Does Isuzu really have enough franchises that they can afford to tick off someone selling their vehicles?
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Court rules against dealer, for Isuzu in franchise suit Eric Freedman
http://www.autonews.com/apps/pbcs.dll/article?AID=/20071203/ANA06/712030310Automotive News
December 3, 2007 - 12:01 am ET
After Isuzu Motors America turned down a request from California dealer Ray Fladeboe to transfer his franchise, Fladeboe continued to sell Isuzu vehicles without a franchise agreement.
Bad move, said the 9th U.S. Circuit Court of Appeals.
The court upheld a $375,000 damage award to Isuzu in the company's suit against a Fladeboe dealership for trademark infringement.
Fladeboe, a multifranchise dealer in suburban Los Angeles, sought to transfer his Isuzu franchise from its parent company to a new corporation he created. Isuzu provisionally approved the deal, the appeals court said, but Fladeboe rejected the terms of the proposed agreement.
Fladeboe then asked to shift the franchise to a different corporation he had set up. Isuzu said no. The dealer sued Isuzu in a state court, arguing that the company's refusal was unreasonable. He lost.
Separately, Isuzu sued Fladeboe's Volkswagen dealership for trademark infringement, alleging it sold Isuzu vehicles without a franchise.
A federal jury ordered the dealership to pay $375,000 in damages.
James Mulcahy, a lawyer for Isuzu, said Fladeboe dissolved the parent company in 2002 without telling Isuzu. Fladeboe's VW dealership "operated under the radar screen without Isuzu's knowledge" by selling Isuzu vehicles, Mulcahy said.
"The motor vehicle code makes it unlawful for a dealer to operate by selling vehicles without the manufacturer's consent," Mulcahy told Automotive News.
The state court jury said Fladeboe violated California's unfair-competition law by selling vehicles without a dealer sales and service agreement.
He improperly used the dissolved corporation's identification number to order vehicles and collect sales incentive payments and warranty reimbursements, the jury found.
The jury awarded Isuzu $214,300 ù the amount of incentive payments Fladeboe got when he did not have a franchise agreement. A state appeals court upheld the verdict earlier this year.
In its federal appeal, Fladeboe VW argued that the jury should have been allowed to hear its claim that Isuzu wrongfully denied the franchise transfer.
The three-judge panel unanimously disagreed, saying that defense was irrelevant to Isuzu's claim of trademark infringement.
Fladeboe "has cited no case which allows a prospective dealer seeking authorization to sell a manufacturer's vehicles but unable to agree to the terms necessary to establish a dealership to use the manufacturer's trademark while the dispute is being worked out," the court said.
Instead, the court said, Fladeboe first should have sued Isuzu in state court or pursued administrative remedies.
David Dimitruk, a lawyer for Fladeboe VW, said his client has not decided whether to seek a rehearing. He said Fladeboe has paid both court judgments.
