Conclusions This matter came on for determination by the Department upon submission of an Order Closing File by Daniel M. Kilbride, an Administrative Law Judge, of the Division of Administrative Hearings, a copy of which is attached and incorporated by reference in this order. The Department hereby adopts the Order Closing File as its Final Order in this matter. ORDERED that this case is CLOSED and no license will be issued to Sunl Group, Inc. ‘and Action Motorsports to sell motorcycles manufactured by Astronautical Bashan Motorcycle Manufacture Co. Ltd. (BASH) at 11485 South Cleveland Avenue, Suite 1, Fort Myers (Lee County), Florida 33907. DONE AND ORDERED this a — day of July, 2009, in Tallahassee, Leon County, Florida. 'ARL A. FORD, Direct6r Division of Motor Vehicles Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399 Filed with the Clerk of the Division otor Vehicles this ZB day of July, 2009. NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. CAF/vlg Copies furnished: Kyle Lee Ride Green, Inc. 5686 Youngquist Road #113 Fort Myers, Florida 33912 Mei Zhou Sunl Group, Inc. ~ 8551 Ester Boulevard Irving, Texas 75063 Howard Chappell, Esquire Law Offices of Howard Chappell 1514 Cumberland Court Fort Myers, Florida 33919 Michael J. Alderman, Esquire Assistant General Counsel Department of Highway Safety and Motor Vehicles ; Neil Kirkman Building, Rm. A-432 Tallahassee, Florida 32399-0504 Daniel M. Kilbride Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator - Florida Administrative Law Reports Post Office Box 385 Gainesville, Florida 32602 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS SUNL GROUP, INC., AND ACTION MOTORSPORTS, Petitioners, RIDE GREEN, INC., ) ) ) ) ) vs. ) Case No. 08-5720 ) ) ) Respondent. ) )
The Issue The issues in this case are whether Petitioner has standing to protest the establishment of an additional motorcycle dealership; and, if so, whether Petitioner is adequately representing this line of motorcycles in the relevant territory or community pursuant to section 320.642, Florida Statutes (2018).1/
Findings Of Fact Tropical Scooters is located at 11594 Seminole Boulevard, Largo, Florida 33778. It has been in the business of selling scooters and other motorized vehicles for ten years. Michele Stanley is the owner and manager of Tropical Scooters and she has knowledge regarding its purchasing and franchise agreements, inventory, and sales figures. Although no franchise agreement was offered into evidence, Ms. Stanley testified Petitioner has an agreement with a distributor, Pacific Rim International, d/b/a Ice Bear ATV (Ice Bear), to sell YNGF motorcycles. Ice Bear has been supplying Petitioner with YNGF motorcycles for approximately two and a half years. Tropical Scooters has had a good relationship with this distributor and has encountered no problems selling the YNGF line. In the last 18 months, Tropical Scooters has sold 137 YNGF units and currently has 23 units at its showroom. Ms. Stanley discovered that Respondents had applied with the Department to establish a YNGF motorcycle dealership at 9145 66th Street North, Pinellas Park, Florida 33782, from the February 22, 2018, notice published by the Department in the Florida Administrative Register.2/ Subsequently, Tropical Scooters filed a timely complaint with the Department challenging Respondents’ application. Ms. Stanley was familiar with the proposed location of the new dealership and stated that it was four miles “as the crow flies” from the Tropical Scooters showroom. Tropical Scooters is an existing dealership that sells YNGF motorcycles and is within 12.5 of the location proposed by Powersports and Motrac for the new dealership. Therefore, Tropical Scooters has standing to bring this challenge pursuant to section 320.642(3). There was no evidence that Tropical Scooters’ representation of the YGNF line of motorcycles was inadequate in its community or territory as described in section 320.642(2)(b).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Department denying the new dealership application of Respondents for the sale and service of Sanmen County Youngfu Machine Co., Ltd., vehicles at 9145 66th Street North, Pinellas Park, Pinellas County, Florida. DONE AND ENTERED this 27th day of July, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI 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 27th day of July, 2018.
The Issue The issue is whether, pursuant to section 320.642, Florida Statutes (2013), Respondent Jaguar Land Rover North America LLC (JLRNA) may relocate the dealership of Respondent Warren Henry Jaguar from 20800 Northwest Second Avenue, Miami, to the east side of Biscayne Boulevard, about 306.45 feet south of Northeast 151st Street, in North Miami.
Findings Of Fact Warren Henry Jaguar is an authorized Jaguar dealer located at 20800 Northwest Second Avenue in Miami Gardens. Warren Henry Jaguar has occupied this location since 1985. Since December 2012, Warren Henry Jaguar has shared this location with the Land Rover dealership of Land Rover North Dade, LLC. Both entities are owned by Warren Henry Automobiles, Inc., which also owns Infiniti and Fiscar dealerships near Warren Henry Jaguar's present location, as well as Land Rover South Dade, LLC, which is mentioned below. By notice dated December 2, 2013, JLRNA informed the Department of Highway Safety and Motor Vehicles (DHSMV) that it intended to permit Warren Henry Jaguar to relocate its Jaguar dealership to a new facility to be located on the east side of Biscayne Boulevard in North Miami, about 306.45 feet south of the intersection of Biscayne Boulevard and Northeast 151st Street, in North Miami. The new dealership would be in a development to be known as Biscayne Landing. The existing and proposed locations are both in Dade County, whose population exceeds 300,000 persons. On December 9, DHSMV published notice to this effect in the Florida Administrative Register. Despite an incorrect proposed street address, The Collection's principal, Kenneth Gorin, knew the proposed location of the relocated Jaguar dealership and timely protested the proposed relocation. The Collection is an authorized dealer for Jaguar, Audi, Porsche, Ferrari, Maserati, McLaren, Aston Martin, and Alfa Romeo. The Collection sells and services these vehicles from a single dealership located at 200 Bird Road in Coral Gables, Dade County. Warren Henry Jaguar and The Collection are "motor vehicle dealers" within the meaning of section 320.60(11)(a)1., Florida Statutes. JLRNA is a "distributor" and "licensee" within the meaning of section 320.60(5) and (8), Florida Statutes. As such, JLRNA is authorized to distribute Jaguar and Land Rover motor vehicles to its respective authorized dealers in Florida. In general, JLRNA assigns each of its dealers an area of responsibility (AOR) based on the proximity of zip codes to each dealership. Each Jaguar dealership has a non-exclusive AOR, meaning that JLRNA may unilaterally change a dealer's AOR. Although the AOR of Land Rover of North Dade is also non- exclusive, the AOR of Land Rover of South Dade is exclusive, meaning that JLRNA may not unilaterally change its AOR. The present location of Warren Henry Jaguar is east of the Sun Life Stadium. This area is in economic decline, as evidenced by widespread commercial vacancies and elevated crime levels. Within Warren Henry Jaguar's AOR for its current location, the new location would be about 7.2 road miles and less than five air miles to the southeast of the current location. The proposed location would be directly west of Oleta River State Park, which is separated from Haulover Park on the ocean by a narrow finger of the northernmost portion of Biscayne Bay. The proposed location is in an area that is economically vibrant. During at least one 12-month period within the 36 months preceding publication of notice of the relocation, The Collection made more than 25% of its retail sales of new Jaguars to persons who registered those vehicles within a radius of 12.5 miles of the proposed relocation site. Warren Henry Jaguar's present location is about 16.3 air miles from The Collection's dealership. The proposed location is about 2.4 air miles and 2.2 road miles closer to The Collection's dealership; the new location would be about 13.9 air miles and 15.8 drive miles from the Collection. The drive time between The Collection's dealership, on the one hand, and the present and proposed locations, on the other hand, would be almost unchanged. The "community or territory" within which to judge the performance of the Jaguar brand is the combined AORs of The Collection, Warren Henry Jaguar, and Alpine Motors, which is the Jaguar dealership in Ft. Lauderdale, Broward County (CommTerr). The parties agree upon this designation of the CommTerr, which captures the three Jaguar dealers operating in Dade and Broward counties. As noted in the Conclusions of Law, the adequacy of Jaguar representation in the CommTerr requires consideration of at least 11 factors, as set forth in section 320.642(2)(b). These statutory factors are considered, where appropriate, in groups. Two of the 11 statutory factors are the reasonably expected market penetration for the CommTerr and the volume of registrations and service business transacted by the existing dealers in the CommTerr. See § 320.642(2)(b)3. and 11. The assessment of the performance of the CommTerr requires the establishment of a benchmark against which the CommTerr may be measured. A reliable benchmark must reflect the relevant demographics of the CommTerr. A benchmark relatively close to Broward and Dade counties would better reflect the market and demographic conditions than a more distant benchmark. After considering a number of factors, JLRNA's dealer network analyst selected as a benchmark the AOR of the West Palm Beach Jaguar dealer. The analyst has testified as an expert in almost 100 cases of this type, including 10 to 15 dealer- relocation cases, and has been accepted as an expert in each case that went to trial. In the alternative, JLRNA's dealer network analyst selected as a benchmark the AORs of all Florida Jaguar dealers outside of the CommTerr. The exclusion of the CommTerr from the alternative benchmark was necessitated by the fact that the size of these two counties would have overrepresented their sales performance and effectively distorted the sales of Jaguar dealers through the remainder of Florida. These benchmark selections are reasonable. The Collection's dealer network analyst did not object to the alternative benchmark, although his Florida benchmark includes the CommTerr. However, the Collection's dealer network analyst objected to the West Palm Beach AOR primarily because this was the second-highest-performing AOR in Florida in 2012, although it has since ranked lower. As already noted, reliance on the West Palm Beach AOR as a benchmark tends to control demographic variables. The reasonableness of this selection is further evidenced by the fact, noted below, that Alpine Motors performed quite well when compared to the benchmark West Palm Beach AOR during the period in question. The objection to the West Palm Beach AOR is therefore rejected. To address any material difference in market conditions between the CommTerr and the benchmark area, JLRNA's dealer network analyst analyzed consumer purchase preferences in these two markets. During the relevant period, Jaguar's offerings have been the XF, which is in the medium premium sedan segment, and the XJ, which is in the large premium sedan segment. During most of the relevant period, JLRNA also offered the now-discontinued XK, which was in the large premium sport segment. In the last couple of years, JLRNA replaced the XK model with the F model--first a convertible and then a coupe; the F model is in the premium sport segment. Segmentation analysis applies more objective filters, such as body type (e.g., sedan vs. coupe) and body length, plus more subjective filters, such as eliminating otherwise-eligible line-makes, such as Hyundai, due to the perception that they are not within the core premium brand associated with Jaguar. After applying these filters and making relatively minor adjustments for segment-based market preferences between the CommTerr and the West Palm Beach AOR, the JLRNA dealer network analyst reasonably determined that Jaguar sales in the CommTerr were inadequate. For instance, in 2012, for the medium premium, large premium, and large sport premium (XK not yet replaced by F) segments, the Jaguar dealers would have been expected to generate 1129 retail registrations, but achieved only 822. The expected penetration for Jaguar dealers in the CommTerr was 8.32%, but the actual penetration was only 6.06%; this translates to a retail registration effectiveness of 72.8%. At the time that the JLRNA dealer network analyst prepared his initial report, 2012 was the last year for which retail registration effectiveness data was available. At the time, though, 2012 was not an anomaly. The retail registration effectiveness of the CommTerr compared to the West Palm Beach AOR was 98.1% in 2009, 83.1% in 2010, and 93% in 2011. Updating his earlier work, the JLRNA dealer network analyst showed that the CommTerr underperformed in 2013 and 2014 (through June) with retail registration effectiveness, when compared to the West Palm Beach AOR, of 85.6% and 78.2%, respectively. The downward trend from adequate performance in 2009 and near-adequate performance in 2011 became more pronounced from 2012 through June 2014. As noted above, Alpine Motors performed well during this period. In 2009, 2011, and 2013, its retail registration performance exceeded the performance of the West Palm Beach AOR benchmark. The underperformance of the CommTerr is thus attributable to the underperformance of Warren Henry Jaguar and The Collection, whose retail registration performance fell below that of the West Palm Beach AOR benchmark each year from 2009 through June 2014. The CommTerr performed no better when compared to the alternative benchmark of Florida less the CommTerr. Here, the CommTerr achieved retail registration effectiveness of 100% in 2010, 95.7% in 2011, 87.5% in 2012, 90.83% in 2013, and 84.81% through June 2014. And the below-benchmark performance is attributable to Warren Henry Jaguar and The Collection, as, again, Alpine Motors' retail registration effectiveness exceeded that of Florida less the CommTerr in 2009, 2010, 2011, and 2013. Based on the foregoing, new Jaguar sales have achieved below-expected market penetration in the CommTerr after consideration of all relevant factors, and JLRNA has received inadequate representation in the CommTerr as a whole. These findings are driven by penetration and representation factors applicable to the portion of the CommTerr in Dade County. Two of the 11 statutory factors are: a) whether there is adequate interbrand and intrabrand competition with Jaguar in the CommTerr and adequate consumer care for Jaguar in terms of sales and service and b) whether the relocation is justified based on economic and marketing conditions pertinent to dealers in the CommTerr. See § 320.642(2)(b)9. and 10. Based on population and demographics, the CommTerr encompasses one of the more important markets for luxury vehicle manufacturers in the world in terms of opportunities for sales and corporate branding. The CommTerr promises to continue to represent an important market for new luxury vehicle sales into the future. For relevant segments, new-vehicle registrations in the CommTerr have increased from 10,054 in 2010 to 17,984 in 2013. For the first six months of 2014, these registrations reached 9611, annualizing to another increase in new-vehicle registrations in 2014. For the most part, the period in question covers the recovery of the auto industry from the Great Recession of 2008. However, there is some evidence that Jaguar may be a brand in decline, as its popularity among older buyers has not transferred to younger buyers. From 2006 to 2011, U.S. Jaguar sales dropped from 19,943 to 11,138 new vehicles. But the vast potential of the south Florida market to support more luxury vehicle sales supports the finding that Jaguar sales in the CommTerr are inadequate. Based on the foregoing, inadequate performance by Jaguar in the CommTerr during the period in question has not been due to adverse economic and marketing conditions. Inadequate performance by Jaguar in the CommTerr is due to inadequate representation by The Collection and Warren Henry Jaguar in engaging in interbrand and intrabrand competition. Two factors of the 11 statutory factors are: a) the impact of the relocated dealer on consumers, the public interest, existing dealers, and JLRNA and b) the size and permanency of investment reasonably made and reasonable obligations incurred by existing dealers to perform their obligations under their dealer agreements. See § 320.642(2)(b)1. and 2. There is substantial opportunity for additional Jaguar sales in the CommTerr through two means: conquest sales, meaning the sale of Jaguar models to purchasers who own corresponding models of competitors' vehicles, and the sale of Jaguar models by CommTerr dealers to displace pump-in