Pub. 1 2019 Issue 3

I n 2018, a lower NH court ruled that Kia Motors America, Inc. (“KIA”) properly terminated its franchise agreement with Kia of Somersworth (“Somersworth Kia”) which affirmed the prior ruling by the Motor Vehicle Industry Board. On March 28th, the NH Supreme Court affirmed that ruling. The following is a summary of that decision, the full version of which can be found at https://www.courts.state.nh.us/supreme/ opinions/2019/2019025kia.pdf Like most dealer sales and service agreements (“Dealer Agreement”), KIA spelled out numerous provisions which Somersworth Kia had to fulfill, including employing parts and service personnel. Specifically, the agreement provided: “DEALER shall employ and train a sufficient number of competent personnel of good character, including one or more persons who will function as sales manager, service manager and parts manager, sales persons, service techni- cians and parts personnel to fulfill all of DEALER’S respon- sibilities under this Agreement and as recommended by COMPANY, and shall cause such personnel to attend such training schools as COMPANY may from time to time require at DEALER’S sole expense.” (KIA OF SOMER- SWORTH v. KIA MOTORS AMERICA, INC, NH Supreme Court (March 2019)). In 2011 and 2012, KIA sent Somersworth Kia notices of “perceived staffing and training deficiencies” for failing to meet “technician training requirements in 2009 and 2010, to adequately staff and train personnel in its parts and service department, and to meet the minimum num- ber of technicians required to participate in Kia’s “Optima Hybrid Program.” (Id. at 2). The Motor Vehicle Industry Board (“MVIB”) noted that Somersworth Kia violated parts and service personnel requirement on “almost a constant basis.” (Id.) KIA met with Somersworth several times over this issue. In November of 2014, KIA formally notified Somersworth Kia that it was in breach of the dealer agreement for not employing adequate parts and service staff. When the let- ter was sent, Somersworth Kia did not have a service man- ager, service advisor/service consultant, or parts-counter person. Though Somersworth Kia had 60 days to cure the staffing breach, it failed to do so and KIA sent a termination letter on February 23, 2015 that was effective in 90 days. The Supreme Court noted that “[a]t the time the termination letter was sent, Somersworth did not have a single position filled in its parts and service department that was required under the Dealer Agreement.” (Id. at 3). Somersworth Kia filed a protest before the MVIB which denied the protest after a hearing. Somersworth Kia then filed a motion for a rehearing on the “grounds that the Board erred in finding that Kia had sent the termination let- ter within 180 days of first obtaining knowledge of Somer- sworth’s staffing issues, as required by RSA 357-C:7, II(a).” (Id.) This is also known as the 180-day lookback period. The MVIB rejected the rehearing request finding that: "'[The notice was proper because of the continuing nature of the staffing problems.' In so doing, the Board stated that '[i]t would be contrary to the intent of the dealer statute to require a manufacturer to initiate a termination action by sending a termination letter at the first technical breach of the dealer agreement' (emphasis added). The Board also noted that 'Kia expended tremendous effort in order to correct the breach and avoid a termination,' and it was '[o]nly after these efforts had failed and the breach rose to a critical level' that Kia sent its termination letter." (Id.) Somersworth Kia appealed the MVIB ruling to the superior court which upheld the Board’s order and concluded that: "[Each] day that Somersworth was out of compliance with the Dealer Agreement’s staffing requirements constituted a new violation of that agreement.” The court reasoned NH Supreme Court Upholds Dealer Termination PETE MCNAMARA NHADA PRESIDENT, FOUNDATION EXECUTIVE DIRECTOR D R I V E 8