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Buick-Pontiac v. General Motors Corp.

December 29, 2008

TOM RICE BUICK-PONTIAC, GMC TRUCK, INC., GARSTEN MOTORS, INC., DOING BUSINESS AS APPLE CHEVROLET, BRIGHT BAY GMC TRUCKS, INC., CARS UNLIMITED OF SUFFOLK LLC, DOING BUSINESS AS NESENGER 112 CHEVROLET, GARDEN BUICK, INC., KAYSON CHEVROLET, INC., KURLAND CADILLAC OLDSMOBILE-GMC, INC., MANFREDI CADILLAC OLDSMOBILE, INC., SMITHTOWN BUICK, INC., VAN BUREN BUICK PONTIAC, INC., KINNEY MOTORS, INC., DOING BUSINESS AS APPLE CHEVROLET, M&S CHEVROLET, INC., M&S OF PAWLING, INC., WOODBURY AUTO PARK, INC., GEISS AUTO, INC., DURFEE CHEVROLET-OLDSMOBILE-GEO, INC., AND DOBLER CHEVROLET, INC., PLAINTIFFS,
FULTON CHEVROLET-CADILLAC CO., INC., PLAINTIFF-APPELLANT,
v.
GENERAL MOTORS CORPORATION, DEFENDANT-APPELLEE.*FN1



SYLLABUS BY THE COURT

Franchised automobile dealerships sued manufacturer-franchisor, claiming insufficient reimbursement under franchise agreements and New York Vehicle and Traffic Law § 465 for repair parts provided to car owners in connection with warranty repair services. The United States District Court for the Southern District of New York (Buchwald, J.) granted summary judgment dismissing the claims of the test plaintiff. This appeal followed.

Affirmed.

The opinion of the court was delivered by: Livingston, Circuit Judge

Argued: May 8, 2008

Before: HALL, LIVINGSTON, GIBSON,*fn2 Circuit Judges.

New York Vehicle and Traffic Law § 465 requires automobile manufacturers to honor warranty agreements with customers and to compensate franchised dealers for labor and parts associated with warranty repair services at a rate that "shall not be less than the price and rate charged by the franchised motor vehicle dealers in the community or marketing area for like services to non-warranty and/or non-service contract customers, provided such price and rate are reasonable." N.Y. Veh. & Traf. Law § 465. The principal issue raised by this appeal is whether a franchised dealership that over many years consistently submitted claims and accepted reimbursement at a manufacturer's standard rate, without ever seeking additional compensation, may thereafter hold the manufacturer liable under Section 465 for additional compensation on past claims, or whether its initial requests for and acquiescence in reimbursement at the standard rate preclude relief.

The plaintiffs in this diversity action are New York car dealerships who sued defendant-appellee General Motors Corporation ("GM") under Section 465 and their franchise agreements with the company, claiming that GM's standard reimbursement rate for warranty repair parts is too low under the statute. The parties proceeded to discovery solely on the claims of plaintiff-appellant Fulton Chevrolet-Cadillac Co., Inc. ("Fulton"), and GM successfully moved for summary judgment dismissing Fulton's claims. This appeal followed.

Background

GM is a Delaware corporation that manufactures and distributes automobiles in the United States through a network of authorized dealers operating under the trade names Buick, Chevrolet, Pontiac, GMC Truck, Hummer, and Cadillac. Since 1981, Fulton has been an authorized Cadillac and Chevrolet dealer in Middletown, New York, pursuant to a series of franchise agreements with GM.

Like most automotive manufacturers, GM warrants certain parts, systems, and accessories in connection with the retail sale of its cars and reimburses franchised dealers for performing repair work under these warranties. In order to be reimbursed for parts and labor provided in connection with a warranty repair, dealers must submit a claim to GM using a computerized system called the Warranty Information Network System ("WINS").*fn3 To use this program, which allows GM to reimburse dealers across the country based on a uniform methodology, a dealer electronically inputs into a computer certain information about the work performed in connection with a warranty repair job. The dealer is not required to submit underlying repair orders, but must input the repair order number and date, the vehicle identification number of the car under repair, the vehicle's mileage, the applicable "labor operation" number, the primary failed part number, and the parts reimbursement amount. The "Line Total," which reflects the total amount of reimbursement the dealer is requesting for the warranty repair, is then calculated automatically by the dealer's computer pursuant to a GM-specified formula, and the dealer is given the opportunity to review the Line Total before submitting the claim.

WINS typically reviews, approves, and pays warranty claims automatically without any individual review by a GM employee. The system will not approve a claim automatically, however, if it does not fall within certain parameters, for example, if it seeks reimbursement for repair parts in an amount that exceeds a certain ceiling. That ceiling is determined pursuant to a GM-specified formula, which involves multiplying the dealer list prices for the parts being used in the repair by a standard parts markup for the dealer. The standard parts markup used by WINS for most dealers in the United States currently is forty percent. Hence, for most dealers, a reimbursement claim will not be approved automatically by WINS if it seeks more than 140 percent of the dealer list prices for the parts used in the repair.

Although most claims submitted through WINS are processed in this way, there are several mechanisms for bypassing the automated procedure and seeking reimbursement at a higher rate than that allowed by the ordinary WINS formula. For example, if a dealer wants a GM employee to review an individual reimbursement claim, it can "H-route" the claim via the WINS program to its GM service representative and include comments explaining why individualized review is desired and seeking permission to submit a claim for reimbursement at a higher rate. In addition, dealers may submit "P" code claims when a warranty repair requires more parts than the limit provided for by the associated labor operation. WINS allows a dealer also to submit a "case add credit" in circumstances where it seeks additional reimbursement on a previously submitted claim.

Dealers may submit warranty reimbursement claims via WINS at any time. The program processes standard claims twice per week, and provides dealers with "claims memos" on the day following such processing. These memos report the disposition of any warranty claims submitted during the last cycle. Approximately ninety percent of warranty claims are approved upon initial submission, and ordinarily are paid within ten days. If a dealer is unhappy with the disposition of a claim, however, it can resubmit the claim using the H-route procedure and include comments explaining the dealer's dissatisfaction. The dealer also may appeal directly to its service representative, or invoke certain dispute resolution procedures described in its franchise agreement with GM.

All authorized GM dealers throughout the United States use WINS to submit warranty reimbursement claims. GM processes and pays approximately 48 million claims through WINS each year. During 2003, GM approved about 1.9 million claims from New York dealers, ...


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