ISSUE 3, 2024 12 The Road To PAGA Reform From Challenge to Triumph 16 CNCDA NextGen Shaping the Future of California’s Dealership Leaders 22 How Licensed Vendors Support Your Dealership and CNCDA Official Publication of the California New Car Dealers Association
Business Transactions • Buy-Sell Agreements • DMV, BAR, and other governmental approvals • Lender flooring and capital loan agreements • Entity formation and structure • Shareholder Agreements • Manufacturer approvals and relations • NMV non-profit association representation Estate Planning • Succession planning for businesses • Trust Agreements including lifetime benefit trusts • Gift and Estate Tax planning Tax • Property Tax planning, audits, and appeals • Federal estate and gift tax controversy audits • EDD Audits BUSINESS LAW | LITIGATION | ESTATE PLANNING | REAL ESTATE | TAX | EMPLOYMENT PRACTICES FERRUZZO & FERRUZZO, LLP | A Limited Liability Partnership, including Professional Corporations 3737 Birch Street, Suite 400, Newport Beach, California 92660 | PH: (949) 608-6900 | ferruzzo.com Business Litigation • Consumer Legal Remedies Act lawsuits • Sales and Service Agreements • Disputes before the CA New Motor Vehicle Board • Consumer claims regarding the sale of automobiles • Manufacturer audit disputes • Hearings before the AQMD, RWQC and OSHA Real Estate • Dealership site acquisition and dispositions • Lease agreements • Lender Opinion Letters Employment Practices • Wage and hour class action lawsuits • Private Attorneys General Act (PAGA) claims • Arbitration Agreements • Employer Handbooks and Employer Compliance Procedures Ferruzzo & Ferruzzo, LLP began providing legal representation to new car and truck dealers over four decades ago. Over the course of that time, one of the central goals of the firm has been to remain rooted in our client relationships. With the strength of over 25 attorneys, we provide a spectrum of legal services to support every aspect of running and owning your new car and/or truck dealership. We have practice groups in each area of the law that service the needs of you and your dealership.
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6 Cheers to Another 100 Years of Success 8 PRESIDENT’S MESSAGE The Power of Your Vote During Election Season By Brian Maas, President, CNCDA 10 2024 Officers and Directors 12 The Road To PAGA Reform From Challenge to Triumph By Autumn Heacox, Director of Communications & Marketing, CNCDA 16 CNCDA’s NextGen Shaping the Future of California’s Dealership Leaders By Autumn Heacox, Director of Communications & Marketing, CNCDA 18 Sharing Good News By McKenna Bediamol, Administrative Coordinator, CNCDA 20 CNCDA 2024 Chairman’s Club 22 How Licensed Vendors Support Your Dealership and CNCDA By Autumn Heacox, Director of Communications & Marketing, CNCDA 24 UPCOMING EVENTS New Laws Seminars 25 UPCOMING WEBINAR PAGA Reform Now We Have Something to Work With 26 Navigating the Road Ahead Top 5 Challenges for Dealers in the Back Half of 2024 and How to Solve for Them By ACV 28 MANNING LEAVER LEGAL LANE Lemon Law 101 By Timothy D. Robinett, Esq., Partner, Manning, Leaver, Bruder & Berberich LLP 30 2024 Sponsors 32 Q2 2024 California Auto Outlook ©2024 California New Car Dealers Association (CNCDA) | The newsLINK Group LLC. All rights reserved. The California New Car Dealer Quarterly is published four times each year by The newsLINK Group LLC for the CNCDA and is the official publication for this association. The information contained in this publication is intended to provide general information for review, consideration and dealer education. The contents do not constitute legal advice and should not be relied on as such. If you need legal advice or assistance, it is strongly recommended that you contact an attorney as to your specific circumstances. The statements and opinions expressed in this publication are those of the individual authors and do not necessarily represent the views of the CNCDA, its board of directors or the publisher. Likewise, the appearance of advertisements within this publication does not constitute an endorsement or recommendation of any product or service advertised. The California New Car Dealer Quarterly is a collective work, and as such, some articles are submitted by authors who are independent of the CNCDA. While the California New Car Dealer Quarterly encourages a first-print policy, in cases where this is not possible, every effort has been made to comply with any known reprint guidelines or restrictions. Content may not be reproduced or reprinted without prior written permission. For further information, please contact the publisher at (855) 747-4003. 12 16 ContentsISSUE 3, 2024 1517 L St. Sacramento, CA 95814 www.cncda.org (916) 441-2599 Brian Maas President Michael Walsh, MBA Chief Financial Officer Anthony Bento Chief Legal Officer Autumn Heacox Director of Communications & Marketing Cathy Mason Director of Operations Rebecca Matulich Director of Events & Partnerships Kenton Stanhope Director of Government Affairs Andrea Daugherty Political Engagement Manager Lauren Johnston Membership Manager Liza Hernandez Staff Accountant Stacy Barawed Executive Assistant McKenna Bediamol Administrative Coordinator Jamie Cowden Administrative Assistant 4
