Three key factors influencing the Volkswagen, Scout dealership legal dispute

Dealerships across the country are rising up against Volkswagen and Scout in a new battle. This time, every Volkswagen dealer in the U.S. is potentially involved, thanks to a class-action lawsuit filed in Virginia’s Eastern District on March 3. The lawsuit, representing all VW dealers, accuses Volkswagen of America, Volkswagen AG, Scout Motors, and Scout Sales of violating dealer agreements by excluding their own dealers from selling Scout vehicles.

This lawsuit marks a significant shift in the usual dealings between dealers and manufacturers. Typically, disputes are settled outside of court or involve individual dealers over issues like warranty work. Class-action suits like this are rare. Brian Maas, President of the California New Car Dealers Association, stressed this point, stating that lawsuits of this nature are uncommon. The rarity of these cases is due to their potential implications on the franchise model itself. Maas highlighted the belief that these disputes pose a significant threat to the traditional relationship between manufacturers and dealers, where manufacturers do not get to cherry-pick what vehicles dealers can sell.

The National Automobile Dealers Association (NADA) has also weighed in on this issue, criticizing VW and Honda for their direct sales strategies that undermine the franchise system. This direct approach by manufacturers to consumers could jeopardize the investments made by franchised dealers in their brands and products. The integrity of the franchise system is paramount to the NADA, as it aims to protect the long-standing partnership between manufacturers and dealers.

The frustrations expressed by Volkswagen dealers stem from years of loyalty to a brand that has not consistently delivered competitive products compared to other competitors in the market. Despite their commitment, dealers have faced challenges due to low sales volume and thin profit margins. The introduction of Scout Motors and its exclusive nature has further exacerbated tensions, leading to the filing of this class-action lawsuit.

This legal battle has drawn attention not only from industry experts and associations but also from other OEMs. Every manufacturer is watching closely to see how this case unfolds. Leonard Bellavia, an attorney representing the plaintiffs, anticipates a motion to dismiss from the defendants in response to the lawsuit. However, if successful, the certification of the class action could have significant implications for the relationship between manufacturers and dealers moving forward.

The lead plaintiffs in this case, Chris Curran and Fred Ippolito, have stepped forward on behalf of their dealerships to challenge Volkswagen. Their stance reflects a deep commitment to protecting the rights of dealers against potential infringements by manufacturers. While the outcome of this lawsuit remains uncertain, the implications for the future of dealer-manufacturer relations are significant. Dealers are standing up for their rights and the integrity of the franchise system, sending a clear message to manufacturers that loyalty should be a two-way street.