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Auto Franchise Dealer Termination Claim Permitted to Proceed
By: Jeffrey M. Goldstein

Judicial Update — Nissan N. Am., Inc. v. Tillman, No. 2018-CC-00462-SCT, 2019 Miss. LEXIS 220 (June 6, 2019)

In a recent case, the Supreme Court of Mississippi ruled that in an auto franchise dealer termination dispute between an automobile dealer and an automobile manufacturer the dealership had timely filed a complaint under the Mississippi Dealership Act after the auto franchisee received the auto manufacturer’s letter providing notice that the dealership was being terminated. The MDA has two provisions applicable to the dispute: first, the MDA statute requires an auto manufacturer seeking to terminate a dealer agreement to provide a notice of termination to is vehicle dealer at least sixty days before the effective date of the termination; and, second, another statutory provision provides a dealer an opportunity to challenge a notice of termination by filing a verified complaint with the Mississippi Motor Vehicle Commission “within the sixty-day notice period.”

In this case, because the parties’ franchise agreement required ninety days’ notice before a termination, the franchisor Nissan served the 90-day notice on November 23, 2016. In turn, the franchisee car dealership filed its complaint on February 17, 2017; although the dealership’s filing was within the 90 days period it was not within the initial 60 days period following service of the notice. The Motor Vehicles Board, in dismissing the franchisee’s complaint as untimely, framed the issue as: “does the statutory language ‘within the sixty-day notice period’ refer to the earlier language in the statute that states that the minimum statutory notice period for termination is ‘sixty (60) days before the effective date’ of the termination, or does it mean sixty days after a dealer receives a notice of termination?”

In upholding the Chancery Court’s reversal of the Motor Vehicles Board’s decision dismissing the dealer’s complaint, the majority on appeal found that “the language ‘within the sixty-day notice period’ means, refers and was intended by the Legislature to refer to the sixty-day period before the effective date of the threatened termination.” The majority on appeal concluded that the statute was unambiguous and that “the best reading of the statute is that a dealer may file a complaint within the sixty-day period before the effective date of the threatened termination of the dealership agreement.” Accordingly, the car dealer’s complaint was timely filed with the Mississippi Motor Vehicle Commission within the sixty days immediately preceding the effective date of termination.

Like many other state statutes protecting automobile dealers, the Mississippi Motor Vehicles Act was enacted “to regulate certain conduct in the motor vehicle distribution industry, including the termination of a dealership agreement between a manufacturer and dealer, and it creates an administrative avenue for a dealer to seek recourse from the Commission upon receipt of a notice of termination.” Although only two of the nine judges dissented from the majority ruling in favor of the auto dealer, the distinct reasoning models used by each respective side reflect the prototypical reasoning patterns used by other courts in similar circumstances. One side – here the majority – argued that the statute was clear on its face, or had a clear and plain meaning, and the other side – here the minority – contended that the language of the statute should be interpreted broadly by reference to external policy factors – in this case the timely and quick resolution of claims by dealers against auto manufacturers. With regard to the latter position, the dissent argued that: “A commercially reasonable interpretation would require the parties to challenge the termination as soon as possible and to allow the Commission adequate time to resolve the dispute so that, if it is proper, the termination may be effective on the intended date of termination.”

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