The California New Car Dealers Association has protected and promoted the interests of California’s franchised new car dealers for the last 10 decades. In that time, we have made a tremendous impact on the industry as a whole and will continue to bring value and support to our members. To learn more about the nation’s largest state automobile dealer association and all the key advantages of being a member, please visit us at cncda.org. CHEERS TO ANOTHER 100 YEARS OF SUCCESS
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Brian Maas, President, CNCDA PRESIDENT’S MESSAGE The Power of Your Vote During Election Season As we approach November’s General Election, I want to emphasize the profound significance of your vote. It’s not just a civic duty but a pivotal role as business leaders in California. The decisions we make on election day will reverberate across our industry, our businesses and our way of life. Our association works tirelessly to ensure that the voices of California’s new car dealers are heard loud and clear in the state legislature. A significant part of that effort is channeled through CNCDA’s Candidate PAC. By contributing to our Candidate PAC, you directly support the election of officials who understand and are sympathetic to your unique challenges as a dealer and are committed to advancing business-friendly legislation. Our collective action has yielded tangible results. Helping to elect legislators who understand dealer issues and priorities allows our lobbying team to remind our elected officials of the importance of your businesses to their districts and constituents. It would be hard to imagine our success in the state capitol — ranging from passing our franchise bill (AB 473) last year to PAGA reform this summer — without the active participation of dealers. These victories were not just about sound policy — they were the outcome of having the right people in the right positions in Sacramento, individuals who comprehend our industry’s needs because they’ve had the support of our PAC and the backing of our members. But our work is far from over. Some of the most pivotal races this November are incredibly close, and the outcome of these elections will directly influence our ability to pass dealer-friendly legislation next year. We need to ensure that those elected to represent us understand our members’ way of life and are committed to protecting it. That’s why I’m urging you to exercise your right to vote on election day and consider contributing to our PAC if you haven’t already. Your support is not just important, it’s indispensable — now more than ever. It’s not too late to make a difference. Every dollar you contribute ensures that the candidates who share our values have the resources they need to succeed. Together, we have the power to shape our industry’s future and secure our dealers’ success. Please scan the QR code below and make your contribution today. And don’t forget — your vote matters. Make it count this November. https://members.cncda.org/donate-now Thank you for your continued support and dedication to California’s automotive industry. Sincerely, Brian Maas, President California New Car Dealers Association 8 California New Car Dealer Quarterly
Anticipate every turn In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® John Alexander, john.f.alexander@bofa.com James Diedrich, james.a.diedrich@bofa.com Liane Low-Bevett, liane.low-bevett@bofa.com Bob Ludwig, robert.ludwig@bofa.com business.bofa.com/dealer ©2024 Bank of America Corporation. All rights reserved. 5949042 12-23-0323 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA. In an industry that’s always evolving, your dealership can rely on our Dealer Financial Services team’s 90 years of experience to see what’s around the corner, forward-thinking insights to prepare you, and technology to keep you ahead of the curve. What would you like the power to do?® John Alexander, john.f.alexander@bofa.com James Diedrich, james.a.diedrich@bofa.com Liane Low-Bevett, liane.low-bevett@bofa.com Bob Ludwig, robert.ludwig@bofa.com business.bofa.com/dealer ©2024 Bank of America Corporation. All rights reserved. 5949042 12-23-0323 Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value “Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets divisions of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.
