In late September of last year, the Texas Supreme Court denied the petition for review of an El Paso Court of Appeals decision in favor of the Texas Department of Motor Vehicles and Hyundai Motor America in suit brought by a franchisee. The denial triggered a strong amicus response from the Texas Automobile Dealers Association in support of the dealerships’ motion for rehearing. SCOTX has now decided to take another look and has reinstated the petition.
New World Car Nissan, Inc., d/b/a World Car Hyundai, and New World Car Imports, San Antonio, Inc., d/b/a World Car Hyundai v. Hyndai Motor America and Texas Department of Motor Vehicles (No. 23-0122) arose from a complaint filed by New World Car with the TDMV alleging that Hyundai Motor violated several provisions of the Occupations Code with respect to vehicle allocations and sales requirements that shorted New World on allocations while requiring it to sell more vehicles than Hyundai Motor provided to be considered 100% sales efficient. TDMV referred the case to SOAH, which after discovery and hearing issued a proposal for decision recommending denial of New World’s claims. TDMV rejected the ALJ’s recommendation and subsequently issued a final order finding that Hyundai violated the Code. The Austin Court of Appeals reversed TDMV’s final order and remanded. On reconsideration, the TDMV board “with several new members” reversed itself and adopted the ALJ’s initial recommendation. New World filed a motion for rehearing, which was overturned by operationo f law. New World sought judicial review in the Austin Court of Appeals, but the case was transferred to El for docket equalization.
The court of appeals affirmed TDMV’s order. First, the court rejected New World’s arguments that the TDMV board adopted its final order through unlawful procedure by refusing to receive New World’s brief prior to the hearing on remand or by relying on statements outside the record (made by board members and Hyundai’s counsel) to make its decision. Neither of these issues appear to be what SCOTX might be interested in on rehearing. Rather, as argued by TADA’s brief, the issue appears to be whether Hyundai required New World to adhere to “an unreasonable sales or service standard” in violation of § 2301.467(a)(1), Occupations Code. The standard in question is a “100% sales efficiency standard,” which New World contends Hyundai requires it to maintain in order to maintain its dealerships. According to New World, the TMDV board misinterpreted the statute by looking solely to the Dealer Agreement for the standard, which does not contain the standard, and also that Hyundai acted “unfairly” and “inequitably” by declining to allocate New World the vehicles necessary to meet the standard. The court, however, found that substantial evidence supported the board’s finding on this issue.
Next, New World contended that the board misinterpreted § 2301.468, which bars “unreasonable discrimination” between franchisees in the sale of a vehicle by a manufacturer or dealer. The primary evidence here involved allegedly more favorable vehicle allocations to Red McCombs’ dealerships during the same period. The court rejected this argument, holding that substantial evidence supported the board’s judgment on weight and credibility and that its decision was not arbitrary or capricious. Finally, the court turned aside New World’s claim that Hyundai violated its duty of good faith and fair dealing pursuant to § 2301.478(b) by “using the metric of sales efficiency.” That standard, the court determined was widely used in the industry, and, in any event, Hyundai did not require New World to be 100% sales efficient.
It’s not often that SCOTX agrees to reopen a case, but it looks like the TMDV board’s and court of appeals’ interpretation of § 2301.467 got its attention. We look forward to seeing what happens next.
