Arent Fox Secures Precedent Setting Victory on Behalf of Maserati Dealers
Earlier this week, Arent Fox LLP secured an important decision on margin and bonus programs for Maserati dealers in New York. The Arent Fox team argued before Administrative Law Judge Walter Zulkoski of the New York Department of Motor Vehicles, who ultimately granted in all aspects the firm’s motion for partial summary judgment.
The dispute began last year when Maserati introduced a bonus program that would drastically change the margin structure and put onerous conditions on a substantial portion of Maserati dealers’ income. The nine percent margin would be shrunk to seven percent, the four percent holdback would be reduced to two percent, and then most of the remainder (three and a half percent) could only be earned back by meeting various objectives in the new bonus program.
In addition to the impact on Maserati dealers’ income, the new bonus program had many hoops for Maserati dealers to jump through, including, among other things, image and facility requirements, customer service targets, used car sales targets, and part sales targets. It will be very expensive for Maserati dealers to comply with the program, in order to qualify for money that they used to enjoy automatically.
Arent Fox Automotive partner Russell P. McRory challenged the implementation of this program, arguing that the changes altered the nature of the relationship between the dealer and manufacturer, and was a franchise modification regulated by the New York Dealer Act.
Judge Zulkoski ruled that the dealer’s “loss of the present assured 4% ‘holdback’ for the 2% ‘holdback’ and the subjective Bonus Program by reducing their present long standing expected margin both as to the amount received from [Maserati] and also due to the increased administrative cost to administer the Bonus Program, effectively and significantly impacts its return on investment and as such as a modification of its present franchise arrangement.” The ALJ also concluded that, as a regulated franchise modification, Maserati’s bonus program is subject to the automatic stay granted by the Dealer Act.
“We are thrilled that the New York Department of Motor Vehicles ruled on our motion,” said Automotive leader Aaron H. Jacoby. “The victory this week is not only a win for our clients, but is also a win for the entire automotive industry. Manufacturers will now have to consider how their margin and bonus programs affect a dealer and their franchise. We believe this has the potential, as Beck Chevrolet was for sales performance standards, to be the beginning of a sea change in how manufacturers offer and alter trading margins and bonus programs to dealers.”
The Arent Fox team representing the Maserati dealers was led by Russell P. McRory and included James M. Westerlind, Charles Gallaer and Michael P. McMahan. Arent Fox was pleased to be assisted in this matter by the Jonathan P. Harvey Law Firm, PLLC of Albany, New York, whose senior partner Jonathan P. Harvey was co-counsel.
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