sales, which are sales by Jaguar dealers outside of the CommTerr to purchasers within the CommTerr. If the CommTerr dealers achieved the retail registration effectiveness of the West Palm Beach AOR, based on 2012 registration data, 350 conquest sales and 106 displaced pump-in sales would be available to the CommTerr dealers. These two categories thus represent a total opportunity of 456 new- vehicle sales. JLRNA's dealer network analyst estimates that Warren Henry Jaguar would obtain about 116 of these sales, if it relocated to the proposed location, leaving about 340 sales to The Collection and Alpine Motors. For 2013, the dealer network analyst estimates that, if it relocated, Warren Henry Jaguar would obtain 127 sales from conquest and pump-in displacement sales, leaving 246 sales to The Collection and Alpine Motors. By some measures, The Collection had, at 103 units, the largest shortfall in sales, when measured against average sales, among all U.S. Jaguar dealers for the 12 months ending in July 2014. Even The Collections' dealer network analyst conceded that sales performance of The Collection--as well as Warren Henry Jaguar (except in 2008), but not Alpine Motors--was below his Florida benchmark every year. (Pet. Ex. 2, Tab 11, p. 4.) The Collection contends that its below-average performance is due to its status as a single-line Jaguar dealer, as contrasted to the dual-line (Jaguar and Land Rover) dealership of Warren Henry Jaguar and its affiliate. The Collection's claim of disadvantage as a single-line dealer fails for two reasons. First, The Collection represents numerous other luxury brands, including Audi, which features SUVs that are competitive with Land Rover SUVs. Second, Alpine Motors, which has consistently outperformed The Collection and Warren Henry Jaguar, is a single-line dealer without other brands--and has earned a profit each year since 2009. Evidence offered by The Collection concerning the financial impact of the relocation was flawed. For instance, The Collection's dealer network analyst could offer no support for his assumption of a direct relationship between reduced sales revenues and reduced service and parts revenues. Worse, The Collection's accountant incorrectly assumed a direct relationship between reduced gross revenues and reduced profits. The relationship between dealership revenues and profits can be complicated. For instance, notwithstanding the lost sales opportunities of 103 units for the 12 months ending in July 2014 and poor sales over the entire period in question, The Collection is the most profitable Jaguar dealership in the United States. From 2011 to 2013, The Collection's net after- tax profit climbed 45% on the sale of seven fewer new Jaguars. Similar indirect relationships between new-Jaguar sales and gross or net after-tax profits exist from 2009 through August 2014. For example, The Collection's gross profit increased 23.3% from 2010 to 2012 while its vehicle sales decreased by 9.2%. Less dramatically, in attempting to demonstrate that The Collection's Jaguar-based financial performance was precarious, The Collection's accountant imputed excessive rent based on an overly generous value assigned to the facility and an excessive allocation to Jaguar of a share of the facility and facility costs. The accountant also distorted The Collection's Jaguar-based financial performance by including one-time legal expenses paid or incurred in 2013 in connection with this dealer-relocation litigation. As noted above, there is little risk posed to The Collection from the proposed relocation because there is plenty of sales opportunity in the CommTerr to go around. Thus, there is little risk posed to The Collection's investment and obligations in connection with its dealer agreement with JLRNA. Moreover, there is little, if any, evidence as to the size or permanency of investment or obligations incurred by The Collection to perform its obligations under its agreement with JLRNA. The record does not permit a precise allocation of facility expenses to Jaguar--and, thus, The Collection's obligations to Jaguar--but the facility-expense allocation is smaller than estimated by The Collection's accountant. JLRNA argues that a Jaguar loss, if any, would be a rounding error, given the sales and profits generated by The Collection's sales and service of the other seven brands. As framed, this argument is irrelevant because it impermissibly enlarges the scope of the issues of these cases. But where, as here, the protesting dealer represents several line-makes in a single facility and the subject line-make is a small fraction of its overall business, the investment risk posed to such a Jaguar dealer, as The Collection, is much less than the risk posed to a single-line Jaguar dealer that represents no other line-makes. Based on the foregoing, the relocation of Warren Henry Jaguar would not have an adverse impact on existing dealers, nor would it have an adverse financial impact on The Collection. And this relocation would not pose an unreasonable risk to The Collection's investment and obligations under its agreement with JLRNA. Another factor of the 11 statutory factors is any action by JLRNA to deny The Collection, as to the Jaguar brand, the opportunity for reasonable growth, market expansion, or relocation, including the availability of line-make vehicles in keeping with the reasonable expectations of JLRNA in providing an adequate number of dealers in the CommTerr. See § 320.642(2)(b)4. Although owned by JLRNA, Land Rover is not the same line-make as Jaguar, so JLRNA's refusal to grant The Collection a Land Rover franchise is not cognizable under this statutory factor. At some point, Mr. Gorin and Mr. Zinn negotiated the sale of Land Rover of South Dade to Mr. Gorin, The Collection, or an affiliate of either of them. But these negotiations were unsuccessful, and, of course, this proceeding cannot serve as a means of forcing Mr. Zinn (or Mr. Gorin) to sell so as to create a dual-line dealership in south Dade County. As noted above, the dealer agreement between Land Rover of South Dade and JLRNA precludes the manufacturer's unilateral revision to the dealer's AOR, so JLRNA could not create for The Collection an AOR out of the AOR of Land Rover of South Dade, even if JLRNA were motivated to do so. The corporate policy of JLRNA is to encourage dual- line dealers. There is nothing inherently objectionable in such a policy. Even with the growing popularity of Land Rover and declining popularity of Jaguar over the past several years, this corporate policy, on the present record, has not denied The Collection a reasonable opportunity for growth. However, Jaguars and Land Rovers share a common engine on a number of models, and JLRNA allocates these engines between the two line-makes. Obviously, the potential exists for JLRNA to restrict the growth of single-line Jaguar dealers by allocating a disproportionately large number of engines to Land Rovers. But the record does not demonstrate that JLRNA has done so in these cases. Except for a few months leading up to the administrative hearing, when the supply of XF and new F models was constrained, all Jaguar models have otherwise been in free supply during the period in question, so JLRNA's allocations of engines between Jaguars and Land Rovers could not have denied The Collection a reasonable opportunity for growth. Further, The Collection may have declined allocations, even of the F model, during the period in question, further underscoring the free-supply status of all Jaguar models during the relevant period. Based on the foregoing, JLRNA has not denied The Collection the opportunity for reasonable growth, market expansion, or relocation, including the availability of Jaguar vehicles in keeping with the reasonable expectations of JLRNA in providing an adequate number of dealers in the CommTerr. Another factor of the 11 statutory factors is any attempt by JLRNA to coerce The Collection into consenting to the relocation of Warren Henry Jaguar. See § 320.642(2)(b)5. On one occasion, JLRNA's Vice President of Dealer Network Development warned Mr. Gorin that he would be "crossing a line" if The Collection persisted in objecting to the relocation of Warren Henry Jaguar. The officer made the comment at an informal encounter with Mr. Gorin during a Jaguar dealer meeting. The officer added that The Collection's relationship with JLRNA would never be the same if Mr. Gorin did not drop its protest of the relocation. The officer characterized the protest as The Collection's "suing" JLRNA. The Vice President of Dealer Network Development has considerable power over Jaguar dealers. He was and is in charge of the Business Builder Program, which is the program by which dealers, such as Warren Henry Jaguar and The Collection, earn manufacturer hold-backs by various activities. For Jaguar, these hold-backs, which are more formally known as a "variable margin program," amount to up to 7% of the manufacturer's suggested retail price (MSRP) of a vehicle and may provide the difference between a profit and loss in Jaguar dealership operations over the course of a year. Notwithstanding the source of these threats, their seriousness is negated by the absence of any attempt whatsoever by JLRNA to punish The Collection for maintaining this protest. Had there been such evidence, the weight that would have been assigned to this factor would have been considerable and possibly jeopardized the proposed relocation. Another factor of the 11 statutory factors is the distance, travel time, traffic patterns, and accessibility between The Collection and the proposed relocation. See § 320.642(2)(b)6. As noted above, as a result of the relocation, the air distance between The Collection and Warren Henry Jaguar would be reduced by about 2.4 miles and the road distance would be reduced by about 2.2 miles. The relationship between relatively small changes in distance between dealers and the lack of meaningful impact on the non-relocating dealer is reflected in section 320.642(5)(a)4., which bars a protest if the relocating dealer reopens less than six miles from its existing location and its new location is more than 15 miles from the non- relocating dealer. The proposed relocation meets the first criterion and, by road miles, the second criterion. But the new location, by air miles, is about one mile short of the 15-mile threshold. Nonetheless, the relatively short distance that Warren Henry Jaguar would be moving and the relatively small change in the proximity of its new location to The Collection are facts to be considered under this statutory factor. In terms of travel time, the existing and new locations of Warren Henry Jaguar are both about 20.6 minutes from The Collection. And the relatively modest distance between the existing and new locations would not produce any changes in average driving time for owners of Jaguars in operation within Warren Henry Jaguar's AOR. Based on the foregoing, there are no material differences in distance, travel time, traffic patterns, and accessibility between The Collection, on the one hand, and, on the other hand, Warren Henry Jaguar's existing and new locations. Another factor of the 11 statutory factors is whether benefits to the consumer will likely occur from the relocation and whether these benefits are not obtainable by other geographic or demographic changes or expected changes in the CommTerr. See § 320.642(2)(b)7. The MSRPs of the Jaguar models at issue range from about $50,000 to over $100,000. Any foreseeable changes in the demographics of the immediate vicinity of Warren Henry Jaguar's present location are not going to be of any benefit to the public that might constitute customers of these luxury cars. The relocation toward the coast benefits the public because the demographics of the immediate vicinity of the new location is more in tune with the luxury car market. After the relocation, more of Jaguar's potential customers would be able to examine JLRNA's offerings in closer proximity to their homes, and all of Jaguar's potential customers would be able to examine Jaguar's offerings in a safer setting that hosts other luxury brands for comparison shopping, such as Audi, Lexus, and Lamborghini, and other high-end retail attractors, such as fine restaurants and high-end stores, including those at the nearby Aventura Mall and planned for the Biscayne Landing development itself. Based on the foregoing, the relocation of Warren Henry Jaguar will provide relevant consumers benefits that cannot be obtained by other geographic or demographic changes. The final factor of the 11 statutory factors is whether The Collections is in substantial compliance with its dealer agreement with JLRNA. It is. Balancing these 11 statutory factors, JLRNA has proved that its existing dealers in the CommTerr--particularly, The Collection and Warren Henry Jaguar--have provided inadequate representation. No other factors persuade otherwise.
Recommendation It is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order dismissing all protests of The Collection to the proposed relocation of Warren Henry Jaguar to the east side of Biscayne Boulevard, about 306.45 feet south of Northeast 151st Street, in North Miami. DONE AND ENTERED this 22nd day of May, 2015, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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 22nd day of May, 2015. COPIES FURNISHED: Jennifer Clark, Agency Clerk Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-430 2900 Apalachee Parkway, MS 61 Tallahassee, Florida 32399 (eServed) Richard N. Sox, Esquire Bass Sox Mercer, P.A. 2822 Remington Green Circle Tallahassee, Florida 32308 (eServed) J. Martin Hayes, Esquire Akerman Senterfitt 106 East College Avenue, Suite 1200 Tallahassee, Florida 32301 (eServed) Stephanie Leigh Carman, Esquire Hogan Lovells US LLP 600 Brickell Avenue, Suite 2700 Miami, Florida 33131 (eServed) John J. Sullivan, Esquire Hogan Lovells US LLP 875 3rd Avenue New York, New York 10022 (eServed) Barrett Rachel Charapp, Esquire Charapp & Weiss, LLP 20801 Biscayne Boulevard, Suite 403 Aventura, Florida 33180 (eServed) Michael G. Charapp, Esquire Charapp & Weiss, LLP 8180 Greensboro Drive, Suite 1000 McLean, Virginia 22102 Brad D. Weiss, Esquire Charapp & Weiss, Llp 8180 Greensboro Drive, Suite 1000 Mclean, Virginia 22102 Ryan L. Ford, Esquire Hogan Lovells Us Llp 555 13th Street, Northwest Washington, Dc 20004 Kimberly S. Maccumbee, Esquire Charapp & Weiss, Llp 8180 Greensboro Drive, Suite 1000 Mclean, Virginia 22102 Terry L. Rhodes, Executive Director Department Of Highway Safety And Motor Vehicles Neil Kirkman Building, Room B-443 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (Eserved) Steve Hurm, General Counsel Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A-432 2900 Apalachee Parkway Tallahassee, Florida 32399-0500 (eServed)
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 a proposed motor vehicle dealership in Seminole County, Florida.
Findings Of Fact DOAH provided the parties with adequate notice of the final hearing. On December 11, 2008, DOAH mailed a Notice of Hearing to each of the parties, scheduling the final hearing for April 6, 2009. No Notice was returned as undelivered. No party objected to a final hearing on April 6, 2009. On December 11, 2008, DOAH also issued an Order of Pre- hearing Instructions that, in relevant part, required the parties to file a pre-hearing stipulation which was to include a list of witnesses and exhibits to be called and submitted at the final hearing. No party complied with the Order. The documents forwarded to DOAH by the Department support the findings. The Notice of Publication for a New Point Franchise Motor Vehicle Dealer in a County of More than 300,000 Population was published in the Florida Administrative Weekly, Volume 34, Number 43, on October 24, 2008. On behalf of Respondent, Mr. James Sursely timely filed a protest letter dated November 7, 2008, with Ms. Nalini Vinayak, the administrator at the Department responsible for receiving such protests. The remaining facts are undisputed in this proceeding. The proposed new point franchise motor vehicle dealer is for a line-make identified in the record as Chunfeng Holding Group Co. Ltd. (CFHG) motorcycles. The proposed location is in Seminole County, Florida. Seminole County has a population in excess of 300,000. The proposed new point franchise motor vehicle dealer is located at 3311 West Lake Mary Boulevard, Lake Mary, Florida. Respondent owns and operates an existing CFHG dealership that is located at 306 West Main Street, Apopka, Orange, County, Florida, 32712. The proposed dealership is within a 12.5-mile radius of Respondent's dealership. Respondent has standing to protest the establishment of the proposed dealership. The petitioners submitted no evidence that Respondent is "not providing adequate representation" of the same line-make motor vehicles in the community or territory.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order denying the establishment of the proposed franchise dealership. DONE AND ENTERED this 21st day of April, 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 21st day of April, 2009.
