OEMs quit suit over Fla law reimbursing dealers for warranty

OEMs quit suit over Fla law reimbursing dealers for warranty

The Alliance of Automobile Manufacturers yesterday, July 2, 2014, withdrew their ongoing lawsuit in Florida against a state franchise relations measure that passed into law there in 2008 requiring OEMs to reimburse their franchise dealers for warranty repairs at the same level dealers charge consumers at retail for vehicle repairs. The principal issue raised by the Alliance in the Florida case, and in other states where the OEMs have challenged warranty reimbursement legislation passed into law, has been on the constitutional premise that the law violated the Commerce Clause that prohibits states from enacting laws that negatively impact interstate commerce.

The Florida law, pushed initially in the state legislature by the new car dealer association in Florida, is of the –second generation” variety such that it represented recognition by dealers in the state that certain OEMs were not complying with the spirit, if not letter, of the law already on the books providing that OEMs fairly reimburse their dealers for warranty repairs they perform on behalf of OEMs, measured by such yardsticks as the level of fees dealers charge consumers for repairs. Despite attempts by dealers and OEMs to come to terms on the warranty reimbursement law since its enactment by Florida in 2008, the Alliance forged ahead with its suit, the closest thing to consensus between the parties being an amendment to the complaint in 2012. According to Automotive News, information sought on discovery from OEMs was thought by some of them to be confidential and not something they wanted to provide the other side, which caused the Alliance, after six years of wrangling with the state of Florida and dealers there, to call it a day and withdraw their complaint.

This action will likely impact conversations that have been ongoing between OEMs and dealers in other states that have offered second generation style warranty reimbursement legislation that has passed into law, or measures of this variety that they and their dealer associations are considering. Close to home, Virginia has a warranty reimbursement law that pretty effectively takes care that dealers there are fairly compensated. Maryland, which, on point, passed legislation in the General Assembly earlier this year, has a second generation warranty reimbursement law that becomes law October 1, 2014.

With OEM lawsuits like the one in Florida in mind, care was taken in Virginia and Maryland to avoid constitutional questions to which the OEMs could point in mounting legal challenges that could be protracted. Stay tuned.

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