Latest Case This Week: Subaru of America, Inc. v. Putnam Automotive, Inc. (Cal. Ct. App.)

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Subaru of America, Inc. v. Putnam Automotive, Inc.

Court: California Courts of Appeal

Docket: A159686(First Appellate District)

Opinion Date: February 10, 2021

Judge: Kline

Areas of Law: Arbitration & Mediation, Business Law, Commercial Law

Putnam purchased a service-only (satellite) Subaru facility in San Francisco. Putnam entered into a temporary “Dealer Candidate Satellite Service Facility Agreement.” Subaru and Putnam subsequently executed a Subaru Dealer Agreement for the sale and service of vehicles at a Burlingame dealership and a five-year (renewable) Satellite Service Facility Agreement, which contained an arbitration provision. In 2017, Subaru stated that it would not approve Putnam’s proposed relocation of the satellite facility and would not renew the Satellite Agreement in 2019. Putnam filed protests with the New Motor Vehicle Board. Subaru moved to compel arbitration. The trial court found that the Satellite Agreement did not come within the Motor Vehicle Franchise Contract Arbitration Fairness Act, an exception to the Federal Arbitration Act. Putnam was compelled to arbitrate claims arising from that agreement. The court denied Subaru’s request to compel Putnam to dismiss its Board protests, which were stayed pending arbitration. An arbitrator found that the Satellite Agreement was a franchise, that Subaru was required to show good cause, and that Subaru had established good cause for terminating the Satellite Agreement. The court of appeal affirmed the confirmation of the arbitration award, rejecting arguments that the arbitrator lacked jurisdiction to make a good cause determination; enforcement of the arbitration provision was illegal under the Vehicle Code; public policy underlying California’s New Motor Vehicle Board Act precluded the arbitrator from making a good cause determination; and that Putnam’s due process rights were violated when Subaru failed to provide the required notice of the reasons for termination.