2024 Officers and Directors EXECUTIVE COMMITTEE DAVID SIMPSON Chairman Simpson Buick GMC Cadillac of Buena Park, Simpson Chevrolet of Garden Grove, Simpson Chevrolet of Irvine TONY TOOHEY Immediate Past Chairman Auburn Toyota RICK NIELLO Region 1 Vice President The Niello Company MARK NORMANDIN Region 2 Vice President Normandin Chrysler Dodge Jeep Ram BILL HATFIELD Region 3 Vice President Hatfield Buick GMC JARED HARDIN Region 4 Vice President Hardin Buick GMC ROBB HERNANDEZ Vice Chairman Camino Real Chevrolet SAL GONZALES Region 5 Vice President Culver City Volvo ANNE BOLAND Secretary/Treasurer Bob Smith BMW 10 California New Car Dealer Quarterly
DIRECTORS Randy Denham S.J. Denham Inc. Matthew Hall AutoNation Western Region Taz Harvey Dublin Mazda Rick Niello The Niello Company Tony Toohey Auburn Toyota Jessie Dosanjh Stevens Creek Chevrolet Ryan Fitzpatrick Coliseum Lexus of Oakland Dave Moeller City Toyota Mark Normandin Normandin Chrysler Jeep Dodge Ram Devinder Singh Bains Turlock Chrysler Dodge Jeep Ram Cheryl Bedford Sunset Auto Center Don Groppetti Nissan of Visalia Bill Hatfield Hatfield Buick GMC Ted Nicholas Three-Way Chevrolet Cadillac Ellena Sweet Fresno Acura James Graham Santa Margarita Ford Bruce Hamlin Guaranty Chevrolet Motors Inc. Jared Hardin Hardin Buick GMC John Oh Lexus of Westminster David Simpson Simpson Buick GMC Cadillac of Buena Park Anne Boland Bob Smith BMW Matt Browning Browning Automotive Group Sal Gonzales Culver City Volvo Rinaldi Halim Sierra Automotive Group Robb Hernandez Camino Real Chevrolet Region 1 Region 2 Region 3 Region 4 Region 5 11 California New Car Dealer Quarterly
The Road To PAGA Reform FROM CHALLENGE TO TRIUMPH By Autumn Heacox, Director of Communications & Marketing, CNCDA Running a successful car dealership in California has always been about more than just selling cars; it’s about building a business that supports employees, contributes to the local community and thrives in a competitive market. However, this goal has become increasingly challenging over the past decade as California business (and dealership) owners found themselves ensnared in the web of the Private Attorneys General Act (PAGA). PAGA was enacted in 2003 by then‑recalled Gov. Gray Davis in his last few days in office. The law was initially intended to help employees enforce labor laws by allowing them to sue their employers on behalf of the state. While its original intentions may have been noble, the reality of PAGA’s implementation was far from practical. Over the years, it became clear that a few trial attorneys caught on to PAGA loopholes, allowing them to exploit the law for personal gain by filing lawsuits on behalf of employees for minor or technical violations that had little to do with their well-being. These PAGA lawsuits imposed staggering (and sometimes devastating) penalties on California businesses and nonprofits, often forcing them to pay millions of dollars to settle the suits — even when violations were as minor as a clerical error on a pay stub. Most settlements went to the attorneys, with employees receiving only a fraction of the total payout. 12 California New Car Dealer Quarterly
For California’s franchised car dealerships, this was more than just a legal issue; it was an existential threat. The financial burden of these lawsuits was crippling, putting over 130,000 California dealership jobs at risk and threatening the very survival of franchised dealerships that have been, in many cases, cornerstones of their communities for generations. Recognizing the seriousness of the problem, the California New Car Dealers Association (CNCDA) knew it was our responsibility to take action for our members. The journey to PAGA reform was not an easy one. Additionally, the inherently problematic nature of PAGA lawsuits is that providing explanations to adequately inform the public (and, in turn, legislators) required sharing real-life examples, thus potentially painting a target on business owners’ backs (even when the lawsuits were baseless). However, as the number of lawsuits grew, it became clear that too many businesses were devastated by these cases, and our dealers were not alone in their plight. CNCDA began its fight against PAGA roughly six years ago, initially focusing on raising awareness among its members and gathering the necessary funds to challenge the law. This was no small task. Rallying support for a cause as complex and multifaceted as PAGA reform required tremendous effort and perseverance. Some members initially hesitated to contribute, uncertain about the chances of success or the potential backlash from the public. However, the CNCDA Board of Directors pressed on, and as the lawsuits piled up, more and more members recognized the necessity of change. The association realized that to bring about meaningful reform, we would need to qualify the issue on the upcoming general election ballot and bring the issue to California voters to weigh in. When CNCDA started PAGA reform efforts in 2018, the expectation was qualifying and running a ballot measure in 2022. Unfortunately, research and drafting pushed our efforts into late 2021, and COVID-19 unavoidably extended the time needed for the 700,000 valid signatures required for qualification. In the spring of 2022, the coalition pushed qualification to the 2024 general election to ensure we obtained the requisite number of signatures. This is when our collective dealership body rallied together and raised the funds to get the signatures needed to place PAGA reform on the ballot. In late 2023, the association realized that to better secure a reform victory, we would need to adopt a dual-track approach: simultaneously working towards campaigning for the ballot measure while also engaging in a new strategic public affairs campaign with a coalition of other California business groups to encourage legislators toward enacting reform directly. “Our dealers stepped up in an unprecedented way, demonstrating the power of collective action and the importance of standing up for what’s right. They pulled out their checkbooks and took action to ensure the measure qualified for the ballot. This initial fundraising campaign was a testament to their dedication and unwavering support for our efforts.” — Brian Maas, President CNCDA 13 California New Car Dealer Quarterly
