05-002426 Classic Nissan, Inc. vs. Nissan North America, Inc. Status: Closed Recommended Order on Tuesday, March 20, 2007.

Summary: The proposed termination of the dealer agreement meets statutory requirements and is not unfair.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CLASSIC NISSAN, INC. , )

)

Petitioner , )

)

vs. ) Case No. 05 - 2426

)

NISSAN NORTH AMERICA, INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

On August 7 t hrough 11, 14 through 18, and 21 through 23,

2006, a formal administrative hearing in this case was held in

Tallahassee, Florida, before William F. Quattlebaum,

Administrative Law Judge, Division of Administrative Hearings.

APPEARANCES

For Petitioner: W. Douglas Moody, Jr., Esquire

Robert C. Byerts, Esquire

Myers & Fuller, P.A.

2822 Remington Green Circle

Post Office Box 14497

Tallahassee, Florida 32308

William R. Pfeiffer, Esquire

The Law Offices of William R. Pfeiffer

2822 Remington Green Circle

Post Office Box 10528

Tallahassee, Florida 32302

Frank A. Hamner, Esquire

Frank A. Hamner, P.A.

1011 North Wymore Road

Orlando, Florida 32789

For Respondent: Dean Bunch, Esquire

Sutherland , Asbill & Brennan, LLP

3600 Maclay Boulevard, South, Suite 202

T allahassee, Florida 32312 - 1267

Steven A. McKelvey, Jr., Esquire

S. Keith Hutto, Esquire

M. Ronald McMahan, Jr., Esquire

Nelson, Mullins, Riley & Scarborough, LLP

1320 Main Street, 17th Floor

Post Office Box 11070

Columbia, South Carolina 29201

Cristian S. Torres, Esquire

Nissan North America, Inc.

Legal Department

333 Commerce Street, 7th Floor

Nashville, Tennessee 37201

STATEMENT OF THE ISSUE S

Pursuant to Subsection 320.641(3), Florida Statutes (2006), 1

the issue s in the case are whether Nissan North America, Inc.'s

(Respondent) , proposed termination of the d ealer a greement with

Classic Nissan, Inc. (Petitioner), was clearly permitted by the

franchise agreement, undertaken in good faith, undertaken for

good cause , and based on material and substantial breach of the

dealer agreement ; and whether the grounds relied upon for

termination have been applied in a uniform and consistent

manner.

P RELIMINARY STATEMENT

By Notice of Intent dated April 6, 2005, the Respondent

advised the Petitioner that the dealer agreement entered into by

the parties was being terminated. The Petitioner disputed the

termination and filed a Petition for Hearing with t he Florida

Department of Highway Safety and Motor Vehicles, which forwarded

the Petition to the Division of Administrative Hearings. The

final hearing was scheduled and then re - scheduled several times

upon various motions, finally commencing on Augu st 7, 2006.

At the hearing, the Petitioner presented the testimony of

Darren Hutchinson, John Sekula, Scott O’Brien, and Ernest

Manuel. Petitioner's Exhibits numbered 15, 26, 27, 47, 58, 79,

80, 100, 102, 104, 107, 117, 126, 129 through 132, 136, 159, 170

throu gh 176, 180, 183 through 188, 193, 195, 214, 217 through

248, 359, 368, 369, 381, 383, 385, 388, 391, 398, 400, 404, 406,

411 through 413, 475, 478, 480, 483, and 488 were admitted into

evidence.

The Respondent presented the testimony of Timothy Pierson,

A ndrew Delbrueck, William Hayes, Douglas Kirchoff, Dawn

Mitchell, Joseph Stancato, Herbert Walter, Patrick Doody, and

Sharif Farhat. Respondent's Exhibits numbered 1 through 6, 9,

13 through 22, 24 through 33, 36, 38 through 40, 44, 46, 48, 49,

51 through 53, 55 through 57, 59 through 70, 79 through 84, 87,

95 through 99, 101 through 108, 120, 122 through 124, 129, 130,

134, 140, 141, 143 through 148 (including 145A1), 150, and 151

were admitted into evidence.

The 20 - volume Transcript of the hearing was fil ed on

September 15, 2006. Both parties filed Proposed Recommended

Orders on October 16, 2006, that have been considered in the

preparation of this Recommended Order.

FINDINGS OF FACT

1. Pursuant to definitions set forth at Section 320.60,

Florida Statute s, the Petitioner is a "motor vehicle dealer" and

the Respondent is a "licensee."

2. In 1997, the Petitioner and the Respondent entered into

an agreement whereby the Petitioner took control of an already -

existing Nissan dealership located in Orlando, Flor ida.

3. In 1999, the Petitioner and the Respondent entered into

a Dealer Sales and Service Agreement (Dealer Agreement) , which

is a "franchise agreement" as defined at S ubs ection 320.60(1),

Florida Statutes. The Respondent's proposed termination of the

1999 Dealer Agreement i s at issue in this proceeding.

4. At all times material to this case, the dealership has

been owned by Classic Holding Company. Classic Holding Company

is owned by four members of the Holler family. Christopher A.

Holler is ident ified in the Dealer Agreement as the p rincipal

o wner and the e xecutive m anager of the dealership. The family

owns a number of other dealerships , representing a variety of

auto manufacturers.

5. The Respondent does not sell cars at retail to

individual pu rchasers. Standard Provision Section 3.A. of the

Dealer Agreement requires that the Petitioner "actively and

effectively promote" vehicle sales t o individual retail

purchasers.

6. Standard Provision Section 3.B. of the Dealer Agreement

permits the Respon dent to develop and select the criteria by

which sales are measured, as long as the measur ement criteria is

reasonable.

7. Standard Provision Section 12.B.1.a. of the Dealer

Agreement permits the Respondent to terminate a dealership when

a dealer fails to substantially meet its vehicle sales

obligation.

8. The Dealer Agreement includes examples of various

criteria that may be used to measure dealer performance.

Specifically included among the examples is the calculation of a

dealer's "sales penetration" within a defined geographic

"Primary Market Area" (PMA) around the dealership as compared to

other local and regional dealers.

9. Sales penetration is calculated by dividing a dealer's

total new vehicle sales by the number of competitive new

vehicles r egi stered in the dealer’s PMA.

10. Data related to vehicle registration was compiled by

R. L. Polk (Polk) , a nationally recognized organization commonly

relied upon in the auto industry for such information. There

was no evidence offered to suggest the Polk data was incorrect.

11. The dealer's sales penetration is compared to Nissan's

regional sales penetration to determine the dealer's sales

performance as measured against other Nissan dealer 's in the

region. A dealer performing at 100 percent of the regi onal

average is performing at an "average" level. Otherwise stated,

an average dealer is performing at a "C" level.

12. The use of sales penetration calculations as a

measurement of dealer performance is common in the automotive

industry.

13. The Respon dent has used sales penetration as a

measurement of dealer sales performa nce for more than 20 years.

14. The Respondent's use of sales penetration as a

measurement of dealer performance was reasonable or was

permitted by the specific terms of the Dealer A greement.

