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Len Stoler, Inc. v. Volkswagen Group of America, Inc.
United States District Court, E.D. Virginia, Alexandria Division
January 25, 2017
LEN STOLER, INC., d/b/a LEN STOLER AUDI, Plaintiff,
VOLKSWAGEN GROUP OF AMERICA, INC., d/b/a AUDI OF AMERICA, INC., Defendant.
Ellis, III United States District Judge
diversity action is a dispute between plaintiff, Len Stoler,
Inc., d/b/a Len Stoler Audi (“Stoler”), a former
car dealership, and defendant, Volkswagen Group of America,
Inc., d/b/a Audi of America (“AoA”), Stoler's
former distributor. Stoler contends that AoA violated several
provisions of Maryland Transportation Code
(“MTC”) § 15-207 in the course of their
full discovery, the parties filed cross motions for summary
judgment. As those motions have been fully briefed and twice
argued orally, the matter is now ripe for disposition.
following are the undisputed material facts derived from the
parties' statements of undisputed facts, including a
joint stipulation of undisputed facts (“JS”).
• Stoler is a corporation organized and existing under
the laws of Maryland, with a principal place of business in
Owings Mills, Maryland.
• From 1982 until May 2, 2016, Stoler was a licensed and
authorized Audi franchisee in the business of buying and
selling Audi vehicles. Stoler sold its Audi-related assets in
• AoA is a corporation organized and existing under the
laws of New Jersey, with its principal place of business in
• AoA purchases Audi vehicles from corporate affiliates
in Germany and then imports and sells these vehicles to
franchised Audi dealers throughout the United States.
• AoA and Stoler signed their operative franchise
agreement (the “Dealer Agreement”) in 1997.
• The Dealer Agreement incorporated several other
provisions, including, but not limited to, “[t]he
Dealer Agreement Standard Provisions (the “Standard
Provisions”), the Dealer Operating Plan (the
“Operating Plan”), [and] the Audi Retail Capacity
Guide (the “Retail Capacity Guide”)[.]” JS
• Beginning in 2008, the Retail Capacity Guide
implemented a Market Opportunity Guide (“MOG”),
which is a projection of Audi sales for that dealer as
calculated by AoA.
• The Standard Provisions, which were incorporated by
reference into the Dealer Agreement, state that Stoler's
dealership premises “will conform to the requirements
of this Agreement, the Operating Standards and such other
standards as [AoA] may prescribe from time to time, taking
into consideration the number of Authorized Automobiles in
operation in [Stoler]'s Area and reasonably foreseeable
future requirements.” JS ¶ 46.
• AoA maintains a Margin and Bonus Program, which
includes dealer incentives. Such incentives include cash
bonuses, provided that the dealer meets certain criteria.
• The Margin and Bonus Program applies to all Maryland
• One of the bonuses in the Margin and Bonus Program is
the “Standards Bonus.” • The Standards Bonus
is paid as a percentage of Adjusted MSRP of each new car
the dealer sells.
• Eligible Audi dealers are paid a Standards Bonus on
the following basis:
o “Universal” Audi dealers meet minimum
requirements and qualify for a Standards Bonus worth 1% of a
vehicle's adjusted MSRP.
o “Brand Dedicated” Audi dealers meet additional
criteria and standards, yet may share facilities with other
franchises. Brand Dedicated Audi dealers qualify for a
Standards Bonus worth 2.35% of adjusted MSRP.
o “Exclusive” Audi dealers meet the same
standards as a “Brand Dedicated” dealer, but also
have exclusive Audi facilities and staff.
“Exclusive” Audi dealers qualify for a Standards
Bonus worth 3.75% of adjusted MSRP.
• To receive any Standards Bonus, a dealer must meet the
following minimum qualifying criteria: (i) the dealer must
have a facility that complies with that dealer's MOG,
(ii) the dealer must achieve a score of 85% at the annual
evaluation based on the Audi Dealer Operating Standards
Checklist, and (iii) the dealer must maintain monthly
compliance with the Dealer Operating Standards Scorecard,
which sets forth additional criteria.
• If a dealer's MOG exceeds 400 units, that dealer
must operate out of an exclusive facility to qualify for a
• AoA updates each dealer's MOG every three to four
• In calculating a dealer's MOG, AoA uses two
separate formulas. The formula yielding the higher sales
projection provides the dealer's MOG.
• By the beginning of 2014, all Maryland dealers'
MOGs exceeded 400, and thus the dealer agreements and
incorporated obligations of every Maryland Audi dealer called
for each dealer to operate out of exclusive facilities.
• During all times relevant to this case, the only
Standards Bonus Stoler has ever received is the Brand
Dedicated bonus, worth 2.35% of adjusted MSRP. Stoler has
never received the Exclusive Standards Bonus because Stoler
has never had an exclusive Audi facility, nor had Stoler ever
commenced construction of one.
