is not located within 12.5 miles of the proposed location. Nevertheless, Delray Mazda established that during any 12 month period of the 36 month period preceding the filing of the licensee's application for the proposed dealer Delray Mazda made 25% of its retail sales of new motor vehicles to persons whose registered household addresses were within a radius of 12.5 miles of the proposed site. Respondent, Jupiter Dodge Mazda, is not within 12.5 miles of the location for the proposed new dealership yet it also met the sales standard described in paragraph 7. The proposed new motor vehicle dealer, J.S. Imports, Inc., is owned by John Staluppi, Jr., the son of John Staluppi. No other person or entity owns more than a 10% interest in JSI. It is proposed that J.S. Imports, Inc. will be located at 631 South Military Trail, West Palm Beach. Such real property is part of an automobile mall or auto mall (a cluster of automobile dealerships) which is owned or controlled by John Staluppi. The new Mazda vehicle sales facility would be located at 631 South Military Trail; however, the service facility for the dealership would be located elsewhere within a shared space at 561 South Military Trail, West Palm Beach. Both parcels are owned or controlled by John Staluppi. Both parcels are part of the same auto mall. As part of its documentation to establish the dealership, J.S. Imports, Inc. (JSI) submitted an unsigned lease for the subject property between John Staluppi and the proposed dealer. On or about October 25, 1996, just prior to this case going to hearing, John Staluppi entered into an agreement to sell the assets of the automobile dealerships located within the auto mall. He also agreed to lease the real estate upon which they are located. The lease included the sites for the new Mazda point as well as the service location. Without going into details of the agreement which are not material to the issues of this case, and without listing all of the corporate entities involved in the transaction, the principals in this new agreement were John Staluppi and Terry Taylor. Material to this case, however, is the covenant between Mr. Taylor and John Staluppi, Jr. Those parties reached an agreement to sublease the real estate at 631 South Military Trail and the service department at 561 South Military Trail, West Palm Beach. Such agreement to sublease was also executed October 25, 1996. Based upon the foregoing, as of October 25, 1996, the proposed site for the Mazda new point dealer continued to be 631 South Military Trail with service work to be at 561. These sites are identical to the information submitted by the applicant to the Department of Highway Safety and Motor Vehicles. This information was also disclosed to Respondents during discovery of the case, prior to the prehearing stipulation. Subsequently, the transaction between Mr. Taylor and John Staluppi was abandoned. Mr. Taylor’s deposit on the transaction was refunded. Apparently, these parties no longer intend to abide by the terms of the asset purchase agreement. JSI does not own the proposed site. If approved, JSI will lease the property from John Staluppi or entities he owns or controls. As of the time of hearing, JSI did not have a signed lease for the subject property. Typically, Mazda does not submit applications for new point dealerships without some documentation substantiating control of the proposed site. A proposed dealer would normally either own or control the proposed site. Control of the site may be shown by a lease, an option to purchase or an option to lease. In this instance, Mazda presumed the proposed site would be secured through the efforts of John Staluppi, Jr. on behalf of his company which would lease from his father. Moreover, Mazda believes its agreement with JSI (for the applicant dealer to reimburse it for costs or expenses incurred should the dealership effort fail due to an act or omission of JSI) adequately protected its interests in this regard. As of the dates of filing the application for a new point dealership, the notice of same, and the hearing in this cause, no person or entity, other than John Staluppi, Jr., had a beneficial ownership interest in the proposed dealership. To determine whether an additional same line-make dealer should be approved, the existing network of motor vehicle dealers must be evaluated to determine whether they are providing adequate representation to the community or territory. The applicable statutory criteria do not define "adequate representation" nor the "community or territory." Typically, sales data of past dealership performance is utilized by all parties to establish a community or territory (Comm/Terr) and to evaluate the dealers' effectiveness. In this case how the Comm/Terr should be defined is disputed by the parties. Although entitled to weight in the consideration of how the Comm/Terr should be defined, the dealer agreements with the three existing dealers (Respondents) do not assign an area by geographical boundaries. Respondents believe the Comm/Terr, based upon their interpretation of their agreements, should be defined as Palm Beach County as a whole. In contrast, Mazda studies have defined the market for these dealers in different ways; however, it believes the Comm/Terr should be Palm Beach County excluding the primary market area (PMA) ascribed to Jupiter Dodge Mazda. In making this determination, Mazda constructed the PMAs for the existing dealers as well as the new point (or open point) which has been designated as the Staluppi PMA. Within the Staluppi PMA it is presumed that dealer would have a competitive advantage in the market. Similarly, within the Stewart PMA that dealer would have the competitive edge due to customer preference and convenience. The actual shopping patterns of Mazda customers was also assessed. In this case, the three dealers are located in three distinct geographical areas: one toward the northern boundary of the county at Jupiter; one to the south at Delray; and one in the eastern central portion at downtown West Palm Beach. The proposed Staluppi/JSI site is west of the Stewart location. Based upon the actual shopping patterns the majority of the sales by these three existing dealers are made to customers in the same county. Because few of Mazda's customers come from adjacent counties, the largest area which should be used to define the Comm/Terr is the county itself. Within Palm Beach County there are also identifiable plots associated with the three dealers which show that while Stewart and Delray are connected to the JSI site (via established purchasing patterns), Jupiter is not. For this reason, Mazda's expert in rendering his initial opinions regarding this matter excluded Jupiter from the Comm/Terr. This approach has been deemed persuasive. Currently, there are three clusters of automobile and truck dealerships within the Palm Beach Comm/Terr: Delray, where Mazda is now located; Military Trail/Okeechobee Boulevard, where Mazda wants to be located; and North Lake Boulevard. Eighty percent of the customers who shop for new cars, regardless of brand, go to one of the three clusters. Mazda is not represented in two of these popular shopping venues. Mazda and Dodge are the only brands offered in Jupiter. Less than 5% of the customers from the remainder of Palm Beach County (away from the Jupiter PMA) went to Jupiter to purchase a new vehicle. To determine a reasonable expected market penetration standard, it is appropriate to exclude certain factors, such as the consumer preferences for certain types of vehicles (independent of brand) over which the dealers have no control. Market penetration is the traditional standard used to measure adequacy of representation because it reflects the competitive efforts of the competing dealers. Registration data of all brands is used to comprise a single indicator called market share, which is an objective and accurate measure of market activity. Registration data reflects actual consumer purchases. Actual registrations account for demographic characteristics, including age, income, education, size-class preferences, and product popularity. Market penetration for any area is computed utilizing all registrations to addresses in the area, regardless of the location of the selling dealer. After registration data is compiled, the performance of the Comm/Terr can be compared to another market area (allowing for differences in segment popularity). In this case, Mazda compared the Palm Beach