15. The Respondent's use of the sales penetration

measurements was widely communicated to dealers, who were

advised on a routine basis as to the performance of their

dealerships compared to local de alers and on a regional basis.

16. The Petitio ner knew, or should have known, that sales

penetration was being used to measure the P etitioner's sales

performance.

17. There was no credible evidence presented at the

hearing that the Respondent calculated sales penetration in

order to disadvantage the Petitioner relative to other Nissan

dealers in the region.

18. At the hearing, the Petitioner suggested alternative

standards by which sales performance should be reviewed,

including consideration of total sales volume. The use of sales

volume to measure retail effectiveness would penalize

dealerships in smaller markets and fail to reflect the market

opportu nity available to each dealer.

19. There was no credible evidence presented at the

hearing that total sales volume more accurately measured the

Petit ioner's sales performanc e than did sales penetration.

20. The Petitioner suggested that the use of sales

penetration to substantiate the proposed termination of the

Dealer Agreement at issue in this case was unreasonable and

unfair because approximately h alf of Nissan's dealerships will

be performing below 100 percent of the regional average at any

given time, yet the Petitioner has not proposed termination of

dealership agreements with half of its dealer network; however ,

the proposed termination at issue in this case is not based

merely on the P etitioner's sales penetration.

21. In 2002, the Petitioner's sales penetration was 110.5

percent, well above the regional average. At that time, the

Respondent was preparing to introduce a number of new vehicles

to the market. Some of the new vehicles were revisions of

previous models, while others were intended to compete with

products against which Nissa n had not previously competed.

22. Nissan representatives believed that the new models

would substantially e xpand sales opportunities for its

dealerships, and they encouraged their dealer network to prepare

for the new environment. Some dealers responded by increasing

staff levels and modernizing, or constructing new facilities.

The Petitioner failed to take a ny substantive action to pre pare

for the new model lineup.

23. Beginning in 2003, and continuing throughout the

relevant period of this proceeding, the Petitioner's regional

sales penetration went into decline. From 2002 to 2003, the

Petitioner's annuali zed sales penetration fell more than

30 points to 85.13 in 2003. The Petitioner's sales penetration

for 2004 was 65.08 percent. The Petitioner's sales penetration

for the first quar ter of 2005 was 61.78 percent.

24. Following the introduction of the ne w models and

during the relevant period of this proceeding, regional Nissan

sales increased by about 40 percent. By 2004, the average

Nissan dealer in the Petitioner's region had a sales penetration

of 108.8 percent of the regional average. Through the f irst

quarter of 2005, the average dealer in the region had a sales

penetration of 108.6 per cent of the regional average.

25. Compared to all other Florida Nissan dealers during

the relevant period of this proceeding, the Petitioner was

ranked, at its best , 54th of th e 57 Florida Nissan dealerships

and was ranked lowest in the state by January 2005.

26. Every Florida Nissan dealership, other than the

Petitioner, sold more new cars in 2004 than in 2002. The

Petitioner sold 200 fewer vehicles in 2004 than i t had two years

earlier.

27. The three other Orlando - area Nissan dealers

experienced significant sales growth at the same time the

Peti tioner's performance declined.

28. The Petitioner has suggested that the Respondent

failed to provide the information t o appropriate management of

the dealership. The Dealer Agreement indicated that Christopher

A. Holler was the e xecutive m anager of the dealership ; however,

his address was located in Winter Park, Florida, and he did not

maintai n an office in the dealershi p.

29. The Respondent's representatives most often met with

managers at the dealership, who testified that they communicated

with Mr. Holler. On several occasions as set forth herein,

Nissan representatives met with Mr. Holler for discussions and

corresp onded with him.

30. There was no credible evidence presented at the

hearing that the Petitioner was unaware that its sales

penetration results were declining or that the Petitioner was

unaware that the Respondent was concerned wit h the severity of

the dec line.

31. The Respondent communicated with the Petitioner on a

routine basis as it did with all dealers. As the Petitioner's

sales performance declined, the Respondent communicated the

monthly sales report information to the Petitioner, and the

topic of declining sales was the subject of a continuing series

of di scussions between the parties.

32. In February 2003, Tim Pierson, the Respondent's

district operations manager (DOM), met with the Petitioner's on -

site manager, John Sekula, and discussed the dea lership's

declining sales penetration. Mr. Sekula was subsequently

transferred by the ownership group to another a uto

manufacturer's dealership.

33. In August 2003, Mr. Pierson met with the Petitioner's

new manager, Darren Hutchinson, as well as with a r epresentative

from the ownership group, to discuss the continuing decline in

sales penetration, as well as an alleged undercapitalization of

the dealership and the lack of an on - site executive manager with

authority to control dealership operat ions.

34. O n October 1, 2003, the Respondent issued a Notice of

Default (NOD) charging that the Petitioner was in default of the

Dealer Agreement for the failure to "retain a qualified

executive manager" and insufficient capitalization of the

dealership .

35. In Dece mber 2003, Mr. Pierson met with Christopher A.

Holler to disc uss the dealership's problems.

36. By the time of the meeting, Mr. Hutchinson had been

designated as the e xecutive m anager, although Mr. Hutchinson 's

decision - making authority does not appear to have ext ended to

financial operations.

37. During that meeting, based on the Petitioner's failure

to meet the capitalization requirements and respond to the

deterioration in sales, Mr. Pierson inquired as to whether the

Petitioner was interested in selli ng the dealership, but

Mr. Pierson testified without contradiction that Mr. Holler

responded "no." Mr. Hutchinson explained at the hearing that he

asked the question because there was little apparent effort

being made to address the deficiencies at the d ealership , and he

was attempting to ascertai n the Petitioner's intentions.

38. Mr. Hutchinson was directed to prepare a plan to

address the Petitioner's customer service rating, which had

fal len to the lowest in the area.

39. Based on an apparent belief that the ownership group

was going to remedy the Respondent's concerns about

capitalization, the Respondent extended the compliance deadline

set forth in the NOD , but the extended deadline passed without

any alteration of t he dealership's capitalization.

4 0. A letter to the Respondent dated March 25, 2004,

allegedly from Mr. Holler, noted that sales and customer service

scores had improved; however, there was no credible evidence

presented during the hearing to support the claimed improvement

in either sal es or customer service. The letter also stated

that the capitalization of the dealership would be increased in

April 2004 and that new vehi cle orders were being reduced.

41. On March 19, 2004, Mr. Pierson spoke with Mr. Holler

and believed , based on the conversation , that a meeting would be

scheduled to discuss the sales and capitalization issues. In

anticipation of the meeting, Pierson sent the sales penetration

reports directly to Mr. Holler, but the meeting did not occur.

There was no additional capi tal placed into the dealership

during April 2004.

42. In April 2004, Andy Delbrueck, a new DOM for the area,

met with Mr. Hutchinson to discuss the continuing decline in

sales penetration th r ough the end of March 2004. Other dealers

in the area were expe riencing increased sales at this time, but

the Petitioner's regional sales penetration continued to decline

and was below the region for almost all Nissan models.

