Hyundai didn’t coerce former dealership to build standalone Genesis facility, Wisc. jury says

Hyundai Motor America didn’t wrongfully coerce or attempt to coerce one of its former dealerships to provide an exclusive facility for its Genesis franchise, a federal jury in Wisconsin has found.

However, the automaker did modify its Accelerate Brand Program agreement with Racine Car Dealer, which did business as Racine Hyundai, without the 60 days’ written notice required by the state dealer law, the jury said. Even so, it awarded no damages to the ex-dealership group for that violation.

Racine Car Dealer accused Hyundai of misleading it, withholding information and changing its dealer incentive program policies and rules without notice. The automaker’s actions forced the dealer group to terminate the Genesis side of its business before selling its assets, the suit said.

In July 2021, Zeigler Auto Group bought the Hyundai store and three other dealerships as part of what was to be a $50 million package, according to the suit. It now operates as Zeigler Hyundai of Racine, in Mount Pleasant. The package also included Honda, Subaru and Toyota stores.

The dispute came in what U.S. District Judge William Conley described as a changing environment for dealers and automakers:

“In the last decade, the distribution of automobiles in the United States has begun to undergo a sea change with large, multi-franchise dealerships buying up smaller, local dealers for whom protective state and federal dealer laws were originally enacted,” Conley wrote in a pre-trial decision on several motions, including one that dismissed Genesis Motor America as a defendant.

That sea change, he continued, was “primarily driven by economies of scale, internet marketing, narrowing profit margins, tightening inventory, incentive programs, demographics, international competition, the pandemic and direct-to-consumer sales.”

Racine Car Dealer claimed the automaker waited until a few days before the scheduled closing of its asset sale to advise that Zeigler wouldn’t be eligible for some incentive payments unless it dropped its Genesis dealership or moved it to an exclusive facility.

Racine Car Dealer contended its only viable option at that point was to terminate its Genesis franchise, a move that resulted in a $2 million drop in the sale price of its assets from $50 million to $48 million, according to court filings.

The case went to trial on claims under the Wisconsin Motor Vehicle Dealer Law, the federal Automobile Dealers’ Day in Court Act and state contract law.

The split verdict came down Jan. 24.

Hyundai spokesman Michael Stewart said: “We were gratified that the jury took the time to review Hyundai’s actions with respect to Racine Car Dealer sale of its Hyundai franchise, understood the issues at play, ultimately found that Hyundai acted reasonably and rejected in total Racine Car Dealer claim of damages.”

In the latest development in the case, Hyundai is asking the trial judge to order the dealership to reimburse if for more than $10,000 in legal costs. Racine Cars has objected to that request, arguing that although the jury determined it didn’t incur a financial loss from the state dealer law violation, the verdict in its favor on that claim “served a broader legislative purpose of increasing protection of motor vehicle dealers against unfair treatment by manufacturers.”

Lawyers for Racine Car Sales didn’t respond to questions from Automotive News.


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