After nearly a decade of litigation concerning rival San Antonio dealerships, the Texas Court of Appeals has ruled that Hyundai Motor America didn’t unreasonably discriminate in awarding discretionary allocations of new vehicles.
The three-judge panel upheld a ruling by the Texas Department of Motor Vehicles Board in favor of the manufacturer in a dispute with New World Car Nissan and New World Car Imports San Antonio, which own two Hyundai stores in the city.
In unanimously rejecting New World Car’s challenge, the court refused to interpret the dealer law as requiring manufacturers to make the same allocation to competing dealerships in the same market.
The litigation has been a long story that grew out of economic, supply chain and natural disaster woes.
In 2009 and 2010, New World Car voluntarily reduced its vehicle inventory because of the recession, while its principal market competitor, Red McCombs Hyundai, which also has two stores in San Antonio, maintained high inventory levels, the decision said.
In 2011, the destructive Japanese tsunami disrupted global supply chains and left South Korea’s Hyundai with fewer vehicles to allocate to its U.S. franchisees.
Red McCombs Hyundai, which was not part of the litigation, made itself eligible for additional discretionary vehicle allocations by beginning to sell Hyundai’s early luxury model, the Equus, renovating both of its stores at a cost of about $2.5 million and participating in Hyundai’s service loaner program.
“New World Car took no comparable actions, despite HMA’s encouragement to do so,” the court said. “World Car South remains a dual dealership (with Kia) and World Car North did not complete its renovations until 2014, by which time the inventory shortage had ended.”
In 2013, New World Car filed a complaint about the discretionary allocations with the Texas DMV, which ruled in the dealer’s favor in 2017.
But in a later review, the Court of Appeals reversed the DMV board’s ruling. The DMV then reconsidered the case and, in 2020, rejected World Car’s claims.
In the latest decision, issued Nov. 29, the court said Red McCombs had taken “numerous steps to prove brand commitment to Hyundai. Based on the evidence, the (DMV) board reasonably concluded New World Car failed to prove HMA engaged in unreasonable discrimination.”
Further, Hyundai Motor America’s use of sales efficiency as a metric didn’t violate its duty of good faith and fair dealing, the court said, adding that “virtually every” automaker uses sales efficiency metrics to evaluate dealership performance.
Hyundai spokesman Ira Gabriel said in an email that “additional matters between (New) World Car dealerships(s) and HMA also were ruled in favor of HMA.”
A lawyer for New World Car, Jarod Stewart, of Houston, said in a statement to Automotive News that the company “will continue to fight to make sure that it and other Texas dealers are not victims of the same type of unfair treatment that occurred in this case.”
Stewart said the ruling “disregards the unfairness of the allocations,” adding that the DMV board got it right the first time, in 2017, when it held that New World Car was treated unfairly.
