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Abbott Nicholson Attorneys Prevail In Precedent-Setting Case Interpreting Montana’s Motor Vehicle Dealer Franchise Law

Posted Feb. 27th 2018

On February 13, 2018, the Montana Supreme Court issued a precedent-setting decision on dealer franchise law in which Abbott Nicholson attorneys Robert Weller and Kristen Baiardi played a lead role on behalf of the prevailing party. The case had its beginning in 2011 when publicly-traded Lithia Motors dealer group, headquartered in Medford, Oregon, sought the counsel of the Abbott Nicholson Auto Dealer Practice Group in connection with the aftermath of Chrysler’s bankruptcy filing in 2009. Prior to Chrysler’s bankruptcy, Lithia operated a stand-alone Dodge dealership in Billings, Montana. Chrysler terminated the Jeep and Chrysler-Jeep franchises of two other dealers in Billings in bankruptcy and awarded Lithia Chrysler and Jeep franchises to make the Billings store a Project Genesis dealership. Subsequently, one of the terminated dealers, Rimrock Chrysler Jeep, availed itself of the federal Section 747 arbitration process and received a letter of intent to be added to Chrysler’s dealer network. The location chosen by Rimrock and Chrysler for the new dealership was less than one mile down the street from Lithia of Billings’ existing location. Under Montana’s franchise law, Lithia as the existing dealer had the right to protest the addition of a same line-make dealer within its relevant market area and the franchisor (Chrysler) had the statutory burden of proof to show that there was good cause for the establishment of an additional Chrysler-Jeep dealer and that the establishment would be in the public interest.

Abbott Nicholson attorneys Weller and Baiardi represented Lithia in the “add-point” protest, which included a four day trial in Helena, Montana in 2012 after which the Hearing Officer held that Chrysler had failed to meet its burden of proof and sustained Lithia’s protest. In the following years, Rimrock fully exercised its appellate rights in the Montana courts. This was a case with a unique, memorable, and circuitous procedural history that reached the Montana Supreme Court on two separate occasions. Rimrock’s challenges to Lithia’s successful protest culminated with a recent ruling by the Montana Supreme Court affirming the dismissal of Rimrock’s appeal and upholding the Hearing Officer’s decision not to permit establishment of an additional Chrysler-Jeep dealership less than one mile from the Lithia of Billings location.

The published opinion of the Montana Supreme Court is a resounding endorsement of the statutory protections available to most existing, adequately performing dealers under their state franchise laws. These protections enable dealers to have the confidence to invest in their facilities and inventories without the worry that a franchisor can open a competing dealership in very close proximity.

A copy of the Montana Supreme Court’s decision can be found here.