Findings Of Fact Based on the stipulations of the parties, on the exhibits received in evidence, on the deposition testimony received in evidence, and on the testimony of the witnesses at the hearing, I make the following findings of fact. Facts Stipulated To The Petitioner, Mike Smith Pontiac GMC, Inc., ("Dealer"), is a corporation organized and existing pursuant to the laws of the State of Florida. Dealer is engaged in the business of operating an automobile dealership with its place of business located in Daytona Beach, Florida. The Respondent, Mercedes-Benz of North America, Inc. ("MBNA"), is a corporation organized and existing pursuant to the laws of the State of Delaware. BNA has the exclusive license in the United States, its territories and possessions, to distribute, sell, and service Mercedes-Benz passenger cars, parts, and products. MBNA's principal place of business is located in Montvale, New Jersey. In addition, MBNA has seven zone offices within the United States, each of which oversees the operations of the Mercedes-Benz dealerships located within the zone. The zone office responsible for dealership operations in Daytona Beach, Florida, is located in Jacksonville, Florida. On or about January 1, 1984, MBNA and Dealer entered into a Mercedes- Benz Passenger Car Dealer Agreement which granted the Dealer the right to sell and service Mercedes-Benz passenger cars and parts through December 31, 1985. That agreement was extended by MBNA until January 31, 1986, by letter dated October 23, 1985. On or about June 21, 1985, Michael Smith left the dealership and no longer functions as dealer-operator of Dealer. Litigation between Michael Smith and Dealer and Jerome Ginsburg is presently pending in the Circuit Court in and for Volusia County, Florida, wherein Michael Smith presently claims to continue to own a 25 percent interest in Dealer. Pending disposition of this proceeding, MBNA has continued its business relationship with Dealer to date. Other Background Facts MBNA is a wholly owned subsidiary of Daimler-Benz Aktiengesellschaft, a corporation of the Federal Republic of Germany, which manufacturers Mercedes- Benz passenger cars. Dealer was formed by Jerome Ginsburg ("Ginsburg") and Michael D. Smith ("Smith") for the purpose of operating an automobile dealership named "Mike Smith Pontiac," located in Daytona Beach, Florida. Jerome Z. Ginsburg is both a lawyer and a businessman of substantial means. In late 1982, Jerome Ginsburg negotiated the purchase of an automobile dealership in Daytona Beach, Florida, from the owner, Mr. Roger Holler. At the time of purchase of the dealership, Ginsburg had absolutely no experience in the automobile field and, to this day, has never managed the day-to-day operations of an automobile dealership. It was not Ginsburg's original intent to personally operate the dealership. Ginsburg did not consider it prudent for him to enter into the automobile business without the aid of a person experienced in that business. The buy-sell agreement between Ginsburg and Holler required, as a condition of sale, that Holler approve the qualifications of the dealer- operator, i.e., the person who would actually be in charge of managing the day- to-day operations of the dealership. The buy-sell agreement between Ginsburg and Holler also provided that Ginsburg would lease the real property on which the dealership was situated and contained a guaranteed option to purchase that property at a value set by an agreed :AI appraiser, which option could be exercised by Ginsburg beginning one year after the dealership purchase. Ginsburg set out to find an experienced dealer- operator to run the Daytona Beach dealership and he picked Michael D. Smith. Ginsburg was aware that the manufacturers were highly selective with respect to whom they would approve as dealer-operators. The investigative focus of MBNA differs with respect to evaluating a potential dealer-operator as opposed to a dealer-owner. MBNA looks to the financial status and ability to capitalize the dealership of the proposed owner. With respect to a proposed operator, however, MBNA seeks an individual who has proven automobile dealership management experience. Smith submitted a resume outlining his automotive experience and employment history to Ginsburg and Ginsburg hired a detective agency to check the validity of the information submitted. The agency confirmed Smith's automobile experience. Although Smith had extensive experience in the automobile business, he did not possess any unique qualities which made him substantially different from many other dealer-operators. There are a large number of other people with similar experience. Ginsburg, as majority shareholder and president of Dealer, assumed that Smith would operate the day-to-day business of Dealer subject to the usual controls of the board of directors and himself as chief executive officer of Dealer. There is nothing to the contrary in either of the franchise agreements between Dealer and MBNA giving the dealer-operator special independent status or legal rights vis-a-vis Dealer. Smith, like Ginsburg, was not a party to the franchise agreements. The two principals in Dealer were Ginsburg and Smith. Ginsburg provided all of the money for the business. Ginsburg was president of Dealer and has always held at least 75 percent of the stock of Dealer. Smith operated Dealer on a day-to-day basis. In both of the franchise agreements entered into by MBNA and Dealer, Ginsburg is shown as a "Dealer Owner" and Smith is shown as both a "Dealer Owner" and a "Dealer Operator." Ginsburg loaned Smith all of the money to buy stock in Dealer and was never repaid by Smith. A Mercedes-Benz automobile is one of the most expensive cars sold in the United States, the price to the consumer being as high as $70,000.00 for some models. Thus, MBNA's standards are higher than those of many other manufacturers, and MBNA expects its dealers to provide facilities and service commensurate with the quality and cost of the product they represent. MBNA's emphasis on service rather than sales distinguishes MBNA from most other automobile manufacturers. Because MBNA does not have a problem with sales, MBNA has a philosophy of going to the ultimate to try to satisfy its customers. It is important to MBNA that the ownership experience be as positive as is possible while the customer owns a Mercedes- Benz automobile. Thus, MBNA prefers, at a minimum, a Mercedes- Benz service reception area isolated from other car lines, with a covered area where the customer can bring his car in, be greeted, and have his order written. Moreover, MBNA expects all of its dealerships to provide a lounge wherein a customer can wait comfortably and be treated in a manner consistent with the cost of the car. If MBNA terminates Dealer, Dealer will not be paid for the value of good will or going concern value of its business but rather would receive a liquidation value of Dealer's MBNA franchise. MBNA franchises are very valuable. If Dealer is terminated and MBNA thereafter selects another dealer, less investment will have to be made by the successor dealer and MBNA could expect to more easily obtain concessions from the new dealer. Dealer continues to operate a dual franchise by also selling Alfa Romeo and Pontiac automobiles. Dealer does not insist on continuing to operate the MBNA franchise in Daytona even though MBNA wants to get rid of Dealer and, in fact, Dealer became contractually bound to sell to third parties unconnected to Dealer in October 1986. The third party, Mr. Cutler, agreed to pay $3.3 million for the dealership. A sale to a qualified candidate acceptable to MBNA would accomplish MBNA's sole objective in this termination proceeding by changing its representation in Daytona Beach. At all times material to this case, Dealer was treated fairly with respect to its allocation of vehicles by MBNA. Dealer's allocation was increased while Smith was operating Dealer. The Agreement Between Smith and Ginsburg In Mid-February of 1983, Jerome Ginsburg and Michael Smith entered into a written agreement titled "Operating Financial Agreement." The agreement contemplated the formation of a Florida corporation for the purpose of purchasing Lamb Pontiac, GMC, Mercedes-Benz, in Daytona Beach, Florida. The agreement also contemplated that Ginsburg would advance all of the funds necessary four the business venture and that Smith's primary role would be in the day to day on-site management of the business subject to the general supervisory control of Ginsburg. With respect to ownership of the corporation to be formed, the agreement provided in Paragraph 3: 3. That the stock of said corporation shall be owned 75 percent by JZG [Ginsburg] and 25 percent by MDS [Smith]. The 25 percent stock owned by NDS shall be placed in escrow until the provisions of this contract are met, together with properly executed stock transfer documents executed in blank so that said stock can be transferred to JZG or his appointee and undated but executed letters of resignation from any position as an officer or director, all in the event of a default as outlined in this Agreement. With respect to the distribution of the profits of the corporation to be formed, the agreement between Ginsburg and Smith provided in paragraph 6: Disregarding any modifications that may be made for tax purposes, to net income earned, said distributable income defined as prior to any salary or compensation to the parties, (less any cash requirements for the operations of the business) shall be distributed in accordance with stock ownership. To MDS -- 25 percent, however, 50 percent of any monetary compensation in excess of One Hundred Thousand and 00/00 ($100,000.00) shall be paid to JZG to the extent required to balance the capital and loan accounts in the corporation to the ratio of 75 percent JZG and 25 percent MDS. To JZG -- 75 percent. The parties can elect to take said compensation in any form desired provided that it includes compensatory charges for any tax effect on the corporation or the other party. With respect to Smith's basic obligations and salary under the agreement with Ginsburg, Paragraph 7 provided: 7. MDS [Smith] agrees to operate the dealership on a daily basis in accordance with the highest standards in the industry and to devote his full time to the operation of the dealership and shall not engage in any other work activity without JZG's [Ginsburg's] prior consent nor shall he invest or aid anyone else in investing or engaging in the automobile business or any related business without JZG's prior consent. MDS shall be employed by the Corporation at a salary of $60,000 per year. Paragraph 11 of the agreement provided: 11. In view of the large capital expenditure of JZG, MDS and his wife both agree to execute a promissory note in favor of JZG for 25 percent of the cash required not to exceed $225,000. Said promissory note shall be due in the event there is a default by MDS under this Agreement. The note shall be cancelled and returned upon the balancing of the capital and loan accounts as provided in Paragraph 6A. Said note shall bear interest at the rate of 10 percent per year compounded annually until paid. Said note shall be due at the end of the 54 months after purchase and unless fully paid, shall accrue interest at the highest rate allowed in the State of Florida and shall provide for waiver of presentment, dishonor and notice, the payment of full legal costs of collection, etc. The agreement between Smith and Ginsburg also contained the following provision in Paragraph 15: 15. In the event in the future, any franchisor requires that MDS have the right to purchase or obtain a greater interest than provided herein, then in that event, MDS agrees that he will not exercise any such right. In the event a franchisor actually requires the transfer of such greater interest to MDS then in that event, compensating adjustments will be made in the ownership of the other franchises and or other assets to maintain the agreed upon ratio of ownership of assets and distribution of profits. In addition to the foregoing, the agreement between Smith and Ginsburg contained numerous specific obligations and agreements as to the manner in which Smith would operate the business as well as a lengthy definition of what constituted a default by Smith under the agreement. Included in the definition of default by Smith was the failure of Smith to achieve specified amounts of distributable income during each of the first five years of operation of the business. The terms contained in the agreement were drafted by Ginsburg and Ginsburg made the stock escrow arrangement a condition of Smith's ability to participate in the dealership. Ginsburg had Smith sign blank stock transfer forms and blank resignation forms in February 1983, on which the date was left blank. After Smith signed these documents, they were kept by Ginsburg in his office. Twenty-five per cent of Dealer's stock was issued to Smith, but, immediately after Smith signed his stock certificates, Ginsburg took back Smith's stock and held it. Ginsburg and Smith never advised MBNA of the existence of this agreement. The Application Process After executing the foregoing agreement, Ginsburg and Smith contacted MBNA with a view toward obtaining approval of Dealer as a franchisee. MBNA requested that Ginsburg and Smith provide certain information, including business experience, financial data, and information related to stock ownership in Dealer. As part of the pre-application process, in response to MBNA's request for background information, on April 26, 1983, Ginsburg sent to MBNA copies of applications which had been submitted to the GM Pontiac Division. Ginsburg intended that MBNA utilize the information contained in the GM Pontiac Division materials in the evaluation of Dealer's application. Ginsburg's cover letter of that date stated that the dealership would be owned by a corporation, ". . . 75 percent of which will be owned by me and 25 percent by Michael Smith." The documents submitted to GM Pontiac Division and forwarded to MBNA with Ginsburg's letter of April 26, 1983, included a form titled "Applicant's Source Of Funds Statement." That form, filled out and signed by Smith, contains a detailed list of assets owned by Mr. Smith which he describes as being the assets which will constitute the source of his funds to acquire a 25 percent interest in the dealership. That detailed list does not include mention of any loan of money from Ginsburg. Another portion of the documents submitted to GM Pontiac Division and forwarded to MBNA requested the following information: "Would any funds you plan to invest be borrowed or be otherwise encumbered? If yes, state from whom, terms, restrictions and repayment program." Both Smith and Ginsburg answered the question, "no," and neither provided any information regarding from whom funds were to be borrowed, the conditions of the loan, or the repayment schedule. At MBNA's initial meeting with Ginsburg and Smith, on May 27, 1983, discussions were had regarding remodeling of the dealership service facility. At that time, the dealership's Mercedes-Benz reception area was the same one used for Pontiac and there were no adequate facilities for customer waiting. Under date of June 23, 1987, Smith and Ginsburg submitted an Application For Dealer Agreement to MBNA on behalf of Mike Smith Pontiac, GMC, Inc. The application form included a portion titled "Statement Of Finances And Ownership." That statement showed that Mike Smith Pontiac, GMC, Inc., had a maximum authorized capital stock of $1,000.00, that Ginsburg owned 75 shares for which he paid $750.00, and that Smith owned 25 shares for which he paid $250.00. In the column titled "Amount Borrowed for this Investment," both Ginsburg and Smith reported, "None." Subsection 6 of the Statement of Finances And Ownership states: "Information is given below when it is indicated that stockholders, partner, or owner have borrowed funds to make their individual investment in this business." No information was provided regarding funds borrowed for the investment in Mike Smith Pontiac, GMC, Inc., with regard to either Smith or Ginsburg. At the time of Dealer's original application and at all other times material to this case, MBNA had a written policy regarding absentee ownership. That policy read as follows in pertinent part: It is our intent to avoid "absentee management" and to ensure operating control of the dealership by the resident owner/operator and, therefore, it will be the policy of MBNA that the owner/operator of the dealership shall have: 51 percent stock interest in the dealership, or a minimum of 20 percent ownership coupled with the absolute right to purchase up to 51 percent of the dealership during the term of the Dealer Agreement, evidenced by a written Agreement between the shareholders to that effect. COMMENT Although MBNA may, in exceptional circumstances, approve the application of a newly formed enterprise where the owner/operator has less than 51 percent of the shares because of his financial inability at he outset to acquire 51 percent, it is the goal of MBNA to ensure that the owner/operator does acquire operating control during the term of the dealer agreement. Notwithstanding the foregoing written policy regarding absentee ownership, NBNA does not appear to have been very concerned about the application or enforcement of that policy. When representatives of MBNA met with Smith and Ginsburg during the application stage of the relationship, the NBNA representatives told Smith and Ginsburg about the 20 percent minimum ownership requirement with respect to dealer-operators, but did not discuss with Smith and Ginsburg the requirement of a right to purchase up to 51 percent of the stock. Further, the MBNA representative did not provide Smith and Ginsburg with a copy of the written absentee ownership policy and did not ask them to provide MBNA with a copy of a written agreement between the shareholders showing that the dealer-operator had the absolute right to purchase up to 51 percent of the dealership during the term of the dealer agreement. MBNA did not ask Ginsburg or Smith about any other agreements between those two individuals. The MBNA absentee ownership policy is not incorporated as one of the provisions of the agreement between MBNA and Dealer. During the application process neither Ginsburg nor Smith made any mention of their written "Operating - Financial Agreement," nor did either of them show that document to any representative of MBNA. Similarly, neither Ginsburg nor Smith told MBNA that Ginsburg