Mr. Hutchinson advised that he was hiring additional staff and

had sufficient advertising fun ds to return the regional sales

penetration averages by June.

43. In early May 2004, Mr. Delbrueck and a Nissan vice

p resident, Patrick Doody, sent a letter about the Petitioner's

declining sales performance to Mr. Holler and requested that the

Petitioner prepare a plan to address the problem.

44. On May 18, 2004, Mr. Delbrueck again met with

Mr. Hutchinson and discussed the decline in sales performance

and customer service scores, as well as the issue of the

dea lership's undercapitalization.

45. A May 25, 2004 , letter to the Respondent, allegedly

from Mr. Holler, noted that the dealership's sales penetration

had improved, that additional staff had been hired, and that the

Petitioner anticipated reaching or exceeding the regional sales

penetration averag e by the end of the third quarter of 2004.

The Petitioner never reached regional sales penetration averages

following this letter, and , at the time it was written, there

had been no material improvement in the d ealership's sales

penetration.

46. On June 17, 2004, Mr. Delbrueck met with Mr. Holler to

discuss the continuing decline in the Petitioner's sales

performance. Mr. Delbrueck believed, based on the meeting, that

Mr. Holler was aware of the problem and would make the changes

necessary to improve sal es, including emp loying additional sales

staff.

47. On July 7, 2004, the Respondent issued an Amended NOD,

citing the continuing decline in the Petitioner's sales

performance as grounds for the default, in addition to the

previous concerns related to capi talization that were identified

in the earlier NOD. The Amended NOD established a deadline of

November 29, 2004, by which time the cited deficiencies were to

be remedied.

48. One day later, Mr. Delbrueck met with Mr. Hutchinson,

discussed the Amended NOD , and made various suggestions as to

how the Petitioner could improve the dealership's sales,

including marketing and staffing changes. Mr. Delbrueck also

offered to send in a trained Nissan representative, William

Hayes, to review dealership operations a nd provide suggestions

to improve conditions at the facility and ultimately to increase

car sales. Mr. Hutchinson accepted the offer.

49. A letter to the Respondent dated July 23, 2004,

allegedly from Christopher A. Holler, noted that staffing levels

had increased as had sales for the month of July; however , there

was no credible evidence presented at the hearing that any

substantive increase in staffing had occurred or that the

Petitioner's sales penetration had increased. The letter

contained no specif ic plan for remedying the problems cited in

the Amended NOD.

50. In late July 2004, a Nissan training representative,

William Hayes, performed a focused review of the Petitioner's

operations and provided a list of specific recommendations

intended to impr ove the Petitioner's sales performance. He met

with Mr. Hutchinson at the dealership and discussed the list of

recommendations. At that time, Mr. Hutchinson stated that he

believed th e recommendations were useful.

51. On September 10, 2004, Nissan Vice President Doody

sent another letter to Mr. Holler referencing the Petitioner's

declining sales performance and , again , requesting that the

Petitioner prepare a plan to address the issue.

52. A September 30, 2004 , letter to the Respondent,

allegedly from M r. Holler, noted that staffing levels had been

increased, a new executive manager (Mr. Hutchinson) had been

hired, advertising funds had been increased, and customer

service scores had improved. However, by that time,

Mr. Hutchinson had been employed at the dealership since at

least August of 2003, and there was no credible evidence

presented at the hearing that staffing levels, advertising

funds, or customer satisfaction scores had been materially

increased.

53. On October 18, 2004, Nissan Vice Presiden t Doody, sent

another letter to Mr. Holler about the Petitioner's declining

sales performance, noting that whatever efforts had been made by

the Petitioner to improve sales had been unsuccessful.

Thereafter, Mr. Doody arranged a meeting with Mr. Delbrueck ,

Mr. Holler , and another member of the Holler family to discuss

the deteriorating situation at the deale rship and between the

parties.

54. The meeting occurred on October 26, 2004, during which

the Nissan representatives addressed the issues including u nder -

capitalization, declining sales , and customer satisfaction

scores. The Nissan representatives noted the Petitioner's

failure to respond to any of the continuing problems and advised

the Petitioner that , if the situation did not improve, the

Responden t could initiate proceedings to t erminate the Dealer

Agreement.

55. At the hearing, the Nissan representatives testified

that the Holler family members in attendance at the October 26 th

meeting had no response during the discussion and offered no

specific plan to resolve the situation. The Petitioner

presented no credible evidence to the contrary.

56. Shortly after the meeting, and in the absence of any

substantive attempt by the Petitioner to resolve the concerns

set forth in the NODs, the Nissan repres entatives decided to

pursue termination of the Dealer Agreement if the Petitioner's

sales penetration c ontinued to be unsatisfactory.

57. The Petitioner's regional sales penetration as of

November 2004 was 65.69 percent. The year - end sales penetration

fo r 2004 was 64. 5 percent of regional average.

58. On January 7, 2005, Mr. Delbrueck met with

Mr. Hutchinson to discuss the dealership's sales performance.

By that time, more than a year had passed since Mr. Hutchinson's

designation as e xecutive m anager, yet the dealership's sales

performance had not improved.

59. Mr. Delbrueck inquired as to whether the Petitioner

would be interested in using an additional Nissan resource (the

EDGE program) designed to identify specific deficiencies in the

sales process. The EDGE program included an extensive review of

the sales process from the customer perspective, including a

six - month survey period and four hidden ca mera "mystery shopper"

visits.

60. There was a charge to dealers participating in the

EDGE program. Mr. Hutchinson told Mr. Delbrueck that he would

have to discuss the program with the owners. The Petitioner

subseque ntly chose not to participate.

61. During the January 7 th meeting, Mr. Delbrueck also

encouraged Mr. Hutchinson to hire additional sales s taff. At

the hearing, Mr. Hutchinson testified that at the time of this

meeting, he had been "building a sales force" yet by March of

2005, the Petitioner's full - time sales staff was approximately

one - half of what it had been in 2003.

62. On February 11, 2005, Mr. Delbrueck met with

Mr. Hutchinson and Holler family members to follow up on the NOD

and the October 26 th meeting, but made no progress towards

resolving the problems.

63. On February 23, 2005, Mr. Delbrueck and Mr. Hayes met

with Mr. Hutchinso n to follow up on the recommendations

Mr. Hayes made in July 2004. Mr. Hutchinson continued to state

that the recommendations were useful, but very few had been

implemented, and he offered no plausible explanation for the

delay in implementing others.

64 . On February 24, 2005, the Respondent issued a Notice

of Termination (NOT) of the Dealer Agreement that set forth the

continuing decline in sales penetration as grounds for the

action, as well as th e alleged undercapitalization.

65. At some point in ear ly 2005, the Petitioner increased

the capitalization of the dealership and corrected the

deficiency, although it was implied during the hearing that the

correction was temporary and that the increased capital was

subsequently withdrawn from the dealership. In any event, the

Respondent issued a Superceding NOT on April 6, 2005, wherein

capitalization was deleted as a specific ground for the proposed

termination.