• In addition to offering dealer incentives such as the
Standards Bonus program, AoA makes several benefits available
to all Maryland Audi dealers, regardless of the type of
facility any such dealer operates, including:
o a “goodwill fund, ” from which dealers can take
up to $5, 000 per repair to pay for service costs not covered
by a warranty;
o a “service-mailers” program whereby AoA splits
with dealers the cost of mailing service advertisements to
o free, next-day delivery on parts;
o access to “iAudi, ” AoA's suite of
web-tools providing information, support, and applications to
help dealers sell and service vehicles; and
o several training-related benefits.
• On September 21, 2011, Audi dealers, including Stoler,
received a memorandum from AoA, explaining AoA's newly
announced “Grandfather Policy” and “Cure
• The Grandfather Policy and Cure Policy allowed
non-exclusive dealers whose MOGs exceeded 400-and thus needed
exclusive facilities to qualify for a Standards Bonus-to
continue receiving Standards Bonuses so long as those dealers
took certain steps to operate from exclusive facilities.
• The Grandfather and Cure Policies gave dealers three
years to bring their facilities back into compliance with
their MOGs and brand standards and to continue receiving
Standards Bonus payments.
• On January 10, 2014, Stoler received a letter from AoA
explaining that, based upon AoA's MOG projections for
2014-2016, Stoler's MOG now exceeded 400.
• Given that Stoler's MOG was above the 400-unit
threshold, AoA's Retail Capacity Guide provided that
Stoler must operate from an exclusive Audi facility.
• Because Stoler's Audi facility was not
exclusive-and thus not compliant with the terms of
Stoler's MOG or Retail Capacity Guide-Stoler would not
have been entitled to receive any Standards Bonuses in 2014
without the Grandfather and Cure Policies.
• On April 25, 2014, Stoler received a letter from AoA
summarizing Stoler's scores on AoA's evaluation
criteria for the Standards Bonus. The letter indicated that
Stoler was eligible to receive Standards Bonuses, but noted
that the eligibility was based in part on the Grandfather
Policy and Cure Policy. The letter also stated that Stoler
would remain eligible for Standards Bonuses in accordance
with AoA's Cure Policy, advising that “[a]s your
dealership is affected by the Cure Policy, your [area general
manager] will be contacting you regarding your facility
deficiencies and Cure Policy timelines.” JS ¶ 18.
• On October 16, 2014, Stoler received a letter from AoA
reviewing the previous communications between the parties
regarding the Grandfather Policy and Cure Policy. The letter
stated that “in order to maintain Standards Bonus
eligibility beyond 2014, Len Stoler Audi is required to enter
a Facility Letter of Intent (LOI) by December 31,
2014.” JS ¶ 19.
• It was impracticable to convert Stoler's existing
facility into an exclusive Audi facility.
• In mid-January 2015, AoA and Stoler entered into a
“Facility Agreement, ” in which Stoler agreed to
construct an exclusive Audi facility, and AoA agreed to pay
Stoler the Exclusive Standards Bonus once construction on the
new facility commenced.
• Negotiations of the Facility Agreement spanned
approximately one month. Stoler's counsel negotiated the
Facility Agreement on Stoler's behalf. Some of the
changes that Stoler's counsel requested were incorporated
into the final draft of the contract.
• The Facility Agreement provides, “[Stoler] and
its legal counsel have reviewed the laws applying to
dealer/manufacturer relations. [Stoler] agrees that the
Facility requirements as expressed in this Agreement are
reasonable and necessary in view of the need to service the
public and further that the economic conditions in the
industry and specifically in [Stoler]'s relevant market
area support this action.” JS ¶ 47.
• The Facility Agreement also represents that
“[b]oth parties have had legal counsel of their choice
review this Agreement and are fully advised as to the legal
and binding nature of this Agreement.” JS ¶ 48.
• In signing the Facility Agreement, Stoler
“agree[d] and covenant[ed] not to sue AoA with respect
to any alleged damages [Stoler] may suffer as a result of
[Stoler]'s loss of the right to receive any Standards
Bonus . . . arising out of [Stoler]'s failure to perform
its obligations under this Agreement.” JS ¶ 49.
• The Facility Agreement further contemplates that
Stoler would remain eligible to receive Standards Bonus
payments at a Brand Dedicated level, worth 2.35% of adjusted
MSRP; but AoA would cease paying Stoler any Standards Bonus
payments if Stoler had not begun constructing an exclusive
facility by December 31, 2015.
• If Stoler had not signed a letter of intent to build
an exclusive facility in accordance with the Grandfather and
Cure Policies, AoA would have ceased paying Stoler ...