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Ts & A Motors, LLC v. Kia Motors America, Inc.

Supreme Court of New Hampshire

March 29, 2019


          Argued: November 13, 2018


          Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the brief and orally), for the appellant.

          Nixon Peabody LLP, of Manchester (Kevin M. Fitzgerald and Nathan P. Warecki on the brief), and Hogan Lovells U.S. LLP, of Washington, D.C. (Catherine E. Stetson and Kirti Datla on the brief, and Ms. Stetson orally), for the appellee.

          LYNN, C.J.

         The appellant, TS & A Motors, LLC d/b/a Kia of Somersworth (Somersworth), appeals a decision of the Superior Court (McNamara, J.) affirming an order of the New Hampshire Motor Vehicle Industry Board (the Board) ruling that the appellee, Kia Motors America, Inc. (Kia), properly terminated its franchise agreement with Somersworth pursuant to RSA 357-C:7 (Supp. 2018). We affirm.


         The following facts are drawn from the trial court's order, or are otherwise supported by the record and undisputed on appeal. In December 2007, Kia and Somersworth entered into a Dealer Sales and Service Agreement (Dealer Agreement), which governed the franchise relationship between the parties. Under this agreement, Somersworth is required to employ certain parts and service personnel. Specifically, the agreement provides:

DEALER shall employ and train a sufficient number of competent personnel of good character, including one or more persons who will function as sales manager, service manager and parts manager, sales persons, service technicians and parts personnel to fulfill all of DEALER'S responsibilities under this Agreement and as recommended by COMPANY, and shall cause such personnel to attend such training schools as COMPANY may from time to time require at DEALER'S sole expense.

Dealer Agreement § IV.A.4.

         Subsequently, between March 2011 and March 2012, Kia sent a series of letters notifying Somersworth of perceived staffing and training deficiencies. These letters referenced Somersworth's failure to meet technician training requirements in 2009 and 2010, to adequately staff and train personnel in its parts and service department, and to meet the minimum number of technicians required to participate in Kia's "Optima Hybrid Program." During Somersworth's tenure as a dealer, Kia employees overseeing Somersworth made note of its high employee turnover rates. The Board determined that over the course of its operations as a dealer, Somersworth violated the provision of the Dealer Agreement that required certain parts and service personnel "on an almost constant basis." Kia management worked with Somersworth to remedy its staffing deficiencies. It sent numerous written notifications to Somersworth referencing the inadequacy of its parts and service staffing, met with Somersworth to discuss its concerns over staffing, and gave Somersworth the "benefit of the doubt" when the dealer promised to hire the appropriate number of staff members.

         Finally, on November 6, 2014, Kia sent formal notice to Somersworth of its failure to employ a minimally adequate parts and service staff, as required under the Dealer Agreement. At the time this letter was sent, Somersworth was operating without a service manager, service advisor/service consultant, or parts-counter person; all positions mandated by the Dealer Agreement. The November 6 letter provided a 60-day period to cure the staffing breach; however, Somersworth continued to function without the requisite staff. In light of Somersworth's continued failure to cure its staffing issues, on or about February 23, 2015, Kia notified Somersworth that, effective 90 days from receipt of the letter, its Dealer Agreement with Kia would terminate. At the time the termination letter was sent, Somersworth did not have a single position filled in its parts and service department that was required under the Dealer Agreement.

         Somersworth protested its termination before the Board, arguing that there was insufficient evidence of statutory good cause on the part of Kia to terminate the agreement. See RSA 357-C:7, I(c). Specifically, Somersworth argued that "[d]ue to an unprecedented tight labor market for automobile service workers in the Seacoast area, . . . it was unable to hire the workers required under the dealer agreement," and thus "it was not reasonably possible for it to comply with the staffing requirements." In an order dated May 10, 2017, the Board denied Somersworth's termination protest.

         On May 26, 2017, Somersworth filed an application for rehearing on the grounds that the Board erred in finding that Kia had sent the termination letter within 180 days of first obtaining knowledge of Somersworth's staffing issues, as required by RSA 357-C:7, II(a). In support of its request for rehearing, Somersworth attached the 2011 and 2012 communications from Kia, which, it argued, proved that Kia had actual knowledge of Somersworth's deficiency in staffing its parts and service department "well over 180 days prior to the notice of termination." Somersworth also pointed to testimony, relied on by the Board in its initial ...

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