66. The Petitioner's January 2005 sales penetration was

49.3 percent of regional average, the l owest of any Nissan

d ealer in the State of Florida.

67. Consumers typically shop various automobile brands,

and a consumer dissatisfied with a dealer of one brand will

generally shop dealers of competing brands located in the same

vicinity, in order to pu rchase a vehicle at a convenient

dealership for ease of obtaining vehicle service.

68. The Respondent asserted that it was harmed by the

Petitioner's deteriorating sales performance because Nissan

sales were "lost" to other manufacturers due to the Petiti oner's

failure to appropriately market the Nissan vehicles. The

Petitioner asserted that because Nissan's overall sales

performance in the Petitioner's PMA was average, no Nissan sales

were lost. The Respondent offered testimony suggesting that

sales los t to Nissan may not have been lost to the Holler

ownership group because the group also owned nearb y Mazda and

Honda dealerships.

69. The evidence regarding the calculation of lost Nissan

sales was sufficiently persuasive to establish that Nissan was

harm ed by the Petitioner's inadequate vehicle sales volume and

by the Petitioner's failure to meet its obligation to "actively

and effective promote" the sale of Nissan vehicles to individual

purchasers as req uired by the Dealer Agreement.

70. The number of s ales lost is the difference between

what a specific dealer , who met regional sales averages , should

have sold compared to what the dealer actually sold.

71. In 2003, the Respondent lost 185 sales based on the

Petitioner's poor sales performance. In 2004, the Respondent

lost 610 sales based on the Petitioner's poor sales performance,

200 more lost sales than from the next poorest performing Nissan

dealer in Florida .

72. The parties offered competing theories for the

Petitioner's declining performance, whi ch ar e addressed

separately herein.

73. The greater weight of the evidence presented at the

hearing establishes that as set forth herein, the Respondent's

analysis of the causes underlying the Petitioner's poor sales

performance w as persuasive and is acce pted.

74. The Respondent asserted that the sales decline was

caused by operational problems, including an inadequate

facility, inadequate capitalization, poor management,

ineffective advertising, inadequate sales staff , and poor

customer service.

75. Com peting dealerships in the area have constructed

improved or new facilities. Customers are more inclined to shop

for vehicles at modern dealerships. Upgraded dealerships

typically experience increased cust omer traffic and sales

growth.

76. The Petitioner 's facility is old and in disrepair.

Some dealership employees referred to the facility as the "Pizza

Hut" in recognition of the sales building's apparent resemblance

t o the shape of the restaurant.

77. Nissan representatives discussed the condition of t he

facility with the Petitioner throughout the period at issue in

this proceeding. When the Respondent began preparing for the

introduction of new models in 2002, the Respondent began to

encourage dealerships including the Petitioner, to participate

in th e "Nissan Retail Environment Design Initiative" (NREDI), a

facility - improvement program.

78. Apparently, the Petitioner was initially interested in

the program, and, following a design consultation with the

Respondent's architectural consultants, plans fo r proposed

improvements to the Peti tioner's facility were created.

79. At the time, the Respondent was encouraging dealers to

improve facilities, the Respondent had a specified amount of

funding available to assist dealers who chose to participate in

the NREDI program, and there were more dealers interested than

funds were available. Although funds were initially reserved

for the Petitioner's use, the Petitioner declined in June of

2003 to participate in the program, and the funds were

rea llocated to othe r dealerships.

80. The Respondent implied that one of the reasons the

Petitioner did not upgrade the dealership facility was a lack of

capitalization.

81. The allegedly inadequate capitalization of the

dealership was the subject of continuing discussions between the

Petitioner and the Respondent for an extended period of time ;

however, inadequate capitalization was specifically deleted from

the grounds for termination set forth in the NO T at issue in

this proceeding.

82. Although the evidence indicates t hat lack of

capitalization can limit a dealer's ability to respond to a

multitude of problems at a dealership, the evidence is

insufficient to establish in this case that an alleged lack of

capitalization was the cause for the dealership's failure to

upgra de its facility. In a letter to the Respondent dated June

30, 2003, the Petitioner stated only that it was "not feasible"

to proceed and indicated an intention only "to proceed in the

future , " but offered no additional explanatio n for the lack of

feasibil ity.

83. Similarly, it is not possible, based on the evidence

presented during the hearing, to find that Petitioner's failure

to respond to the deteriorating operations at the dealership was

due to a lack of financial resources.

84. Daily operations at t he dealership were hampered by

the lack of appropriate management at the dealership location.

Although Mr. Holler was identified in the Dealer Agreement as

the p rincipal o wner and the e xecutive m anager of the dealership,

his address was located in Winter Park, Florida, and there was

no credible evidence presented that he managed t he operation on

a daily basis.

85. As sales deteriorated, the Respondent began to insist

that the Petitioner designate someone located on - site at the

facility as e xecutive m anage r with full control over the day - to -

day operations of the dealership.

86. In June 2003, Mr. Sekula was appointed as e xecutive

m anager, but his authority was limited and his decisions

required approval of the ownership group. At the hearing,

Mr. Sekula a cknowledged that the ownership group was

bureaucratic. Shortly after his appointment, he was transferred

by the ownership group to another o f their competing

dealerships.

87. Several months later, Mr. Hutchinson was appointed as

e xecutive m anager. There was no credible evidence presented to

establish that Mr. Hutchinson ran the fiscal operations of the

dealership. He prepared budgets for various expenditures and

submitted them to the ownership group. The ownership group

apparently controlled the "purse strings" of the dealership.

There was no credible evidence presented as to the decision -

making process within the group; however, decisions on matters

such as the dealership's advertising budget required approval of

the ownership g roup.

88. The failure to provide appropriate on - site management

can delay routine decisions and negatively affect the ability to

manage and motivate sales staff. For example, when Nissan

offered Mr. Hutchinson the opportunity to participate in the

Nissan EDGE sales program, Mr . Hutchinson was initially unable

to respond, because he lacked the ability to commit the

financial res ources to pay for the program.

89. Mr. Hutchinson testified that the ownership group

routinely approved his advertising budget requests. As the

Petitio ner's sales declined, so did advertising expenditures,

from $694,10 7 in 2002 to $534,289 in 2004.

90. The Petitioner's declining advertising expenditures

were a contributing factor in deteriorating sales. The

Petitioner reduced its total advertising budg et while the

Orlando market was growing, and the Petitioner's sales

penetration declined while competin g dealerships sales

increased.

91. Additionally, the Petitioner did not monitor the

effectiveness of its advertising. The Petitioner's advertising

was implemented through "Central Florida Marketing," a separate

company owned by the Holler organization. There is no evidence

that either the Petitioner or Central Florida Marketing

monitored the effectivenes s of the advertising.

92. A substantial number of Nissan buyers within the

Petitioner's PMA purchased vehicles from other dealerships,

suggesting that the advertising failed to attract buyers to the

Petitioner's dealership. Only eight percent of the Petitioner's

customers acknowledged seeing the Petitio ner's advertising,

whereas about 20 percent of car shoppers in the Orlando area

admit being inf luenced by dealer advertising.