Comm/Terr to the Miami/Ft. Lauderdale market. Typically, manufacturers and companies which compile data regarding vehicle sales classify new vehicle sales into segments. These segments list models which are comparable to one another and are, presumably, competing for the same customer. Mazda classifies its vehicles into nine segments. Although it could be argued Mazda is ineffective against Ford, General Motors, and Chrysler, part of that theoretical ineffectiveness is due to the lack or absence of entries from Mazda into markets or segments flooded by those make vehicles. For example, Mazda does not have a vehicle to compete with a Chevrolet Suburban. Nevertheless, on a segment-by-segment basis where Mazda competes with an entry comparable to the other line-makes (in size and class) Mazda's effectiveness can be computed and demonstrated. By measuring Mazda's penetration in each segment achieved in the Miami/Ft. Lauderdale area, applied to the industry data available in each segment in the Staluppi/JSI PMA, an appropriate standard is established for what could be expected if the latter were receiving adequate representation. Similarly, by applying the penetration rate to the Palm Beach Comm/Terr as a whole it is possible to establish what could be expected if the Comm/Terr were receiving adequate representation. By considering the segment analysis the process takes into account differences in consumer preferences between markets as to the popularity of segments, and thereby gives a more accurate measure of what Mazda's reasonably expected market penetration should be. Utilizing this segment analysis, the reasonably expected 1995 Mazda market share in the Staluppi/JSI PMA was 5.97%. The actual penetration for Mazda in this PMA was 3.81%. Similarly, in the Palm Beach Comm/Terr in 1995, Mazda's reasonably expected share in the segments was 6.21%. The actual penetration for Mazda in the Comm/Terr was 4.49%. Alternatively, adding Jupiter to the Palm Beach Comm/Terr, Mazda's reasonably expected market share in 1995 was 6.19%. The actual penetration in the Palm Beach Comm/Terr (adding Jupiter) was 4.65%. Thus, in each analysis Mazda performance fell short of its reasonably expected penetration. With a properly constructed dealer network, containing the appropriate number of dealerships in proper locations, it is reasonable to expect the dealer network in Palm Beach County to perform as well as the dealer network in Miami/Fort Lauderdale after adjusting for the local consumer patterns that make Palm Beach different from the other area. Net shortfall is the number of additional Mazdas that would have to be registered in order to equal the expected level based on average performance across an area. On the basis of the net shortfall in units, or units required to be registered in order to bring the Staluppi/JSI PMA up to the expected performance, the 1995 shortfall was 246 units. In reviewing the Palm Beach Comm/Terr as a whole over the three year period from 1993 to 1995, the efficiency has changed from 70.1% to 72.4%. For the Comm/Terr plus Jupiter, the efficiency has changed from 68.6% to 75.2% during the three years immediately following the insertion of Jupiter Dodge Mazda. Mazda was not receiving adequate representation from the standpoint of not achieving reasonably expected market share. That conclusion is the same whether the area under review is the Staluppi/JSI PMA, the larger Palm Beach Comm/Terr, or the Palm Beach Comm/Terr with Jupiter included. Increases in performance in 1996 (after the existing dealers knew an additional dealer was being sought for the Palm Beach Comm/Terr) while commendable do not negate the historical pattern of providing inadequate representation. The growth of population and households in Palm Beach County has been predominately to the west and central portions of the county and throughout the Delray Beach area. The proposed Staluppi/JSI PMA has also experienced rapid growth in households and population which is expected to continue. Among Mazda buyers, 28.5% thought that the location of the dealer was extremely important; 35.1% thought it was very important; 22.8% thought it was somewhat important; whereas only 8.7% thought it was not important, and 4.9% not important at all. The Military Trail auto mall into which JSI proposes to open the additional Mazda dealership, now contains Toyota, Jeep Eagle, Chrysler Plymouth, Nissan, Infiniti, Kia, GMC, Saturn, Ford and Isuzu. Other brands considered part of this cluster are on Okeechobee Boulevard. They are VW, Hyundai, Acura, Subaru, Volvo, Oldsmobile, Buick, Audi, BMW, Lexis, Lincoln Mercury, Chevrolet, Dodge, Mitsubishi and Mercedes Benz. Mazda would be required to have 3.2 dealerships in order to have the same share of the franchises in the Palm Beach Comm/Terr as it has in the Miami/Ft. Lauderdale area. Because Jupiter Dodge Mazda does not serve the Palm Beach Comm/Terr in a meaningful way, the Comm/Terr has two Mazda dealerships, and needs at least one more dealership to have a reasonable opportunity to receive adequate interbrand competition and gain expected market share. The likely cause of the current inadequacy of performance for the Palm Beach Comm/Terr is insufficient dealer count and poor dealer location. Without a dealer in the Staluppi/JSI PMA, consumers average 9.9 miles from the nearest Mazda dealer, which is higher than the major competitors located in the Staluppi/JSI PMA. With the addition of a Mazda dealer in the Staluppi/JSI PMA customers will be 7.2 miles, on average, to the nearest Mazda dealer a distance which should be more competitive with other brands such as Ford (3.9 miles), Chevrolet (4.7 miles), Nissan (7.2 miles), and Toyota (7.2 miles). Optimal location analysis also demonstrates that the proposed location would maximize customer convenience. If the J. S. Imports dealership is allowed to "float" in the Palm Beach Comm/Terr, while the other dealer locations are fixed, the location which would maximize customer convenience is near the proposed site. The proposed location is near the optimal location, and in the midst of a cluster of dealerships where approximately 30% of the sales of all Palm Beach County dealers are made. The proposed site is good in terms of solving the customer convenience problem in the area, and providing Mazda a presence in the cluster where many sales are made. The addition of a dealership will likely benefit consumers and the public interest. It will provide the growing population of the Staluppi/JSI PMA with a more convenient place to shop for Mazdas and more convenient Mazda service. It will take Mazda to a growing cluster of dealerships allowing customers a one stop opportunity to comparison shop Mazda and its competitors. Moreover, with increased interbrand and intrabrand competition Mazda and the existing dealers should be able to improve sales penetration and take advantage of the available market for Mazda products. Therefore, because of the large untapped opportunity for Mazda in the Palm Beach Comm/Terr as a whole, in the Comm/Terr plus Jupiter, and in the "identifiable plot" known as the Staluppi/JSI PMA, the addition of a new dealer should not cause a decrease in the existing Mazda dealers' sales over the long term. The addition should have a positive impact upon the overall sales opportunities for all the Mazda dealers. If you compute the total lost opportunity for sales in this market (941 units) and allocate a portion of sales to the Staluppi/JSI PMA (555), the remainder would be available to the existing dealers of the Comm/Terr. This remainder of the lost opportunity, (467 units utilizing the average penetration profile; 386 using the Jupiter profile), would be available for all Palm Beach Mazda dealers. Therefore, the proposed addition of a dealership can take place without taking any sales from existing Mazda dealers. The existing dealers should increase their sales because a large number of customers are now shopping in the Northlake and Okeechobee/Military Trail clusters, and could not previously consider Mazda conveniently because of the lack of a dealer. Having a dealer in the Okeechobee/Military Trail cluster should stimulate interest in Mazdas. All existing dealers have made substantial financial investments to perform their obligations under their dealers' agreements. In Stewart's case, the total investment is close to $5,000,000. Stewart's real estate and building are valued at approximately $3,000,000. Jupiter Dodge Mazda has