Pub 20-2021-2022 Issue 1

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S I S S U E 1 | 2 0 2 1 14 new jersey auto retailer plan in place so that succession is as seamless as possible when a transition happens. It should be an essential part of an overall estate plan. Involuntary Termination Involuntary franchise termination is rare in the auto industry, but its threat is not so rare. No threatened dealer should take any written suggestion of termination lightly. For several years, many auto franchisors have sent “routine” agreement letters for dealers to sign, containing admitted “breaches” that they pledge to cure, with the further admission that the breaches would be adequate cause for termination. DON’T SIGN SUCH LET- TERS. A termination threat is one of those occasions when a dealer should immediately consult with experienced counsel. Buy-Sell Activity Because of pandemic fallout, dealership sales transactions went from low velocity to high activity, and the variations in geo- graphical differences and brand differences were noteworthy. Buy-Sell activity in 2021 is expected to be brisk, with valuations at record highs for nearly all brands. Rights of First Refusal Factory ROFRs in dealer agreements are now commonplace. They are unlawful in only five states, so the prospect is very real when dealers negotiate their buy-sells. If you are looking to buy a dealership, investigate the likelihood of a factory ROFR exercise as soon as you can. Even though many states require expense payments by the factory to displaced buying dealers, that remedy does not usually cover all expenses. Alternate Dispute Resolution Alternate Dispute Resolution for disputes between dealers and consumers is a common feature of retail contracts. For decades, consumer groups have attacked mandatory contractual arbi- tration as allegedly unfair to consumers. Look for the Biden administration to vigorously attack dealer arbitration provisions in consumer contracts. In 2021, be vigilant about the legal devel- opments in this arena. Such clauses in consumer contracts may become prohibited by federal law or regulation. Dealer Associations Legal Standing Associations should have standing to represent the common interests of their dealer members. This enables them to represent dealers in their organizations’ name, without the need for dealers to be parties. In 2021, we should see more dealer laws allowing association standing. Taxes President Biden has promised to greatly overhaul tax laws to gain more government revenue from high earners and profitable businesses. That would include most franchised dealers. Dealers should work with their CPAs to develop strategies to properly protect personal and business income. “Other” Workforce Issues Aside from the “identity” phenomenon, dealers must cope with a host of workplace policies, practices and procedures such as hiring, firing, workplace conditions, wage/hour, overtime and more. With expected legal changes, you will need to revise your operations and employee manuals. 2021 could see a higher minimum wage requirement in federal legislation. Warranty Reimbursement Battles over retail reimbursement for parts used in warranty repair have continued for decades. Although there is not yet adequate compliance by factories, across the board, in pay- ing earned warranty reimbursement for both labor and parts, dealers across the country have mostly prevailed in court. In 2021, dealers should continue to demand from their franchisors what they are due in parts and labor warranty reimbursement. In some states, and with some brands, compromises have been reached so that dealers accept reasonable accommodation. Natural Disasters, Terrorism, Unrest and Pandemics While the pandemic year of 2020 is still fresh on everyone's mind, dealers without emergency plans should develop them now. Dealers should have basic information on hand to contact all employees in any emergency and tell them what to do and where to go. Encroachment and Franchise Modification While protests under state laws of establishments and reloca- tions of nearby competitive dealerships seem to have tapered off, they still happen. When a dealer is confronted with a notice announcing that the factory intends to place another same-line dealer within a protestable proximity, you will want to contest the move. Seek legal help if you get such a notice. Factory Audits Even though dealers grow anxious when the factory announc- es an audit, most audit results are uneventful. Sometimes, however, warranty or incentive audits do conclude that charge- backs are owed. Sometimes, chargebacks are excessive or penalize dealers for technical infractions that caused no losses to anyone — the factory or consumers. Often, dealer challeng- es to chargebacks are successful, in whole or part. Anecdotal evidence suggests that factory audits are on the rise. Usually, dealers have no meaningful option regarding whether an audit will take place. In 2021, dealers should fully understand what an audit is about and in most cases, cooperate fully. If you see a clear abuse, either call your rep or your lawyer. Eric L. Chase is an attorney at the law firm of Bressler, Amery & Ross, P.C. He devotes a significant part of his practice to the representation of franchised au - tomotive dealers and has been lead counsel in numerous landmark decisions. He can be reached at 973.514.1200 or via email at echase@bressler.com . LEGAL TRENDS continued from page 13 Alternate Dispute Resolution for disputes between dealers and consumers is a common feature of retail contracts.