General Motors Corp. v. Darling's, CIV.01-151-B-S.

• Decision Date: 13 July 2004
• Docket Number: No. CIV.01-151-B-S.,CIV.01-151-B-S.
• Citation: 324 F.Supp.2d 257
• Parties: GENERAL MOTORS CORPORATION, Plaintiff, v. DARLING'S d/b/a Darling's Auto Mall, Defendant.
• Court: U.S. District Court — District of Maine

Page 257

324 F.Supp.2d 257

GENERAL MOTORS CORPORATION, Plaintiff, v. DARLING'S d/b/a Darling's Auto Mall, Defendant.

No. CIV.01-151-B-S.

United States District Court, D. Maine.

July 13, 2004.

Daniel L. Goldberg, Bingham McCutchen LLP, Boston, MA, Frederick J. Badger, Jr., Richardson, Whitman, Large & Badger, Bangor, ME, James C. McGrath, Bingham McCutchen LLP, Boston, MA, for plaintiff.

Judy Metcalf, Eaton Peabody, Brunswick, ME, for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SINGAL, Chief Judge.

This is the latest installment in a line of cases arising from disagreement over the meaning and application of 10 M.R.S.A. § 1176, which requires automobile manufacturers to reimburse automobile dealers for warranty repairs "at the retail rate customarily charged" by each dealer. The suit began with a declaratory judgment action filed by an automobile manufacturer, General Motors ("GM"), to which the defendant dealer, Darling's, responded with a counterclaim. Judgment on the pleadings was entered in favor of GM on the question of whether Darling's is entitled to reimbursement on claims made more than 180 days after the date of service. At this point, the issues presented for resolution are: (1) the validity of a two-step process for reimbursement at the retail rate; (2) the validity of GM's refusal to pay certain supplemental claims on the grounds that Darling's had not provided the Vehicle Identification Number ("VIN") and date of service, as requested by GM; (3) whether GM has a right to audit and charge back improperly paid claims during the statutory period for approval or disapproval of the dealer's warranty reimbursement claims; (4) whether GM's refusal to increase Darling's initial reimbursement labor rate to fifty-two dollars per hour in the spring and summer of 2001 violated section 1176; and (5) whether GM's actions constitute unfair or deceptive trade practices under 10 M.R.S.A. § 1174. GM alleged in its Second Amended Complaint that it "currently intends to implement a procedure for processing supplemental warranty claims in the state of Maine that requires a claiming dealer to submit the information detailed in the sample form attached as Exhibit A," and asks this Court to "[d]eclare, pursuant to 28 U.S.C. § 2201, that section 1176 of the Maine Dealer Act does not prohibit GM from requiring dealers to submit the information required in ... Exhibit A ... as a condition of payment of such claims." Darling's, for its part, "respectfully requests ... entry of a permanent injunction against GM" to force GM to comply with Darling's understanding of 10 M.R.S.A. § 1176 and "restrain[ ] it from imposing an obligation upon Darling's to file the national warranty reimbursement form [Exhibit A to the Second Amended Complaint] before it will abide by its obligation to reimburse Darling's."

The Court held a four-day bench trial in January 2004. Following the trial, the parties submitted proposed findings of fact and conclusions of law. Having observed the testimony and carefully reviewed the trial exhibits and post-trial filings, the Court concludes, for the reasons set forth below, that: (1) section 1176 does not prohibit the two-step reimbursement process used by GM; (2) GM is entitled to require Darling's to include the VIN and date of service on supplemental warranty claims; (3) GM has a contractual right, which does not violate section 1176, to charge back amounts paid for warranty repair reimbursement during the statutory period for approval or disapproval of the claim where Darling's failed to comply with GM's policies regarding parts retention; (4) GM's refusal to increase Darling's initial reimbursement labor rate to fifty-two dollars per hour in 2001 did not violate section 1176; and (5) there is no basis on which to conclude that GM has engaged in unfair or deceptive trade practices in violation of section 1174. The Court declines to endorse GM's proposed form on justiciability grounds. Whatever the propriety of granting injunctive relief in a case such as this, having found no violation of section 1176 on GM's part, the Court finds no basis for awarding Darling's the injunctive relief requested in its counterclaim.

