Special to Our Automobile Friends

Summer 2007 Edition

WARRANTY REIMBURSEMENT FOR MOTOR HOMES

By Lee Craven

North Carolina law requires manufacturers to compensate franchised dealers at a reasonable rate for "parts, work, and service in connection with warranty service." N.C.G.S. §20-30S.1. Basically, the law requires manufacturers to pay for diagnostic work, repair service and labor, and the associated administrative requirements for the warranty work. [d. The rate of compensation must be reasonable, it must be what the dealer would charge a retail customer for similar non-warranty work, and it must be competitive with other franchised dealers in the dealer's market. [d. Basically, the manufacturer should pay you at the same rate that you normally charge customers.

If the manufacturer refuses to pay, or if another dispute arises (and usually that dispute is "what is the proper rate?"), then the dealer should write to the manufacturer and notify it of the problem. If the matter still cannot be resolved, the dealer can petition the Commissioner of the Division of Motor Vehicles and request a hearing on the matter.

A similar, but slightly different, question we have seen is: "what about warranty work on recreational vehicles?" While the answer is not quite so clear cut, we believe that certain warranty work is reimbursable.

North Carolina law excludes warranty reimbursement for "parts used to repair the living facilities of recreational vehicles." N.C.G.S. §20- 30S.l (b). So, you cannot repair the refrigerator in a motor home and expect be reimbursed by the manufacturer. Also, the warranty reimbursement laws do not apply to recreational trailers. N.C.G.S. §20-30S.S.

Recreational trailers are not defined in the North Carolina statutes, but recreational vehicles are. An RV can be either a motor home, a travel trailer, a fifth-wheel trailer, a camping trailer or a truck camper. Motor homes are living quarters on a self-propelled motor vehicle chassis that "must provide at least four of the following facilities: cooking, refrigeration or icebox, self-contained toilet, heating or air conditioning, a portable water supply system including a faucet and sink, separate 110-12S volt electrical power supply, or an LP gas supply." N.C.G.S. §20-4.0l (27)d2. If you have four or more of those things, you have a motor home.

We take the position that while a recreational trailer which is pulled by another vehicle is likely excluded from the warranty work statutes, a recreational vehicle like a motor home or motor coach is not excluded from these statutes. If the vehicle is self-propelled, warranty work not specifically excluded, it should be reimbursable. While the manufacturer can certainly legally exclude the work on the living facilities of the RV, it cannot exclude work on other parts, like the radiator or the engine. If the manufacturers fail to uphold their obligations for these vehicles under the warranty statutes there may be grounds for an administrative hearing to force them to comply with state law.

CHRYSLER, JEEP & DODGE DEALERS BEWARE!

By Richard Vinegar & Devan Culbreth

Chrysler is believed to have recently sent out a number of pre-termination letters to what Chrysler believes to be its lower performing dealers. Some of our North Carolina dealer clients have received this letter. These letters reference the North Carolina dealer termination statute, N.C. Gen. Stat §20-30S(6), and give dealers 180 days to improve their sales. In the event that these performance goals set by Chrysler have not been met within the 180 days, the letter threatens to take action against these dealers.

Although these letters are not themselves termination letters, they do satisfy the N.C. Gen. Stat. §20-30S(6)(a) 180 day right-to-cure requirement. As a result, dealers in receipt of these letters MUST respond promptly, incorporating information based on that dealer's unique circumstances, including history, market situation, demographics, and product availability. The following list is a non-exhaustive summary of topics that should be covered in a dealer's response letter:

• All inaccuracies or half truths contained in the factory's letter need to be addressed, including, if applicable, the unfairness of the figure that Chrysler has selected for the dealer's Minimum Sales Responsibility (MSR).
• Document all reasons for the dealer's inability to sell more cars, especially those outside of the dealer's control.
• Document all actions taken and investments made by the dealer to improve sales, including recent investments made in facilities, changes in staff, and changes in marketing designed to boost sales.
• Document past difficulties with the factory. For instance, less personal service from Chrysler, lack of availability of a dealer's most marketable product, lack of advertising support from the factory, etc.
• Express the dealer's strong interest in improving sales and give a specific, detailed plan for improving the dealership's sales performance in the future.

At the conclusion of the 180 cure period, dealer performance will be measured again by Chrysler and those dealers whose sales performance has not met the factory's goals (especially those who have made little or no improvement) may be the target of a termination letter. At that time, a dealer will need to fJle a formal protest petition before the N.C. Commissioner of Motor Vehicles within the appropriate statutory period of time in order to preserve his rights under North Carolina law to protest the termination.

The moral of this story is that every performance letter received from the factory requires a prompt, well thought out response. All recent correspondence between the factory and dealer will corne into evidence at any termination proceeding before the Commissioner, so dealers need to make sure that the correspondence fJle that the DMV hearing officer will review at the termination hearing includes numerous letters from the dealer documenting the issues addressed above and showing the dealer's concern about the situation.

About our authors:

Richard J. Vinegar graduated from Duke University, magna cum laude, 1976, and from Comell University School of Law , 1979, He served as research assistant to the Han, Burley B. Mitchell, Jr., and the Han. Hugh A. Wells, N.C. Court of Appeals, 1979 - 1980. His practice concentrates on automobile dealership law, contracts, employment law, appellate practice and franchising.
 

Lee Craven is an associate at Johnson, Hearn, Vinegar, Gee & Glass, PLLC. He graduated from the University of North Carolina in 1998, and from the University of North Carolina School of Law in 2002. Mr. Craven's practice includes all types of civil litigation and administrative law. He also concentrates on automobile dealership law, with an emphasis on litigation, administrative hearings and franchise disputes.
 

P. Devan Culbreth is an associate at Johnson, Hearn, Vinegar, Gee & Glass, PLLC. She is a graduate of Wake Forest University, cum laude, and of its law school. She has a Masters Degree in Psychology. Her practice concentrates on estate planning, business and corporate law, and automobile dealer legal transactions.

DISCLAIMER: Johnson, Hearn, Vinegar, Gee & Glass, PLLC, provides this newsletter for general information only. The materials contained herein may not reflect the most current legal developments. Such material does not constitute legal advice, and no person should act or refrain from acting on the basis of any information contained In this newsletter without seeking appropriate legal or other professional advice on their particular circumstances. Johnson, Hearn, Vinegar, Gee & Glass, PLLC and all contributing authors expressly disclaim all liability to any person with respect to the contents of this newsletter, and with respect to any act or failure to act made in reliance on any material contained herein. Distribution of this newsletter does not create or constitute an attorney-client relationship between the firm and any reader or user of such information.