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Rohrich Cadillac, Inc. v. Bureau of Professional & Occupational Affairs

Commonwealth Court of Pennsylvania

July 11, 2013

Rohrich Cadillac, Inc., Petitioner
v.
Bureau of Professional and Occupational Affairs, State Board of Vehicle Manufacturers, Dealers and Salespersons, Respondent

Argued: June 17, 2013

BEFORE: HONORABLE BERNARD L. McGINLEY, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge

OPINION

JAMES GARDNER COLINS, Senior Judge

This matter is a dispute under the Board of Vehicles Act[1] between two competing Pittsburgh area Cadillac dealerships, Rohrich Cadillac, Inc. (Rohrich) and Bowser Cadillac, LLC (Bowser), over the relocation of Bowser's dealership. Rohrich petitions for review of an order of the State Board of Vehicle Manufacturers, Dealers and Salespersons (Board) that sustained a protest filed by Bowser against General Motors, LLC (GM) and directed GM to approve Bowser's request for relocation of its dealership. For the reasons that follow, we affirm.

Bowser operates a Cadillac dealership at 2670 Washington Road, McMurray, Pennsylvania, in Washington County just south of Allegheny County. (Board Final Adjudication and Order Findings of Fact (F.F.) ¶¶2, 17.) Rohrich's Cadillac dealership is located on West Liberty Avenue, Pittsburgh, Pennsylvania, approximately twelve miles from Bowser's current location, and is the Pittsburgh area's largest Cadillac dealership. (F.F. ¶¶6, 41, 45.) Rohrich's assigned area of responsibility is adjacent to Bowser's assigned area of responsibility. (F.F. ¶44.) The new location at issue here, 3260 Washington Road, McMurray, Pennsylvania, is within Bowser's assigned area of responsibility and within the same municipality and zip code, but is 2.8 air miles to the north of 2670 Washington Road, and would reduce the distance between the Bowser and Rohrich dealerships to 9.1 air miles. (F.F. ¶¶2, 25, 30, 41.) Both Bowser and Rohrich exceed GM's standards for satisfactory performance and are viewed by GM as successful dealerships. (September 18, 2012 Board Hearing Transcript (Sept. 18 H.T.) at 81, 213-14, R.R. at 133a, 265a-266a.)

GM has had an Essential Brand Elements (EBE) program since 2009 to encourage its Cadillac dealers to improve their facilities, under which it pays dealers approximately $800 per vehicle sold if their facilities are compliant with the EBE standards or they are progressing with facility improvements that will make them EBE compliant. (F.F. ¶50; Sept. 18 H.T. at 113-14, 360-61, R.R. at 165a-166a, 412a-413a.) Rohrich's facility had not met GM's standards, but Rohrich in or about 2011 began building a new facility that meets those standards at its West Liberty Avenue, Pittsburgh Cadillac dealership location, and is therefore EBE compliant and receives the $800 per vehicle incentive from GM. (F.F. ¶¶48, 50; Exhibit P-52, R.R. at 1076a-1077a.) During the construction of the new facility, Rohrich has temporarily operated its Cadillac dealership from its Chevrolet dealership, also on West Liberty Avenue, Pittsburgh, slightly to the south and closer to Bowser's dealership. (F.F. ¶43; September 19, 2012 Board Hearing Transcript (Sept. 19 H.T.) at 547-49, R.R. at 598a-600a; Exhibit P-52, R.R. at 1076a-1077a.)

Bowser's dealership at 2670 Washington Road does not meet GM's facility standards, and because Bowser had not proceeded with construction of an improved facility that met GM's standards, it was not receiving EBE payments. (F.F. ¶¶19, 51.) Bowser does not own the 2670 Washington Road property and did not want to construct a new facility on property that it did not own. (F.F. ¶¶13, 24.) Bowser did not purchase the 2670 Washington Road property because the owner's asking price of $3 million was more than $1 million higher than what it felt was the market value. (F.F. ¶¶20-21.) Bowser also felt that it would be difficult and expensive to construct a new facility on the 2670 Washington Road property because the property has a stream running through it. (F.F. ¶¶22-23.)

In December 2011, Bowser had the opportunity to purchase 3260 Washington Road, McMurray, Pennsylvania, a flat property with good visibility, located at a four-way stoplight intersection, and Bowser's principal entered into a contract to purchase the 3260 Washington Road property for $2 million. (F.F. ¶¶25-27; Exhibit P-4, R.R. at 795a-815a.) The 3260 Washington Road property is located close to other non-Cadillac vehicle dealerships, including Lincoln, Acura and Volvo, all of which GM regards as competitors of Cadillac. (F.F. ¶27; Sept. 18 H.T. at 272, R.R. at 324a, Sept. 19 H.T. at 414-15, R.R. at 465a-466a.)

