GNYADA January 2015 Newsletter

8 Manufacturer Right of First Refusal

The number of buy/sells has sky rocketed recently, and there’s been an uptick in manufacturers taking con- trol of the purchase by using their right of first refusal. Most Dealer Agreements require the manufacturer to inform a selling deal- er when it (the manufacturer) intends to step into the shoes of a buyer and assume the obligations in the pur- chase agreement. This provision also allows the manufacturer to assign its right to a third party (typically, a deal- er preferred by the manufacturer). New York Franchise Law Under the terms of most Dealer Agreements, a selling dealer must present a signed purchase agreement to the manufacturer for approval along with supporting information related to the prospective purchaser. New York franchise laws give the

manufacturer 60 days from receipt of all reasonably requested information to render its decision. In addition to an approval or a denial, the manufacturer can within that 60- day period exercise its right of first refusal. In so doing, the manufacturer steps into the shoes of the prospective purchaser. Multi-Franchise Buy/Sells It is important to remember that court cases have made clear that a buy/sell agreement for a multi-franchise store must break out the value being paid for each franchise. The reasoning is that a selling dealer cannot frustrate a manufacturer’s right to purchase, or assign the purchase of, its (the manu- facturer’s) franchise by proposing the sale of a number of franchises for a single price. This would leave manu- facturers with no option other than

acquiring vehicles that the manufacturer does not produce (for example, Nissan having to pur- chase a dual Nissan and Chevrolet operation). Dealers should consult with experi- enced motor vehicle franchise coun- sel if they have any questions associ- ated with the sale of their dealership or a manufacturer’s right of first refusal. This article is provided for informational purposes only and is not to be construed as legal advice. GNYADA thanks Richard Sox, Esq., of Bass, Sox, Mercer for his contribution to this article.

Recent Franchise Law Successes

One of our members scored a significant victory in its fight against General Motors to keep its franchise. The Administrative Law Judge in the trial ruled in favor of the dealer, thus negating Chevrolet’s efforts to terminate the dealer due to claims of an underachieving franchise.

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A local GM dealer has successfully filed for a labor rate increase after GM agrees to follow NY Franchise Law.

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Need another copy of our Franchise Law Brochure that highlights the new amendments we were able to put for- ward? Contact Phyllis Aguilar at 718.746.5900, ext. 271, or phyllisa@gnyada.com to request more copies.

Greater New York Automobile Dealers Association • www.gnyada.com

The Newsletter • January 2015 5