was holding Smith's stock certificate and signed, undated, resignation and stock transfer documents. The "Operating - Financial Agreement" was not brought to MBNA's attention because Ginsburg did not feel it was necessary to tell them about it. MBNA assumed that the information submitted by Ginsburg and Smith was true. The First Agreement Between The Parties The first written agreement entered into between MBNA and Dealer was an agreement titled "Mercedes-Benz Passenger Car Dealer Agreement." This agreement was filled out by representatives of MBNA and was then reviewed by Ginsburg and Smith. Ginsburg and Smith confirmed that the statements inserted in the agreement were true. The agreement had an effective date of July 5, 1983, and remained in effect through December 31, 1984. This agreement was entered into by MBNA and Dealer as corporations. The first agreement included a section titled "Dealer Operating Requirements Agreement, also referred to as "DORA." The DORA portion of the first agreement included the following language: Additionally Dealer agrees that the following changes and/or improvements recommended by Mercedes-Benz of North America, Inc., in the course of an analysis of Dealer's service department are necessary to the proper functioning of Dealer's service department. Dealer agrees that it will complete the following within the period indicated: The foregoing was followed by a typed itemization which included the following: "Provide plans for an acceptable M-B service reception area and customer lounge," which had an agreed completion date of 10-1-83, and "Complete renovation of service facility in accordance with approved plans, as mentioned above," which had an agreed completion date of 12-31-83. These same DORA commitments were also contained in the application materials reviewed and signed by Ginsburg and Smith. In early October of 1983, Ginsburg wrote to MBNA and, among other things, sought to defer compliance with the DORA items quoted above until after the purchase of the real property on which the dealership was located, which purchase could not take place until one year after acquisition of the dealership. The condition that the property be purchased prior to completing renovations had not been mentioned by Ginsburg or Smith at the time the parties initially discussed and agreed to the DORA commitments and deadlines for completion. MBNA acquiesced in Dealer's request and agreed to extend the completion dates for the above-quoted DORA items in the DORA provisions of the next agreement. The Second Agreement Between The Parties Under date of January 1, 1984, MBNA and Dealer entered into a second written agreement titled Mercedes-Benz Passenger Car Dealer Agreement. Like the first agreement, this agreement was entered into by MBNA and Dealer as corporations. This is the existing and presently effective agreement. This agreement replaced the initial franchise agreement. Like the first franchise agreement between the parties, this agreement was drafted entirely by MBNA personnel without negotiation. Among the specific provisions of this existing agreement pertinent to this case are the following: FIRST: MBNA appoints Dealer as a dealer of Mercedes-Benz Passenger Cars and as a dealer of Mercedes-Benz Parts in accordance with the provisions of this Agreement. Dealer accepts this appointment and assumes the obligation of an authorized Mercedes-Benz dealer, as specified in this Agreement. SECOND: Subject to the terms and conditions hereof, MBNA will sell to Dealer and Dealer will buy from MBNA Mercedes-Benz Passenger Cars and Parts and assumes the obligation of selling and promoting the sale of Mercedes-Benz Passenger Cars and Parts and performing service, including Warranty Service, for Mercedes-Benz Passenger Cars in the following non-exclusive area: Counties of Volusia and Flagler in the State of Florida. MBNA may alter the area described above at any time by written notice to Dealer. THIRD: The accompanying Dealer Operating Requirements Agreement (Form No. MB-903-O) and the Dealer Agreement Standard Provisions (Form No. MB-902-F) are hereby made a part of this Dealer Agreement. Dealer acknowledges receipt of the Dealer Agreement Standard Provisions and declares that it has examined the provisions and that it is fully familiar with them. FOURTH: This is a personal service agreement and has been entered into by MBNA in reliance upon, and in consideration of, the personal qualification and representations with respect thereto of the following named persons, hereinafter called Dealer Operators, who participate full time in the management of the Dealer and have full managerial authority and responsibility for the operations of Dealer: Name Address Title Michael Smith D. 1 River Ridge Trail, Ormond Secretary/ Treasurer/ Beach, FL 32074 General Manager and the following named persons, hereinafter called Dealer Owners who participate in the ownership of Dealer: Percentage Name Address of Ownership Jerome Z. Ginsburg 8 Boulder Trail, Armonk, 75 percent NY 10504 Michael D. Smith 1 River Ridge Trail, Ormond Beach, FL 32074 25 percent Except as may be otherwise provided in this Agreement, neither Dealer nor the persons named above shall permit any change in the ownership or management of Dealer without the prior written approval of MBNA, which approval shall not be unreasonably withheld. No representative of MBNA has authority to give verbal approval to a change in ownership or management. FIFTH: MBNA hereby approves the following locations for the Dealer's business pursuant to this Agreement: a salesroom at 833 Volusia Avenue, Daytona Beach, Florida; facilities for the sale of used cars with space provided for used Mercedes-Benz Passenger Cars at same and service and parts department at same Facilities at these locations shall correspond as to style, size, layout, color, equipment, and identification by MB Signs as required by MBNA in accordance with the applicable provisions of this Agreement and with such reasonable directives and suggestions as MBNA may issue from time to time. Without the prior written consent of MBNA, Dealer shall neither change the location of its salesroom, storage facilities, service department, or used car facilities, nor establish for use in its Mercedes-Benz business, pursuant to this Agreement, any additional salesroom, storage facilities, service department, or used car facilities. . . . . SEVENTH: This Agreement is to be governed by, and construed according to, the laws of the State of New Jersey. It is understood, however, that it is a general form of agreement designed for use in any state; and it is therefore agreed that any provision herein contained which in any way contravenes the laws of any state or constituted authority which may apply to this Dealer Agreement shall be deemed to be deleted here from in accordance with the applicable provision of the accompanying Dealer Agreement Standard Provisions. . . . . EIGHTH: This Agreement terminates and supersedes all prior written or oral agreements, if any, between MBNA and Dealer, relating to the subject matter hereof, except with respect to any trade indebtedness which may be owing by either MBNA or Dealer to the other, and except that this Agreement shall not operate to cancel any of Dealer's unfilled orders with MBNA for any Mercedes- Benz Passenger Cars, Parts, and Products placed with MBNA pursuant to the provisions of any agreement terminated or superseded by this Agreement. Except as herein otherwise provided, the Dealer, upon execution of this Agreement and in consideration of the execution thereof by MBNA, releases MBNA from any and all claims, demands, contracts, and liabilities (including statutory liabilities) of any kind and nature whatsoever, if any, arising from or out of or in connection with any such prior agreements. . . . . TENTH: This Agreement shall become effective as of the day and year first above written and shall continue in effect until December 31, 1985, when it shall terminate, unless otherwise previously terminated in accordance with the applicable provisions of this Agreement. The agreement described immediately above incorporated a document titled Dealer Operating Requirements Agreement (hereinafter "DORA"). Paragraph II,E. of the DORA provisions stated: "The minimum inventory of Mercedes-Benz vehicles in Dealer's stock will be 18 units." And as the last item under Section IV of the DORA, it is provided "In 1984/85, after purchase of real property, provide M-B identified reception area and customer lounge." The agreement entered into between the parties also incorporated a separate document known as the "Standard Provisions," which document is a part of every Mercedes-Benz Passenger Car Dealer Agreement. Among the provisions of the Standard Provisions are the following: Paragraph 15.D. Dealer and MBNA agree that the following acts or events, all within the control of Dealer or originating from actions taken by Dealer or its management or owners, are so contrary to the spirit and purposes of this Dealer Agreement as to warrant its termination . . . . Removal, resignation, withdrawal or elimination from Dealer for any reason of any person listed in Article Fourth; provided, however, that if the person leaving is a non- owner Operator who left without notice, Dealer will be given such reasonable time as circumstances may require to replace the Operator with an Operator satisfactory to MBNA; Any change, whether voluntary or involuntary, in the management or ownership of Dealer as set forth in Article Fourth without the prior written approval of MBNA; . . . . Any disagreement between or among the Dealer Operators or Owners of Dealer which in MBNA's opinion may adversely affect the conduct of Dealer's business or the interests of MBNA, providing the disagreement continues three (3) months after notice to Dealer by MBNA that the disagreement must be resolved; Any misrepresentation by Dealer or by any Dealer Operator or Owner in applying for this Dealer Agreement, or regarding the source of funds or capitalization of Dealer; Submission by Dealer of false applications or claims for reimbursement, refund or credit, or of false reports of the delivery or transfer of MB Passenger Cars if such applications, claims or reports are fraudulent or part of a pattern of false applications, claims or reports; When MBNA learns that any of the above events or acts have occurred MBNA will endeavor to discuss it with Dealer. Thereafter, MBNA may terminate this Agreement by giving Dealer written notice of such termination, to be effective upon receipt of such notice. . . . . Paragraph 15.E. If MBNA determines that Dealer has failed to provide adequate facilities or to fulfill the sale and service obligations Dealer assumed under this Agreement, MBNA will advise Dealer of such failure and attempt to discuss it with Dealer. Thereafter, MBNA shall notify Dealer in writing by Certified Mail of the nature of the failure, of the acceptable remedy and of the period of time (not less than six months) during which Dealer will be expected to remedy the failure. If the failure has not been substantially remedied at the end of the period, MBNA may terminate this Agreement by giving Dealer three months written notice. Paragraph 16. This Agreement can be extended or renewed only through an express written instrument to that effect and only if such instrument is duly executed on behalf of MBNA by one of the persons referred to in Article Ninth of the Mercedes-Benz Dealer Agreement. Any business relations of any nature whatsoever between MBNA and Dealer after the expiration of this Agreement or after its proper termination pursuant to Paragraph 15 of this Agreement, without such written extension or renewal shall not operate as an extension or renewal of this Agreement. Nevertheless, all such business relations, so long as they are continued, shall be governed by terms identical with the provisions of this Agreement. Concerns About Smith's Performance During the spring of 1985; Ginsburg began to have some serious concerns about the manner in which Smith was managing the dealership. An area of primary concern was that expenses had increased significantly and the financial statements were not showing profits that should have been there. Because of these concerns, Ginsburg and Paul Richards flew to Florida for two days at the end of April of 1985. Paul Richards was an accountant who had been providing accounting services for Ginsburg and who shortly thereafter was hired full-time by Ginsburg. During the two-day visit in April of 1985, Ginsburg and Richards met with Smith, and Richards also met with the office manager. Expenses were extremely high at that time. There appeared to be no control over expenses or cash flow. There were indications that Smith had obligated the dealership for contingent liability under recourse repurchase type obligations. The dealership had not been making money for a couple of months at that time. They discussed these problems with Smith. They tried to establish control over the dollars being spent and tried to set up a purchase order system. They established a budget for the month of May of 1985. On May 13, 1985, Ginsburg and Richards returned to Florida to do a closer review of Dealer's books and records. During the- week of May 13, 1985, they discovered further serious problems with the operations of the dealership. During this week Ginsburg and Richards first discussed the possible removal of Smith as dealer-operator. Later in that same week Ginsburg and Richards met with Smith and discussed with him all of the problems they had discovered. Smith did not deny the problems, but asked for a chance to correct them and to continue as the dealer-operator. Ginsburg wrote a document which had the effect of modifying the "Operating - Financial Agreement," and at the end of the week of May 13, 1985, Ginsburg presented the modifying document to Smith, discussed it with Smith, and told Smith that the only way Smith could remain as the dealer-operator was to sign the modification to their previous agreement. Ginsburg also required that Smith sign a new undated resignation and a new undated stock transfer authorization. The modification document listed all of the problems that were known to Ginsburg and Richards at the time the document was prepared. Neither Ginsburg nor Richards threatened Smith in any way in conjunction with obtaining Smith's signature on the modification document. Specifically, they did not threaten Smith with criminal prosecution. Ginsburg let Smith take the modification document home so that Smith could consider it further or consult with an attorney. At the time Ginsburg presented Smith with the modification document, Ginsburg felt that the financial viability of Dealer was threatened and was concerned that Dealer might go bankrupt. On May 31, 1985, Smith met with Richards and signed the modification of his agreement with Ginsburg in the presence of Richards. At the same time Ginsburg signed an undated resignation document and an undated stock transfer authorization. Smith was not asked to sign any document whereby he specifically agreed to resign as the individual named as the dealer-operator at Paragraph Fourth of the franchise agreement between MBNA and Dealer. He has never signed such a document. Modifications to the Ginsburg/Smith Agreement The modification to the agreement recited, among other things, that Smith had failed to meet the minimum distributable income goals in the original agreement and set new monthly distributable income goals for the period July 1, 1985, through June 30, 1986. Specific provisions of the modified agreement in this regard read as follows: Whereas the parties acknowledge that the goal set forth in Par. 4C(i) of minimum distributable income for the first 12 month period has not been met also the second 12 month period will not be met and Whereas MS wants to remedy the default and JG has agreed based on the following terms and conditions (a) The deficiency for the first 12 month period is $83,338. The deficiency for the second 12 month period shall be determined at the end of the period by Paul Richards. Copies of his computation shall be sent to the parties. MS agrees to prepay JG 75 percent of the total deficiency for these 2 periods. Until such repayment is completed Par 6a shall continue in effect. Par 3 is amended to extend the escrow until such payment is made. The parties hereby agree that in all other respects the agreement shall continue in effect except as set forth above & following. MS has prepared a monthly profit projection for the third 12 month period a copy of which is attached hereto as Exhibit A. Said profit projection shall total $900,000 & shall be agreed to by JG. MS agrees that failure to meet the profit projection for any one month which is not corrected by achieving the next month's profit projection plus the deficiency for the prior month shall constitute a default under this amendment and the original agreement. . . . Paragraph 2(d) of the modification to the prior agreement contained the following additional provisions with respect to the possibility of default: 2.