GM violated California law in attempting to terminate Folsom Chevrolet’s Franchise

Scali Rasmussen defeats GM’s “RSI” sales performance metric

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Law firm Scali Rasmussen definitively established that General Motors not only should not have terminated Folsom Chevrolet’s franchise but that it violated California law in doing so. The New Motor Vehicle Board’s decision was effective August 13, 2018.

“The decision puts General Motors and all manufacturers on notice that termination cannot be based on flawed sales performance metrics such as the Retail Sales Index, commonly known as ‘RSI,’ and similar sales efficiency metrics,” explained Scali Rasmussen Partner Halbert “Bert” Rasmussen, who along with Senior Associate Jade Jurdi led the legal team’s victory.

“This decision is a phenomenal victory for all California dealers and will have ripple effects across the country. For example, this outcome provides not only a shield as used in this case, but potentially a sword for recovery of damages caused by GM’s application of the faulty metric,” said Scali Rasmussen Founder and Managing Partner, Christian Scali, who himself routinely represents auto dealers before the New Motor Vehicle Board and in courts across the country in complex franchise cases against auto manufacturers and others.

While previous cases in other states, most notably one involving Beck Chevrolet in New York, have come out in favor of dealers facing termination over RSI and other metrics that fail to account for market nuances,Folsom Chevrolet, Inc., vs. General Motors, LLC (Case Number PR-2483-16, decided Aug. 13, 2018) is the first California case to so clearly call the use of such metrics a violation of California’s vehicle code.

Following a two-week merits hearing and subsequent hearing before the public members of the New Motor Vehicle Board of the State of California, the Board accepted Scali Rasmussen’s argument that General Motors’ use of the RSI sales performance standard violated the state’s vehicle code.

Administrative Law Judge Evelyn M. Matteucci and the board determined that General Motors’ reliance on RSI was a violation because it fails to account for a number of market circumstances, including brand preference, geography, and demographics.

The board also found that General Motors failed to meet its burden of establishing good cause for termination, because, among other things, it failed to submit sufficient evidence as to the business transacted by Folsom Chevrolet relative to the business available to it.

Scali Rasmussen’s attorneys are thought leaders in the automotive industry, often called upon to provide their opinions on new and trending issues on auto distribution and franchise, F&I, employment and advertising issues. The firm also drafted the CNCDA’s 2015 and 2017 Advertising Law Manuals, providing auto dealers with practical guidance on advertising practices.


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