The turning point came when CNCDA and the coalition realized that pursuing a legislative fix in Sacramento could bring a more immediate (and cost‑effective) solution. This shift in strategy, guided by CNCDA Director of Legislative Affairs Kenton Stanhope, involved engaging with legislators and aligning with labor unions that had previously opposed reform. By presenting a united front and demonstrating the real-world impacts of PAGA on businesses and employees, CNCDA helped build a consensus for change. The path was far from smooth. During this period, CNCDA dealers and staff worked tirelessly, building relationships with key legislators, holding over 90 meetings with lawmakers during our 2024 Dealer Day, and leveraging the power of our membership to make nearly 125 phone calls to elected officials, urging them to support proposed PAGA reform bills. This approach proved to be a game-changer. With unmatched support from our dealer members, CNCDA raised nearly $3.85 million for the initial ballot measure campaign (securing more than half of all the funds needed to qualify the measure for the ballot) and over $150,000 for the public affairs campaign. As momentum built, the coalition against PAGA grew stronger, with other business groups joining the fight, but it was clear to all: The car dealers were at the wheel and steering the coalition toward success. “Our multifaceted approach allowed us to attack the problem from multiple angles. By building relationships at the state capitol and engaging with all stakeholders, including labor unions, we were able to create the momentum needed to push this reform across the finish line,” said Kenton Stanhope. The result of these efforts was nothing short of historic. On July 1, 2024, Gov. Gavin Newsom signed SB 92 and AB 2288 into law, marking a significant victory for California’s businesses. These bills bring long-overdue reforms to PAGA, ensuring that employees’ claims are resolved more quickly and fairly while providing relief to businesses showing goodwill to comply with the law. David Simpson, CNCDA 2024 chairman, echoed this sentiment: “We faced incredible challenges along the way, but the perseverance of our members and the unwavering support from our coalition partners made all the difference. The PAGA reform victory belongs to every dealer who refused to give up.” The success of this campaign serves as a testament to the power of CNCDA’s membership and the impact that a dedicated group of individuals can have on shaping public policy. The fight against PAGA was long and arduous, but in the end, it was worth having — a fight that secured a brighter future for California’s franchised dealers and the countless employees who depend on them. Timeline Fixing PAGA is a testament to your dedication. CNCDA’s dealers were the true driving force behind this success. • 2004: PAGA was enacted in response to concerns over the insufficient resourcing of the California Labor Commissioner’s office. While intended to protect employees, it largely failed in practice. • 2006: Law firms specializing in PAGA cases emerged. Lawsuits under PAGA took nearly twice as long to resolve, paid employees significantly less, cost employers billions and allowed attorneys to claim a third of settlements. • 2014: The California Supreme Court ruled in the Iskanian case that since the state of California didn’t sign arbitration agreements between employers and employees, PAGA cases could move forward outside arbitration. This led to a tsunami of new PAGA cases. • 2016: PAGA cases surged by 1,440%, with 5,000 cases filed. Since 2016, dealers alone paid over $60 million in public PAGA settlements, with settlements from all employers expected to reach $16 billion in the next five years. • 2018: The average cost of a single PAGA settlement to an employer was $1,118,777. • 2020: COVID-19 significantly changed California’s employment law, leading to an increase in lawsuits from predatory trial attorneys. • 2022: CNCDA and our dealer members led a coalition to qualify PAGA reform for the November 2024 ballot and raised over $3.5 million, plus another $1.5 million from CNCDA itself (more than half of the total raised from all groups). • 2023: Fundraising and PAGA reform education continued, with efforts to support our ballot measure campaign. • February 2024: CNCDA adopted a dual-approach strategy, pursuing a legislative solution to PAGA while maintaining momentum on the ballot measure front. • July 2024: After months of intense lobbying and public affairs efforts, two bills — AB 2288 (Kalra) and SB 92 (Umberg) — were introduced and signed into law by Gov. Gavin Newsom. Advocacy Highlights • 90+ legislative meetings focused on addressing PAGA at 2024 Dealer Day. The conversations with legislators were undeniably impactful. • 160 members donated $3,850,900 toward our ballot measure fundraising efforts. As a result, CNCDA members raised more than half of the total dollars to qualify for the ballot. • Nearly 125 phone calls were made by our members to their elected officials voicing support for SB 92 (Umberg; D-Santa Ana) and AB 2288 (Kalra; D-San Jose). The legislation passed with overwhelming support. 14 California New Car Dealer Quarterly