Bowser's dealer agreement with GM requires it to request and obtain GM's approval of any change in its dealership location. (Exhibit P-3, R.R. at 746a-749a.) In December 2011, Bowser submitted a request to GM for approval of the relocation of its dealership to 3260 Washington Road, McMurray, Pennsylvania. (F.F. ¶29.) In response to this request, GM suggested as alternatives a buy-out of Bowser's franchise or moving its Cadillac dealership to Bowser's Buick-GMC dealership in Pleasant Hills, to the east. (F.F. ¶¶64-66; Sept. 18 H.T. at 139-40, R.R. at 191a-192a; Sept. 19 H.T. at 463-67, R.R. at 514a-518a.) Bowser rejected GM's offers with respect to these alternatives. (F.F. ¶¶65-66.)

On February 7, 2012, GM issued a letter to Bowser denying its request to relocate its dealership. (F.F. ¶37; Exhibit P-1, R.R. at 730a-732a.) In this letter, GM listed six reasons for the denial: 1) it would cause a 16% reduction in Rohrich's "state expected sales;" 2) it would reduce the distance between Bowser and Rohrich to 8.7 miles, placing them "only minutes apart;" 3) it would negatively impact the Pittsburgh Multi Dealer Area (MDA) Cadillac Network because it would place Bowser into the Pittsburgh MDA, which had "minimal additional sales and registration opportunity for Cadillac;" 4) it would decrease customer convenience and sales to the south of Bowser's current location; 5) it "would create a significant risk to Cadillac dealers' opportunity to achieve a reasonable return on investment;" and 6) it would negatively impact Cadillac's competitiveness against other luxury brands because dealers for other luxury brands are separated by distances of 17-23 miles. (Exhibit P-1, R.R. at 731a-732a; see also F.F. ¶38.)

On February 21, 2012, Bowser filed a protest with the Board, alleging that GM violated Section 12(b)(4) of the Board of Vehicles Act, which provides that manufacturers may not "[u]nreasonably withhold consent to the relocation of an existing new vehicle dealer." 63 P.S. § 818.12(b)(4). Rohrich petitioned to intervene in the protest proceeding, and the Board, over Bowser's objection, permitted Rohrich to intervene.

The Board heard two days of testimony concerning GM's reasons for denying the relocation request and whether those reasons were genuine concerns for the structure or competitiveness of the Cadillac dealer network, and received voluminous exhibits introduced by GM, Bowser and Rohrich.

With respect to effects of the proposed relocation on Rohrich and its ability to earn an adequate return on investment, Bowser's expert testified that GM used inconsistent methods to compare Rohrich's situation before and after the relocation to create its 16% percent reduction in Rohrich state expected sales. (Sept. 19 H.T. at 522-42, R.R. at 573a-593a.) As a result, GM characterized reductions attributable to Bowser's present location as effects of the proposed new location, and overstated the effect of the relocation three-fold. (Sept. 19 H.T. at 538-42, R.R. at 589a-593a.) GM's expert admitted that that state expected sales is a measure of market size, not projected lost sales, and that Rohrich's market area would still have a population substantially larger than Bowser's. (Sept. 18 H.T. at 268-69, 287-88, R.R. at 320a-321a, 339a-340a.) GM's expert also testified that Rohrich with its new facility could be expected to have an increase in annual sales of 146 vehicles with Bowser at its current location, and did not opine that the Bowser relocation would create any risk to Rohrich or any other Cadillac's dealer's return on investment. (Sept. 18 H.T. at 234-36, 285-86, R.R. at 286a-288a, 337a-338a.). Bowser's expert testified that even with increased competition from Bowser's relocation and loss of some sales to Bowser, under GM's figures, Rohrich would still be expected to have an increase in annual sales of approximately 100 vehicles. (Sept. 19 H.T. at 565-66, R.R. at 616a-617a.) GM admitted that Rohrich was the only Cadillac dealer affected by Bowser's proposed relocation. (Sept. 18 H.T. at 111-12, R.R. at 163a-164a.)

With respect to the distance between the dealerships, there was evidence that GM exaggerated the effect of the move by using road miles for the change in distance, while using air miles and Rohrich's nearer temporary location in calculating the distance between Bowser's proposed location and Rohrich. (Sept. 19 H.T. at 542-48, R.R. at 593a-599a.) GM's characterization of the new location and Rohrich's dealership as "only minutes apart" was contradicted by testimony that the road between the dealerships is a congested road with numerous stoplights and that the driving time between Rohrich's dealership and Bowser's proposed ...


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