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Warranty parts surcharge denied

February 28, 2014
An Illinois appellate court on Feb. 20 upheld a lower court’s ruling that a surcharge imposed by Nissan on the state’s Infiniti dealers for repair work under warranty violates section 6 of the Illinois Motor Vehicle Franchise Act.
In 2007, when Nissan did not have a written agreement with a majority of its Illinois Infiniti dealers to set a uniform parts reimbursement rate, the company began imposing an across-the-board surcharge on the wholesale invoice of each new vehicle it sold to its dealers. The surcharge, listed as a "Warranty Supplemental Cost Recovery" charge, ranged from as low as $90 in 2007 to as high as $245 by 2009. 
The surcharge appeared as a separate line-item charge to the dealers as part of their total costs owed to Nissan via the wholesale invoice, but did not appear as a charge that figured into the total MSRP of the vehicle on the invoice as did other line-item charges such as destination and handling costs and vehicle options like splash guards. Nissan imposed the charge on all new Infiniti vehicles sold to all Illinois dealers, regardless of their actual individual warranty reimbursements.
Attorneys for Nissan argued the surcharge was permitted under section 6(g) of the franchise act (815 ILCS 710/6). 
But the Appellate Court ruled that section 6(b) of the Act, which generally provides that "the franchiser shall reimburse the franchisee for any parts provided in satisfaction of a warranty at the prevailing retail price charged by the dealer for the same parts when not provided in satisfaction of a warranty" is the basic governing principle, and that the franchiser may surcharge dealers ONLY when the franchiser has availed itself of the right presented in section 6(g) to enter into an express written contract with the majority of its Illinois dealers on a uniform warranty reimbursement policy, and then may recover costs ONLY from those franchisees who are receiving their "prevailing retail price." 
The appellate court decision upheld the rulings by both the Illinois Motor Vehicle Review Board and the Cook County Circuit Court. Nissan retains the right to attempt an appeal to the Illinois Supreme Court. 
The CATA will keep dealers up-to-date on any further developments. Both the CATA and the IADA submitted amicus curiae, or "friend of the court" filings by someone who is not a party to a case who offers information that bears on the case but who has not been solicited by any of the parties to assist a court.
A filing may take the form of legal opinion, testimony or learned treatise (the amicus brief) and is a way to introduce concerns ensuring that the possibly broad legal effects of a court decision will not depend solely on the parties directly involved in the case. 
 
The decision on whether to admit the information lies at the discretion of the court.
 
 

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