about $1,000,000 invested in its dealership. Delray Mazda has approximately $3,500,000 invested in its dealership. All three existing dealerships should benefit from an increased Mazda presence in the market place. The reasonably expected market penetration for Mazda should improve with an additional dealership at the Staluppi auto mall. Mazda has not denied its existing dealers an opportunity for reasonable growth, expansion or relocation. In fact, Mazda urged Stewart to establish the dealership at the proposed location. Only when efforts with Stewart failed did Mazda go outside the existing dealers for an operator for the additional point. Mazda has not attempted to coerce the existing dealers into consenting to the additional dealership. In reaching this conclusion the single incident complained of by one existing dealer (that Mazda withdrew some advertising support) has been considered but is not persuasive that Mazda has acted improperly in its efforts to establish the new point. The distance travel time, considering traffic patterns and accessibility, between the proposed site and its nearest same line-make dealer (Stewart) is approximately ten minutes. While geographically closer than other dealers of same line-make vehicles, traffic and accessibility put the proposed site and Stewart at a reasonable distance. No evidence in this case supports a conclusion that consumers could have the same benefits offered by the proposed dealership from other changes. No evidence suggests the existing dealers are not in compliance with their dealer agreements. Intrabrand and interbrand competition should improve with the establishment of the new point. Service and sales facilities will be more convenient to customers. All existing dealers make sales into the area of the proposed site. With anticipated population growth and market availability, any sales lost to the new point should be offset by Mazda’s increased market presence, improved market penetration, and greater overall sales for all dealerships.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED That the Department of Motor Vehicles and Highway Safety enter a final order approving the new point dealership sought by Mazda Motor of America on behalf of J.S. Imports, Inc. DONE AND ENTERED this 1st day of May, 1997, in Tallahassee, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 1997. COPIES FURNISHED: Dean Bunch, Esquire Sutherland, Asbill & Brennan, L.L.P. 909 East Park Avenue Tallahassee, Florida 32301 James D. Adams, Esquire Adams & Quinton 7300 West Camino Real Camino Real Centre Boca Raton, Florida 33433 Douglas E. Thompson Post Office Box 16480 West Palm Beach, Florida 33416 Dean J. Rosenbach Lewis, Vegosen, Rosenbach & Silber, P.A. Post Office Box 4388 West Palm Beach, Florida 33402-4388 Michael J. Alderman, Esquire Division of Motor Vehicles Neil Kirkman Building, Room A-432 Tallahassee, Florida 32399-0504 Charles J. Brantley, Director Division of Motor Vehicles Neil Kirkman Building, Room B439 Tallahassee, Florida 32399-0500 Enoch Jon Whitney, General Counsel Division of Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
The Issue The issue is whether Petitioner's applications to establish new dealerships for the sale of motorcycles manufactured by Shanghai Motorcycle Co., Ltd. (JMSTAR), and Shanghai Shenke Motorcycle Co., Ltd. (SHEN), should be granted. PRELIMANARY STATEMENT In the Florida Administrative Weekly, Volume 34, Number 21, May 23, 2008, the Department of Highway Safety and Motor Vehicles (DHSMV) published two Notices of Publication for a New Point Franchise Motor Vehicle Dealer in a County of Less than 300,000 Population. Said notices advised that Petitioner Gator Moto, LLC and Gator Moto, LLC (Petitioner) intended to establish new dealerships for the sale of motorcycles manufactured by Shanghai Motorcycle Co., Ltd. (JMSTAR), and Shanghai Shenke Motorcycle Co., Ltd. (SHEN). On or about June 3, 2008, Respondent Austin Global Enterprises, LLC, d/b/a New Scooters 4 Less (Respondent) filed two complaints with DHSMV about the proposed new motorcycle dealerships. DHSMV referred both complaints to the Division of Administrative Hearings on June 10, 2008. On July 2, 2008, Respondent filed its Compliance with Initial Order. On July 7, 2008, Petitioner filed Petitioner's Compliance with Initial Order Division of Administrative Hearings (DOAH) Case Nos. 08-2735 and 08-2736. This is the only communication that DOAH has received from Petitioner. On July 23, 2008, Administrative Law Judge Barbara J. Staros entered an Order of Consolidation for DOAH Case Nos. 08-2735 and 08-2736. On July 24, 2008, Judge Staros issued a Notice of Hearing, scheduling a final hearing on December 4, 2008. On November 26, 2008, Respondent filed its Compliance with Pre-hearing Instructions. Petitioner did not respond to the Order of Pre-hearing Instructions. On December 1, 2008, Judge Staros issued an Amended Notice of Hearing. The amended notice only changed the commencement time for the hearing. DOAH subsequently transferred these consolidated cases to the undersigned. On the morning of the December 4, 2008, hearing, DHSMV advised the undersigned's office that DHSMV had failed to arrange for the appearance of a court reporter at the hearing. Accordingly, the undersigned issued an Order Granting Continuance and requiring the parties to confer and provide DOAH with mutually-agreeable dates for re-scheduling the hearing. On December 17, 2008, Respondent filed its unilateral Compliance with Order Granting Continuance. Respondent filed this pleading after an unsuccessful attempt to confer with Petitioner. On December 18, 2008, the undersigned issued a Notice of Hearing and Order of Pre-hearing Instruction. The notice scheduled the hearing for February 9, 2008. On February 3, 2007, Respondent filed its unilateral Compliance with Order of Pre-hearing Instructions. Petitioner did not file a response to the Order of Pre-hearing Instructions. When the hearing commenced, Petitioner did not make an appearance. Respondent made an appearance and presented the testimony of Colin Austin, Respondent's Managing Member. Respondent did not offer any exhibits. The hearing transcript was not filed with DOAH. Neither party filed proposed findings of fact and conclusions of law.
Findings Of Fact Respondent has standing to protest Petitioner's applications pursuant to Section 320.642(3)(a)2., Florida Statutes (2008). According to DHSMV's published notice, Petitioner intended to establish two new motorcycle dealerships at 2106 Northwest 67th Place, Suite 15, Gainesville, Florida, on or after May 9, 2008. This location is only 4.5 miles from Respondent's place of business. At some point in time, Petitioner relocated its business to 7065 Northwest 22nd Street, Suite A, Gainesville, Florida. This location is only 5.3 miles from Respondent's place of business. Petitioner's application indicated that Petitioner intended to establish itself as a dealer of SHEN and JMSTAR motorcycles. Currently, Respondent sells those motorcycles under License No. VF/1020597/1. Respondent currently supplies itself with SHEN and JMSTAR products from a United States distributor. Respondent has a good faith belief that Petitioner intends to import the motorcycles and related products directly from the Chinese manufacturers. In that case, Petitioner would be able to sell the products at a lower price than Respondent and thereby deny Respondent the opportunity for reasonable growth. Petitioner did not notify DOAH about a change of address. DOAH's notices and orders directed to Petitioner at its address of record have not been returned. Petitioner has not communicated with DOAH since filing a response to the Initial Order. Petitioner did not make an appearance at the hearing. Apparently, Petitioner has abandoned its applications to establish the new dealerships.
Recommendation Based on the forgoing Findings of Fact and Conclusions of Law, it is ORDERED: That the Department of Highway Safety and Motor Vehicles enter a final order denying Petitioner's applications. DONE AND ENTERED this 16th day of February, 2009, in Tallahassee, Leon County, Florida. S SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 16th day of February, 2009. COPIES FURNISHED: Michael James Alderman, Esquire Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32344 Collin Austin Austin Global Enterprise, LLC 118 Northwest 14th Avenue, Suite D Gainesville, Florida 32601 Justin Jackrel Gator Moto, LLC 4337 Northwest 35th Terrace Gainesville, Florida 32605 Justin Jackrel Gator Moto, LLC 2106 Northwest 67th Place, Suite 15 Gainesville, Florida 32653 Carl A. Ford, Director Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room B-439 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 Robin Lotane, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building 2900 Apalachee Parkway Tallahassee, Florida 32399-0500