93. The Respondent asserted that the Petitioner failed to

have sufficient sales staff to handle the increased customer

traffic pr ecipitated by the introduction of new Nissan models in

2002 and 2003. The Respondent offered evidence that the average

vehicle salesperson sells eight to ten cars monthly, five to six

of which are new cars and that , based on sales expectations, the

Petiti oner's sales force could not sell enough cars to meet the

regional averages.

94. Although the evidence establishes that the Petitioner

cut sales staff as sales declined at the dealership, there is no

credible evidence that customers at the Petitioner's fa cility

were not served. The assertion relies upon an assumption that

the Petitioner experienced increased sales traffic upon the

introduction of new models and that the sales staff was

inadequate to sufficiently service the increased traffic. The

evidenc e failed to establish that the Petitioner experienced an

increase in sales traffic such that sales were lost because

staff was un available to assist customers.

95. However, the Petitioner's sales staff failed to take

advantage of customer leads provided t o the dealership by the

Respondent. The Respondent gathered contact information from

various sources including persons who requested vehicle

information from the Respondent's internet site, as well as the

names of lease customers whose lease terms were ex piring. The

contact information was provided to dealers without charge

through the Respondent's online dealer portal. The Petitioner

rarely accessed the data, and it is , therefore , logical to

presume that the leads resulted in f ew closed sales.

96. The Petitioner's customer satisfaction scores also

declined during the time period relevant to this proceeding.

Poor customer service can eventually influence sales as negative

customer "word - of - mouth" dampens the interest of other

prospective customers. The Respondent monitored the customer

opinions of dealer operations through a survey process, which

resulted in "Custome r Service Index" (CSI) scores.

97. Prior to 2003, the Petitioner's CSI scores had been

satisfactory, and then CSI scores began to decline. By the

close of 2003, the CSI scores were substantially below regional

scores, and the sales survey score was the lowest in the

Petitioner's district.

98. Although the Petitioner asserted on several occasions

that CSI scores were increasing, the evidenc e established that

only the March 2004 CSI scores improved and that no other

material improvement occurred during the time perio d relevant to

this proceeding.

99. The Petitioner asserted at the hearing that the sales

performance decline was caused by a la ck of vehicle inventory,

the alteration of the Petitioner's PMA, a lack of available

financing from Nissan Motors Acceptance Corporation (NMAC),

hurricanes, improper advertising by competing dealers, and the

death of Roger Ho ller, Jr.

100. The Petitioner also asserted that this termination

action is being prosecuted by the Respondent because the

Petitioner declined to participate in the NREDI dealer - facility

upgrade program and declined to sell the Respondent's extended

service plan product.

101. A number of the suggested causes offered by the

Petitioner during the hearing were omitted from the Petitioner's

Proposed Recommended Order, but non etheless are addressed

herein.

102. The Petitioner asserted that the Respondent failed to

make available marketable inventory sufficient for the

Petitioner to meet sales penetration averages. The evidence

failed to support the assertion.

103. Nissan vehicles were distributed according to an

allocation system that reflected dealer sales and inventory.

The Respondent used a "two - pass" allocation system to distribute

90 percent of each month's vehicle production. The remaining

10 percent were reserved for allocation by Nissan market

representatives.

104. Simply stated, dealers earned new vehicles to sell by

selling t he vehicles they had. New vehicle allocations were

based upon each dealer's "days' supply" of cars. The

calculation of days' supply is essentially based on the number

of vehicles a dealer had available on the lot and the number of

vehicle s a dealer sold in each month.

105. Through the allocation system, a dealership that

failed to sell cars and lower its days' supply would be

allocated fewer cars during the following month. More vehicles

were made available to dealers with low days' supplies than were

a vailable to dealers with higher supplies. It is clearly

reasonable for the Respondent to provide a greater supply of

vehicles to t he dealers who sell more cars.

106. At some point during the period relevant to this

proceeding, Nissan removed consideratio n of sales history from

the days' supply - based allocation system calculation; however,

there was no credible evidence presented to establish that the

elimination of the sales history component from the calculation

reduced the vehicle allocatio n available t o the Petitioner.

107. The Respondent applied the same allocation system to

all of its dealerships, including the Petitioner. There is no

evidence that the Respondent manipulated the allocation system

to deny a ny vehicles to the Petitioner.

108. The Res pondent provided current inventory and

allocation information to all of its dealerships, including the

Petitioner, through a computerized database system. The

Petitioner was responsible for managing vehicle inventory and

for utilizing the allocation syste m to acquire cars to sell.

109. Although the Petitioner asserted that the decline in

sales was related to a lack of vehicle inventory, there was no

evidence that the Petitioner's inventory declined during the

period relevant to this proceeding. In fact, the evidence

established that the Petitioner's inventory actually increased

from 150 vehicles in early 2003 to 300 vehicles in early 2004,

at which time the Petitioner reduced vehicle orders and t he

inventory began to decline.

110. The Petitioner also ass erted that it was provided

vehicles for sale that were undesirable to the Petitioner's

customers, due to expensive or excessive options packages.

There was no credible evidence that the Petitioner's sales

declines were related to an inve ntory of undesirab le vehicles.

111. Further, there was no evidence that the decline in

sales penetration was related to poor supply of any specific

vehicle model. Other than two truck models, the Petitioner's

sales penetration decline occurred across the full range of

Nis san vehicles offered for sale.

112. Every Nissan dealer had the ability to exercise

significant control (including color and option package choices)

over most of the inventory acquired during the "first pass"

allo cation.

113. Any inventory deficiencies t hat may have existed were

the result of the Petitioner's mismanagement of inventory.

Mr. Hutchinson did not understand the vehicle allocation system

or its relationship to the days' supply calculation. The

Petitioner routinely declined to order units of Nissan's

apparently most marketable vehicles du ring the allocation

process.

114. During 2003, the Petitioner declined 137 vehicles

from the "first pass" allocation , including 18 Sentras and

56 Altimas, and declined 225 vehicles from the "second pass"

al location , including 59 Sentras and 59 Altimas. During the

first half of 2004, the Petitioner declined 58 vehicles from the

"first pass" allocation and 42 vehicles from the "second pass"

allocation.

115. During the hearing, one of the Petitioner's witness es

generally asserted that the Respondent's turndown records were

erroneous; however, the witness was unable to identify any

errors of significance, and the testimony o f the witness was

disregarded.

116. After the two - pass allocation process was completed ,

there were usually some vehicles remaining for distribution to

dealers. Nissan assigned responsibility to DOMs to market these

units to dealers. The DOMs used the days' supply calculation to

prioritize the order in which they contacted dealers, althoug h

the vehicles were available to any dealer. There is no evidence

that any DOM manipulated the days' supply - based prioritization

of vehicles for denying the Petitioner the opportuni ty to obtain

vehicles to sell.

117. Any vehicles remaining available afte r the DOM

attempts to distribute the vehicles were identified as

"Add itional Vehicle Requests" (AVR) and were made available to

all dealers simultaneously. Dealerships were notified of such

availability by simultaneous facsimile transmission or through

th e Nissan computerized database. There was no evidence that

the Petitioner was denied an opportunity to obtain AVR vehicles,

and in fact, the Petitioner obtained ve hicles through the AVR

system.

