Pub. 1 2019 Issue 3

that adopting Somersworth’s argument would mean requiring a manufacturer to terminate a franchise agreement at the first sign of breach, without providing a dealer with the opportunity to remedy the infraction, a construction the court found incon- sistent with the statute’s purpose “to protect dealers from oppressive con- duct by manufacturers.” (Id. at 4). Somersworth Kia then appealed the Superior Court ruling to the NH Supreme Court. The Supreme Court first noted that a manufacturer can terminate a dealer under RSA 357-C (Dealer Bill of Rights) only if it has “good cause” to do so. Good cause is present when: “(1) there is a failure by the dealer to comply with a provision of the franchise agreement that is 'reason- able and of material significance to the franchise relationship,' provided compliance on the part of the dealer is 'reasonably possible'; and (2) the manufacturer 'first acquired actual or constructive knowledge of such failure not more than 180 days prior to the date on which notification' of termination is given. RSA 357-C:7, II(a) (emphasis added).” (Id.) In its appeal, Somersworth Kia took the stance that KIA did not satisfy the 180 day look-back period because KIA knew of the staffing issues all the way back to 2011, which was years before the 2015 termination letter. Thus, Somersworth Kia argues, “ ... the plain language of [the Dealer Bill of Rights] supports this position, as commencement of the statute’s notification period turns on the date the manufacturer 'first acquired ... knowledge' of the breach.” (Id.) According to the Supreme Court, KIA contented that: “ ... the phrase 'such failure' assigns the 180-day requirement to the specific failure on which the termina- tion was based. Kia argues that the breach that triggered the termination — and thus, the only breach relevant to the look-back period — occurred sometime between October 2014 and February 2015, and marked the 'last straw' for Kia 'after a series of breaches of the Dealer Agreement. '” (Id. at 5.) The Supreme Court agreed with KIA’s analysis of focusing on the statute as a whole: “ ... the 180-day look-back provision mandates that a manufacturer first acquire knowledge of the failure on which its termination is based no more than 180 days prior to the date on which it provides the dealer with notice of termination. See RSA 357- C:7, II(a). Moreover, after review of the record, we are persuaded that where similar breaches occur both before and during a statutory look-back period, each day a dealer is in breach is a new 'failure' on which a manufac- turer’s termination may be based. See RSA 357-C:7, II(a).” (Id.) The Supreme Court cited several facts gathered by the MVIB: • Somersworth Kia’s parts and service dept was a “revolving door workplace with unprece- dented turnover rates” (Id.) • There were four parts manag- ers in the six months before the termination letter • Other staff observed new employees “being hired and then leaving very quickly” (Id.) • KIA worked extensively with Somersworth Kia to resolve the staffing shortage • When the termination notice was delivered, Somersworth Kia “ ... did not have a single position filled in its parts and service department.” (Id.) The court then concluded that: “ ... the staffing breach that was occurring at Somersworth between August 2014 and February 2015 was separate from any breach Kia may have been aware of in 2011 and 2012. Importantly ... the record indicates that Somersworth’s violations of the Deal- ership Agreement were distinct, each involving different individuals and unique staffing inadequacies. Thus, the failure on which Kia’s termination letter was based was not the same as any failure of which it had knowl- edge prior to the statutory look-back period.” (Id. at 6) The Supreme Court found that Somersworth Kia’s argument would weaken the Dealer Bill of Rights, “lead to absurd results” and would harm dealers because manufactur- ers would be encouraged to “ ... terminate a franchise relationship as soon as they learn of a dealer’s breach, rather than working with that dealer to remedy the breach without termination.” (Id. at 7) The Court also noted that Somersworth Kia’s inter- pretation would make it harder for a manufacturer to terminate if the new breach was similar to a stale breach. Finally, the court pointed out that it would be incongruous for the Dealer Bill of Rights to reward dealers that constantly violate the dealer agree- ment and punish “manufacturers for their tolerance.” (Id.) 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