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In a time of change and evolving challenges within the automotive industry, CNCDA’s NextGen group stands as a beacon for the future of California’s franchised new car and truck dealerships. This dynamic group of engaged leaders is not just preparing for the future — they’re actively shaping it. Who Is NextGen? NextGen members at CNCDA are defined as individuals holding managerial positions at franchised new car and truck dealerships. Regardless of age or family relationships, these future leaders are dedicated to carrying forward the legacy of their predecessors while innovating and adapting to the demands of tomorrow. Mission and Vision NextGen’s mission is to empower, encourage and develop future dealership leaders through engagement, education and community. The group is committed to strengthening a community of leaders prepared to steer California’s automotive industry into the future. Recent Successes: A Year of Growth and Achievement The past year has been a testament to the NextGen group’s strength and the important role they play statewide. This past March, CNCDA’s Dealer Day gathered 20 NextGen dealers. This was a huge milestone as the group’s goal was to hopefully get just a handful to attend. These 20 first-time Dealer Day attendees networked and engaged with the broader dealership community, marking a crucial step in their development as leaders. At the same time, their attendance marked a SIGNIFICANT boost to our association’s advocacy efforts. “I’m incredibly proud of California’s NextGen accomplishments this year. Our NextGen members made up roughly 20% of the total dealers at CNCDA’s 2024 Dealer Day, far surpassing the goals we set. There is a clear need and desire for engagement by the NextGen members we serve.” — Kailey Hatfield, Hatfield Buick GMC The momentum continued last month with the group’s Second Annual NextGen Retreat, held in Paso Robles. This retreat brought together both the Steering Committee and invited NextGen members for a few days of education, networking and strategizing. The event also saw a larger attendance than initially anticipated. The retreat featured a variety of speakers who are experts in their fields. Kenton Stanhope, CNCDA’s Director of Government Affairs, highlighted the importance of grassroots activism in the current political climate. Rinaldi Halim, Sierra Automotive Group, Open Road Capital and CNCDA board member, shared invaluable insights from his life journey and how he’s accrued his success in the automotive industry. Members also learned the importance of succession planning, with Jan Slania from Federated Insurance offering essential advice on keeping dealerships thriving across generations. In addition to these keynotes, the retreat provided a platform for members to brainstorm, troubleshoot and share CNCDA’s NextGen SHAPING THE FUTURE OF CALIFORNIA’S DEALERSHIP LEADERS By Autumn Heacox, Director of Communications & Marketing, CNCDA 16 California New Car Dealer Quarterly
experiences in a supportive environment. The feedback was overwhelmingly positive, with attendees praising the opportunity to connect with peers and gain practical knowledge to apply in their dealerships. The Future is Bright: Strategic Priorities for the Year Ahead Looking ahead, the Steering Committee’s priorities for the coming year focus on promoting and educating automotive successors, engaging NextGen members in key activities and serving as a vital resource for information and peer networking. Key goals include boosting NextGen attendance at: 2025 Dealer Day, the Annual Retreat and CNCDA’s Welcome Reception at the NADA Show in New Orleans. The goal is to strengthen connections and better position NextGen members to lead their dealerships into the future. The Importance of Involvement NextGen is not just a group — it’s a movement critical to the long-term success and sustainability of California’s automotive industry. The involvement of these emerging leaders in advocacy and community engagement ensures that the association remains strong and effective for decades to come. By participating in events, contributing to discussions and engaging in advocacy, NextGen members are laying the groundwork for a thriving franchised dealership community in California. As we reflect on the past year’s successes and look forward to the opportunities ahead, it’s clear that NextGen is more than just the future of CNCDA — it’s the driving force to sustain and propel our industry forward. As we continue to navigate the challenges and opportunities ahead, the NextGen group remains a cornerstone of CNCDA’s efforts to empower and inspire the next generation of dealership leaders. Their involvement is crucial to ensuring our association survives and thrives in the future. Let’s continue to support and engage with NextGen — because the future of our industry depends on it. If you want to receive NextGen communications, please email Autumn Heacox at aheacox@cncda.org. Meet Your 2024/2025 NextGen Steering Committee These leaders are driving the vision and strategic priorities of the NextGen group, ensuring a solid future for California’s dealership community: • Chair: Kailey Hatfield, Hatfield Buick GMC • Vice Chair: Joe Castelino, Stevens Creek Volkswagen • Secretary: Scott Normandin, Normandin Chrysler Dodge Jeep Ram FIAT • Treasurer: Tanner Hedrick, Hedrick’s Chevrolet • Officers: Jeremy Cappalo, Reliable Buick GMC Cadillac, and Seth Simpson, Simpson Chevrolet of Garden Grove 17 California New Car Dealer Quarterly
Sharing Good News By McKenna Bediamol, Administrative Coordinator, CNCDA For the past year, CNCDA has been collecting and sharing our dealers’ good news on our website and across our social media channels. Our goal is to highlight the good works and philanthropic efforts of our members in their communities. These stories include hosting donation drives during the holidays, supporting local schools or sending dealership teams to volunteer with local organizations. Our effort is to show the public that our members are more than just car dealers. You provide immeasurable support and uplift to your communities 24/7/365. Please check out our monthly Sharing Good News pages under the News section on www.cncda.org. Your dealership may just be one of our featured members! Wilson Automotive Group Vikki Murphy and Allen Moznett of Wilson Automotive Group presented Leslie Hardy, city of Orange director of community services, with a check, fully sponsoring the city’s “Concerts in the Park” series. Future Kia and Future Ford Future Ford and Future Kia donated $5,000 to the Fresno Sheriff’s Memorial. Gold Rush Subaru Gold Rush Subaru sent volunteers to help clean up trash and debris along the American River for Earth Day. Premier Chevrolet of Buena Park Premier Chevrolet of Buena Park donated $500 to the Buena Park National Little League. 18 California New Car Dealer Quarterly
