Dealerships lose appeal to keep out competitor

The Chapman and Towbin auto groups have lost their appeal to stop Chrysler Group LLC from locating a new Dodge, Chrysler and Jeep dealership within their normal territories.

Nevada law allows the Department of Motor Vehicles to prevent a dealership from opening within 10 miles of another, although dealers can and often set up next to each other.

The franchise that the Chrysler head office decided to award to Phoenix-area dealer John Grant in April 2010, in the middle of the car lot cluster on West Sahara, fell within the potentially protected zones of Towbin-owned Prestige Chrysler Jeep Dodge on 6520 Centennial Center Blvd. and Chapman Dodge Chrysler Jeep Ram on 3175 E. Sahara Ave.

However, a DMV administrative law judge ruled in June that both Chapman and Towbin waived their right to protest Grant's entry into the market as part of a different deal to merge their neighboring Chrysler product shops in the Valley Automall in Henderson.

Clark County District Judge Elizabeth Gonzalez upheld the ruling at a Thursday hearing, citing her limited authority to overturn it .

The DMV judge Tom Conner noted that both Chapman and Towbin had received lucrative franchises in exchange for their waivers, although both dealers said they were meant to cover all of Las Vegas.

Chapman attorney Kevin Stolworthy said an appeal to the Nevada Supreme Court was likely not only because of the immediate effect on the dealers but what he considers the broader leverage the ruling hands to the manufacturers.

"If (DMV) is going to allow the waiver of a protest, then the manufacturers can make the dealers waive all sorts of things," he said. "If you open this door, where does it end."

While acknowledging this was the first time this type of case had arisen in the state, Chrysler spokesperson Sean Thueson called the argument "a bit of a stretch." Both he and Chrysler declined further comment.

In court papers, Chrysler argued that no law prevented waivers and they have been put into effect in other situations.

But the Nevada Franchised Auto Dealers Association jumped into the case on the side of Towbin and Chapman, saying that the 10-mile law was based on a public interest in protecting the geographic distribution of dealerships, so individual owners could not sign that away even if they wanted.

According to court papers, the dealership shuffle dates back to 2005 when Chrysler launched Project Genesis to encourage its dealers to sell Chrysler, Dodge and Jeep vehicles instead of just one or two, as had been done historically.

In addition, the Las Vegas Chrysler dealership lineup was slimmed from eight to three: Chapman Dodge on East Sahara and Chapmen Chrysler Jeep and Towbin Dodge in Henderson. This left blanks in Chrysler's northwest and west zones.

To rebuild its market position in keeping with the three-brand approach, Chrysler devised a plan to add Jeep and Chrysler to Chapman Dodge, allot the northwest zone to what became Prestige in 2010 and encourage one side to buy out the other in Henderson. The seller would then receive the West Sahara franchise.

The Chapman and Towbin contend that the protest waiver merely pertained to each other, but Chrysler has successfully argued it covered a much broader scope.

However, the Henderson zone progressed slowly, according to Conner's ruling, because neither side wanted to surrender the profitable territory. In early 2010, Chrysler internally set a deadline for wrapping up a Henderson deal then awarded the West Sahara franchise to Grant without telling either Towbin or Chapman.

On April 16, Chapman reached terms to buy Towbin Dodge in Henderson, but Chrysler had decided to go with Grant a few hours earlier. That triggered a protest by Towbin and Chapman and the subsequent court case over the waiver.

Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.