The court concluded that GM’s refusal to grant buyer’s request to move the seller’s dealership to the buyer’s location was not a violation of applicable Missouri law.
M&A Stories
February 23, 2022
In a recent case, the court ruled in favor of General Motors (GM) regarding their decision to approve a dealership sale without granting the buyer’s request for relocation. The court determined that GM’s refusal to relocate the seller’s dealership to the buyer’s desired location did not violate Missouri law.
Background
When selling an auto dealership, the approval of the automaker, in this case, GM, is required. In this specific 2019 deal, a Kansas City GM dealership was sold to a local GM auto dealer. The buyer requested GM’s approval for the sale, which included moving the seller’s dealership to the buyer’s location in Kansas City.
GM’s Decision
GM approved the sale but denied the relocation request based on marketing reasons. They explained that their analysis indicated sufficient representation in the proposed location, and the market conditions, including registration performance, demographics, and economic considerations, did not justify approval. Furthermore, the requested move conflicted with GM’s current network plan. GM also highlighted the potential protests from other Buick GMC dealers, which could pose significant risk and expense. Consequently, GM denied the relocation request, stating that it was not in the best interests of their customers, the Buick GMC and Cadillac brands, or the dealer network in the Kansas City Metro Area.
Legal Disputes
The buyer and seller disagreed with GM’s decision and filed complaints with a Missouri state agency. However, their attempt at mediation proved unsuccessful. Despite the unresolved complaints, the sale closed at a reduced price of $1.8 million. Eventually, the buyer and seller withdrew their administrative complaints against GM without any prejudice.
The lawsuit
Several months later, the seller filed a lawsuit in a Kansas City, Missouri federal district court, seeking $4 million in damages from GM for denying the relocation request. GM requested the court to dismiss the claim, arguing that their actions, as described in the seller’s complaints, were lawful if proven true. The court agreed with GM and dismissed the seller’s lawsuit.
This case is referred to as Conklin Fangman Kansas City, LLC v. General Motors, LLC, No. 4:21-cv-0001-DGK, United States District Court, W.D. Missouri, Western Division, (December 13, 2021)
Conclusion
The court supported GM’s decision to deny the relocation request, concluding that GM’s actions were lawful. It appears that the seller pursued the lawsuit in an attempt to gain more from the deal after already selling the dealership.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
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Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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