January 09, 2006
Shift_dismissed
The Aberdeen News reports that a federal judge in South Dakota ruled that Nissan North America, Inc. does not have to continue supplying its vehicles to a dealership that was sold without Nissan’s approval. Under the franchise agreement, the dealer, Krantz, Inc., was required to give Nissan advance notice and a chance to evaluate any proposed transfer. In 2002, Nissan informed Krantz that it could continue to operate its Watertown, S.D. dealership, but that Nissan wanted eventually to leave Krantz’s market and that it would not approve any transfer of the franchise. Krantz nevertheless sold its Nissan dealership to Billion Southtown, Inc. in 2004 without giving the requisite notice or getting Nissan’s permission. Nissan then terminated the franchise agreement and refused to honor the transfer of the dealership. The judge dismissed the lawsuit filed by Krantz and Billion, ruling that Nissan acted in good faith in terminating the franchise agreement and did not violate federal law.
This decision is consistent with several other recent decisions holding that a franchisor may refuse to approve a transfer if it acts in good faith and for legitimate business reasons. See e.g., Gabe Staino Motors, Inc. v. Volkswagen of America, Inc., 2005 WL 1041196 (E.D.Pa. Apr. 29, 2005) and Transamerica Services Technical Supply, Inc. v. General Motors Corp., 2004 WL 234684 (Ohio App. Feb. 6 2004).