DEALERLAW.COM Bellavia Gentile & Associates, llp. A Newsletter for Motor Vehicle Dealerships & Associations: Fall Leonard Bellavia, Esq.

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1 DEALERLAW.COM Bellavia Gentile & Associates, llp A T T O R N E Y S A T L A W A Newsletter for Motor Vehicle Dealerships & Associations: Fall 2012 In This Issue: Welcome Letter Page 1 Lawsuit against Obama Administration Doubles in Size as Former Chrysler Dealers Defeat Government s Key Motion Page 1, 3 Firm News & Events Page 2, 4 Identifying and Avoiding Payment Packing at Your Dealership Page 2 Dear Friend, The past several months have been very noteworthy for the firm and the automotive industry at large. First, as you will be able to read about below, the firm successfully defeated a motion to dismiss our lawsuit against the Obama administration in conjunction with the forced Chrysler dealership closings. As a result, 75 additional dealerships have joined our lawsuit. Inside, you will also find information about our business succession planning services. Having worked with many dealerships over the years, we have developed a number of business succession plans to help owners plan for their retirement and the successful continuation of their businesses. I can tell you that it is the single most overlooked aspect that we encounter. With advantageous tax codes slated to drastically change at the end of the year, I urge you to contact us as soon as possible to review your current plans. As always, if you have any questions, please contact me at (516) or me at LBellavia@DealerLaw.com. Does Your Dealership Have A Business Succession Plan? Page 5 About the Firm Page 6 Sincerely, Leonard Bellavia, Esq. Partner Welcome Lawsuit against Obama Administration Doubles in Size as Former Chrysler Dealers Defeat Government s Key Motion Bellavia Gentile & Associates Defeats Government s Motion to Dismiss, Alleging Dealers Constitutional Rights Were Violated Largely due to the success in defeating the government s dismissal motion, the number of former Chrysler dealers who seek to recover damages for the wrongful Taking of their dealerships during the historic Chrysler bankruptcy of 2009 increased from 75 original dealers to 150 dealers. As a result, Bellavia Gentile & Associates has filed an amended complaint, which doubles the number of dealers involved in the litigation. The lawsuit alleges that the dealers constitutional protections against the Taking of private property for the public good were violated when GM and Chrysler were forced to terminate dealerships in order to receive money from the federal government s Troubled Asset Relief Program (TARP). Continued on page 3 The Bellavia Gentile & Associates Report 1

2 Charles Gallaer has joined Bellavia Gentile & Associates. It was his experience in law as well as his love for cars and interest in the automotive industry that brought him to the firm. Originally from Newport News, Virginia, Mr. Gallaer graduated from the University of Virginia with Bachelor of Arts degrees in History and Economics. Upon graduation, he was recruited by FIRM NEWS & EVENTS BGA Profile: Charles Gallaer Ford Motor Co. to be a zone manager at its Pittsburgh, Pennsylvania office. He was later hired by a Lincoln Mercury dealership in Newport News as its operations manager and was later promoted to general manager. In 2010, he relocated to Long Island to attend Brooklyn Law School. As a law clerk, he provides research and support of numerous DRP and warranty parts programs. He currently lives in Smithtown with his wife, Jodi, and their two children. BGA was selected by most of the nation s Saab dealers (162) to file Saab NA into an involuntary Chapter 11 bankruptcy and file claims for sums due and owing from Saab for warranty receivables, incentive monies and other damages. If any dealer or trade association executive has any questions about the process for filing Proofs of Claims, they should contact BGA at Identifying and Avoiding Payment Packing at Your Dealership Pressures on margins have led many dealerships to renew their focus on Finance and Insurance (F&I) sales as a way to add incremental gross profit to new and used vehicle transactions. Many find the temptation to adopt sales tactics of yesteryear alluring and now are reviving these techniques in order to generate gross profit today. While using these methods may increase F&I sales in the short term, using both can expose the dealership to costly liability. For the purpose of this article, F&I sales include anything from traditional F&I products such as extended service contracts, insurance and so on to aftermarket products like paint sealant and accessories. Packing occurs when your staff fails to itemize a vehicle s payment absent any additional F&I products. An example of payment packing is quoting a payment of $300 per month to purchase a vehicle without disclosing that a portion of that payment (say $100 per month) represented F&I products purchased in addition to the vehicle. Consumers are likely to claim that either they were unaware that the payment included anything but the price of the vehicle or that the dealership forced them to purchase the additional F&I products as a condition to taking delivery of the vehicle. The FTC and state regulatory agencies consider payment packing an unfair and deceptive trade practice. Because of this, dealerships that insist on using payment packing as a sales tool expose themselves to liability from these agencies as well as plaintiffs attorneys. There are several steps dealerships can take to limit possible payment packing claims: * Disclose Base Payments Clearly to Consumers: You should develop processes to capture the customers consent to additional products by disclosing base payment (payment for the vehicle without additional F&I products) at the time of sale. One popular way to disclose this information is by using a menu. A model menu would include a base payment with several options regarding terms of finance and down payment, and then show how the payment would change, should customers elect to purchase incremental F&I products. When using any disclosure documents like this, it is crucial to obtain the customers acknowledgements, in writing, that they were aware of the base payment. * Disclosure on Purchase Orders and Retail Installment Sales Contracts: If possible, do not have F&I products aggregated into the price of the vehicle on these two documents. Doing so without additional disclosures will make it appear that your dealership is payment packing. * Disclosure through Supporting Documents: Your customers should acknowledge that they purchased additional products in writing. Requiring customers to sign disclosure documents for each F&I product purchased or utilizing a menu can accomplish this. If the companies that provide your F&I products do not have disclosure forms, we can help draft suitable forms for you to use. 2 Phone: Fax:

