“In contrast to the 'non-retail sales' provision found within the dealer agreement, the non-retail sales policy is a separate, very detailed set of rules issued by [Harley-Davidson] prohibiting the sale of new or previously unregistered motorcycles to a customer who intends to resell the vehicle or intends to ship the motorcycle outside the United States. The non-retail sales policy does not prohibit the export of, or otherwise apply to, used motorcycles.” That, said Laidlaw’s lawyers, makes Harley-Davidson susceptible to the same risks to its brand as if used motorcycles are shipped overseas.
In its reply brief to Laidlaw’s protest, Harley-Davidson attorneys noted that the OEM has served termination notices on 19 dealers since 2005. (Two other cases are pending in California at press time.) “All of these 19 dealers, except in cases pending, have left the Harley-Davidson system,” they said. OEM executives acknowledged that there is an unofficial threshold of 20 violations before The Motor Co. seeks sanctions against a dealer for NRSP violations.
Briefs on both sides noted that Harley-Davidson began using the National Insurance Crime Bureau database to enforce the NRSP sometime in 2010 or 2011. Identifiers of motorcycles shipped overseas recorded in that database are compared to the company’s Sales and Warranty Registration database.
Of the 70 Laidlaw sales flagged as questionable, an onsite audit found that 36 were shipped overseas: 12 to Jordan, 11 to Thailand, nine to Vietnam, two to Hong Kong, one to Taiwan and one to Cambodia.
Twelve disputed sales were to a Jordanian national living in the United States who claimed he was buying them for friends and family. Muneer Al Sharif bought a used Road King from the dealer in 2009, and then returned a month later to purchase another bike, saying it was for his brother, according to Laidlaw’s documents. He did not reveal to the dealership that his brother was a reseller, Laidlaw stated. Over the next few months, Al Sharif bought eight more motorcycles and registered them to family members.
Harley-Davidson executives claimed several occurrences should have tipped off the dealer's staff: the multiple sales, the fact that two or more of the bikes were nearly identical, all-cash transactions, no sales taxes charged and no trade-ins. (A footnote in a Laidlaw document noted that a bill of lading alerted the OEM that Al Sharif had bought and shipped Harley-Davidson motorcycles from other dealers, as well.)
Another six motorcycles were sold to a Billy Ngo and “multiple purchase exporters that followed Ngo” – two people allegedly acting as straw men to buy motorcycles for him. The Laidlaw salesperson in this instance became suspicious and stopped selling to Ngo after the fifth bike purchase. Ngo claimed all of the motorcycles were for personal use in Vietnam.
As for the rental units, the dealer acknowledged that it sold five units to each of three EagleRider franchisees (including its own) based on assurances from an EagleRider executive that five vehicles fell below the fleet sales threshold. Laidlaw’s documents show that the NRSP up to 2008 allowed dealers to transfer five units a year from their “pleasure” pool inventory into the “fleet” pool. Although that policy was changed in 2008, the documents assert that John Severson at EagleRider told Brent Laidlaw that, based on information Severson had obtained from Harley-Davidson, Laidlaw could sell five bikes per EagleRider office from the retail fleet, as long as he recorded them as non-retail sales. Laidlaw testified that he did so, and made just $500 over invoice on each of the transactions.
“[Brent Laidlaw] consummated the sales because he knew EagleRider needed new motorcycles for the summer, and he hoped the sales would ingratiate him to EagleRider, which might then refer him customers,” the document stated.
Attorneys for Laidlaw’s argued that the dealer was unaware it was violating the NRSP and “lacked understanding” of “detailed rules.” They asserted that the OEM never provided training on the policy to any sales staff, and that, once aware, Laidlaw’s had taken steps to remedy the issues.