(d) In the event of a default under the original agreement or this amendment by MS, he shall immediately turn over day to day operation of the dealership to JG or his designee cooperate in the orderly transition of all businesses to the new management execute any additional documents required for such transition by any franchisor i.e. GM, GMC, Pontiac, M.B., Alfa Romeo etc. or by any lendor i.e. GMAC, Barnett Bank. In the event of a default provided MS complies with the terms set forth herein, he shall be paid his salary for 90 days after default. The amendment to the agreement further provided in Paragraph 2(g) that Smith would submit a schedule for repayment of monies owned by Smith to the business and in Paragraph 2(h) stated: "MS acknowledges that he has willingly executed assignment and resignation papers which are to be effective upon default." The amendment to the agreement also included an observation that in view of current problems listed further down in the amendment to the agreement, Smith's performance would be evaluated on a continuous basis for the next 120 days. That observation was followed by an itemization of fifteen problems that were described as requiring immediate and continued corrective action. Those fifteen items read as follows: Excess new vehicle inventory Aged new vehicle inventory New vehicle inventory purchased in excess of cost New vehicle inventory purchased without RDR cards Excess inventory of used cars Aged inventory of used cars Used vehicles purchased or traded in at excess of value Purchases made in excess of the cash flow ability to pay Used vehicle purchases made in spite of already existing excess inventory Nonmonitoring of payables, receivables & credit extensions Excess advertising costs and non- monitoring of results Employment of excess personnel Payment of personnel in excess of that required and without consideration of economic return Failure to monitor the fleet rental car lease program & dispose of vehicles on return Failure to achieve income levels as projected The amendment to the agreement concluded with the following language: "Repetition or continuation of these problems, failure to take corrective actions or doing any act that creates further losses shall be considered an immediate default." The Termination of Smith's Involvement With Dealer During the latter part of May and the first three weeks of June of 1985, the dealership continued to experience problems and Ginsburg and Richards discovered new problems. Among the new problems was discovery of the fact that Smith had entered into recourse obligations to facilitate the sale of cars. Those recourse obligations exposed Dealer to contingent liability for which there was no reserve in the dealership books and records. The recourse obligations were not reflected anywhere in the dealership's books and records. It was also discovered that Smith had failed to inform Ginsburg of another serious problem, namely, the fact that GMAC had threatened to terminate the dealership's floorplan. Termination of the floorplan would have put the dealership out of business. By June 21, 1985, Ginsburg determined that it was no longer feasible for Smith to remain in control of Dealer's operations because of the numerous problems summarized above. On that day, Ginsburg met with Smith and told Smith that things were not working out and that Ginsburg was asking Smith to leave. Ginsburg told Smith that Smith was in default under the terms of the modifications to their "Operating - Financial Agreement" and that Ginsburg was exercising his rights under the modified agreement to date Smith's resignation and to transfer Smith's stock. Ginsburg thereafter dated Smith's resignation June 21, 1985. Ginsburg also dated Smith's stock transfer authorization June 21, 1985, and transferred all of Smith's stock to Ginsburg. When Smith left the dealership on June 21, 1985, Ginsburg knew that Smith was disappointed, but thought that they had parted on friendly terms. When Smith left, Ginsburg expected that Smith would cooperate in an orderly transition as provided in paragraph 2.(d) of the modification to their agreement. Ginsburg even allowed Smith to retain possession of two demonstrators (one for Smith and one for Smith's wife) for several months after June 21, 1985. It was not long before Ginsburg was disabused of any notion that he still had a friendly relationship with Smith. Prior to the termination of Smith, Ginsburg had not advised MBNA of any of the problems at the dealership. Following Smith's termination, Ginsburg did not immediately notify MBNA of the termination. By letter dated June 26, 1985, Ginsburg advised MBNA that Smith was on vacation, that Smith had submitted his resignation, and that Dealer intended to accept. Ginsburg did not forward copies of the resignation and stock transfer authorization with the letter. Instead, Ginsburg was trying "to buy time" by not fully informing MBNA of the circumstances. Ginsburg was concerned that had he told MBNA the entire truth, they would have become concerned that there was no dealer- operator on the premises. Ginsburg's letter of June 26, 1985, was received by MBNA on June 27, 1985. By that time MBNA had already heard through the "grapevine" that Smith had been terminated from his position as dealer-operator. On June 27, 1985, the MBNA zone manager also received a phone call from Smith and a telegram from Smith which made him aware that Ginsburg and Smith had a dispute and that Smith was still claiming to be the "dealer of record." The telegram read: THIS IS TO PUT YOU ON NOTICE AND INFORM YOU THAT I AM STILL DEALER OF RECORD IN DAYTONA BEACH FLORIDA AND ANY AND ALL CORRESPONDENCE RECEIVED FROM JEROME Z GINSBURG OR ASSOCIATES IN REGARD TO MIKE SMITH PONTIAC INC WERE NOT EXECUTED LEGALLY AND WERE NOT AGREED UPON BY MYSELF THEREFORE THEY ARE TO BE TOTALLY DISREGARDED By letter dated June 28, 1985, Smith confirmed his earlier notification to MBNA. The letter included the following: This will further confirm my mailogram to you on June 27 regarding the papers filed. I hereby put you on notice of the documents being invalid and any signatures were obtained through duress some time ago and no action should be taken on any request of Mr. Ginsburg in relation to this dealership. He does not have the authority to act in this capacity in regard to the franchise. When the MBNA zone manager received the conflicting communications from Ginsburg and Smith, he felt that MBNA's only option was to invoke the provisions of the franchise agreement which required the principals to resolve their differences within 90 days. By memo to the home office, he recommended invocation of that option because of the dispute as well as because of other matters mentioned in the memo. The Warning Letter To Dealer By letter dated July 1, 1985, MBNA followed the zone manager's recommendation and invoked paragraph l5D(g) of the franchise agreement by advising Dealer that the dispute between Ginsburg and Smith must be resolved within 90 days under pain of possible termination of the franchise agreement. The letter included the following: It has come to our attention that a dispute is underway at your dealership among the owners of the corporation. We have received conflicting correspondence concerning the employment status of Mr. Smith and we are very concerned as to the effects this disagreement will have on the Mercedes-Benz customers in the Daytona Beach market. This internal dispute conceriing ownership interest in your corporation is compounded by the recent events which have transpired concerning your lack of or unwillingness to conform to your Dealer Operating Requirement Agreement as well as misleading DDR reporting practices in conjunction with your leasing operation in St. Petersburg, Florida. These various incidents along with the current serious disagreement among corporate officers is unacceptable. At the time of sending the July 1, 1985, letter, MBNA did not know, as between Ginsburg and Smith, which was telling the truth. MBNA also felt that it had no way of determining which of the two was telling the truth. Further, MBNA felt that it had no obligation, contractual or otherwise, to referee a dispute between Ginsburg and Smith. Further Events Following Smith's Termination Shortly after Smith's termination, Ginsburg sought to remedy the management vacuum resulting from Smith's departure by locating a replacement dealer-operator. To that end, in Ginsburg's letter of June 26, 1985, he asked MBNA to assist him in trying to find a new dealer-operator. MBNA did not provide any assistance in this regard. With the many financial problems facing the dealership and with MBNA threatening termination, it is difficult to find a competent dealer-operator who wants to leave a reasonable job and move into that uncertain situation. As an interim measure, in July of 1985 Ginsburg arranged for a Mr. Lawrence Rigby, the dealer-operator of another dealership owned by Ginsburg, to temporarily fill the role of dealer-operator or general manager. Rigby is an experienced automobile dealer-operator. Since approximately July of 1985, Rigby has been spending roughly 70 to 75 per cent of his time managing Dealer. Rigby's name has never been submitted to MBNA for approval as a dealer-operator to replace Smith. Since his telegram of June 27, 1985, and his letter of June 28, 1985, Smith has continued to contend that he still has an ownership interest in Dealer and that he still has the right to manage the day-to-day operations of Dealer. In this regard, Smith claims that he continues to be the dealer-operator of Dealer because he is so designated in the franchise agreement. Smith, through his attorneys, has put MBNA on notice of his contentions in this regard and has threatened to join MBNA in a lawsuit if MBNA takes any action inconsistent with Smith's contentions without first obtaining Smith's consent. Smith continues to contend that he has not agreed to sell or transfer his stock in Dealer to Ginsburg or anyone else. Smith continues to contend that he has not agreed to, and that he in fact objects to, the assignment or transfer of Dealer's Mercedes-Benz franchise to anybody. Specifically, Smith contends that he has not authorized the sale of Dealer or the transfer of Dealer's franchise to Mr. Cutler. All of Smith's contentions in this regard were communicated to MBNA. In September of 1985, Smith filed suit in circuit court against Ginsburg, Dealer, and Advantage Leasing to enforce the claims described in the preceding paragraph. After the suit was filed, an injunction was entered which allowed Smith to return to the dealership for a few days. Smith's return was disruptive to Dealer's activities, but the injunction was soon stayed by an appellate court. The appellate court ultimately determined that whatever rights Smith might have against the defendants in his lawsuit, those rights did not include the right to manage Dealer or be employed by Dealer. As of the date of the formal hearing in this case, no final decision had been rendered in the circuit court litigation between Ginsburg and Smith, and the disputes between Smith and Ginsburg had not been resolved. MBNA did not undertake any investigation or inquiry into the facts and circumstances surrounding Smith's departure from the dealership. MBNA did not try to find out if Smith had actually resigned (as Ginsburg claimed) or if he had been involuntarily ejected (as Smith claimed). MBNA did not try to find out if there was any good reason for removing Smith, if in fact he had been removed involuntarily. Instead, without any investigation into what the actual facts might be, and with full awareness that under any version of the facts Ginsburg owned at least 75 percent of Dealer's stock, MBNA took the position that Smith continued to be an owner of 25 percent of the stock of Dealer and continued to be the general manager until such time as MBNA approved a change in the ownership and/or management of Dealer. MBNA persisted in this position even after it was clear to MBNA that Smith was no longer performing any management functions at Dealer after June 21, 1985. MBNA's position was based on language in the franchise agreement to the effect that there will be no changes in the ownership or management of Dealer without prior approval of MBNA. Because of the foregoing position, MBNA has also taken the position that it will not approve any changes in the management or ownership of Dealer, absent the consent of Smith. By letter dated August 28, 1985, Ginsburg asked MBNA to accept him as Dealer's dealer-operator. With that letter he provided copies to MBNA of Smith's resignation and cancelled stock certificate, together with corporate minutes. The letter of August 28, 1985, stated, inter alia, that Ginsburg had become a Florida resident and intended to become the dealer-operator of Dealer. This statement was not true because Ginsburg was not and never became a Florida resident. Moreover, Ginsburg is the chief executive officer and a substantial investor in several other businesses which have offices in New York, Ohio, South Carolina, and Texas. It is most unlikely that Ginsburg would ever devote full- time attention to the management of Dealer to the exclusion of his several other business ventures. Ginsburg's letter of August 28, 1985, did not provide MBNA with any information regarding his experience in the automotive field. Ginsburg has never been the day-to-day operator of an automobile dealership. Upon consideration of Ginsburg's letter of August 28, 1985, MBNA was of the opinion that Ginsburg had neither the experience nor the time to manage the day-to-day operations of Dealer. Accordingly, MBNA responded to Ginsburg's letter of application with a summary denial in a letter dated September 10, 1985. This summary rejection was repeated in the termination letter of October 23, 1985. MBNA has no written criteria to determine whether a candidate for dealer-operator is satisfactory. Individual discretion is exercised with judgmental factors in lieu of written criteria. Ginsburg has continued to look for a permanent replacement for Smith, but has been unable to find anyone acceptable to himself. Other than Ginsburg's proposal of himself as dealer-operator, no dealer-operator candidate has been submitted to MBNA for approval since the departure of Smith. Since June of 1985, MBNA has continued to provide cars to Dealer and to treat Dealer in an ordinary fashion despite the departure of Smith. The Termination Letter By letter dated October 23, 1985, MBNA advised Dealer that it intended to terminate Dealer's Mercedes-Benz Passenger Car Dealer Agreement on January 31, 1986, a date more than 90 days from the date of the letter. The letter of October 23, 1985, also stated: The Mercedes-Benz Dealer Agreement expires on December 31, 1985. In order to provide sufficient notice to effect the termination of the Agreement, we will extend the Dealer Agreement until January 31, 1986. This notice and extension is pursuant to the provisions of Paragraphs 15 and 16 of the Mercedes-Benz Passenger Car Dealer Agreement. The termination letter of October 23, 1985, stated that there had been "numerous deficiencies" and "material breaches" of the Mercedes-Benz Passenger Car Dealer Agreement dated January 1, 1984. The specified deficiencies and breaches were described as follows in the termination letter: Your corporation has reported on past occasions what appears to be inaccurate sales reports, referred to as DDR cards. This was done apparently for the purpose of gaining an unfair advantage by abusing the allocation system by which Mercedes-Benz vehicles are distributed in the United States. Improper reporting on sales documents impairs our ability to have the proper customer information available for the administration of the warranty and, in the event of a recall, does not enable us to forward proper documentation to the ultimate user of the vehicle. Under section IV, titled Service Department, of the Dealer Operating Requirement Agreement, (DORA), executed as part of the Dealer Agreement, your corporation agreed and committed: "in 1984/85, after purchase of real property, (to) provide Mercedes-Benz identified reception area and customer lounge". This commitment has not been met. In addition, your corporation has attempted to make a change in management by the attempted dismissal of the Dealer Operator, Mr. Michael D. Smith as General Manager. This is in direct viola- tion of Paragraph FOURTH of the Mercedes-Benz Dealer Agreement which states "...neither dealer nor the persons named above shall permit any change in the ownership or management of dealer without the prior written approval of Mercedes- Benz of North America..." This has resulted in a situation where the dealership has been functioning without any approved management. As we stated previously in our letter of September 10, 1985, we are not willing to approve Mr. Jerome Z. Ginsburg as a dealer operator as he appears to be a New York based attorney and is not experienced in the management of a dealership. Mr. Ginsburg was never approved as a Dealer Operator and his name is listed under Paragraph FOURTH of the Mercedes-Benz Dealer Agreement solely as a dealer owner who participates in the ownership of the dealer. This non-approved change in management has resulted in a management dispute. We advised you in our corporate communication of July 1, 1985 that we were invoking the provisions of Paragraph 15D(g) of the Mercedes-Benz Passenger Car Dealer Agreement thereby giving you 90 days to resolve this internal management dispute. This dispute is anything but resolved as demonstrated by the Transcript of Proceedings of Mike D. Smith, Plaintiff vs. Mike Smith Pontiac, GMC, Inc., a Florida Corporation; Advantage Leasing and Rental Corporation, a Florida Corporation; and Jerome Z. Ginsburg, Defendants in the Circuit Court Seventh Judicial Circuit of Florida in and for Volusia County, Case : 85-3034- CA-01, Division F, as well by Mr. Smith's recent appearance at the dealership and the attempted arrest of him by other parties at the dealership. It has also come to our attention that in review of the aforementioned Transcript that Mr. Ginsburg and Mr. Smith misrepre- sented the ownership interest each was required to have as a condition precedent to the execution of the Dealer Agreement. In addition to the foregoing material breach alluded to in Paragraph 3 of this letter, this misrepresentation as to the owner- ship of the corporation also constitutes a material breach of the Dealer Agreement, thus justi- fying the termination of that Agreement and relationship between us. We believe that we have given your corporation sufficient time to remedy the many problems which have occurred at your dealership. As Mr. Korman, our Dealer Organization Manager, indicated to one of your attorneys, Mr. Crocker, our previous corporate communications were designed to indicate to you the seriousness of the situation at your dealership and the need to take the appropriate timely actions to remedy them. You have not done so. Inaccurate Sales Reports (DDR cards) All of MBNA's dealers are required to fill out a DDR card, or sales report, for each Mercedes-Benz car sold. It is not infrequent that DDR cards have mistakes on them. Accurate reporting of sales by way of DDR cards is very important to MBNA. The purpose of having cards completed accurately is threefold: (1) to determine the starting date of the retail customer's vehicle warranty, (2) to advise MBNA of the address and name of the purchaser or lessee in the event of a vehicle recall, and (3) to determine the dealer's future allocation of vehicles. With regard to the last of these three purposes, Mercedes-Benz vehicles are in great demand and they are usually easily sold by Mercedes-Benz dealers. Generally, demand exceeds supply and dealers want more cars than are allocated to them. Each dealer's allocation is derived by way of a mathematical formula based on his actual sales as a percentage of the zone's sales. No inaccurate sales