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Sunday, 10 August 2014

US: Dealer sues JLR and dealership group over failed acquisition

Automotive News reports a lawsuit  over a failed acquisition of five Long Island dealerships (three of them Jaguar Land Rover ones). The plaintiff, Napleton Dealership Group, claims that it had an agreement to buy them before JLR announced that it was going to exercise its right of first refusal. The agreement was not made conditional on the manufacturers' approval, and the seller did not disclose that JLR had the right to block it.

There are also allegations that some sort of impropriety was involved, as Napleton had spent six months on due diligence investigations and the eventual buyer completed in a single month. No-one in Europe would be surprised at a manufacturer having a favoured buyer in mind, but as we know they do things differently in the States. Whether that allegation holds water or not depends on the evidence, and is surely not the interesting aspect for Motor Law readers.

Of course, dealer agreements here commonly preserve the manufacturer's right to decide who is admitted to the network, at least to the extent permitted by the block exemption. Napleton's lawyer is quoted as saying that some manufacturers do the same in the US, and he describes it as having a 'chilling effect' on the dealer's ability to attract a buyer. Exactly! But whether such restrictions are universal or just common, it's surprising that six months of due diligence didn't pick it up. Would a dealer here be expected to disclose the existence of such a provision? Unlikely: the general rule is 'caveat emptor', which is why we do due diligence investigations.

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