118. The Petitioner asserted that the Nissan practice of

res erving 10 percent of each month's production for allocation

by market representatives rewarded som e dealers and punished

others.

119. Market representative allocations are standard in the

industry, and such vehicles are provided to dealerships for

various reasons. Nissan market representative allocations were

used to supply extra cars to newly opened dealerships or in

situations where a dealership was sold to new ownership. Nissan

market representative allocations were also provided to dealers

who partic ipated in the N REDI facility upgrade program.

120. The provision of additional vehicles by market

representatives to new or expanded sales facilities was

reasonable because the standard allocation system would not

reflect the actual sales capacity of the facilit y.

121. The Petitioner presented no evidence that the

Respondent, or any of its market representatives, manipulated

the 10 percent allocation to unfairly reward any of the

Petitioner's competitors or to punish the Respondent for not

participating i n various corporate programs.

122. Prior to 2001, the Respondent had a program of

providing additional vehicles to under - performing dealers in an

apparent effort to increase sales by increasing inventory;

however, the program did not cause an increase in sales and

actually resulted in dealers being burdened with excessive

unsold inventory and increased floor plan financing costs. The

Respondent eliminated the program in 2001, and there is no

evidence that any dealership was provided vehicles through this

program during the time period relevant to this proceeding.

There is no evidence that the Respondent eliminated the program

for the purpose of reducing the vehicles allocated or otherwi se

provided to the Petitioner.

123. The Petitioner asserted that the Respondent altered

the Petition er's assigned PMA in March 2004 and that the

alteration negatively affected the Petitioner's sales

penetration calculation because the Petitioner's area of sales

responsibility changed.

124. Prior to March 2004, the Petition er's PMA was

calculated using information reported by the 1990 United States

Census. After completion of the 2000 Census, the Respondent

evaluated every Nissan dealer's PMA and made alterations based

upon population changes a s reflected within the Census.

125. Standard Provision Section 3.A. of the Dealer

Agreement provides that the Respondent "may, in its reasonable

discretion, change the Dealer's Primary Market Area from time to

time."

126. There was no credible evidence presented to establish

that the 2000 PMA was invalid or was improperly designated.

127. There was no evidence that the Respondent's

evaluation of the Petitioner's PMA was different from the

evaluation of every other PMA in the United States .

128. There was no evidence that the Respo ndent evaluated

or altered the Petitioner's PMA with the intent to negatively

affect the Petitioner's ability to sell vehicles or to meet

regio nal sales penetration averages.

129. There was no credible evidence that the 2000 PMA

adversely affected the dea lership or that the Petitioner's

declining sales penetration was related to the change in the

PMA. The alteration of the PMA did not sufficiently affect the

demographics of the Petitioner's market to account for the

decline in sales penetration. Recalcul ating the Petitioner's

sales penetration under the prior PMA did not markedly improve

the P etitioner's sales penetration.

130. The Petitioner suggested that the 2000 PMA revision

was an impermissible modification or replacement of the Dealer

Agreement, bu t no credible evidence was offered to support the

assertion. There was no evidence that the Petitioner did not

receive proper notice of the 2000 PMA.

131. At the hearing, the Petitioner implied that the

Respondent caused a decline in sales by refusing to make Nissan

Motor Acceptance Corporation (NMAC) financing availab le to the

Petitioner's buyers.

132. NMAC is a finance company affiliated with, but

separate from, the Respondent. NMAC provides a variety of

financing options to dealers and Nissan vehicle purchasers.

133. NMAC relies in lending decisions, as do most lenders,

on a "Beacon score" which reflects the relative creditworthiness

of a customer's application to finance the purchase of a car.

Vehicle financing applications are grouped into four ge neral

"tiers" based on Beacon scores. Various interest rates are

offered to cus tomers based on Beacon scores.

134. The Petitioner offered data comparing the annual

number of NMAC - approved applications submitted in each tier by

the Petitioner on behalf of the Petitioner's customers to

suggest that the decline in the Petitioner's sales indicated a

decision by NMAC to decrease the availability of NMAC credit to

the Petitioner's customers.

135. There was no evidence that NMAC treated the

Petitioner's custome rs differently than the customers of

competing dealerships or that NMAC - financed buyers received

preferential interest rates based upon the dealership from which

vehicles were purchased.

136. There was no evidence that the Respondent exercised

any control over individual fin ancing decisions made by NMAC.

137. There was no evidence that the Respondent

manipulated, or had the ability to manipulate, the availability

of NMAC financing for the purpose of negatively affecting the

Petition er's ability to sell ve hicles.

138. A number of hurricanes passed through the central

Florida region in August and September of 2004. The Petitioner

asserted that the dealership's physical plant was damaged by the

storms, and that the hurricane - related economic impact on area

consumers caused, at least in part, the decline in sales.

139. The evidence failed to establish that the

Petitioner's physical plant sustained significant hurricane

damage to the extent of preventing vehicle sales from occurring.

None of the Petitioner's vehicle inventory sustained hurricane -

related damage.

140. There was no evidence presented to indicate that the

Petitioner's customers experienced a more significant economic

impact than did the customers of competing dealers in the area.

141. There was no credible evidence that the hurricanes

had any material impact on the Petitioner's sales penetration.

The Petitioner's sales penetration immediately prior to the

hurricanes was 62.8 percent. The Petitioner's sales penetration

in August 2004 was 61.6 p ercent, in September was 61.1 percent,

an d in October was 62.3 percent.

142. Generally, within 30 to 45 days after a hurricane,

customers with damaged vehicles use insurance proceeds to

purchase new vehicles. The Petitioner's sales volume increased

at th is time ; although because other dealers in the region also

experienced increased sales, there was no change to the

Petitioner's sales penetration calculation.

143. The Petitioner asserted that improper advertising of

"double rebates" by competing dealers caused declining sales,

and offered evidence in the form of newspaper advertisements in

support of the assertion; however, the Petitioner's own

advertising indicated the availability o f such rebates on

occasion.

144. There was no evidence presented to est ablish that the

Respondent was responsible for creating or approving

advertisements for dealerships. The Respondent has a program

whereby dealers who meet certain advertising guidelines can

obtain funds to defray advertising costs, but the program is

volu ntary. The Respondent does not regulate vehicle advertising

or retail pricing.

145. There was no evidence that the Petitioner reported

any allegedly misleading or illegal advertising with any law

enforcement agency having jurisdiction over false advertis ing or

unfair trade practices.

146. Mr. Hutchinson testified that the death of

Roger Holler, Jr., in February 2004, negatively affected sales

at the dealership, but there was no evidence that Roger Holler,

Jr., had any role in managing or operating the d ealership. The

Petitioner's sales decline commenced prior to his death and

continued thereafter. The evidence failed to establish that the

death had any impact on the operation of the dealership or the

P etitioner's sales performance.