Honda of DTLA Honda of DTLA worked with Next of Kin Group to collect teddy bears for local foster kids in the community. Motor City Buick GMC Motor City Buick GMC staff member, Martin, has engaged with the community every Monday by sharing breakfast, such as donuts, with community members at the local Home Depot. Auburn Toyota Auburn Toyota sent staff volunteers to help Placer Land Trust at Canyon View Preserve clear out invasive plants. Hello Auto Group Hello Auto Group donated over 300 backpacks filled with school supplies for students in Sulphur Springs Union School District. Chase Chevrolet Chase Chevrolet helped San Joaquin Child Support serve over 1,500 hot dogs and handed out over 1,000 backpacks to children in the community at the Block Party Backpack Giveaway. Mercedes-Benz of Walnut Creek Mercedes-Benz of Walnut Creek staff attended Contra Costa College’s 2024 Automotive Camp, where they inspired the next generation with their auto industry stories and vehicle demonstrations. To share YOUR good news, contact McKenna Bediamol at mbediamol@cncda.org. 19 California New Car Dealer Quarterly
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How Licensed Vendors Support Your Dealership and CNCDA By Autumn Heacox, Director of Communications & Marketing, CNCDA CNCDA recently welcomed several new Licensed Vendors, expanding our network of trusted partners. These companies are exclusively licensed in their respective service areas and meet our high standards of quality and reliability. When you choose to start a new relationship with these Licensed Vendors, CNCDA receives additional financial support. This support keeps your membership dues low, strengthens our advocacy efforts on your behalf and provides you access to top-tier services. We encourage our dealers to consider partnering with these vendors. By doing so, you directly support CNCDA’s mission. We appreciate the partnership and dedication of our Licensed Vendors. For more information on becoming a CNCDA Licensed Vendor, please contact Rebecca Matulich, director of events & partnerships, at rmatulich@cncda.org. 22 California New Car Dealer Quarterly
EPICBROKERS.COM ©2024 Edgewood Partners Insurance Center. All rights reserved. | CA License: 0B29370 EPIC Insurance Brokers & Consultants is proud of its partnership with more than 300 California dealerships and is the CNCDA’s only licensed broker for health insurance and employee benefits. As the dealers’ consultant, experience what EPIC can do for you, including: • A team producing significant results with decades of experience understanding the specific needs of dealerships • Fully insured and unique alternative funding options to best fit your needs and generate the best possible costs • Full compliance services and HR support for your team LEARN MORE ABOUT OUR SERVICES BY CONTACTING: Alison McCallum (949) 422-6431 alison.mccallum@epicbrokers.com 25 California New Car Dealer Quarterly
Navigating the Road Ahead TOP 5 CHALLENGES FOR DEALERS IN THE BACK HALF OF 2024 AND HOW TO SOLVE FOR THEM By ACV There’s no getting around it: the auto industry has been on quite a ride over the past few years. U.S. auto dealers face a myriad of challenges that require adept navigation and strategic planning. Since we’ve moved into the back half of 2024, several key issues have emerged or continue to plague dealers, demanding attention and innovative solutions. Let’s explore the five top challenges facing U.S. auto dealers and strategies to overcome them. 1. Pricing Pressures and Declining Value of Used Vehicles One of the prominent challenges looming over dealers this year is the increasing pressure on vehicle pricing, specifically the declining value of used vehicles. Factors such as oversupply, changing consumer preferences and the proliferation of ride-sharing services contribute to this downward trend, impacting dealers’ profitability and inventory management strategies. Solution: Embrace data-driven pricing strategies that leverage market insights and consumer demand patterns to optimize pricing decisions. Diversify inventory to include a mix of new and preowned vehicles, focusing on popular models with strong resale value. Enhance customer education efforts to emphasize the value proposition of pre-owned vehicles, highlighting cost savings and quality assurance measures. 2. Shifting Consumer Preferences Consumer preferences are evolving rapidly, driven by sustainability concerns, technological advancements and changing lifestyles. Dealers must anticipate and respond to these shifts to remain relevant in a competitive market. Consumers want ease and are willing to pay for it, dealers will be well rewarded to provide convenience to consumers. Solution: Embrace digitalization and offer omnichannel experiences to cater to diverse consumer preferences. Providing transparent self-service vehicle valuation, lowfriction consumer vehicle sourcing programs, and even picking up vehicles from the consumer’s driveway can give you the winning edge. 3. Regulatory Compliance Navigating the complex regulatory landscape poses a significant challenge for auto dealers, with evolving emissions standards, data privacy regulations and consumer protection laws requiring strict adherence. Solution: Stay informed about regulatory updates and invest in compliance management systems to ensure adherence to legal requirements. Ensure that everyone at the dealership knows compliance requirements by providing ongoing training to staff members to uphold compliance standards and mitigate regulatory risks effectively. 