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When it comes to maintaining a business, keeping customer-facing facilities current with the changing times can sometimes be a daunting task. Failure to provide a modern and updated customer experience can affect sales and otherwise negatively affect a business’s prospects. For one Volvo dealership near Houston’s Memorial Park, it may also mean the end of the road.

Star Motors Cars was Volvo’s Houston franchise, signing on nearly 50 years ago. However, despite that fact that Volvo has boasted record sales lately in the wake of adding new sleek and aerodynamic models to its lineup, Star’s performance has declined. In this regard, Volvo contends that Star was the brand’s worst performing outlet in the entire country for six years running. Volvo is now seeking to cut ties with Star, claiming that the dealership’s aging facilities fail to project sufficient status to potential customers.

According to court transcripts in the dispute, a company manager described the dealership as “going to a museum or a time capsule.” The dealership is purportedly so dated that the customer-contact area of the service bay is devoid of any air conditioning, whereas outside one can find a hockey stick-shaped sign that has long since been retired from every other Volvo dealership in the world.

Despite the dealership’s struggle to move its facilities into more modern times, Star’s long-time owner Glenn Seureau believes the lack of sales are due to something else. In particular, he blames the location of the dealership and Volvo’s incentive programs, which he claims were so unbalanced that Star “lost money selling cars.”

In other contexts, a dispute between a retailer and manufacturer is often handled in private and relatively quickly. For example, a manufacturer might simply opt to replace a dealer that it deems unsuitable. Things are quite different in the automotive industry though due to protectionist laws that shield dealers from car makers and heavy oversight by government regulators.

With the Volvo/Star dispute entering its fourth year, Texas regulators are tasked with answering the question of whether Volvo has the legal right to cut ties with Star and move on to a more attractive business partner. This issue is complicated, as Volvo could not simply claim that Star is not selling enough cars. When a car manufacturer seeks to end a relationship with a Texas auto dealer, seven tests are considered, including not just sales but also whether the public has been harmed. This means that even if a franchise persistently underperforms, it can be very difficult to sever the relationship. So far, though, Volvo appears to be making its case.

The dispute was heard last fall over a six day period. In April 2019, Judges Henry Card and Sarah Starnes found that, while two of the car maker’s incentive programs did treat Star unfairly, under Texas law Volvo still had proven it was legally entitled to terminate its relationship with Star and seek a new partner. The fight is not over, though, as Star has indicated that it intends to take the case to the Texas Department of Motor Vehicles Board.

Houston, Texas Commercial Litigation Attorneys

Okin Adams is a Texas law firm assisting businesses of all sizes with their legal, financial, and strategic challenges. We have represented entities in a variety of litigation-related matters and understand the unique issues and procedures that can impact a business dispute.

We bring an effective and efficient blend of big-law commercial litigation experience to the table, but handle matters with the personal touch and adaptability of a boutique. We also embrace legal technologies that allow us to scale our representations as needed and handle large volumes of data and other client materials. We employ complementary technologies in the courtroom, with the ability to navigate and display evidence in a digital presentation that maintains pace and effectiveness with witness examinations and oral arguments. Put simply, our goal in each case is to outmatch our opponent and obtain the best result possible for the client.