The Issue Whether Volkswagen of America, Inc., should be permitted to establish an additional franchised dealership in Broward County, Florida, as more specifically described in the written notice it provided the Department of Highway Safety and Motor Vehicles advising of its intention to establish such a dealership.
Findings Of Fact Based upon the evidence adduced at hearing and the record as a whole, the following findings of fact are made: VWoA is a Florida-licensed importer and distributor of Volkswagen (VW) vehicles. It is a wholly-owned subsidiary of Volkswagen AG (VAG). VAG, which is headquartered in Germany, manufactures VW- brand motor vehicles. On a worldwide basis, it produces more vehicles than any other manufacturer except Ford Motor Company and General Motors Corporation. VWoA distributes to its franchised dealerships in the United States and Canada VW vehicles manufactured by VAG. VWoA establishes annual planning volumes or sales objectives for each of its franchised dealerships (based upon the dealership's past sales performance and other pertinent factors). For the first quarter of each year, VWoA's allocation of vehicles to the dealership is based upon the established planning volume for that dealership. In determining the number of vehicles to allocate to a dealership during the remainder of the year, VWoA takes into consideration the dealership's to-date sales performance for the year in relation to VWoA's expectations (as reflected by the dealership's planning volume previously established for that year). VWoA's franchised dealerships (VW dealerships) in the United States are assigned to one of five regions, each headed by a VWoA regional team leader. VW dealerships in Florida are assigned to the Southeast Region. James Wolter has been the regional team leader for VWoA's Southeast Region since January 1, 1999. Each region, including the Southeast Region, is divided into districts, each headed by a VWoA area executive. The area (defined in terms of zip codes) around each dealership in a district in which the dealership is deemed to have a geographic advantage over other VW dealerships because of the dealership's proximity (in terms of distance by air) to consumers living in that area is referred to by VWoA as the dealership's Primary Area of Influence or PAI. Three digit numbers are used to designate each dealership's PAI. VW dealerships in southeast Florida, from Indian River County (to the north) to Dade County (to the south), are assigned to District 22. Charles Westly has been the area executive of District 22 since January 1, 1999. At present, there are 11 existing VW dealerships located in District 22: Vista Volkswagen, whose PAI is 012; Esserman International, whose PAI is 029; Vero Beach Motorsports, whose PAI is 031; South Motors, whose PAI is 041; Gunther Volkswagen, whose PAI is 073; Stuart Volkswagen, whose PAI is 087; Esserman Volkswagen, whose PAI is 095; Deel Volkswagen, whose PAI is 223; Borton Volkswagen, whose PAI is 237; Palm Beach Volkswagen, whose PAI is 241; and Schumacher Volkswagen, whose PAI is 242. Nine of these 11 dealerships are located in Dade, Broward, or Palm Beach Counties (which, collectively, are also known as the "Miami Metro"). The dealerships located in Dade County are Esserman International, South Motors, Esserman Volkswagen, and Deel Volkswagen. The dealerships located in Palm Beach County are Borton Volkswagen, Palm Beach Volkswagen, and Schumacher Volkswagen. Borton Volkswagen, which is operated by Borton, is located at 2201 North Federal Highway in Delray Beach in southeast Palm Beach County. Palm Beach Volkswagen and Schumacher Volkswagen are located to the north of Borton Volkswagen. The dealerships located in Broward County are Vista Volkswagen and Gunther Volkswagen. Although Broward County presently has fewer VW dealerships than either of the other two counties which comprise the Miami Metro, of the three Miami Metro counties, Broward County is (based on 1998 registration data) the largest market in terms of the sale of new automobiles (of all makes). Vista Volkswagen, which is operated by Vista (an entity owned by Charles Dascal, Larry Hoffman, and Richard Buttafuoco, who also have an ownership interest in the entity that operates South Motors) is located 17.2 miles south of Borton Volkswagen at 700 North Federal Highway in Pompano Beach in northeast Broward County. Vista also operates (out of separate facilities and using a separate sales and service staff) a BMW dealership at this location. Gunther Volkswagen is located 11.4 miles to the southwest of Vista Volkswagen at 1660 South State Road 7 (441) in the Fort Lauderdale/Plantation area. It is operated by Gunther Motor Company of Plantation, Inc. (Gunther Plantation), which prior to July 15, 1999, was known as Gunther Motor Company, and, which prior to 1991, was known as Gunther Volkswagen, Inc. Gunther Plantation also operates (out of separate facilities and using separate sales and service staff) Kia and Mazda dealerships on the 15-acre tract on which Gunther Volkswagen is located. Joseph F. Gunther, Jr. (Mr. Gunther) is the President of Gunther Plantation and its majority (51%) shareholder. The remaining 49% of the shares of the corporation are owned by Mr. Gunther's three sons, Joseph F. Gunther III (16%), John Casey Gunther (Casey Gunther) (16%), and Michael Gunther (17%). The elder Mr. Gunther has had an ownership interest in Gunther Plantation and has been actively involved in the operations of Gunther Volkswagen since 1970. In 1970, when Gunther Volkswagen opened (as the third VW dealership in Broward County), VWoA had annual sales in the United States of 569,292 units, which were made through a dealer network of 1,160 dealerships. 6/ Thereafter, as Japanese imports became increasingly popular, annual sales of new VWs (VW sales) in the United States declined. There was also a decline in the number of VW dealerships in the United States starting in 1973. (The number of VW dealerships in the United States peaked at 1,203 in 1972.) In 1993, VW sales in the United States were 49,533 units, fewer than had been made in any year since 1955. By that year, the nationwide VW dealership network was "pretty fragmented." It consisted of 639 dealerships (564 less than had been in operation in 1972), not all of which were at the "right" locations. In 1993, Dr. Ferdinand Piech (an engineer by profession) became the Chief Executive Officer of VAG. Under his leadership, VAG took measures that significantly improved the quality of the product it manufactured. At the same time, VWoA reorganized its management structure and began the task of rebuilding the VW dealership network in the United States by closing underperforming dealerships, relocating dealerships to better locations, and selectively adding new dealerships in markets where it was either not represented or not adequately represented. In the years subsequent to 1993, VW sales in the United States have rebounded significantly. In 1994, 1995, 1996, 1997, and 1998, VW sales in the United States were 97,043, 115,114, 135,907, 137,885, and 219,679 units, respectively. While VW sales in the United States have increased over this period of time, the number of United States VW dealerships has declined each year. At the end of 1998, there were 600 VW dealerships in the United States, 39 less than in 1993 and 603 less than in 1972. VWoA anticipates that VW sales in the United States will continue to rise. It has a sales objective of 306,000 units for 1999 and 348,000 units for 2000. There has also been, subsequent to 1993, a substantial increase in VW sales by dealerships in what is now District 22 (the District 22 area) and by dealerships in the Miami Metro. In 1993, 1994, 1995, 1996, 1997, and 1998, VW sales by dealerships in the District 22 area totaled 1,226, 2,448, 3,041, 3,913, 4,264, and 7,757 units, respectively, and VW sales by dealerships in the Miami Metro totaled 1,187, 2,351, 2,941, 3,816, 4,236, and 7,648 units, respectively. In the first six months of 1999, VW sales by dealerships in the District 22 area totaled 5,739 