4. Digital Transformation The digital revolution has reshaped the automotive industry, with online sales platforms, virtual showrooms and digital marketing channels becoming increasingly prevalent. Dealers must embrace digital transformation to enhance customer engagement and stay competitive. Solution: Invest in robust digital infrastructure, including user-friendly websites, mobile apps and CRM systems, to streamline operations and improve the customer experience. Leverage data analytics to gain insights into consumer behavior and personalize marketing efforts effectively. By effectively using your customers’ data, vehicle data and pricing trends, you can meet them with the right car at the right time, even when they’re not actively looking to get into something new. 5. Talent Acquisition and Retention Attracting and retaining skilled talent remains a persistent challenge for auto dealers, with competition from tech firms and changing job preferences among younger generations complicating recruitment efforts. Solution: Develop comprehensive talent acquisition strategies that highlight the opportunities for career growth and professional development within the automotive industry. Foster a positive workplace culture that values diversity, inclusivity and employee wellbeing to attract and retain top talent. No matter the issues that rear their head, one thing will always remain true: Auto dealers are survivors who will always find creative solutions to power past challenges. By implementing innovative solutions and embracing digital transformation, dealers can navigate these challenges successfully and emerge stronger in an evolving market landscape. 26 California New Car Dealer Quarterly
Sources 1. “Navigating the Declining Value of Used Vehicles in the Automotive Market.” Automotive News. 2. “Consumer Preferences and Trends in the Automotive Industry: Insights for Dealerships.” Deloitte. 3. “Compliance Management Strategies for Auto Dealerships.” National Automobile Dealers Association (NADA). 4. “Digital Transformation in Automotive Retail: Leveraging Technology for Competitive Advantage.” McKinsey & Company. 5. “Talent Acquisition and Retention Best Practices in the Auto Sector.” Society for Human Resource Management (SHRM).
Lemon Law 101 By Timothy D. Robinett, Esq., Partner, Manning, Leaver, Bruder & Berberich LLP There has been a dramatic spike in the number of lemon lawsuits filed in California over the last few years, and the recent trend has been for plaintiffs’ attorneys to name the selling and/or repairing dealerships as defendants. According to recent reports, there were 22,655 new lemon law cases filed in California in 2023, which represents an increase of 52% over 2022.1 According to a study performed by manufacturer defense counsel Bowman and Brooke, filings in Los Angeles County’s local branch courthouses alone saw a dramatic increase of 1,400% in the number of filings between 2021 and 2023. By all indications, this trend is not slowing down, and dealers need to be aware of the impact on their stores and the steps they can take to best protect their interests. History of California’s Lemon Law California first enacted the Song‑Beverly Consumer Warranty Act in 1970 to protect consumers from defective goods, including motor vehicles, and required manufacturers to repurchase or replace new vehicles that could not be repaired after a reasonable number of attempts. California’s lemon law has been amended several times since the original law was enacted to clarify the definition of what constituted a reasonable number of repair attempts, to expand the law to include the sale or lease of used vehicles that were still covered under the manufacturer’s new vehicle warranty, to apply the law to vehicles purchased and used primarily for business reasons (provided the vehicle weighed less than 10,000 pounds and the business had five or fewer vehicles registered in its name), and to create a presumption that a vehicle qualifies for repurchase or replacement if there have been four or more unsuccessful repair attempts (or two or more failed attempts if the defects presented a significant safety hazard), or if the vehicle has been at the dealership for more than 30 days for repairs within the first 18 months or 18,000 miles, whichever occurs first.2 The California lemon law further states that if the buyer can establish that the failure to comply with the provisions of the statute was willful, then the buyer may be entitled to a civil penalty of up to two times the amount of his/her damages.3 A buyer that prevails under the lemon law is also entitled to recover his or her attorney’s fees and costs. Not surprisingly, it is often the buyer’s attorneys’ fees and costs that are the driving force in the prolonged litigation and increasing numbers of filings of lemon law claims. Why Are So Many Dealerships Now Being Named in Lemon Lawsuits? While lemon lawsuits were traditionally a manufacturer’s issue, plaintiffs’ attorneys are now regularly naming the selling dealer and/or the repairing dealer in their lawsuits. There are various reasons why dealers are now being included in the lawsuits, including plaintiffs believing they have an extra potential pocket to pick for the recovery of damages (or a settlement), the ease in obtaining the dealership’s sales/lease and service records and depositions of dealer personnel through traditional discovery methods without having to subpoena the dealerships, and perhaps most importantly, to block the manufacturers from having the lemon lawsuits removed from state court into federal court. Most manufacturers prefer to defend lemon law claims before a federal judge (as opposed to state judges) because federal courts typically streamline the process and timeline, keep the plaintiff’s counsel on a tighter leash by limiting the number of depositions the buyer’s attorney may take and significantly reduce the length of the trial by giving each side an allotted time to present their case and not allowing witnesses that will simply repeat what has already MANNING LEAVER LEGAL LANE 28 California New Car Dealer Quarterly
