GM had right to recoup incentives, court rules

General Motors was within its rights when it charged back $47,493 in sales incentives it had paid to an Ohio dealership, a divided federal appeals court ruled last month.

Sims Buick-GMC-Truck Inc. in Warren, Ohio, had failed to collect required documentation on time to show that some GM employees, retirees and relatives were eligible for discounted purchases and leases. There was no allegation of fraud or misrepresentation by the store.

There will be no further appeal, dealer Bill Sims said, adding, "We've done everything we can on our end." He noted that GM has changed its chargeback policy to make it less onerous.

Sims Buick-GMC-Truck is near GM's Lordstown, Ohio, plant and makes 80 to 90 percent of its retail new-vehicle sales through GM's Vehicle Purchase Program, according to legal papers. The Lordstown plant builds the Chevrolet Cruze.

A 2012 GM bulletin required dealerships to get a "consumer dealer agreement" signed by purchasers and lessees at the time of delivery. That agreement, which is filed in the deal jacket, shows their eligibility for the program and includes an authorization number from GM.

‘Contractually bound'

A routine audit found that the store hadn't collected the agreements for "a number of transactions" between March 26, 2013, and Jan. 9, 2014, so it debited Sims' account for those deals.

GM defended the deadline as a way to prevent "abuse or potential abuse" of the incentive program and to make it more convenient for customers than having to "pester" them later to sign documents.

After the audit, GM changed the deadline requirement to allow a 30-day grace period after delivery.

GM's Incentive Manual says that "dealers should refer to the individual incentive program administrative message/bulletins for their official rules and responsibilities under the program."

The 6th Circuit U.S. Court of Appeals said the store admitted requiring its salespeople "to consult the incentive bulletins regularly for appropriate policies and procedures."

A lower court judge dismissed the store's suit for breach of contract and violation of the Ohio dealer law.

In upholding that decision, the appeals court said the store's sales and service agreement allows GM to change its allowance and incentive programs, adding that Sims Buick-GMC-Truck "contractually bound itself to this arrangement and cannot undo the bargain now."

‘Good faith'

In the 2-1 majority decision, Judge Jeffrey Sutton wrote, "Just as Sims had the right to expect GM to make the incentive payments, GM had the right to expect Sims to comply with the requirements for obtaining the incentive payments. GM's actions matched its rights and responsibilities under the contract and were performed in good faith."

As further evidence of good faith, Sutton said, GM had reduced the chargebacks from $66,675 to $47,493 to provide a 30-day grace period, although that more lenient requirement didn't take effect until after the audit period. "That was not the action of a manufacturer bent on unfairly squeezing each dollar out of a dealer," he wrote.

The dissenting judge, John Rogers, voted to send the case to trial on the question of whether GM's documentation requirement may violate the state dealer law.

The Ohio Automobile Dealers Association filed a friend-of-the-court brief siding with the store.

A GM spokesman said the automaker is pleased by the decision.

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