units, and VW sales by dealerships in the Miami Metro totaled 5,509 units. In 1998, Gunther Volkswagen sold more VWs than any other dealership in the United States. In terms of the total number of VW sales made during 1998, the other VW dealerships in the Miami Metro ranked 44th (South Motors), 56th (Esserman Volkswagen), 57th (Deel Volkswagen), 61st (Vista Volkswagen), 88th (Palm Beach Volkswagen), 100th (Schumacher Volkswagen), 105th (Borton Volkswagen), and 319th (Esserman International 7/) out of the 600 VW dealerships in the United States. Out of the 170 dealerships in VWoA's Southeast Region, the Miami Metro dealerships' sales rankings for 1998 were as follows: Gunther Volkswagen: 1st; South Motors: 10th; Esserman Volkswagen: 13th; Deel Volkswagen: 14th; Vista Volkswagen: 16th; Schumacher Volkswagen: 22nd; Borton Volkswagen: 24th; and Esserman International: 84th. For the first six months of 1999, three of the Miami Metro dealerships were among the top 50 VW dealerships in the United States in total VW sales. Gunther Volkswagen was number one, with 1,829 VW sales; South Motors was number 17, with 708 VW sales; and Vista Volkswagen was number 44, with 548 VW sales. The increases in VW sales in the District 22 area and the Miami Metro have occurred despite supply shortages of certain popular models with features desired by consumers that have resulted in dealerships creating "waiting lists" for these vehicles (a nationwide problem VWoA and VAG are taking measures to rectify 8/); the absence of a VW dealership in Martin County in 1997 and 1998; and having one less dealership in Broward County since the closing of Arnie Smith Volkswagen in or about July of 1995. Arnie Smith Volkswagen was located in an older facility in a deteriorating area on Sunrise Boulevard in Fort Lauderdale, approximately halfway between Gunther Volkswagen and Vista Volkswagen. In addition to being in a bad location, it suffered from management problems and high employee turnover. As a result, its VW sales were declining. (From January of 1995 through July of 1995, its VW sales were 63 units, 43 less than the number of VW sales it had made during the first seven months of the previous year.) Arnie Smith Volkswagen was bought out by VWoA and Gunther Plantation (which at the time was known as Gunther Motor Company). Vista was asked to participate in the buy-out, but declined to do so. The closing of Arnie Smith Volkswagen left VWoA with two dealerships in Broward County, neither of which was located in the rapidly growing western portion of the county. At the time of the closing of Arnie Smith Volkswagen, VWoA believed that the most prudent course of action was to keep the Broward County VW dealership count at two to allow the two remaining dealerships to "get some meat on their bones." These two dealerships, Gunther Volkswagen and Vista Volkswagen, did enjoy an increase in VW sales after the closing of Arnie Smith Volkswagen. In the first half of 1995, when Arnie Smith Volkswagen was still in business, Gunther Volkswagen and Vista Volkswagen had 571 and 121 VW sales, respectively. In the second half of 1995, when Arnie Smith Volkswagen was no longer selling VWs, Gunther Volkswagen and Vista Volkswagen had 664 and 160 VW sales, respectively. Gunther Volkswagen's VW sales in 1996, 1997, and 1998 were 1,657, 1,657, and 2,565 units, respectively. Vista Volkswagen's VW sales in 1996, 1997, and 1998 were 370, 515, and 722 units, respectively. By late 1996 to early 1997, VWoA determined that the time was right to establish another VW dealership in Broward County and bring its dealership count in the county to three (which is the same number of VW dealerships that VWoA had in the county from 1970 until Arnie Smith Volkswagen went out of business in or about July of 1995). After reviewing vehicle registration and sales data, which reflected that its principal competitors with dealerships in the Coconut Creek area of northwest Broward County were outperforming VWoA in that area, VWoA made the further determination that this third Broward County VW dealership should be located in the Coconut Creek area (which, in 1970, consisted of either swamp or farm land and today is one of the fastest growing areas in the nation, with a population having income characteristics that make it a "great spot to be selling . . . new vehicles"). There has been no showing that VWoA, at any time, attempted to coerce any of the existing VW dealers to consent to the establishment of such an additional VW dealership. After determining to establish an additional VW dealership in the Coconut Creek area, VWoA began looking for an operator for this additional dealership, and it also retained the services of a real estate company, the Core Company (which is now known as Travel Pro), to search for a suitable site in the Coconut Creek area for the dealership. Vista and Gunther Plantation were among the candidates VWoA considered to operate the dealership. VWoA had several conversations about the Coconut Creek market with Vista (which recognized that the Coconut Creek area was a "boom" area with considerable market potential). At no time during these conversations did Vista indicate that it was willing to operate full-scale VW dealerships in both Pompano Beach and the Coconut Creek area. After reviewing the qualifications and credentials of the candidates under consideration, VWoA, exercising reasonable and sound business judgment, determined that the principals of Gunther Plantation (which at the time was third in the nation in the number of VW sales) were best suited to operate the additional VW dealership in the Coconut Creek area. It then entered into negotiations with them. Thereafter, some time before March 18, 1998, Vista approached VWoA and proposed that it be allowed to either relocate its Pompano Beach VW dealership to the Coconut Creek area or operate a full-scale VW dealership in the Coconut Creek area, while maintaining a satellite VW dealership with limited sales, service, and parts facilities (as opposed to a full-scale VW dealership) in Pompano Beach. VWoA rejected both alternatives inasmuch as it had already selected an operator for the Coconut Creek area VW dealership. It does not appear that, in denying Vista the opportunity to operate a VW dealership in the Coconut Creek area, VWoA acted unreasonably; nor is there evidence that VWoA, in any other respect, acted in a manner that unreasonably denied Vista the opportunity to grow and expand its VW dealership. Notwithstanding VWoA's rejection of Vista's proposal, Vista still intends to proceed with plans to relocate its Pompano Beach BMW dealership to the Coconut Creek area, a move that would result in an increase in Vista's operating expenses. In middle to late 1997, VWoA acquired property in the Coconut Creek area for a VW dealership. The property is located on the northeast corner of State Road 7 (441) and Collum Road (Coconut Creek Site), which is in Vista Volkswagen's PAI. The Coconut Creek Site is in an area where existing dealerships representing other major brands (including brands against which the VW brand competes) are clustered. (Such clustering promotes inter-brand competition and makes it more convenient for consumers to shop for automobiles.) There are six such "automobile clusters" in Broward County and southern Palm Beach County, one each in the Delray Beach, the Pompano Beach, the Coconut Creek, the Plantation, the Ft. Lauderdale, and the Hollywood/Davie/Pembroke Pines areas. In 1997, these clusters generated the following new vehicle sales: Delray Beach area cluster: 22,270 units; Pompano Beach area cluster: 28,281 units; Coconut Creek area cluster: 29,602 units; Plantation area cluster: 24,225 units; Ft. Lauderdale area cluster: 16,968 units; and Hollywood/Davie/Pembroke Pines area cluster: 31,449 units. VWoA is presently represented in only three of these six "automobile clusters": the Plantation area cluster (where Gunther Volkswagen is located); the Pompano Beach area cluster (where Vista Volkswagen is located); and the Delray Beach area cluster (where Borton Volkswagen is located). The three existing VW dealerships closest to the Coconut Creek Site are Vista Volkswagen, which is 6.9 miles away, Gunther Volkswagen, which is 12.7 miles away, and Borton Volkswagen, which is 16.3 miles away. (There are existing dealerships in the Coconut Creek area representing brands other than VW (Chevrolet, Dodge, Ford, Lincoln Mercury, Mazda, Mitsubishi, and Toyota) that are 6.9 