reports by Dealer (referred to as "DDR cards") have been discovered by MBNA to have existed prior to January of 1985. Because of the importance of the DDR policy, Dealer was provided with a copy of that policy at the inception of the relationship, and was provided additional copies thereafter. Representatives of MBNA also explained the DDR policy to Dealer on several occasions. The explanations were not always the same. The totality of the DDR card problem at Dealer up to the time of the termination letter consists of one incident in February of 1985 involving six cars that were sold to Advantage Leasing, a leasing company owned by Smith and Ginsburg. The Dealer reported (via DDR cards) a sale of six Mercedes-Benz cars to the leasing company before the cars were removed from Dealer's premises. Those DDR cards did not contain the names of the ultimate lessees. When representatives of MBNA communicated with Dealer about the February 1985 incident and provided Dealer with a copy of the DDR policy, Dealer indicated that it would comply with the policy. Dealer's explanation for part of the February 1985 DDR problem was that the removal of the cars was unexpectedly delayed by a truck breakdown. Ultimately MBNA's representative McDonough was satisfied with Dealer's response to MBNA's communications regarding the February 1985 DDR card incident. MBNA suffered no prejudice as a result of the DDR card problem in February 1985 and Dealer did not receive any advantage in the MBNA allocation system as a result of that problem. Specifically, Dealer did not receive any accelerated DDR credit due to reporting the cars sold at an early date. The DDR policy appears to be ambiguous in some respects and is certainly complex. MBNA has not previously terminated a dealer for making mistakes on DDR cards. The first stated ground for termination in MBNA's October 23, 1985, termination letter in essence accuses Dealer of intentionally submitting inaccurate DDR cards for an improper purpose. However, MBNA did not conduct any investigation into Dealer's motives in this regard and there is no evidence in this case that Dealer had any improper motive or purpose when it submitted inaccurate DDR cards in February of 1985. The Reception Area And Customer Lounge The Dealer Operating Requirements Agreement, or DORA, is a part of the franchise agreement. The purpose of the DORA is to apply MBNA expertise to individual local circumstances. The DORA is drafted by MBNA according to what MBNA thinks is necessary in order for the dealership to operate efficiently and effectively. When Dealer applied for the franchise in 1983, MBNA filled in the application form for Dealer and included non- negotiated provisions related to a customer lounge and a reception area. The provisions in the MBNA application then were put into the initial franchise agreement of MBNA and Dealer. On November 1, 1983, Mr. McDonough became Jacksonville zone manager for MBNA with authority over Dealer, and he determined at that time there were unfulfilled "service requirements" for Dealer. In 1983, Dealer provided a separate customer reception area for Mercedes customers and renovated an existing customer lounge. Dealer's DORA commitment in the existing franchise agreement regarding the reception area and lounge has as a condition precedent ". . . after purchase of real property. . . ." The real property referred to is the property on which the dealership is located. At the time of purchasing the dealership, Mr. Ginsburg also received an option to purchase the dealership premises. The earliest date on which the option could be exercised was one year after the purchase of the dealership. Mr. Ginsburg exercised the option to purchase the property, but the sale has never taken place because Ginsburg and the property owner became embroiled in a dispute about the appraised value of the property, which value determines the purchase price. That dispute resulted in litigation which is still pending. Accordingly, there having been no purchase of the real property, the condition precedent has not occurred. Further, as of the date of the termination letter, the time limit for these commitments ("1984/85") had not expired. Paragraph l5E of the Standard Provisions in the franchise agreement requires that MBNA give a dealer certain notice prior to initiating a termination based on inadequate facilities. No such notice was given by MBNA to Dealer regarding the reception area and customer lounge. MBNA does not terminate a dealer every time a DORA commitment is not met but rather exercises judgment. Where termination involves a DORA provision, then the dealership agreement procedure is followed. The zone manager, Mr. McDonough, was not aware of any complaints regarding Dealer's customer lounge. MBNA did not perform its own study as to whether or how long customers waited at Dealer. However, a scientific study was commissioned by MBNA. That study contains no indication of dissatisfaction with Dealer's service facilities. Instead, it shows that persons purchasing cars from Dealer returned for service or went elsewhere because of the distance to Dealer. Ginsburg was not made aware that the customer lounge represented any major problem with respect to MBNA. Nothwithstanding the assertions in the second stated ground for termination, Dealer's failure to comply with the DORA provisions regarding the reception area and customer lounge was not one of the reasons for the proposed termination. MBNA's real concern in this regard was much broader; it was MBNA's perception that throughout the entire period of the relationship between the parties, Dealer had failed to act in a manner consistent with the "M-B Service Concept." This broader concern was not stated in the termination letter. Throughout the greater part of the relationship between the parties from its inception until the termination letter of October 23, 1985, there seems to have been a continuing concern on the part of MBNA with respect to Dealer's failure to perform in a manner consistent with the "M-B Service Concept. Although the record in this case suggests that the "M-B Service Concept" may be set forth in some document, that document does not appear among the many exhibits offered in this case and the most that can be said about what constitutes the "M-B Service Concept" is that there appears to be some sort of article of faith amongst the functionaries of MBNA to the effect that because Mercedes-Benz cars are such expensive and high quality cars, the entire ownership experience should be a high quality experience, i.e., that Mercedes- Benz car owners are entitled to more than the owners of lesser cars. Aspects of this article of faith include concerns about such matters as the size and quality of the facilities, the staffing of the facilities, and the attitude of those operating the facilities. MBNA seems to have been disappointed with anything less than what might be described as a "gung-ho" commitment to the "M-B Service Concept" and appears to have expected Dealer to take an enthusiastic attitude toward making all sorts of changes in its facilities and operations even at times when MBNA seemed to be having difficulty providing Dealer with enough Mercedes-Benz automobiles to sell. Numerous Dealer Contact Reports show that the Dealer had an inadequate inventory of Mercedes-Benz cars even though Dealer seems to have rather constantly sought to receive more cars than MBNA was able or willing to provide. The location from which Dealer was doing business seems to have been ill suited to the operation of a Mercedes-Benz dealership in conjunction with other lines of cars, because not only was MBNA dissatisfied with Dealer's efforts at implementing the "M-B Service Concept" at that location, but MBNA had been similarly dissatisfied with several previous Mercedes-Benz dealers who had attempted to do business at that same location. MBNA's frustration with Dealer's failure to live up to their ill- defined "M-B Service Concept" should not have come as any real surprise, because MBNA seems to have been similarly frustrated in its efforts to have two or three previous dealers implement the "M-B Service Concept" at that same location.
Recommendation On the Basis of all of the foregoing, it is hereby recommended that the Department of Highway Safety And Motor Vehicles enter a final order to the following effect: Concluding that termination of the Dealer's agreement for the grounds alleged in Subparagraph 1 of the termination letter would be unfair; Concluding that termination of the Dealer's agreement for the grounds alleged in Subparagraph 2 of the termination letter would be both unfair and prohibited; Concluding that termination of the Dealer's agreement for the grounds alleged in Subparagraph 3 of the termination letter would be prohibited; Concluding that termination of the Dealer's agreement for the grounds alleged in Subparagraph 4 of the termination letter would be fair; Concluding that termination of the Dealer's agreement for the grounds alleged in Subparagraph 5 of the termination letter would be both unfair and prohibited; and Concluding that the relief request in the Dealer's verified complaint should be denied. DONE AND ENTERED this 1st day of May, 1987, at Tallahassee, Florida. MICHAEL M. PARRISH 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 1st day of May, 1987. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0271 The following are my specific rulings on each of the proposed findings of fact submitted by each parties. Findings proposed by Petitioner/Dealer (The numbers which follow correspond to the paragraph numbers of the proposed findings of fact contained in the proposed recommended order filed by the Petitioner/Dealer.) Accepted in substance. Accepted in substance. First, second, and third sentences are rejected as irrelevant. Fourth sentence is accepted. Fifth sentence is rejected as irrelevant. Sixth and seventh sentences are rejected as argument. Accepted in substance. Rejected as subordinate and unnecessary details. Also portions rejected as not fully supported by the evidence and as constituting editorial excesses. Rejected as subordinate and unnecessary details and as a summary of testimony rather than proposed findings. Rejected as subordinate and unnecessary details. Also, some details not fully supported by the evidence. Rejected as subordinate, unnecessary details. Rejected as irrelevant, subordinate, or unnecessary details. (Findings have been made as to the provisions of the termination letter.) Accepted. Rejected because this entire paragraph consists of a summary of or quotation of testimony and does not propose a fact based on any testimony. Rejected as irrelevant and immaterial. First sentence is accepted. Second and third sentences are rejected as constituting argument rather than a proposed finding. (The merits of the argument are addressed in the conclusions of law portion of this recommended order.) Accepted in substance. Accepted. Accepted. Accepted in substance. Rejected as irrelevant or subordinate details. Accepted in substance. Rejected because this entire paragraph consists of a summary of testimony and does not propose a fact based on any testimony. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Substance of last sentence accepted. The remainder of this paragraph is rejected as constituting unnecessary details. Last sentence rejected as unnecessary. The remainder of this paragraph is accepted. Substance of the fourth sentence is accepted. The remainder of this paragraph is rejected as constituting unnecessary details. Accepted. Accepted in substance. Rejected as argument. The merits of the argument are addressed elsewhere. Rejected as argument and as unnecessary details. Rejected, primarily because much of it is irrelevant. Also rejected because much of it constitutes argument about credibility rather than proposed findings. Rejected because it is all legal argument. Such arguments belong in a separate brief or in the conclusions of law portion of a proposed recommended order--not in the middle of the proposed findings of fact. Accepted. First two sentences are accepted. The last sentence is rejected: the first clause because it consists of unnecessary detail and the second clause because it is a legal conclusion. First two sentences are accepted. Last sentence is rejected as irrelevant. The essence of this paragraph is accepted with the deletion of the quotations of testimony and other unnecessary details. Rejected as a totally unnecessary quotation of testimony which contains not a single proposed finding of fact and ends in an unnecessary snippy remark. Rejected as irrelevant or subordinate details. Rejected as irrelevant or subordinate details. Rejected as irrelevant or subordinate details. Rejected as irrelevant or subordinate details. Rejected as irrelevant or subordinate details. The first sentence is rejected as argument. The quotation from the contract is accepted. The first sentence following the quotation is rejected as irrelevant. The last sentence is rejected as constituting a legal conclusion. Rejected as irrelevant or subordinate details. Rejected as irrelevant or subordinate details. Accepted in substance. Rejected as irrelevant, subordinate, and unnecessary. Rejected as irrelevant, subordinate, and unnecessary. Rejected as irrelevant, subordinate, and unnecessary. Accepted. Rejected as subordinate and unnecessary details. Accepted in substance. Accepted. Accepted. Accepted. Accepted in substance. Rejected as subordinate and unnecessary details. Rejected as irrelevant and subordinate details. Also rejected because portions are not consistent with the greater weight of the evidence. Finally, portions rejected as constituting argument. Rejected as constituting legal argument. The merits of the argument are addressed elsewhere in this recommended order. Rejected as constituting legal argument. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Accepted. Accepted. Accepted in substance with unnecessary details and quotations omitted. Second sentence accepted in substance. The remainder of this paragraph is rejected as irrelevant. All of this paragraph is rejected as irrelevant details with the exception of the portion to the effect that MBNA was not told about the problem. Rejected as subordinate and unnecessary details. Accepted in substance. Accepted in substance. Accepted in substance with many irrelevant details omitted and some further findings for clarification. Rejected as constituting irrelevant details. Accepted in substance with many irrelevant details omitted. Also omitted are certain editorial excesses. Accepted in substance with certain editorial excesses omitted. Accepted in substance with a lower percentage figure more consistent with the evidence. First three sentences accepted in substance. Fourth and fifth sentences rejected as subordinate, unnecessary and cumulative details. Sixth and seventh sentences rejected as constituting argument or legal conclusions. Rejected as subordinate and unnecessary details, not all of which are warranted by the evidence. The substance of the first sentence and the substance of the quoted language in the last three lines are accepted. The remainder is rejected as irrelevant or subordinate details. Rejected as subordinate, unnecessary details, not all of which are warranted by the evidence. Accepted in substance. Accepted in substance. First sentence is accepted. Second sentence is rejected as irrelevant. Rejected as irrelevant or subordinate details, not all of which are supported by the evidence. Rejected as irrelevant or subordinate details, not all of which are supported by the evidence. Accepted. All but last sentence accepted. Last sentence rejected as argument. Rejected as subordinate and unnecessary details, as well as argument. First sentence accepted. Last two sentences rejected as cumulative or as irrelevant and subordinate details. Rejected for the most part because it consists of subordinate and unnecessary details. Also rejected because portions are not supported by persuasive competent substantial evidence or are contrary to the greater weight of the evidence. Rejected as constituting primarily argument rather than proposed findings of fact. Accepted. Rejected because it is primarily argument rather than proposed findings. Rejected as subordinate and unnecessary details. Rejected as argument. Rejected as argument. Rejected as argument. Rejected as argument. Rejected as argument. Rejected as argument. Accepted. Rejected as argument rather than proposed findings. Rejected as subordinate details, some of which are not supported by the persuasive evidence. Rejected as constituting a mixture of subordinate details and argument. Accepted in substance. Rejected as constituting a mixture of subordinate details and argument. First three sentences accepted in substance. Penultimate sentence rejected as argument. Last sentence rejected as argument and as containing inferences not warranted by the evidence. Rejected as constituting primarily argument. Rejected as argument rather than proposed findings. Rejected as argument rather than proposed findings. Rejected as subordinate and unnecessary detail. Accepted. First and third sentences rejected as unnecessary commentary about the record. Second sentence rejected as erroneous argument. Fourth sentence rejected as cumulative. Quoted material rejected as cumulative. Last two sentences rejected as cumulative. Rejected as argument. Rejected as argument. The relevant terms of the agreement between Smith and Ginsburg are included in the findings. The remainder of this paragraph is rejected as subordinate details and argument. First sentence accepted. Second and third sentences rejected as cumulative. Fourth sentence rejected as contrary to the greater weight of the evidence. Fifth sentence rejected as cumulative. Sixth sentence rejected as contrary to the greater weight of the evidence. Seventh sentence accepted. First sentence is rejected as contrary to the greater weight of the evidence. Second and third sentences are accepted in substance. The remainder of the paragraph is rejected as irrelevant and subordinate details. First sentence rejected as contrary to the greater weight of the evidence. Second sentence rejected as conclusion of law. First part of third sentence accepted; last part rejected as argument. Findings proposed by Respondent/MBNA (The numbers which follow correspond to the paragraph numbers of the proposed findings of fact contained in the proposed recommended order filed by the Respondent/MBNA.) Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected in part as misleading, because the franchise agreement was entered into by two corporations. Rejected in part for reasons stated immediately above. Accepted. Covered in introductory material. Accepted. Rejected as imprecise statement of reasons. Exact stated reasons are included in findings of fact. Accepted. Accepted. Accepted. Accepted in substance. Accepted. Accepted. Accepted in substance. Accepted in substance. Rejected as irrelevant. Rejected as irrelevant. Rejected as irrelevant. Accepted in substance with some subordinate and unnecessary details omitted. First two lines and quoted contract language accepted. The remainder of this paragraph is rejected as irrelevant or subordinate and unnecessary details. Accepted in substance. Accepted in part to the extent of including the text of the written policy. Remainder rejected as contrary to the greater weight of the evidence. Rejected as irrelevant. Accepted in substance. Accepted. Rejected as subordinate or unnecessary details. Rejected as constituting irrelevant or subordinate details, some of which are not fully consistent with the greater weight of the evidence. First sentence rejected as contrary to the greater weight of the evidence. Remainder of the paragraph rejected as irrelevant. Accepted in substance. Accepted in substance. Rejected as irrelevant. Accepted in substance with numerous irrelevant details omitted. Accepted in substance. Rejected as a mixture of irrelevant or subordinate details and argument. Accepted in substance. Accepted. First sentence accepted in substance. The remainder of this paragraph is rejected as constituting irrelevant or subordinate and unnecessary details. First sentence accepted in substance. The remainder of this paragraph is rejected as constituting irrelevant or subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as irrelevant or as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Rejected as subordinate and unnecessary details. Accepted in substance. Accepted. Rejected primarily because of consisting of irrelevant or subordinate details. Also rejected because several details, including final sentence, are not supported by persuasive evidence. Rejected as irrelevant to this proceeding. Rejected as a summary of testimony and not a proposed finding and, in any event, as subordinate and unnecessary details. First two sentences accepted in substance. Last sentence rejected as irrelevant. Rejected as subordinate and unnecessary details. Accepted in substance. Rejected as irrelevant or subordinate and unnecessary details. First two sentences are rejected as contrary to the greater weight of the evidence. Last two sentences are accepted in substance. First sentence rejected as not fully supported by competent substantial evidence. Second sentence rejected as subordinate and unnecessary details. Third sentence rejected as not supported by competent substantial evidence. Fourth and fifth sentences rejected as irrelevant. Sixth sentence rejected as not supported by competent substantial evidence. Accepted in substance. All but last sentence accepted in substance. Last sentence rejected as contrary to the greater weight of the evidence. First sentence rejected as constituting an over- simplification. Other findings have been made regarding this matter. Second sentence is rejected as unnecessary details. The last sentence is accepted in substance. Accepted in substance. Accepted in substance. Rejected as irrelevant or subordinate and unnecessary details. Rejected as irrelevant or subordinate and unnecessary details. Rejected as irrelevant or subordinate and unnecessary details. Accepted in substance. First three sentences accepted in substance. Last two sentences rejected as irrelevant. Accepted in substance with some adverbs and adjectives omitted in the interest of accuracy. All but last sentence accepted in substance with some unnecessary details omitted. Last sentence rejected as contrary to the greater weight of the evidence. Rejected as irrelevant in view of other evidence regarding MBNA's position with regard to a successor dealer/operator. Accepted in substance. Rejected as irrelevant or subordinate and unnecessary details. Accepted. First two sentences accepted in substance. Remainder of this paragraph rejected as subordinate and unnecessary details. Rejected as cumulative and unnecessary. Accepted in substance. Rejected as constituting argument rather than proposed findings of fact. Rejected as constituting argument rather than proposed findings of fact. Rejected because of having argument inextricably intertwined with any proposed findings in this paragraph. Rejected as argument about other party's position and not proposed finding of fact. First sentence is rejected as ambiguous and as subordinate and unnecessary. Second sentence is rejected as ambiguous and as constituting argument. Third sentence rejected as irrelevant. Fourth sentence rejected as ambiguous and as not fully consistent with the evidence. Fifth sentence rejected in part as irrelevant and in part as contrary to the greater weight of the evidence. Rejected as argument rather than proposed findings. First sentence accepted in substance. Second sentence rejected as not supported by persuasive competent substantial evidence. Rejected as argument rather than proposed findings. First three sentences rejected as contrary to the greater weight of the evidence. Fourth sentence rejected as ambiguous rhetorical excess; too broad to be meaningful and not fully supported by the evidence. Fifth sentence rejected as irrelevant or subordinate details. Sixth and seventh sentences rejected as not supported by persuasive competent substantial evidence. Rejected as primarily constituting argument or legal conclusions; what few facts are included are repetitious and cumulative. Rejected as primarily constituting argument or legal conclusions; what few facts are included are repetitious and cumulative. Accepted in substance. Rejected as contrary to the greater weight of the evidence; there were inaccurate cards, but not "false" cards. The first three sentences are rejected in part as an argumentative over-simplification that omits the crux of the matter, and as also constituting subordinate details which are irrelevant in light of other evidence. The remainder of the paragraph is rejected as constituting subordinate and unnecessary details, some of which are not fully supported by the evidence. The first sentence is rejected as exaggeration not supported by the evidence. Also largely irrelevant in light of other evidence. The remainder of the paragraph is rejected as constituting argument or legal conclusions. Rejected as not supported by persuasive evidence and as, in any event, being such a broad, vague, statement as to be virtually meaningless. First three sentences rejected as irrelevant argument; the statements of counsel are not evidence. The remainder of this paragraph is rejected as irrelevant. Rejected because it consists mostly of argument. To the extent it incorporated proposed facts, most of them are irrelevant, subordinate, or unnecessary. What few relevant facts are proposed have been included elsewhere. Rejected as argument instead of proposed findings. All but last sentence rejected as primarily constituting argument. Last sentence accepted in substance. Rejected. This is primarily a description of the issues the Dealer seeks to litigate and argument about legal issues. What few facts are proposed here have been found elsewhere to the extent relevant. Accepted in substance. Rejected as argument or conclusions of law rather than proposed findings of fact. Rejected as an argumentative 0ver-simplification which is in part irrelevant and in part not supported by persuasive evidence. Rejected as argument or conclusions of law rather than proposed findings of fact. COPIES FURNISHED: Henry L. Kaye, Esquire STIERER, AMENDOLA, KAPLAN, HYMAN & KAYE 1401 Harvey Building 224 Datura Street West Palm Beach, Florida 33401 John Radey, Esquire AURELL, FONS, RADEY & HINKLE Post Office Drawer 11307 Tallahassee, Florida 32301 William J. Dunaj, Esquire Teresa Ragatz, Esquire MERSHON, SAWYER, JOHNSTON, DUNWODY & COLE Southeast Financial Center Suite 4500 200 South Biscayne Boulevard Miami, Florida 33131 Leonard R. Mellon, Executive Director Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399-0500
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Closing File and Relinquishing Jurisdiction by William F. Quattlebaum, Administrative Law Judge of the Division of Administrative Hearings, pursuant to Petitioner’s Notice Of Dismissal, a copy of which is attached and incorporated by reference in this order. The Department hereby adopts the Order Closing File and Relinquishing Jurisdiction as its Final Order in this matter. Accordingly, it is hereby Filed November 5, 2012 12:49 PM Division of Administrative Hearings a an ORDERED that this case is CLOSED. DONE AND ORDERED this a day of November, 2012, in Tallahassee, Leon County, Florida. Jule Baker, Bureau of Issuance Oversight Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building, Room A338 Tallahassee, Florida 32399 Filed with the Clerk of the Division of Motorist Services this_Q day of November, 2012. NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. JB/jde Copies furnished: R. Craig Spickard, Esquire Kurkin Forehand Brandes, LLP 800 North Calhoun Street, Suite 1B Tallahassee, Florida 32303 cspickard@kfb-law.com Cindy Bresnee Mercedes-Benz USA, LLC 1 Mercedes Drive Montvale, New Jersey 07645 J. Andrew Bertron, Esquire Nelson, Mullins, Riley And Scarborough, LLP 3600 Maclay Boulevard South, Suite 202 Tallahassee, Florida 32312 andy.bertron@nelsonmullins.com William F. Quattlebaum Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator Saket Pan
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Closing File and Relinquishing Jurisdiction by E. Gary Early, Administrative Law Judge of the Division of Administrative Hearings. The Department hereby adopts the Order Closing File and Relinquishing Jurisdiction as its Final Order in this matter. Accordingly, it is hereby ORDERED and ADJUDGED that Petitioner, Daytona Beach Cycles, LLC d/b/a Indian Motorcycle of Daytona, be granted a license to sell motorcycles manufactured by Victory (VICO) at 420 North Beach Street, Daytona Beach (Volusia County), Florida 32114, upon compliance with all applicable requirements of Section 320.27, Florida Statutes, and all applicable Department rules. Filed March 8, 2012 9:15 AM Division of Administrative Hearings DONE AND ORDERED this Io day of March, 2012, in Tallahassee, Leon County, J “Baker Chief Bureau of Issuance Oversight Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399 Florida. Filed with the Clerk of the Division of Motorist Services this Oy day of March, 2012. 2 Pobias Vinegek Nalini Vinayak, Dealer Kicense Administrator NOTICE OF APPEAL RIGHTS Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. JB/jc Copies furnished: Andrew Pallemaerts Volusia Motorsports, Inc. 1701 State Road 44 New Smyrna Beach, Florida 32168 Jonathan Brennen Butler, Esquire Akerman Senterfitt 222 Lakeview Avenue, Suite 400 West Palm Beach, Florida 33401 E. Gary Early Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator
Conclusions This matter came before the Department for entry of a Final Order upon submission of an Order Closing File by William F. Quattlebaum, Administrative Law Judge of the Division of Administrative Hearings, pursuant to Respondent’s request for dismissal, a copy of which is attached and incorporated by reference in this order. The Department hereby adopts the Order Closing File as its Final Order in this matter. Accordingly, it is hereby ORDERED that this case is CLOSED and no license will be issued to TT of Orlando, inc. d/b/a Maserati of Orlando to sell Maserati automobiles manufactured by Maserati (MASE) at 4225 Millenia Boulevard, Orlando, (Orange County), Florida 32839. Filed December 1, 2011 4:03 PM Division of Administrative Hearings DONE AND ORDERED this 36 day of November, 2011, in Tallahassee, Leon [s SandraC. Lambert, Director Division of Motorist Services Department of Highway Safety and Motor Vehicles Neil Kirkman Building Tallahassee, Florida 32399 County, Florida. Filed with the Clerk of the Division of Motorist Services this _20%l>day of November, 2011. NOTICE OF APPETITES =m" Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rules of Appellate Procedure. SCL:jde Copies furnished: C. Everett Boyd, Esquire Nelson, Mullins, Riley and Scarborough LLP 3600 Maclay Boulevard South, Suite 202 Tallahassee, Florida 32312 Robert Craig Spickard, Esquire Kurkin Forehand Brandes, LLP 900 North Calhoun Street, Suite 1B Tallahassee, Florida 32301 John F. Walsh, Esquire AMSI-Automotive Management Services, Inc. 505 South Flagler Drive, Suite 700 West Palm Beach, Florida 33401 Donald St. Denis, Esquire St. Denis and Davey 1300 Riverplace Boulevard, Suite 101 Jacksonville, Florida 32207 William F. Quattlebaum Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Nalini Vinayak Dealer License Administrator
Findings Of Fact Introduction Petitioner, Palm Oldsmobile, Inc. (Palm), made application for licensure on September 10, 1985 with respondent, Department of Highway Safety and Motor Vehicles (agency). According to the application, Palm seeks to establish a new Oldsmobile dealership at 3701 Northlake Boulevard, North Palm Beach, Florida. Oldsmobile is a product line and operating division of petitioner, General Motors Corporation (GM). The application is supported by GM since by law the manufacturer carries the burden of proving Palm's entitlement to licensure. Respondent, Clark Oldsmobile, Inc. (Clark), is a licensed Oldsmobile dealership with facilities at 717 South Olive Avenue, West Palm Beach, Florida. It lies approximately eight miles south of where Palm intends to establish its facilities. Clark has operated continuously as an Oldsmobile dealership in West Palm Beach since 1939. Its present owner assumed ownership and operation of the business in 1961. It is the only franchised Oldsmobile dealership in that city. Clark exercised its rights under Chapter 320, Florida Statutes, and filed a protest to the application. There are two other Oldsmobile dealers in Palm Beach County, Carter Chevrolet- Oldsmobile, Inc. in Pahokee, and Dan Burns Oldsmobile, Inc. (Burns) in Delray Beach, neither of whom opposes this application. By Clark filing the protest, this proceeding ensued. The Oldsmobile Dealer and Planning Network For marketing purposes, Oldsmobile has divided the United States into six regions. The regions in turn are divided into twenty-seven zones. The southeast region (made up of all or parts of eleven states) includes the Jacksonville zone, which roughly comprises peninsular Florida and the lower one-third of the State of Georgia. Within the Jacksonville zone are ninety. two Oldsmobile dealerships, including Clark. There are five major metropolitan areas in the Florida portion of the Jacksonville zone classified into major marketing areas known as multiple dealer areas (MDA) A MDA is an automobile marketing area consisting of contiguous communities and is a demographic or geographic area that is too large to be served by one dealer. As is relevant here, the West Palm Beach community or territory has been defined as a MDA and roughly consists of the densely populated portion of eastern Palm Beach County. Because a MDA is too large to be served by one dealer, Oldsmobile has contractually assigned two dealerships, Clark and Burns, to the West Palm Beach MDA. Oldsmobile has generally divided MDA's into smaller markets known as Areas of Geographic Sales and Service Advantage (AGSSA1 which are used as a dealer network planning tool. Each AGSSA is made up those federal census tracts closest to a proposed or existing dealer and identifies an area of shopping convenience for consumers in the AGSSA. The AGSSA represents the area in which an existing or proposed resident dealer has or would have an advantage over other same line make dealers in the MDA by virtue of the resident dealer's location. Prior to its decision to add a new dealer point in West Palm Beach MDA, Oldsmobile had divided the MDA into two AGSSA's. Under the plan, the northern portion of the eastern half of Palm Beach County was AGSSA 1 while the southern part of the eastern half constituted AGSSA 2. Oldsmobile has now realigned the MDA into three AGSSA's. Under this plan, the AGSSA 1 is that central portion of eastern Palm Beach County generally between 45th Street and Lantana Road. AGSSA 2 lies south of AGSSA 1 and essentially lies north of 45th Street in the northeastern portion of the county. Clerk of located in AGSSA 1, Burns to AGSSA 2, while Palm proposes to locate its new dealership in AGSSA 3. For purposes of this case, the territory or community to be examined is the West palm Beach MDA. A complete description of the MDA is found in GM Exhibits 5 and 6 received in evidence. The West palm Beach MDA constitutes an identifiable and distinct retail marketing area. To determine whether the existing dealers are providing adequate representation with the MDA, the smaller marketing area know as AGSSA 3, GM has proposed to compare the retail penetration (sales) of Oldsmobile in those areas with the penetration achieved on a national level. Although Clark objects to this comparison as a measuring tool for representation, it is found that this standard is appropriate for determining the adequacy of representation by existing dealers. c. Retail Registration Data Market penetration or sales is best determined by using retail registration data provided by R. L. Polk and Company (Polk). Polk is a nationally recognized organization that collects and analyzes automobile registration data nationwide for all lines and makes of automobiles. Among other things, Polk attempts to assign each automobile registration to a specific census tract. By doing so, a manufacturer can then determine its marketing success or lack thereof in a given geographic area. In this proceeding, both parties have utilized such data to analyze market penetration. This analysis compares total industry retail registrations to the retail registrations of a particular line make in a given area. As a forerunner to Palm filing this application, General Motors conducted an analysis of market penetration in the West Palm Beach MDA by reviewing Polk registration data at both the county and census tract levels. The registration data reviewed included every vehicle registered to an address within a particular area of geography (county or census