3 Chrysler Lawsuit Continued In the lawsuit, Bellavia Gentile & Associates argue that the Obama administration required Chrysler to close down 789 dealerships in order to be eligible for TARP funding. Chrysler received $1.5 billion from the federal government between 2008 and 2009 as part of the TARP program. Originally, 75 rejected Chrysler dealers joined the litigation commenced in February The lawsuit alleges that the federal government violated the Fifth Amendment rights of the rejected dealers when it compelled both GM and Chrysler to shut down nearly 25 percent of their dealerships nationwide as a condition of receiving the TARP funds. Specifically, the original lawsuit alleges that the government was in violation of the Takings clause of the Fifth Amendment which can be invoked if the government seizes the private property of its citizens for the public good. After the government brought a Motion to Dismiss the complaint before the Federal Court of Claims, on February 27, 2012, Judge Robert H. Hodges, Jr. denied the government s Motion to Dismiss and ruled in favor of the plaintiffs. In his ruling, Judge Hodges stated that the plaintiffs had, in fact, stated a viable cause of action against the government and further ordered that the case proceed with discovery which may include massive document production, as well as depositions of former Chrysler employees and members of the Obama administration involved with the TARP program. After the decision of Judge Hodges, a groundswell of interest by other rejected dealers not originally in the lawsuit resulted in the need to file the amended complaint. After Judge Hodges found that we had stated a valid cause of action, it was our goal to add additional Chrysler dealers to our lawsuit. The decision by Judge Hodges gave our case Judge Hodges stated that the plaintiffs had, in fact, stated a viable cause of action against the government... significant credibility, said Leonard A. Bellavia, senior partner of Bellavia Gentile & Associates, LLP. This is a case of great significance as it will determine whether the Federal Government can violate the basic constitutional rights of small business owners who, in most instances, have worked decades to build their business, only to have it taken away by the Federal Government without any compensation whatsoever. 2 Pictured is a closed Chrysler dealership, located in New York. Phone: Fax:

4 BGA Presents to State Automobile Associations Connecticut Automobile Retailers Associations (CAR) Warranty Reimbursement in Connecticut: Effective Strategies to Overcome New Factory Tactics FIRM NEWS & EVENTS In July, Leonard A. Bellavia, the firm s senior partner, lectured on the topic of warranty reimbursement before two State Automobile Dealer Associations, including: Texas Automobile Dealers Associations (TADA) Warranty Reimbursement in Texas: Understanding Your Rights to a Retail Markup BGA Recognized as Service Provider of the Year to the Marine Industry Bellavia Gentile & Associates was recently recognized as the Service Provider of the Year to the marine industry by the Marine Retailers Association of the Americas (MRAA). The Association also named the firm as General Counsel for the association and its membership. Upcoming Events September 9-10, 2012 Leonard A. Bellavia Will Be a Speaker at the Mid-Atlantic Regional Independent Automobile Dealer Associations ( MARIADA ) At Trump Taj Mahal Resort, Atlantic City, New Jersey. September 27-30, 2012 Leonard A. Bellavia and John Gentile Will Be Speakers at the 2012 New Mexico Automotive Dealer Association Convention They will also participate in discussions of the 2013 NMADA legislative agenda that will be pursued in the upcoming legislative session. November 11-14, 2012 Leonard A. Bellavia Will Be a Speaker at the 2012 Marine Dealer Conference and Expo Orange County Convention Center and Rosen Plaza Hotel, Orlando FL. For more information, visit Are You Receiving the Full Amount Owed to You for Your Warranty Parts Work? Warranty Parts Reimbursement You probably are not. Even if you are receiving what you are entitled to, are the costs of doing this work in-house cutting into your bottom line? Our firm is widely regarded as a pioneer in warranty parts reimbursement as we litigated against the largest manufacturers. After recovering seven-figure retroactive warranty payments for our clients, the manufacturers responded by negotiating legislation in several states which allowed for prospective payments at retail. 24 Contact us today to learn the five reasons why you should choose Bellavia Gentile & Associates to manage your warranty reimbursement work. Phone: Fax:

