Kings Dodge, Inc. v. Chrysler Group, LLC

595 F. App'x 530
Court of Appeals for the Sixth Circuit·Decided December 18, 2014·No. 14-3119·Unpublished·Cited by 5 cases

Opinion

JANE B. STRANCH, Circuit Judge.

Kings Dodge, a car dealership, sued Chrysler, a car manufacturer, seeking an increase in its rate of reimbursement for warranty labor and parts pursuant to the Ohio’s Motor Vehicle Dealer Act. This case presents an issue of statutory interpretation — the meaning of the term “rates” in Ohio Revised Code § 4517.52 — which controls Chrysler’s reimbursement payments to Kings Dodge. The district court granted summary judgment to Chrysler, holding that it did not violate the statute and that Kings Dodge failed to submit a particularized claim to Chrysler sufficient to put it on notice of Kings Dodge’s request for an increased warranty-parts reimbursement rate prior to Spring 2013. We AF-' FIRM the grant of summary judgment to Chrysler.

I. BACKGROUND

The efforts of Kings Dodge to obtain an increase in its rate of reimbursement for warranty labor and parts from Chrysler are based on § 4517.52(B) of the Ohio *532 Motor Vehicle Dealer Act (the “Act”), which provides that:

Each [manufacturer] shall compensate each of its [dealers] for labor and parts used to fulfill warranty and recall obligations of repair and servicing at rates not less than the rates charged by the [dealer] to its retail customers for like service and parts for nonwarranty work.

Ohio Rev.Code Ann. § 4517.52(B) (2010).

Under the terms of the Dealer Agreements and Chrysler’s Dealer Policy Manual, which govern the relationship between the parties, Kings Dodge is required to perform warranty service for all Chrysler products and is reimbursed for such work by Chrysler. Reimbursement is based on the multiplication of two measures: the dealer’s warranty labor rate, which must be approved by Chrysler in advance; and the flat time that Chrysler assigns to each warranty repair, based on time studies it performs on its vehicles. On the first measure, Chrysler compensates dealers only for their “actual effective retail rate,” which is “the average hourly rate [the dealer] charge[s] for customer pay repairs.” If a dealer wishes to increase its warranty-labor rate, it must submit an application in compliance with the Dealer Policy Manual’s requirements. For many years, Kings Dodge has submitted thousands of warranty-reimbursement claims to Chrysler under these terms and has been reimbursed accordingly.

On August 30, 2011, Robert Reichert, the owner of Kings Dodge, wrote a letter to Maria Barrow, a Chrysler Service and Parts representative, citing Ohio Revised Code § 4517.52 and requesting that “all warranty repairs completed on and after August 20, 2011, be paid at the same rate as Kings Dodge charges its retail customers. $92.00 per hour for labor, and retail price for replacement parts.” At that time, Chrysler was reimbursing Kings Dodge at an hourly rate of $77.00 for warranty-repair work and paying less than full retail price for replacement parts. Mr. Reichert made no specific request in his letter thát Chrysler alter the times it allotted for warranty service.

On September 6, Gregory Jankowski of Chrysler responded to Mr. Reichert’s letter and instructed him to follow the Dealer Policy Manual’s procedures for requesting a “warranty[-]labor reimbursement increase.” Mr. Jankowski also summarized Chrysler’s requirements for establishing a dealer’s “Labor Reimbursement Rate,” which included the submission of: 200 consecutive retail repair orders charged to retail customers; the dealer’s requested labor rate or average effective labor rate, whichever was less, on company letterhead; a line-item calculation listing all consecutive repair orders in the form of a spreadsheet, including services excluded from retail labor rate calculations; and dealership accounting copies of the repair orders submitted, not older than six months and highlighting dealer labor hours charged as well as the retail price. Mr. Jankowski testified that he did not understand the letter also, to be requesting a change in Chrysler’s warranty-parts reimbursement rates.

On September 30, Mark Pittman, a General Manager at Kings Dodge, submitted the required application, requesting that its warranty labor rate be increased to $84.78 per hour. Included with the request, which was written on company letterhead, was a packet including a labor rate market study of the effective labor rate of the five closest comparable car dealers, a spreadsheet listing 200 repair orders, and copies of the repair orders. The repair orders spreadsheet contained information regarding the type of repair, labor hours billed, cost of sale, retail charge, retail labor rate, customer cou *533 pons, and the actual retail order labor rate. These spreadsheets also listed information regarding the number of “labor hours billed” to retail customers, although the cover letter did not mention labor time as an issue. The spreadsheets did not include any mention of costs or retail rates for parts; however, the individual repair orders contained information on retail rates charged for parts.

After reviewing these materials, Chrysler determined Kings Dodge’s “average effective retail labor rate” and increased its warranty hourly labor rate to $84.07 per hour. The new reimbursement rate was determined by dividing the average amount Kings Dodge charged to a customer by the number of hours on the retail orders. Chrysler did not, however, alter the second component of the reimbursement calculation — the flat time it assigned to each warranty repair based on its internal time studies.

On November 18, Mr. Reichert emailed Mr. Jankowski, among other recipients at Chrysler, acknowledging the increase of the warranty labor rate to $84.07 and again citing Ohio Revised Code § 4517.52.

The labor rate meets part of the requirement, but does not address the time allowed for nonwarranty work. Kings Dodge uses Motor/Alldata 1 to calculate labor time for retail nonwarranty work. As I’m sure you know, retail labor times are considerably higher than warranty times. For example, a water pump replaced on a 8.6 engine pays [.]8 hrs under warranty and 2.2 hrs at retail. 2 The repair orders we submitted to Chrysler for the labor rate increase re-fleet the retail times. In order to fully comply with Ohio law we must use the retail time for warranty repairs. Please advise your position with respect to this issue.

(R. 43, Page ID 2562) No one at Chrysler ever responded to Mr. Reichert’s email. Kings Dodge proceeded to submit warranty-reimbursement claims at the new hourly rate. Chrysler later increased Kings Dodge’s warranty work reimbursement rate to $84.50, effective January 1, 2012, pursuant to the automatic annual labor rate increase provided for in the Dealer Agreements and Dealer Policy Manual. One year later and during this litigation, the warranty labor rate increased again, pursuant to the same provisions, to $86.19, effective January 1, 2013. Chrysler calculated all reimbursements throughout this time using as one factor the specific amount of time assigned by Chrysler to each warranty repair based on its time studies.

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Kings Dodge, Inc. v. Chrysler Group, LLC, 595 F. App'x 530 (6th Cir. 2014).

595 F. App'x 530 (Kings Dodge, Inc. v. Chrysler Group, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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