trace) regardless of the sellers dealer. The data also included the components of retail and fleet, as well as a total registration. Market Penetration in the West Palm Beach Area Retail market penetration is a relative concept that compares the retail registrations of one make with all industry registrations in a particular geographic area. Stated differently, it represents the percentage of business that Oldsmobile obtains out of the total universe of business available. For example, in 1985 9.63% of all vehicles registered in the United States for retail use were Oldsmobile. Therefore, Oldsmobile's national market penetration was 9.63%. correspondingly, 6.15% of all retail vehicles registered in the West Palm Beach MDA in 1985 were Oldsmobile. This equates to an MDA penetration of 6.15%, or far below the national average. Retail registration efficiency to national average is the percentage relationship between retail penetration in a geographic area and national penetration. In 1985, the retail registration efficiency of the West Palm Beach MDA to national average was 63.9% (6.15 divided by 9.63), the lowest in the Jacksonville zone. Moreover, since 1981 retail registration efficiency in the West Palm Beach MDA has steadily declined as follows: 1981 1982 1983 1984 1985 MDA Retail Reg: Industry 31,845 31,328 39,273 42,247 43,797 Oldsmobile 2,632 2,294 2,666 2,719 2,693 Olds % of Ind 8.3 7.3 6.8 6.4 6.1 Nat. Retail Reg: Olds % of Industry 9.2 9.6 10.5 10.0 9.6 MDA Efficiency to National 90.1% 76% 65% 64% 63.5% The downward trend in MDA registration performance has continued through March, 1986 as penetration efficiency has dropped to 60%. Moreover, while national penetration stood at 9.3% in March, 1986 the West Palm Beach MDA penetration dropped to 5.6%. Further, from 1981 to 1985, industry retail registrations in the MDA have increased 11,952 vehicles or 38%, while Oldsmobile retail registrations increased only 61 units or 2%. In 1985, the Oldsmobile West Palm Beach MDA ranked 143rd in retail penetration when compared with the 159 largest Oldsmobile markets in the United States. Based on retail penetration, the West Palm Beach MDA has been the worst MDA in the Jacksonville zone since 1983. In fact, due to its poor retail sales performance, Clark has been in a special assistance program (the AGSSA program) since 1974. Despite suggestions and assistance offered by zone personnel to Clark, the market penetration in the MDA has continued to deteriorate. Market Penetration in AGSSA 3 The most current registration data available at the AGSSA level is year end 1985 data. This data reflects that the West Palm Beach MDA retail penetration has been consistently below zone and national retail penetration. AGSSA 1, in which Clark is located, and AGSSA 3 have repeatedly had low penetration. For the years 1983 through 1985, Oldsmobile's retail penetration for the nation, Jacksonville zone, West Palm Beach MDA and the three AGSSA's were as follows: 1983 1984 1985 National 10.51 10.04 9.63 Zone 8.77 8.25 8.00 West Palm Beach MDA 6.89 6.36 6.15 AGSSA 1 5.9 5.47 5.63 AGSSA 2 8.0 7.55 6.83 AGSSA 3 6.26 5.45 5.60 To increase market penetration, the most logical place to locate a new dealer is AGSSA 3 since there is already a dealer (Clark) in AGSSA 1. It has been Oldsmobile's experience that when a new dealer is added in an MDA, the market penetration of all existing dealers is improved. Lost Opportunities "Lost opportunity" is the difference between actual Oldsmobile retail registrations in an area and the number of registrations that would have occurred had a given norm (i.e., national average penetration) been achieved. The number of lost opportunities represents the number of registrations available to the Oldsmobile dealers in the MDA had national average penetration been attained. The following chart depicts the lost opportunities experienced during the last three full years by the MDA as a whole and its AGSSA components. Lost Opportunities Compared to National Retail Penetration I National 1983 1984 1985 Penetration 10.51 10.04 9.63 MDA (1386) (1539) (1507) AGSSA 1 (416) (450) (530) AGSSA 2 (668) (729) (657) AGSSA 3 (302) (359) (319) When the West Palm Beach norm is adjusted for product popularity, the lost opportunity both to Oldsmobile and its dealers in the MDA grows. This adjustment is appropriate since the West Palm Beach MDA and AGSSA 3 have a much higher percentage of "high" category vehicle registrations than is found on a national basis. Conversely, subcompacts are less popular in the MDA than in the nation as a whole. Because Oldsmobile's penetration in the "high" class is greater in the MDA, an adjustment for this product popularity is appropriate. After adjusting for product popularity, the 1985 national average penetration expectation and lost opportunity increase to 10.71% and 1,973 registrations, respectively. There is also a high level of in-sells (cars sold by dealers outside the market) into the MDA and AGSSA 3. When in-sells in the West Palm Beach MDA are considered, the lost opportunity to the MDA dealers increases from 1,507 (or 1,973 adjusted for product popularity) to 2,418 (or 2,884 adjusted for product popularity). Indeed, even Clark agrees there is a shortfall in registration penetration in AGSSA 3 and that lost opportunities exist. Customer Convenience The number and locations of dealerships for various line makes, including Oldsmobile, provide a basis for comparing the relative levels of customer convenience for buyers in a particular AGSSA. In other words, the lower the distance a customer must travel to a dealership, the higher the convenience to that customer. This is evidenced by the high concentration of retail registration surrounding each MDA Oldsmobile dealer. The Oldsmobile dealer with the best level of convenience has the highest level of sales, and is located in the AGSSA with the highest penetration in the MDA. In this regard, in AGSSA 3, where Oldsmobile has its lowest level of customer convenience in the MDA, its retail registration penetration was also the lowest. Potential buyers in AGSSA's 1 and 2 enjoy far greater convenience to the nearest Oldsmobile dealer does than a potential buyer living in AGSSA 3. For example, the average consumer must travel almost twice as far from his residence in AGSSA 3 to reach an Oldsmobile dealer than to reach a Honda, Ford, Nissan, Volkswagon or Toyota dealer. The average consumer in AGSSA 3 is also substantially closer to a Chevrolet dealer than to an Oldsmobile dealer. Correspondingly, Chevrolet, Honda, Ford, Nissan and Volkswagon have better penetration in AGSSA 3 compared to their MDA average than does Oldsmobile. The sales and service facilities offered by the existing Oldsmobile dealers in AGSSA's 1 and 2, though adequate, are not properly located to conveniently satisfy the needs of existing and potential Oldsmobile customers in AGSSA 3. Interbrand competition is defined as competition among dealers of different line makes such as Oldsmobile, Buick, Pontiac and the like. Proximity has an effect upon such competition. This is borne out by the fact that manufacturers providing convenience to customers in AGSSA 3 have a greater opportunity to enjoy above average penetration performance than manufacturers that do not offer similar levels of convenience. All parties agree that proximity affects intrabrand competition. This is defined as competition among dealers of the same line make (Pontiac versus Pontiac). The proposed Oldsmobile local-ion in AGSSA 3 will be 7.7 air miles from its nearest same line make competitor in AGSSA 1. That distance equals the distance between the AGSSA 3 Ford dealer and its nearest same line make competitor. It is greater than the distance between the Toyota, Nissan, Volkswagon and Chevrolet dealers in AGSSA 3 and their nearest same line make competitor. Therefore, the distance of the proposed Oldsmobile dealer from Clark is consistent with the respective distances between nearest same line make dealers in the MDA. The addition of an Oldsmobile dealer in AGSSA 3 would provide Oldsmobile customers convenience commensurate with the convenience offered by competitive line makes. Further, the customer convenience offered by Oldsmobile in AGSSA 3 would be twice as good as the convenience currently offered by Oldsmobile in AGSSA 3 and would be consistent with convenience offered by Oldsmobile in AGSSA's 1 and 2. Measured by the shortest route in non-rush hour traffic, drive time from the proposed Palm location to the Clark location is relatively long when compared to the convenience levels offered by other line makes. For example, the drive time between the two locations ranges from 12:50 minutes to 13 minutes via Interstate 95. It takes 23 minutes to drive between the proposed location and Clark's location via U.S. 1. A customer living in a typical residential area in AGSSA 3, such as Frenchman's Creek, would travel only 5.7 miles to Palm as opposed to 14.1 miles to Clark's facility. In addition, the travel time would be shortened by some 13 minutes by the insertion of a new dealer point. Oldsmobile's lack of competitive convenience in AGSSA 3 is a significant factor in its inadequate retail market penetration. Clark offered no current data or objective, quantifiable evidence to rebut GM's evidence that customer convenience is directly related to retail market penetration. The Reasonableness of the Penetration Standard Oldsmobile's national average penetration, 9.63%, is a reasonable norm to use in evaluating the West Palm Beach MDA for a number of reasons. First, the area surrounding the MDA exceeds national average. Secondly, Oldsmobile's penetration in another Florida MDA, Tampa/St. Petersburg, has achieved the national average after an Oldsmobile dealer was added in that MDA in 1985. Third, if the norm is adjusted for product popularity, the MDA should achieve a penetration level of 10.71%. Therefore, the national average is a conservative measure of penetration. Fourth, the demographic characteristics of the community approach national average and identify many prospective Oldsmobile purchasers. Finally, some census tracts in the West Palm Beach MDA are already exceeding national average. To develop a reasonable norm, it is necessary to determine what level of penetration an MDA can attain. Selecting a market which is inadequate to develop a standard of adequacy is not proper. It is also improper to compare an MDA with the level it is achieving in a given year and contend that it has reached its full potential. National average is the proper level of performance for an MDA that is performing at substandard levels. Compared to the 1985 national average of 9.63%, only 6.15% of the vehicles registered in the MDA were Oldsmobiles, and in AGSSA 3, only 5.60% of the vehicles registered were Oldsmobile. That deficiency results in a substantial penetration shortfall of 1,507 units compared to national average. That is particularly significant since only 2,664 Oldsmobile were registered in the MDA in 1985. Similarly, the shortfall in AGSSA 3 is 319 units where only 668 Oldsmobiles were registered in 1985. I. The Need for Market Representation The penetration shortfall is a lost opportunity for both Oldsmobile and its dealers. When the 911 units registered in the MDA in 1985 by Oldsmobile dealers located outside the MDA are considered, the total lost opportunity to the MDA dealers approaches 3,000 units. Oldsmobile is not achieving adequate levels of penetration in either the West Palm Beach MDA or in AGSSA 3. The cause of that inadequacy is too few dealers. In Florida, the ratio of population to approved Oldsmobile dealer points is approximately 250,000 to 1. The ratio of registrations per approved dealer point is approximately 10,000 to 1. Based on the size of the market alone, the West Palm Beach MDA could support at least one additional dealer. The relative levels of convenience in the MDA also support additional Oldsmobile representation in AGSSA 3. Oldsmobile provides less convenience to AGSSA 3 buyers than Volkswagon, Honda, Chevrolet, Ford, Nissan, Toyota, Cadillac or Buick. The most recent data available supports the proposition that, in order to have an opportunity to achieve national average or better than national average penetration in an area, a manufacturer must be represented in that area. Of the thirteen major line makes represented in the MDA, six are located in AGSSA 3. only manufacturers represented in AGSSA 3 exceed their MDA average in that AGSSA. 33. The addition of an Oldsmobile dealer in AGSSA 3 would provide levels of convenience already offered Oldsmobile with significant increases during the last five years. For example, the county's population has increased by 23.6% between 1980 and 1985, while AGSSA 3 experienced a 26.1% over the same period. Indeed, the county's population in 1985 stood at 713,253 while the population in AGSSA 3 was 140,007. At the same time, while the growth rates in households, construction, employment, per capita income and various measures of residential and industrial/commercial growth have substantially increased, the rate of growth for these same categories in AGSSA 3 has been even greater. Uncontradicted exhibits offered by GM also reflect that building permit valuations, retail sales and employment have experienced steady increases in recent times, while traffic counts and volume near Palm's proposed facility have grown at a substantial rate. In terms of demographics, Palm Beach County has become more urbanized like other counties in Florida. Its middle and upper middle class groups have grown-in size. This is important since the average Oldsmobile buyer is above the age of 45 and in a household having an income in excess of $40,000 per year. Demographic data also demonstrates that the entire MDA, and AGSSA 3 in particular, have heavy concentrations of household income between $15,000 and $40,000 and at levels above $40,000. Moreover, while there are residents in every age group, in the MDA and AGSSA 3 the older age groups of 55-64 and 65 and older are particularly strong when compared to national demographic data. R. Allocation of Vehicles The Oldsmobile distribution system is based on national allocation. Each dealer's sales rate and available inventory are compared to that of all other dealers in the United States on a car line-by-car line basis. Dealers largely "earn" cars on the basis of how well they "turn" cars. Other manufacturers, such as Buick, use different allocation systems. Every dealer sells all the cars it receives. Based on Oldsmobile's distribution system a dealer may not receive every car it orders if its rate of ordering exceeds its "earned rate." In fact, dealers are encouraged to maintain an order bank in excess of the number of cars they expect Oldsmobile to allocate. This insures that, as Oldsmobile builds cars, dealers Will have orders to be filled. Cars for a new Oldsmobile dealership, such as Palm, are taken from Oldsmobile's national pool prior to allocation being made to all dealers. Thus, the establishment of a new dealership affects each existing dealership in the United States in an equitable manner. Each zone has a limited amount of discretion to provide vehicles over the "earned rate". Clark received allocations above its "earned rate" in years 1984, 1985 and 1986 as follows: January 1-December 31, 1984 222 January 1-December 31, 1985 316 January 1-June 30, 1986 200 TOTAL 738 Every vehicle allocated by Oldsmobile to Clark in excess of Clark's "earned rate" would have gone to another dealer in the zone but for the exercise of managerial judgment and discretion. Any dealer can increase its inventory and allocation by buying vehicles from other dealers. Clark has done so in prior years. Inventory is a factor in sales, but it is certainly not the only factor. In 1984, Clark had the eighth largest inventory in the zone but was twelfth in retail sales. In 1985, Clark had the zone's fifth largest inventory, but was eleventh in retail sales. For 1986, Clark's rank by month as compared to the other dealers in the zone is as follows: Jan Feb Mar Apr Mav Reported Retail Deliveries 11 4 10 15 11 Reported Inventory 2 3 4 3 4 Cooper, another Oldsmobile dealer in the Miami MDA, has consistently outsold Clark in 1986 even though it has had a smaller inventory. In 1978 Clark made a business decision to merchandise Oldsmobiles with diesel engines. Its "earned rate" was not high enough to obtain an increased allocation of diesels so it chose to purchase 751 diesel vehicles from dealers in New York City and Chicago during the years 1978 through 1981. These purchases were made contrary to Oldsmobile's advice. Clark failed to increase its allocation of diesel vehicles due to its inability to negotiate to obtain the retail delivery card from the selling dealers. However, the registrations of Palm Beach County purchasers were reflected in MDA data. Although the diesel product later suffered serious service problems, Clark performed no studies or analyses to determine the impact of these sales upon the loyalty of Oldsmobile customers. Therefore, its contention that the serious service problems affected market penetration is rejected. Moreover, Oldsmobile's own studies showed continued loyalty on the part of diesel customers. Clark did not participate in fleet sales until November, 1985, or until shortly after it filed a protest in this proceeding. At that time Clark sold large numbers of fleet units to its leasing subsidiary. Fleet vehicles are allocated separately from retail units. A dealer will be penalized if it sells a fleet vehicle at retail. Clark lost "earned" cars by engaging in that practice. L. Clark's Sales and Facilities The parties agree that Clark's facilities are adequate. Indeed, its facilities now cover a seven acre area, and include some $1.2 million in improvements made over the past eight years. Clark was recognized by GM in 1985 as one of the top 300 dealers in the country out of 3300 dealers nationwide. This award was based on a combination of sales and customer satisfaction. However, it was largely attributable to Clark's significant fleet sales which occurred in late 1985. During the first part of 1986, Clark was ranked seventy-eighth in the country in sales performance. Clark contends that its new car inventory is much smaller than its competitors, such as Buick and Pontiac, and that this has hampered its ability to increase market penetration. However, even though a given Buick dealer may have more inventory in stock, Oldsmobile dealers have consistently outsold Buick dealers on a national scale.
