Bellavia Gentile & Associates, LLP in conjunction with co-counsel have filed several lawsuits in Federal Court to recover damages resulting from the failure of General Motors, Ford and DaimlerChrysler to properly reimburse numerous dealers for parts used in repairing vehicles under the manufacturers warranty program. Plaintiffs assert causers of action for (i) violation of New York Vehicle and Traffic Law ("VTL") ß 465 (1) and (ii) breach of contract.

Under their respective franchise agreements with the "factories" each Plaintiff was required to perform all necessary repairs covered by the factory's warranties to its retail customers, at no expense to the customer, and the factory was required to reimburse each Plaintiff for labor and replacement of parts installed in such repairs upon receipt of a claim for reimbursement.

Since October 1992, VTL ß 465(1) has explicitly required motor vehicle franchisors to reimburse their New York franchised dealers for replacement parts installed in warranty repairs at "notÖ less the price and rate charged by the franchised motor vehicle dealers in the community or marketing area for like services to no -warranty and/or no-service contract customers provided such price and rate are reasonable."

Notwithstanding the passage of VTL ß 465, which was specially designed and enacted to substantially increase the level of warranty reimbursement to dealers, auto manufacturers have done nothing to comply with the statute and continued to reimburse all of its franchised dealers at the national reimbursement rate of cost plus 30% (for earlier year models) and cost plus 40% (for later year models).

In fact, not only have manufacturers systematically and substantially under reimbursed Plaintiff's for warranty parts in blatant violation of VTL ß465, and breach of contract, but their computerized warranty claims submission system, which all dealers are required to use, will not even process claims seeking parts reimbursed at a rate other than the default rate of cost plus 40%. However, this default rate forced upon all New York dealers is, on average approximately 30% less than the price charged by the other dealers in Plaintiffs' respective "community or marketing areas" for like service to non-warranty customers. Indeed, the reimbursement rate of cost plus 40% is substantially below the factories own suggested retail price (or "MSRP") which is approximately cost plus 67% for most parts.

I. Legal Analysis
Based on a plain reading of Section 465, the factories liability is clear. The main defense advanced by the factories are premised on the notion that it was somehow required of each Plaintiff to determine prevailing non-warranty prices in its community or marketing area and to specifically demand reimbursement at such prices in each of its warranty claims to the factory. That notion was soundly rejected by Senior Judge Sifton in the Universal Ford case, also handled by this firm (denying Ford's motion for summary judgment that was based on Plaintiff's alleged failure to submit particularized claims setting forth the prices dealer claimed Ford must pay under VTL ß465), and by the late-judge Allen Schwartz in a thorough and well-reasoned decision in the case of Ralph Oldsmobile v. General Motors Corp. Therefore, the only real issues in these cases relate solely to the extent of Plaintiff's damages.

Every franchised dealer in the State of New York may be entitled to damages, both retroactively for several years of underpayments, and prospectively for reimbursement at the retail rate.

The key factor to resolve Plaintiff's meritorious claims for compensatory and prospective relief, either by judgment or preferably by settlement, are to establish (1) the prevailing community/marketing area rate for each dealer and (2) a reasonable formula to apply those rates to actual warranty parts claims to arrive at the ultimate warranty parts reimbursement to which each dealer is entitled. In the context of either litigation or settlement, this case can be readily ascertained and accomplished.

First, the prevailing community/marketing area rate each dealer can be established by ascertaining the geographic area from which each dealer draws the majority of its customers. For litigation purposes, Plaintiffs have retained experts who, at considerable expense, have utilized accurate and reliable statistical methods and processes to sample actual customer repair orders from each of the named dealers. Plaintiffs' experts then determined that dealer's individual community/marketing area. The applicable retail markup rates are then determined by looking at average retail markup rates (reflected on each of the dealers' year-end financial statements) for those dealers located within a given dealer's radius or community/marketing area. The final step in establishing the community/marketing area rate is to compute an average markup rate based on the rates of all of the dealers within each given area.

Second, once the community/marketing area rates are established, then we apply those rates to each dealer's warranty claims. Past warranty claims are clearly reflected on each of the dealers' past year-end financial statements, and future warranty claims can be processed on the basis of the average community markup rates to be applied to claims made on an ongoing basis. Moreover, a reasonable cost of living or similar adjustment can be made to ensure that the rates remain current on a prospective basis.

Bellavia Gentile & Associates, LLP and their co-counsel have spent over two years designing and implementing a damage model that would be compelling and determinative at trial. Hundreds of thousands of dollars in expert fees and data retrieved have been expended on behalf of the dealers in prosecuting the cases.

If you agree that the manufacturers should be held to follow the law, and that your dealership has been unfairly deprived of substantial revenues and working capital, you should contact us to discuss your rights more fully. Generally, most dealers' claims for retroactive damages alone, forgetting the value of a higher mark-up going forward, are in the mid to high six figure range.