147. The Petitioner asserted that the Respondent's effort

to terminate the Dealer Agreement was an attempt to punish the

Petitioner for declining to participate in the NREDI program and

offered a chronology of events intended to imply that the

Respondent's actions in this ca se were a deliberate plan to

force the Petitioner to either build a new facility or sell the

dealership. The assertion is speculative and uns upported by

credible evidence.

148. During the time period relevant to this proceeding,

only one of the four Orla ndo - area Nissan dealers agreed to

participate in the NREDI program. Of the four dealerships,

three experienced increased sales activity during the period

relevant to this proceeding. The Petitioner was the only one of

the four dealerships to experience a decline in sales

penetration during this period. The Respondent has taken no

action against the two other dealerships that declined to

par ticipate in the NREDI program.

149. There was no credible evidence that the Respondent

has taken any punitive actio n against any dealership solely

based on a dealership's decision not to participate in the NREDI

program.

150. The Petitioner asserted that the Respondent's actions

in this case were intended to punish the Petitioner for not

selling the Respondent's exten ded service contract (known as

"Security Plus") and for selling a product owned by the

Petitioner, but there was no evid ence supporting the assertion.

151. A substantial number of dealers in the region did not

sell the Security Plus product to new car buy ers. There was no

evidence that the Respondent has penalized any dealer, including

the Petitioner, for refusing to sell the Nissan Security Plus

product.

152. During the hearing, the Petitioner identified a

number of other troubled Nissan dealerships, os tensibly to

establish that other dealerships similarly situated to the

Petitioner had not been the subject of Dealer Ag reement

termination proceedings and that the Respondent had failed to

enforce the Dealer Agreement term ination provisions fairly.

153. A number of the dealerships cited by the Petitioner

are outside the State of Florida and are immaterial to this

proceeding.

154. The Dealer Agreement provides for termination of an

agreement if the dealer materially and substantially breaches

the agreement . The Dealer Agreement does not require

termination of every dealership that fails to achieve avera ge

regional sales penetration.

155. Termination of a Dealer Agreement because of sales

performance requires a dealer - specific analysis that includes

consid eration of the factors underlying poor sales and

consideration of conditions that may warrant del aying

termination proceedings.

156. As to the other Florida Nissan dealers cited by the

Petitioner, many had higher sales penetration levels than did

the Resp ondent. When compared to the Florida dealerships, the

magnitude of the Petitioner's sales penetration decline exceeded

that of all the other dealerships.

157. Many of the cited dealerships had also initiated

changes in management, staffing , and facilitie s to address sale

and service deficiencies. Some of the cited dealers had already

shown sales and service - related improvements.

158. One dealership, Love Nissan, had already been

terminated, even though its sales penetration had exceeded that

o f the Peti tioner.

159. One dealership cited by the Petitioner was Hampton

Nissan, against whom the Respondent had initiated termination

proceedings in 2003. Changes to Hampton's PMA based on the 2000

PMA resulted in an increase in the dealership's sales

penetratio n eventually to levels exceeding those of the

Petitioner, and Nissan has rescinded the action. There was no

evidence that the Hampton Nissan PMA was calculated differently

tha n the Petitioner's PMA, or that either PMA was altered

purposefully to affect th e deale r's sales penetration results.

160. Other dealerships cited by the Petitioner were being

monitored by the Respondent to ascertain whether efforts to

improve sales performance succeed. The Respondent may

ultimately pursue termination proceedings ag ainst

underperforming dealerships if sales performance fails to

improve.

161. There was no credible evidence that, prior to

initiating this termination proceeding, the Respondent failed to

consider the facts and circumstances underlying the Petitioner's

p oor sales and the Petitioner's response to the situation. The

Petitioner has experienced a substantial and continuing decline

in sales penetration and has failed to respond effectively to

the deteriorating situation during the period at issue in this

proc eeding .

CONCLUSIONS OF LAW

162. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat.

163. The Respondent has the burden of proving, by a

preponderance of the evidence, that the proposed termination of

the Dealer Agreement between the parties was undertaken in good

faith, undertaken for good cause, clearly permitted by the

franchise agreement, and based on material and substantial

breach of the dealer agree ment and whether the grounds relied

upon for termination have been applied in a uniform and

consistent manner. Love Nissan, Inc. v. Nissan North America,

Inc. , paragraph 95, Cas e No. 04 - 2247 (DOAH July 14, 2005) (Fla.

DHSMV April 12, 2006). The Responden t has met the burden.

164. S ubs ection 320.641(3), Florida Statutes, provides as

follows:

Any motor vehicle dealer who receives a

notice of intent to discontinue, cancel, not

renew, modify, or replace may, within the

90 - day notice period, file a petition o r

complaint for a determination of whether

such action is an unfair or prohibited

discontinuation, cancellation, nonrenewal,

modification, or replacement. Agreements

and certificates of appointment shall

continue in effect until final determination

of the issues raised in such petition or

complaint by the motor vehicle dealer. A

discontinuation, cancellation, or nonrenewal

of a franchise agreement is unfair if it is

not clearly permitted by the franchise

agreement; is not undertaken in good faith;

is not undertaken for good cause; or is

based on an alleged breach of the franchise

agreement which is not in fact a material

and substantial breach; or, if the grounds

relied upon for termination, cancellation,

or nonrenewal have not been applied in a

uniform an d consistent manner by the

licensee. A modification or replacement is

unfair if it is not clearly permitted by the

franchise agreement; is not undertaken in

good faith; or is not undertaken for good

cause. The applicant or licensee shall have

the burden o f proof that such action is fair

and not prohibited. (Emphasis supplied.)

165. Termination of the Dealer Agreement is clearly

permitted by the franchise agreement. The Dealer Agreement

requires that the Petitioner "actively and effectively promote"

the retail sales of Nissan vehicles to retail customers and

permits the Respondent to terminate the agreement upon the

Petitioner's failure to meet its sales obligations. The Dealer

Agreement specifically provides for measurement of sales

performance by use of the dealer's sales penetration.

166. In this case, the Petitioner failed to actively and

effectively promote the sale of new Nissan automobiles and, as a

result, experienced a substantial and continuing decline in

sales penetration, to the extent that the Petitioner became the

lowest ranked dealership in the State of Florida during the

perio d at issue in this proceeding.

167. The Respondent's termination of the dealership was

undertaken in good faith. The Respondent provided appropriate

and continuing notice to the Petitioner of the decline in sales

penetration and offered specific recommendations intended to

improve the Petitioner's sales performance. It is unknown

whether the recommendations would have been successful because

the Petitioner implemen ted very few of the items. The

Respondent also suggested utilizing the EDGE program to identify

specific sales process deficiencies, but the Petit ioner declined

to participate.

168. Additionally, the Respondent extended several

deadlines for compliance w ith items identified in the initial

NODs based apparently on representations made in communications

received from the Petitioner, although the representations

appear to be contradicted by fact. The Respondent's extension

of the deadlines is a demonstratio n of good faith. Rick Starr

Nissan Lincoln Mercury, Inc. v. Nissan Motor Corp. , Case

No. 92 - 5187 (DOAH June 10, 1993) (Fla. DHSMV Aug. 5, 1993).