be presented to the court. Therefore, plaintiffs’ attorneys will often include the repairing dealer(s) in order to attempt to destroy the federal diversity jurisdiction (which allows federal courts to hear cases involving “citizens” of different states). By naming a California dealership in the lawsuit, filed by a California plaintiff, the diversity of citizenship requirement cannot be met, and the case will be sent back to state court. The result is that plaintiffs’ counsel now regularly name dealers for “negligent repair” causes of action with no real evidence of any actual negligent by the dealership in diagnosis or repairing the vehicle, and with no real intent to actually litigate against the dealers since plaintiffs are not able to recover attorneys’ fees on a negligence claim. What Should a Dealer Do When It Is Served With a Lemon Lawsuit? Dealerships should immediately forward any lemon lawsuits in which they are named to their manufacturer and request defense and indemnification. Both dealer sales and service agreements and California law provide dealers with potential rights on lemon law claims. Specifically, Vehicle Code Section 11713.13(f)(1) provides that it is unlawful and a violation of the Vehicle Code for a manufacturer/ distributor to fail, upon demand, to indemnity an existing or former dealer from claims resulting from “(A) The condition, characteristics, manufacture, assembly or design of any vehicle, parts, accessories, tools or equipment, or the selection or combination of parts or components manufactured or distributed by the manufacturer or distributor.” If a dealer doesn’t know where to send the lawsuit and its tender, it should review its dealer sales and service agreement (which often provides the specific address and/or department where the lawsuits should be sent), ask its manufacturer/ distributor’s regional team, or forward it to its manufacturer/distributor’s legal department. It is important to forward the lawsuits as soon as possible since the manufacturer may take upwards of a couple of weeks to a couple of months to review and respond to the tender. In the meantime, the dealership will, in most circumstances, only have 30 days from its receipt of the lawsuit to file a response to the complaint. It is very important for a dealer to make sure it timely responds to the complaint, or else it risks having the plaintiff’s counsel obtain a default against it. Because many of the newer breed of lemon lawsuits include a negligent repair claim against the dealer, some of the manufacturers may deny the tender outright and tell the dealer it will have to defend itself in the lawsuit, which will require the dealership to hire its own attorney to respond to the complaint and defend the lawsuit. Other manufacturers may agree to defend and indemnify its dealers on lemon lawsuits with negligent repair claims, but will propose an indemnification agreement with a carve-out for those claims alleged solely against the dealer. What is Next on the Lemon Law Horizon? New Legislation Proposed (AB 1755) There is a new Assembly Bill (AB 1755) that recently passed the legislature that will change some of the processes in how lemon law cases are litigated. While it is not entirely clear from the bill whether dealers that are named in the lemon lawsuit are covered by the changes (which predominantly refers to the manufacturer/distributor), the bill will place limits on early discovery procedures, require mediation and limit the buyer’s ability to recover a civil penalty if the manufacturer timely offers to repurchase or replace the vehicle. At this writing, the bill is currently pending on Gov. Gavin Newsom’s desk. Rodriguez v. FCA US LLC Appeal to California Supreme Court In addition to AB 1755, there is currently a case pending before the California Supreme Court that will have a significant impact on lemon law cases for used vehicles sold with a remaining factory warranty. The California Supreme Court is scheduled to hear oral arguments in early September 2024 and must decide whether California’s lemon law statute applies to used vehicles that were not sold as CPO units but were purchased with a remaining new vehicle warranties. The lower court in the Rodriguez case found that the Lemon Law did not apply. While that result seems favorable, if the California Supreme Court upholds the prior ruling, it may lead to an increase in litigation against the selling dealers without any protection or indemnity from the manufacturer. We reasonably anticipate that if the Rodriguez decision is upheld by the Supreme Court, plaintiffs’ counsel will shift their focus to the selling dealer for claims related to the implied warranties that accompany the sale of a vehicle, fraud or negligent misrepresentation regarding the condition of the vehicle at the time of sale and the representations made by the sales staff, and Consumers Legal Remedies Act (CLRA) claims regarding the condition of the vehicle. Manning, Leaver, Bruder & Berberich LLP is a Los Angeles law firm that practices throughout California and has been in existence for over 100 years. It has a strong automobile dealer practice covering all areas related to the automobile dealer industry, including dealership buy-sells, real estate transactions, business and consumer litigation, regulatory compliance, dealer association law and franchise law. See www.manningleaver.com for more information and areas of practice. Nothing in this article may be considered as legal advice. Contact legal counsel for legal advice. 1. California’s Lemon Law: A Sweet Deal for Lawyers, Sour for Consumers by Kyla Christoffersen Powell, published in the Los Angeles Daily News on July 17, 2024. 2. Civil Code Section 1793.22. 3. Civil Code Section 1794(c). 29 California New Car Dealer Quarterly
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