miles or less from their closest intrabrand competitor.) The driving time between the Coconut Creek Site and Gunther Volkswagen is anywhere between 26 and 40 to 45 minutes (depending on traffic). It takes from approximately 17 minutes to 30 to 35 minutes (depending on traffic) to drive from the Coconut Creek Site east to Vista Volkswagen. East-west movement in Broward County has become increasingly difficult over the years as the western portion of the county has become more densely populated. As a result, consumers in Broward County tend to move in a north-south, rather than an east-west, direction to make their vehicle purchases. On March 16, 1998, after a period of negotiation and the exchange of draft agreements, VWoA sent the following letter of understanding to Mr. Gunther and Casey Gunther: 9/ This letter will summarize our understanding of the actions to which you and Volkswagen of America, Inc. ("VWoA") are prepared to commit to establish a new, exclusive Volkswagen dealership for the Gunther organization ("Gunther") in Coconut Creek, FL. The following bullet points are a recap of our meeting on January 30, 1998, and include the following. In light of what we believe to be the potential growth in this market, it is the intent of VWoA to designate Coconut Creek as an open point and to construct a new dealership facility on the property owned by VWoA in Coconut Creek. While the building architecture will be based on the new Volkswagen Corporate Design guidelines, VWoA agrees to seek your input into the size of the building and land requirements needed to operate the dealership. The actual facility construction costs are estimated to be approximately $100 per square foot, but this may vary depending on local requirements and conditions. VWoA will defend its right to designate Coconut Creek as an open point in the event that another dealer in the market protests VWoA's action. Once the facility is completed, VWoA and Gunther will enter into a lease agreement for the land and building. The annual lease will be negotiated based on the cost to purchase the land used by the dealership, the final facility construction costs and local market value. Prior to entering into a new lease for the Coconut Creek dealership, Gunther will have purchased or entered into an intent to purchase from VWoA the existing Gunther Volkswagen, Inc. 10/ building and real property located in Ft. Lauderdale, FL. 11/ It is understood by both parties that it will take time to establish service and parts business at the new point in Coconut Creek, which business will be an integral part of the Volkswagen operations at that facility. The parties further understand that to establish that business will require sufficient New and Used Vehicle sales volumes to generate a gross profit reasonably sufficient to support the facility lease. Because this will be a new point, and because at this time there is not an established sales rate for the Coconut Creek market, VWoA agrees to establish annual new vehicle planning volumes in the following manner: At a minimum, an annual new vehicle planning volume will equal one percent (1%) of the national retail sales objective for the respective year. By way of example only, if the national new vehicle retail objective for a given year is 200,000 vehicles, the planning volume for Coconut Creek would be 2,000 vehicles. 12/ This method of calculating planning volumes will remain in effect for the first three years of operation of the new Coconut Creek point. After the third year, the dealership's new vehicle planning volume will be calculated in the same manner then used by VWoA to establish the planning volume for every Volkswagen dealer. After the first year of operation, the dealership's annual planning volume may be set at a level higher than the calculated 1% of national retail objective if supported by actual retail sales rates at the dealership. All requirements as delineated in the then current Volkswagen Dealer Agreement, Standard Provisions and Operating Standards shall apply to your appointment as a Volkswagen dealer in Coconut Creek. In the event that Gunther elects not to pursue this opportunity to operate an exclusive Volkswagen dealership in Coconut Creek, then Gunther (a) acknowledges VWoA's intent to designate Coconut Creek as an open point and (b) agrees to waive its right to protest the appointment of another dealer operator in Coconut Creek. As previously mentioned, this letter is intended to confirm issues we discussed in January. If you are in agreement with the above, please sign the attached copy of this letter and return it to me. Once we receive the executed copy, we will file the necessary documents with the city and state to obtain their approvals to move forward with our plans. This is an exciting opportunity for both Volkswagen and the Gunther organization, 13/ and we look forward to working closely with you as we get this project underway. Please feel free to give me a call if you have any questions. Mr. Gunther and Casey Gunther both signed this letter on March 25, 1998, indicating that they "concur[red]" with the representations made in the letter. VWoA customarily makes special arrangements concerning allocation of vehicles, like those set forth in the letter of understanding signed by Mr. Gunther and Casey Gunther, with dealers operating newly created VW dealerships to "get the dealership[s] going." This is a reasonable business practice. Following the execution of this letter of understanding, Debra L. Kingsbury, Esquire, VWoA's attorney, sent the following letter, dated April 2, 1998, to Ronald Reynolds, the Administrator of the Department's Dealer License Section: Dear Mr. Reynolds: Pursuant to the requirements of Florida Statutes, Section 320.642, notice is hereby given that Volkswagen of America, Inc. ("VWoA") intends to establish Gunther Motor Company as a dealership for the sale of Volkswagen vehicles at Block 89, Lots 22 and 23, Coconut Creek, Broward County, Florida 33073. This vacant property is on the northeast corner of State Rd. 441 and Collum Rd. VWoA intends to engage in business with Gunther as a dealership on or after April 1, 1999, assuming that no protest is filed. The dealer(s) of the same line-make vehicles in the county where the new dealership will be located and all counties adjoining that county are as follows: County Palm Beach County Borton Volkswagen 2201 N. Federal Highway Delray Beach, FL 33483 Palm Beach Volkswagen 6870 Okeechobee Blvd. West Palm Beach, FL 33415 Schumacher Automotive 3720 Northlake Blvd. Lake Park, FL 33403 Broward County Vista Volkswagen 700 N. Federal Highway Pompano, Beach, FL 33062 Gunther Volkswagen 1660 S. State Road 7 Ft. Lauderdale, FL 33317 Collier County A+ Car World 601 Airport Pulling Rd. Naples, FL 33942 Dade County Deel Volkswagen 3650 Bird Rd. Miami, FL 33133 South Motors of Dade County 16125 South Dixie Highway Miami, FL 33157 Esserman Volkswagen 16825 NW 57th Ave. Miami, FL 33055 The names and address of the dealer-operator and principal investors of Gunther Motor Company are: Dealer-Operator Joseph F. Gunther, Jr. Principal Investors Joseph F. Gunther, Jr. 1660 S. State Road 7 Ft. Lauderdale, FL 33317 If you have questions or require additional information, please do not hesitate to let me know. To the extent that Ms. Kingsbury's letter reflected that Joseph F. Gunther, Jr., would be the "dealer-operator" of the dealership VWoA proposed to establish in Coconut Creek, the letter was inconsistent with the representations made in the March 16, 1998, letter of understanding VWoA had sent to Mr. Gunther and Casey Gunther that the "dealer-operator" of this proposed dealership would be the entire "Gunther organization" (that is, the corporate entity which was owned by Mr. Gunther and his three sons, each of whom had an ownership interest in excess of 10%). 