169. Although the Petitioner asserted the termination was

being pursued because the Petitioner declined to p articipate in

the NREDI program, no credible evidence was offered to support

the assertion. Other Nissan dealerships have also declined to

participate in the NREDI program, and the Respondent has taken

no punitive action towards those dea lers.

170. The R espondent's termination of the dealership was

undertaken for good cause. As stated previously, the Petitioner

experienced a substantial and continuing decline in sales

penetration, becoming the lowest ranked dealership in the State

of Florida during the p eriod at issue in this proceeding. Every

other Nissan dealer in Florida increased sales volume during the

period, while the Petitioner's sales volume declined. The

Petitioner made no substantive attempt to resolve the decline in

sales .

171. The Petition er's declining sales performance was due

to operational problems at the dealership including issues

related to management, advertising, fa cility and customer

relations.

172. The ineffective management of the Petitioner's

dealership was a source of continu ing concern to the Respondent.

The Dealership Agreement originally identified Mr. Holler as the

e xecutive m anager, but there was no credible evidence that he

managed th e Petitioner on a daily basis.

173. The Petitioner subsequently designated other

emplo yees as e xecutive m anagers, but neither actually had full

authority to operate the dealership. Mr. Sekula became the

e xecutive m anager in June 2003 , but he was soon transferred to

another dealership by the ownership group. Subsequently,

Mr. Hutchinson w as appointed as e xecutive m anager, but his

authority remained limited by the requirement that he obtain

approval over budgets and expenditures from the ownership group.

Mr. Hutchinson re duced the full - time sales staff and , apparently

with approval of the owners, reduced the advertising budget.

Further, there was no systematic monitoring of advertising

effectiveness, and the Petitioner failed to use active sales

leads provided to the Petitioner by the Respondent.

174. The Petitioner asserted that the adve rtising budget

actually increased on the "per unit sold" basis, but the

assertion, even if true, fails to establish that the dealership

was actively and effectively promoting the sale of vehicles. It

is as likely that the "per unit sold" calculation incre ased

because new car sales declined more rapidly than did the

advertising budget. A dealership expending a large advertising

budget on the sale of a single vehicle would not be regarded as

effectively promoting the sale of new vehicles.

175. The Petition er's sales facility was uninviting and

substandard in relation to the sales facilities of competing

dealerships in the area, and there were apparently no specific

plans to improve the physical plant, save for the Petitioner's

vague assurance that it would be "feasibl e" to "proceed in the

future."

176. The Petitioner's customer service scores also

declined during the time at issue in this proceeding, to become

the lowest in the area. The Petitioner rejected the

Respondent's suggestion to implement the EDGE program, which

specifically was directed towards reviewing the sales experience

fro m the customer perspective.

177. The result of the Petitioner's failure to actively

and effectively market Nissan vehicles to retail customers was

that the Respondent lost 185 new car sales in 2003 and 601 new

car sales in 2004.

178. The termination is based on material and substantial

breach of the D ealer A greement. The Petitioner's sales

penetration decline was substantial, continuing, and occurred

during a period of in creased sales performance at other Nissan

dealerships. The magnitude of the sales shortfall in this case

demonstrates the ineffectiveness of the Petitioner's

performance. A dealership's failure to achieve reasonable

market share is a material and substan tial breach of the D ealer

A greement. Bill Gallman Pontiac GMC Truck, Inc. v. General

Motors Corp. , Case 89 - 0505 (DOAH June 28, 1990) (Fla. DHSMV

Feb ruary 28, 1991).

179. While not every dealer who fails to achieve average

sales penetration warrants termi nation, the evidence fails to

establish that the Petitioner made any substantive effort to

remedy the sales decline, and the failure to do so further

constitutes a material and substantial breach of the dealer's

obligation to actively and effectively marke t the vehicles to

retail customers.

180. The Respondent has applied the grounds relied upon

for termination in a uniform and consistent manner. Sales

penetration statistics were uniformly calculated and provided an

accurate identification of dealer perfo rmance within each

dealer's competitive environment. Primary Market Areas for all

dealers are established in a routine manner utilizing a

standardized collection of demographic data. The Petitioner

presented no cred ible evidence to the contrary.

181. Th e Petitioner asserted that the Respondent had not

appl ied the grounds for termination uniformly or consistently

because the Respondent allowed other under - performing

dealerships to continue operations while initiating termination

proceedi ngs against the Pe titioner.

182. Many of the cited dealerships responded to sales -

related deficiencies with plans to address operational issues,

including replacement of management and improvement of

facilities. Some may yet face termination proceedings.

183. In contrast , none of the cited dealerships suffered

the magnitude of the Petitioner's sales decline ; yet the

Petitioner made little effort to effe ctively address the

situation.

184. The evidence failed to establish that the Respondent

should have initiated terminati on proceedings against any of the

operating Nissan dealerships cited by the Petitioner prior to

pursuing the termination at issue in this case.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Depart ment of Highway Saf ety and

Motor Vehicles enter a f inal o rder dismissing Petitioner's

protest and approving the April 6, 2005 , Superceding Notice of

Termination.

DONE AND ENTERED this 20th day of March , 2007 , in

Tallahassee, Leon County, Florida.

S

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah. state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of March , 2007 .

ENDNOTE

1/ All references to Florida Statutes are to Florida Statutes

(2006), unless otherwise indicated.

COPIES FURNISHED :

Michael J. Alderman , Esquire

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room A - 432

2900 Apalachee Parkway

Tallahassee, Florida 32399 - 0635

Dean Bunch, Esquire

Sutherland, Asbill & Brennan, LLP

3600 Maclay Boulevard, South, Suite 202

Tallahassee , Florida 32312 - 1267

W. Douglas Moody, Jr., Esquire

Robert C. Byerts, Esquire

Myers & Fuller, P.A.

2822 Remington Green Circle

Post Office Box 14497

Tallahassee, Florida 32308

William R. Pfeiffer, Esquire

The Law Offices of William R. Pfeiffer

2822 Rem ington Green Circle

Post Office Box 10528

Tallahassee, Florida 32302

Steven A. McKelvey, Jr., Esquire

S. Keith Hutto, Esquire

M. Ronald McMahan, Jr., Esquire

Nelson, Mullins, Riley & Scarborough, LLP

1320 Main Street, 17th Floor

Post Office Box 11070

Col umbia, South Carolina 29201

Frank A. Hamner, Esquire

Frank A. Hamner P.A.

1011 North Wymore Road

Orlando, Florida 32789

Cristian S. Torres, Esquire

Nissan North America, Inc.

Legal Department

333 Commerce Street, 7th Floor

Nashville, Tennessee 37201

Carl A. Ford, Director

Division of Motor Vehicles

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room B - 439

2900 Apalachee Parkway

Tallahassee, Florida 32399 - 0500

Judson Chapman, General Counsel

Department of Highway Safety and

and Motor Vehicles

2900 Apalachee Parkway

Neil Kirkman Building , Room A - 432

Tallahassee, Florida 32399 - 0500

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.