I. STATUTORY CONTEXT

The statute at issue in this case was first enacted in 1975. As indicated by the Legislature in connection with amendments to the statute, the provision is intended to protect owners of vehicles not covered by a warranty from having to subsidize warranty repairs on other consumers' vehicles because automobile manufacturers refuse to "pay the fair and full price for warranty repairs made necessary when their automobiles failed to meet warranty standards." Me. L.D. 1878, 109th Leg., 2d Sess. (1980) (Statement of Fact). At the time this litigation was initiated in 2001, the relevant portions of section 1176 read as follows:

If a motor vehicle franchisor requires or permits a motor vehicle franchisee to perform labor or provide parts in satisfaction of a warranty created by the franchisor, the franchisor shall properly and promptly fulfill its warranty obligations ... and ... shall reimburse the franchisee for any parts so provided at the retail rate customarily charged by that franchisee for the same parts when not provided in satisfaction of a warranty. Further, the franchisor shall reimburse the franchisee for any labor so performed at the retail rate customarily charged by that franchisee for the same labor when not performed in satisfaction of a warranty ... Any claim made by a franchisee for compensation for parts provided or for reimbursement for labor performed in satisfaction of a warranty must be paid within 30 days of its approval. All the claims must be either approved or disapproved within 30 days of their receipt. When any such claim is disapproved, the franchisee that submitted it must be notified in writing of its disapproval within that period, together with the specific reasons for its disapproval.

The statute was amended in 2003. As revised, the relevant parts of section 1176 read as follows:

If a motor vehicle franchisor requires or permits a motor vehicle franchisee to perform labor or provide parts in satisfaction of a warranty created by the franchisor, the franchisor shall properly and promptly fulfill its warranty obligations ... and ... shall reimburse the franchisee for any parts so provided at the retail rate customarily charged by that franchisee for the same parts when not provided in satisfaction of a warranty. A franchisor may not otherwise recover its costs for reimbursing a franchisee for parts and labor pursuant to this section. For purposes of this section, the retail rate customarily charged by the franchisee for parts may be established by submitting to the franchisor 100 sequential nonwarranty customer-paid service repair orders or 60 days of nonwarranty customer-paid service repair orders, whichever is less in terms of total cost, covering repairs made no more than 180 days before the submission and declaring the average percentage markup. The average percentage markup so declared is the retail rate, which goes into effect 30 days following the declaration, subject to audit of the submitted repair orders by the franchisor and adjustment of the average percentage markup based on that audit. Only retail sales not involving warranty repairs, not involving state inspection, not involving routine maintenance such as changing the oil and oil filter and not involving accessories may be considered in calculating the average percentage markup. A franchisor may not require a franchisee to establish the average percentage markup by an unduly burdensome or time-consuming method or by requiring information that is unduly burdensome or time-consuming to provide, including, but not limited to, part-by-part or transaction-by-transaction calculations. A franchisee may not change the average percentage markup more than 2 times in one calendar year. Further, the franchisor shall reimburse the franchisee for any labor so performed at the retail rate customarily charged by that franchisee for the same labor when not performed in satisfaction of a warranty ... Any claim made by a franchisee for compensation for parts provided or for reimbursement for labor performed in satisfaction of a warranty must be paid within 60 days of its approval. All the claims must be either approved or disapproved within 60 days of their receipt. A claim may be submitted within 90 days after the performance of services. When a claim is disapproved, the franchisee that submitted the claim must be notified in writing of the claim's disapproval within that period, together with the specific reasons for its disapproval.

Section 1174 of title 10 prohibits manufacturers from "engag[ing] in any action which is arbitrary, in bad faith or unconscionable and which causes damage to [motor vehicle dealers or the public]."

II. FINDINGS OF FACT

A. Background

GM is a Delaware corporation that manufactures automobiles and distributes them through a network of authorized dealers. Darling's is a Maine corporation that owns and operates motor vehicle dealerships in Maine. Darling's became an authorized GM dealer in 1994, and sells GM vehicles pursuant to a "Dealer Sales and Service Agreement" entered into by GM and Darling's in 2000. Under the terms of the Sales and Service Agreement, Darling's is required to perform warranty repairs on qualified vehicles at the owner's request. GM then reimburses Darling's for such repairs, following the policies set forth in the "Service Policies and Procedures Manual."

GM has established a nationwide system by which it processes claims and reimburses its dealers using a computer system dubbed "Warranty Information Network System," or "WINS." Dealers submit warranty reimbursement claims to WINS electronically. These claims include the repair order number, date of service, the vehicle's VIN and mileage, the applicable labor...