DIFFERENCES FROM LAIDLAW SUIT. Harley-Davidson attorneys argued that the sales were part of a fraud that involved many more people than Veik.
“The evidence clearly establishes that Riverside, through its general manager Lester Veik and with active participation of may of Riverside’s current employees and managers, including the current general manager Glen Espinoza, intentionally violated the contractual prohibition on non-retail sales and engaged in fraud to cover it up,” H-D’s attorneys wrote in their post-hearing brief. The Vehicle Code “should not be read to place manufacturers at the mercy of a dishonest dealer.”
In pleading their case, attorneys for Harley-Davidson made a specific argument that this case is different from another case they recently litigated before another board administrative law judge against Laidlaw’s Harley-Davidson of Baldwin Park. The judge in that case and the board found in favor of Laidlaw’s with conditions, but the Motor Co. is appealing that decision.
The differences in this case, the OEM’s attorneys argued, are that
- Riverside knew it was selling to resellers, while Laidlaw’s claimed it didn’t;
- Riverside’s owners did not plead ignorance of the NRSP, as Laidlaw’s did;
- The judge in the Laidlaw’s case found that buyers had deceived Laidlaw’s as to their intent;
- That Riverside employees intentionally registered bikes to friends and relatives of the purchaser, in violation of the state Vehicle Code; and
- Riverside did not hire an outside consultant to ensure compliance, as Laidlaw’s did.
“Riverside’s repeated breaches of a key provision of the contract is material,” H-D attorneys wrote in their post-hearing reply brief. “In contending otherwise, Riverside merely parrots Judge Wong’s opinion from the Laidlaw’s matter, without even addressing the significant differences between the two cases, most glaringly the fact that Riverside intentionally violated the dealer contract and engaged in extensive fraud to cover it up.
Also separating the cases is the allegation that Riverside Harley-Davidson faked some customer service surveys to inflate the dealership’s scores, and that the dealership performed poorly on “several key metrics” and was having “financial difficulty.” Harley-Davidson alleged that dealer principal Jay Dabney violated his own policy of checking traffic and F&I logs, and finally, that Riverside had done nothing to make up for its prior behavior.
“This is nothing better than a thief promising not to steal again,” attorneys wrote. “Riverside has not found the exported bikes to make sure they were safely delivered. Riverside has not found the names of the actual owners and provided them to Harley-Davidson for the purpose of providing safety notices. Riverside has not disgorged its profits on the improper sales. Riverside has not terminated the employment of the employees involved in the cover-up. Riverside has done nothing to cure.”
But in his decision, Ryerson was just as specific in pointing out that the NRSP lays out a list of sanctions that graduate in severity, and penalty, short of termination, would suffice.
“The NRSP specifically provides for at least five alternative or cumulative sanctions that the company may impose if the dealer violates this policy,” he wrote. “Termination is the most drastic available sanction.”
He also agreed with Riverside’s argument that Harley-Davidson doesn’t enforce the NRSP with as much zeal as it does other policies, such as MAP.
“Harley-Davidson enforces the NRSP on an exception basis, rather than auditing every dealership’s records at regular intervals on a random basis,” he wrote, noting that tips or questionable sales records may trigger corporate investigations. “When the number of questionable sales is relatively large, Harley-Davidson Co. will perform a formal audit of the underlying sales records. Audits are not performed frequently.”
In finding for Riverside, Ryerson noted that the dealer had repaid $28,275 in incentives that it had received from Harley-Davidson on the sales; had fired Veik after discovering the improper sales and taken steps to implement new training and compliance practices, and owner Dabney had become more active in the dealership management since firing Veik. (story continues)