5 PRACTICE AREA IN FOCUS Does Your Dealership Have A Business Succession Plan? As an owner of a dealership, you have put hard work and many hours into developing your business into the success it is today; you have risked time and money to ensure your investments have grown into your vision. This growth may include more than one dealership, as well as significant real estate assets. You may also have put together a management team to ensure the smooth operation of your business, which you are confident that, with continued hard work, your investments will continue to grow even further. However, how can you be certain your hard work will stand the test of time once you retire or unexpectedly become unable to run your dealership? The answer is Business Succession. Why Make a Business Succession Plan? A well-designed business succession plan for your automobile dealership will not only benefit you by providing for your financial security but it will also benefit your family now and in the future when you are no longer around to provide for them. Using all of the tools available to minimize taxes, maximize returns and protect your assets is critical to your future and the future of your dealership. A Successful Business Succession Plan Handles Matters Such As: buys/sells manufacturer disputes real estate acquisitions warranty reimbursement partnership issues business succession planning Key Questions to Ask: Can I develop a plan that will allow me to retain my successors to assume management? Can my business succession plan be modified if the successors cannot handle the job? How do I structure the buyout of my business by my successors? How do I minimize the tax consequences of a structured buyout by my successors? How does my business succession plan impact my estate? How do I equitably provide for all of my children, even those not in the business? How do I deal with the factory during this process? Your investments as a dealership owner are essential, and should be put in the hands of experienced professionals. If you or someone you know is looking to protect their dealership business in the future, please contact the experienced attorneys at Bellavia Gentile & Associates. Under the current federal tax structure, this may be an opportune time for you to discuss your succession plan and the steps that you should take now to minimize tax consequences. It is the firm s goal to help you develop a plan that will continue the leadership, performance and success of your business for the next generation while also minimizing tax liabilities and providing for a smooth transition. How to Arrange for a Successful Transfer When You Decide to Retire The key to business succession is to know what questions to ask and who to ask them to. When planning ahead, you must foresee all possible obstacles and work with an experienced team to help you understand your rights and the best options to take. You deserve a business succession plan drafted by professionals who understand the automobile business, professionals who will ask the right questions regarding succession planning, factory relations, leasehold concerns and tax consequences. Phone: Fax:

6 DEALERLAW.COM 200 Old Country Road Mineola, NY Phone: Fax: For more information about our services, or to set up an initial consultation, at no cost or obligation, call One of our attorneys will contact you right away. 200 Old Country Road Mineola, NY Phone: Fax: DEALERLAW.COM Bellavia Gentile & Associates, llp A T T O R N E Y S A T L A W About Bellavia Gentile & Associates, LLP For more than 25 years, Bellavia Gentile & Associates, LLP, has been a nationally recognized authority in the field of automotive franchise law. With offices in Long Island, Manhattan, Albany, New York, New Jersey and Connecticut, the firm has represented hundreds of automobile and marine dealerships across the country and has been recognized as one of the foremost advocates for the rights of franchised or licensed dealers. Dealers have come to rely on the firm s attorneys for a variety of legal matters ranging from franchise disputes and lease negotiations, to the purchase or sale of dealership businesses, real estate matters, and complex federal and state court litigation. Did you know that you can retain one of the nation s leading automobile dealership law firms for only $300 per month? For only $300 per month, participants receive: Unlimited telephone advice concerning dealership operations Preparation of letters and general releases in response to customer complaints Discounted legal services ($250 per hour) for the dealership and dealership employees Annual in-house training session on frequently litigated federal and state laws Regular bulletins and updates concerning changes in federal and state law