14/ By letter dated April 22, 1998, Mr. Reynolds notified Ms. Kingsbury that a "notice of publication to establish a franchise for Gunther Motor Company" was "published in the Florida Administrative Weekly on April 17, 1998." A copy of the "notice of publication" was enclosed, and it read as follows: Pursuant to Section 320.642, Florida Statutes, Volkswagen of America, Inc. ("VWoA"), intends to allow the establishment of Gunther Motor Company, as a dealership for the sale of Volkswagen vehicles, at Block 89, Lots 22 and 23. This vacant property is on the northeast corner of State Road 441 and Collum Road, Coconut Creek (Broward County), Florida 33073, on or after April 1, 1999. The name and address of the dealer operator(s) and principal investor(s) of Gunther Motor Company is Joseph F. Gunther, Jr., 1660 S. State Road 7, Fort Lauderdale, Florida 33317. The notice indicates an intent to establish the new point location in a county of more than 300,000 population, according to the latest population estimates of the University of Florida, Bureau of Economic and Business Research. Certain dealerships of the same line-make may have standing, pursuant to Section 320.642, Florida Statutes, to file a petition or complaint protesting the application. Written petitions or complaints must be received by the Department of Highway Safety and Motor Vehicles within 30 days of the date of the publication of this notice and must be submitted to: Mr. Ronald D. Reynolds, Administrator, Dealer License Section, Department of Highway Safety and Motor Vehicles, Room A-312, Neil Kirkman Building, 2900 Apalachee Parkway, Tallahassee, Florida 32399-0635. A copy of such petition or complaint must also be sent by U.S. Mail to: Debra L. Kingsbury, Attorney, Volkswagen of America, Inc., 3800 Hamlin Road, Auburn Hills, MI 48326. If no petitions or complaints are received within 30 days of the date of publication, a final order will be issued by the Department of Highway Safety and Motor Vehicles approving the establishment of the dealership, subject to the applicant's compliance with the provisions of Chapter 320, Florida Statutes. As noted above, in 1998, including the time when Ms. Kingsbury wrote to Mr. Reynolds and when the April 17, 1998, edition of the Florida Administrative Weekly was published, the corporate entity that is now known as Gunther Motor Company of Plantation, Inc., was known as Gunther Motor Company. It was not until July 15, 1999, that its name was changed to its present name. On that same day, July 15, 1999, a new Florida corporation, named Gunther Motor Company and having Mr. Gunther as its sole shareholder, was formed. If an additional VW dealership is established on the Coconut Creek Site (Proposed Dealership), it would be assigned a PAI consisting of zip codes that are now included in the PAIs of existing VW dealerships which are located further away from the centroids of these zip codes than is the Coconut Creek Site. (The Proposed Dealership's PAI will be referred to herein as the "Coconut Creek PAI.") In 1998, 782 new retail VWs were registered in what would have been the Coconut Creek PAI had the Proposed Dealership been in operation that year. (Only Gunther Volkswagen's PAI (with 1642) and Deel Volkswagen's PAI (with 942) had more than 782 new retail VW registrations that year.) Of these 782 vehicles, 327 were sold by Gunther Volkswagen (constituting approximately 13% of its VW sales), 219 were sold by Vista Volkswagen (constituting approximately 30% of its VW sales), and 113 were sold by Borton Volkswagen (constituting approximately 20% of its VW sales). VWoA takes the position in this proceeding that it is not adequately represented in the "community or territory" in which the Proposed Dealership is located. To evaluate the merits of this claim, it is first necessary to identify this "community or territory." VWoA and Vista agree, and the undersigned finds, that the relevant "community or territory" in the instant case (Comm/Terr) consists of the PAIs now assigned to Gunther Volkswagen and Vista Volkswagen (the two existing VW dealerships in Broward County) and to Borton Volkswagen (which is the southernmost VW dealership in Palm Beach County). In 1998, there was a total of 3,371 new retail VWs registered in the Comm/Terr. While there is no dispute regarding the identity of the relevant "community or territory" in the instant case, VWoA and Vista are not in agreement as to the standard that should be used to measure the performance of VWoA's dealership network in the Comm/Terr. Dealership network performance is generally assessed based upon the "market share" or "market penetration" (which are synonymous terms) achieved by the brand in the market in question during the applicable time period, compared to the "market share" or "market penetration" the brand was "reasonably expected" to achieve. ("Market share" or "market penetration" is expressed as a percentage, and it represents a brand's share of the total number of new vehicle registrations in the market.) A "reasonably expected" "market share" or "market penetration" for the VW brand in the Comm/Terr may be determined by: (a) selecting an appropriate comparison market area separate from the Comm/Terr (but preferably in the same local area) where the brand appears not to be inadequately represented; (b) ascertaining the brand’s "market share" or "market penetration" in that comparison market area; and (c) utilizing a process called "segmentation analysis" to account for any differences in consumer preferences and demographic characteristics that may exist between the comparison market area and the Comm/Terr. VWoA suggests, and the undersigned agrees, that it is reasonable and appropriate to assess VWoA's performance in the Comm/Terr by comparing it with VWoA's performance in the PAIs for Schumacher Volkswagen and Palm Beach Volkswagen (Palm Beach PAIs), as segment adjusted (Palm Beach Standard). 15/ The undersigned rejects Vista's contention that, to properly evaluate VWoA's performance in the Comm/Terr, VWoA's "market share" or "market penetration" in the Comm/Terr should be compared, not with the Palm Beach Standard, but "with [VWoA's] average penetration in the U.S. major metros, the Southeast major metros, and the Florida major metros" (Vista's Approach). Vista's Approach does not take into account, or make adjustments for, any consumer preferences, such as import bias, 16/ and demographic characteristics that may distinguish the Comm/Terr from the "average" "metro" market in the United States, in the southeastern United States, and in Florida. Moreover, Vista's Approach fails to take into consideration that VWoA has an incomplete national dealership network and is inadequately represented in various markets included in "the U.S. major metros, the Southeast major metros, and the Florida major metros." As a result, Vista's Approach yields a standard that, unlike the Palm Beach Standard, is too conservative to reflect a "reasonably expected" "market share" or "market penetration" for the Comm/Terr. Employing the Palm Beach Standard (as segment adjusted), the "reasonably expected" "market shares" or "market penetrations" in the Comm/Terr and the Coconut Creek PAI for the VW brand for the years 1995, 1996, 1997, and 1998 were as follows: Comm/Terr: 1995- 1.9%, 1996- 3.5%, 1997- 3.5%, and 1998- 6.2%; and Coconut Creek PAI: 1995- 1.8%, 1996- 3.5%, 1997- 3.4%, and 1998- 6.1%. The actual "market shares" or "market penetrations" in the Comm/Terr and the Coconut Creek PAI for the VW brand for these years were as follows: Comm/Terr: 1995- 2.2% (which was more than "reasonably expected"), 1996- 3.8% (which was more than "reasonably expected"), 1997-3.2% (which was less than "reasonably expected"), and 1998- 5.4% (which was less than "reasonably expected," but more than VWoA's "average penetration in the U.S. major metros [4.6%], the Southeast major metros [4.4%], and the Florida major metros [4.4%]"); and Coconut Creek PAI: 1995- 2.0% (which was more than "reasonably expected"), 1996- 3.2% (which was less than "reasonably expected"), 1997- 2.8% (which was less than "reasonably expected"), and 1998- 4.6% (which was less than "reasonably expected," but the same as "the average penetration in the U.S. major market metros" and more than the "average penetration in the . . . Southeast major metros, and the Florida major metros"). Accordingly, for every full year after 1996, VWoA's "market share" or "market penetration" in the Comm/Terr has been less than "reasonably expected," and for every full year after 1995, VWoA's "market share" or "market penetration" in the Coconut Creek PAI has been less than "reasonably expected." Comparing VWoA's actual versus its "reasonably expected" "market share" or "market penetration" in the Comm/Terr and the Coconut Creek PAI reveals the "retail registration effectiveness" of its dealership network in those markets. The "retail registration effectiveness" of VWoA's dealership network in the Comm/Terr in 1995, 1996, 1997, and 1998 was 119%, 108.1%, 93%, and 87.1%, respectively. The "retail registration effectiveness" of VWoA's dealership network in the Coconut Creek PAI during those years was 111.6%, 93.4%, 84%, and 76.3%, respectively. Accordingly, for every full year after 1995, the last year that VWoA was represented by four dealerships in the Comm/Terr, the "retail registration effectiveness" of VWoA's dealership network in the Comm/Terr and the Coconut Creek PAI has declined. During this period of decline in VWoA's "retail registration effectiveness" in the Comm/Terr and the Coconut Creek PAI, demographic factors in these markets, insofar as retail vehicle sales are concerned, have been favorable. In fact, such sales increased in absolute terms in the Comm/Terr in 1996, 1997, and 1998 (from 1,367 in 1995, to 1,715 in 1996, to 2,341 in 1997, to 3,902 in 1998), but not enough in 1997 and 1998 to meet reasonable expectations with respect to "market share" or "market penetration" (which measures a brand's performance relative to other brands). The likely cause of VWoA's recent "retail registration [in]effectiveness" in the Comm/Terr is the absence of an adequate number of VW dealerships located within its boundaries (which negatively impacts consumer convenience). There are 132 franchised dealerships (of all brands) in the Comm/Terr. Only three (or 2.3%) of these dealerships are VW dealerships. (The Comm/Terr has had only three VW dealerships since the closing of Arnie Smith Volkswagen in or about July of 1995.) In contrast, in the Palm Beach PAIs, 4% of the franchised dealerships are VW dealerships It does not appear that the recent "retail registration [in]effectiveness" in the Comm/Terr has been caused by the supply shortages of VW product (that have led to the creation of "waiting lists" for certain types of VW vehicles) inasmuch as there is no indication that such supply shortages existed only in the Comm/Terr and were not present elsewhere (including, most significantly, in the Palm Beach PAIs). Having identified the cause of VWoA's recent "retail registration [in]effectiveness" in the Comm/Terr as an insufficient number of VW dealerships, the solution to this problem is obvious: the addition of at least another VW dealership in the Comm/Terr. The Coconut Creek area cluster (where the Coconut Creek Site is located) is an appropriate location for this additional dealership. Relocating one of the existing VW dealerships in the Comm/Terr to the Coconut Creek area would not solve the "retail registration effectiveness" problem that VWoA is experiencing in the Comm/Terr inasmuch it would still leave VWoA with an inadequate share of the franchised dealerships in the Comm/Terr. The establishment of an additional VW dealership on the Coconut Creek site would benefit not only VWoA (by increasing its VW sales and enabling it to attain greater "market share" or "market penetration" in the Comm/Terr than it would with just three dealerships in the Comm/Terr). Consumers, particularly those in the Coconut Creek PAI (Coconut Creek consumers), would benefit as well. At present, with three VW dealerships in the Comm/Terr (none of which is located in the Coconut Creek area) Coconut Creek consumers, on the average, have to travel a further distance (8.6 miles) to buy new VWs (or to have their VWs serviced or repaired) than they do to purchase (or have serviced or repaired) vehicles of any of the 27 major brands that are represented in the Coconut Creek PAI. To purchase (or have serviced or repaired) vehicles manufactured by VAG's and VWoA's principal import competitors, Honda, Mitsubishi, Toyota, Mazda, and Nissan, these consumers have to travel, on the average, 4.1, 4.4, 4.4, 4.6, and 4.8 miles, respectively. If the Proposed Dealership is established on the Coconut Creek Site, Coconut Creek consumers would, on the average, be 4.6 miles away from a VW dealership. The establishment of the Proposed Dealership would not only reduce the distance Coconut Creek consumers, on the average, have to travel to get to a VW dealership, it would also increase the number of service stalls available in the Coconut Creek PAI to service and repair VW vehicles. These additional service stalls are badly needed. For example, consumers wanting to have their vehicles serviced or repaired at Gunther Volkswagen (which has 17 service stalls, four more than the number of stalls Vista Volkswagen has that are completely devoted to VW service and repair 17/), must wait, on average, a minimum of two weeks from the time they make an appointment before the dealership is able to service or repair their vehicles. If there is not an increase in the number of service stalls in the area, as VW sales rise, Coconut Creek PAI VW owners seeking to have their vehicles serviced will face even greater delays and resulting inconvenience. Consumers would also benefit from the increase in interbrand competition and intrabrand competition (among VW dealerships) that would occur as a result of the establishment of an additional VW dealership on the Coconut Creek Site. 18/ The benefits VWoA and consumers would derive from the establishment of the Proposed Dealership would not come at the expense of the existing VW dealers in the Comm/Terr, if these existing dealerships were to respond competitively to a new intrabrand competitor in the market. It is reasonable to anticipate that these dealerships would respond in such a competitive manner and that, among other things, they would increase their marketing efforts in the Comm/Terr. Such increased marketing efforts, along with the addition of a fourth VW dealership in the Comm/Terr, would produce an increased awareness of the VW brand, which, given the significant untapped potential of the brand in the Comm/Terr, would enable each of the existing dealerships, including Vista Volkswagen, to increase its VW sales. Indeed, even if the positive impact (of an additional VW dealership in the Comm/Terr) on consumer demand for the VW brand were disregarded, the opportunity (in terms of VW sales) presently available in the Comm/Terr (that is, the opportunity that the existing VW dealerships have not taken advantage of and therefore have "lost," hereinafter referred to as "lost opportunity" would be sufficient to support a fourth VW dealership in the Comm/Terr and, at the same time, allow the three existing VW dealerships to increase their VW sales in the Comm/Terr inasmuch as this "lost opportunity" in the Comm/Terr is significantly greater than the number of VW sales that it is reasonable to expect the Proposed Dealership would make to Comm/Terr consumers. Vista has made a significant investment ($3,311,971.00 as of October 1998) to perform its obligations under its dealer agreement with VWoA (with which it is in substantial compliance). The establishment of the Proposed Dealership, however, would not cause Vista to be deprived of a fair return on its investment, nor would it have "a significant and unfair negative financial impact on Vista," as Vista claims in its Proposed Recommended Order. While it is true that the size of Vista Volkswagen's PAI would be reduced by the addition of a VW dealership on the Coconut Creek Site, having a smaller PAI 20/ would not have any adverse impact on Vista's VW business if Vista were to respond in an effective, competitive manner 21/ and aggressively take advantage of the opportunity that would be available in the Comm/Terr as a whole 22/ (which, as noted above, would be sufficient to support four dealerships), with its efforts being focused upon the geographic areas closest to its dealership. There is no reason to believe that Vista would not be able to respond in such a fashion and offset any loss of Coconut Creek consumer business that it might suffer as a result of the establishment of the Proposed Dealership with an increase in business from consumers residing in its newly configured PAI and in other areas outside of the Coconut Creek PAI. There is no evidence that VWoA has unreasonably denied Vista opportunities for growth within the Miami Metro market. The establishment of the Proposed Dealership appears to be warranted and justified based upon present and anticipated economic and marketing conditions in the Comm/Terr.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order approving the proposal/application of Volkswagen of America, Inc., to establish an additional dealership in the Coconut Creek area of Broward County. DONE AND ENTERED this 17th day of December, 1999, in Tallahassee, Leon County, Florida. STUART M. LERNER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of December, 1999.
