Opinion ID: 202158
Heading Depth: 2
Heading Rank: 4

Heading: Genesis of the Present Disputes

Text: 12
13 Darling's customary retail rates for parts and labor, which include a wide variety of pricing mechanisms, exceed GM's uniform nationwide reimbursement rates. Depending on the particular part, Darling's may determine the parts price markup according to a matrix (providing a different percentage markup depending on the cost of the part), a menu (providing a flat rate for parts and labor for certain repairs), or a retail list (providing a list of suggested retail prices by the manufacturer). Although Darling's most often calculates its labor time by using the Motors Manual — one of a number of trade manuals used by repair shops to determine the amount of time appropriate for a given repair — it has used at least seven different methods to determine the repair time. Moreover, Darling's has charged different labor rates depending on the repairs made, and Maine's warranty reimbursement statute permits Darling's to change its various labor rates at any time so long as it posts the new rates within the view of its service customers. As explained above, WINS is not capable of accounting for these variables. 14 As a result, Darling's began submitting supplemental warranty reimbursement requests in June 2000. Although Darling's initially included with its claims most of the information required by GM, it did not provide either the date of service or the VIN. GM therefore had difficulty linking the supplemental claims with the corresponding WINS claims and confirming that the claims were submitted within 180 days of the repair. As it turned out, many of Darling's claims were untimely and, because the claims lacked the VINs, GM often had to request additional information from Darling's warranty administrator, Larry Rolnick. 15 Less than a month after Darling's first round of supplemental submissions, Joyce Nolan, GM's Director of Warranty Operations, wrote to John Darling, president of Darling's, to request the date of service and the VIN for each supplemental claim. Nolan advised Darling that, as soon as GM received this information, GM would supply Darling's with procedural information on receiving payment through WINS. Darling replied by letter, asserting that [b]ecause the [warranty reimbursement] statute does not require this information and because it is readily available to GM as part of the initial claim submission, we have chosen not to include it as part of our supplemental retail warranty claim sheet. Nolan responded that it would be unduly burdensome for GM to locate the initial claim submissions without the VINs. But, as a good will gesture, Nolan agreed to approve Darling's first two supplemental submissions and to provide procedural information about H-routing those claims, so long as Darling's would provide the applicable VINs by August 15, 2000. Nolan also stated that future supplemental claim submissions would not be approved if submitted without VINs. Darling's persisted in its refusal to provide VINs, failed to submit an H-route request for the first two sets of supplemental claims, and therefore never received reimbursement on those claims. 16 After further correspondence failed to resolve the impasse, GM's Market Area Manager assigned to Darling's, Barry Alick, arranged to meet with Darling at one of his dealerships in September 2000. Alick again explained that it was difficult for GM to access the claims history of a particular vehicle without the VIN and date of service. Nevertheless, Alick offered to pay all then-pending claims, even though many were untimely, if Darling's would agree to provide the VINs on all future claims and to H-route approved claims for payment via WINS. Darling's agreed and subsequently H-routed over $75,000 in supplemental claims, which GM paid. 17 Although Darling's began to include VINs with its supplemental claims, it continued to submit them late. In a February 2001 letter, Nolan reminded Darling of the 180-day filing deadline, but again agreed to pay the pending claims in an effort to work with you cooperatively. Nolan emphasized, however, that going forward, GM will not approve either initial or supplemental claims for warranty reimbursement unless the claim in question is received within 180 days of the repair order date. Darling's thereafter continued to submit untimely claims, and GM denied them. 18 In May 2001, Darling's responded by reducing the amount of information included in its supplemental claims. Darling instructed Rolnick to design a short form supplemental claim that included only the repair order number, the parts and labor reimbursement that WINS had paid at the uniform rate, a summary of Darling's retail rate for parts and labor, and the difference between the uniform reimbursement and Darling's retail rate. Darling's short form not only omitted the VIN and date of service for each repair, but also the other information it had previously provided explaining the basis for its customary retail rate. The omissions made it difficult for GM to access the underlying WINS data and left GM without a basis for assessing the reasonableness of the claims. Rolnick testified that changing to a short claim form actually increased his workload because it required first preparing an internal worksheet setting forth all the information previously provided to GM, and then preparing a short form omitting certain information.
19 Underlying the dispute about the information required in a supplemental claim was GM's concern that Darling's was over-charging it for warranty repairs. Because, as a practical matter, GM does not receive any of the actual repair invoices associated with a dealer's warranty claims, it monitors warranty claims by exception. In other words, GM pays warranty claims without verification that the dealer actually performed the work or performed the work in compliance with the dealer agreement. 6 20 In order to detect excessive warranty claims, GM analyzes the claims through its Automated Warranty Administrative Review Expert (AWARE) system. When AWARE identifies a dealer with elevated warranty levels, GM notifies the dealer and provides it with materials to conduct a dealer self-review. These self-reviews allow the dealer to audit itself and identify any instances in which it has over-charged GM or otherwise departed from the Dealer Agreement or Service Manual. If a dealer continues to exhibit apparently excessive warranty costs, GM may issue additional self-reviews and, eventually, may conduct its own claims expense review of selected records at the dealership. 21 Darling's had one of the highest cost per vehicle serviced and lowest customer satisfaction ratings of all the GM dealers located in the zone covering northern New England. During 1999 and 2000, its warranty claim submissions indicated elevated levels of warranty costs compared with other dealers. After Darling's performed three self-reviews, GM conducted a claims expense review in August 2000. The claims expense review revealed a number of improper warranty practices by Darling's: (1) seeking reimbursement for goodwill repairs made to cars covered by Darling's extended service contracts, 7 (2) charging labor hours in excess of those provided under GM's time guidelines, and (3) failing to retain parts replaced in connection with warranty repairs. As a result, GM debited $4,245 from Darling's account. After correspondence between the parties, GM agreed to re-credit Darling's all amounts except for $1,279, the amount paid to Darling's for warranty repairs for which Darling's did not retain parts as required by the Service Manual.
22 As set forth above, WINS evaluates the labor reimbursement portion of a warranty claim based on each dealer's pre-approved warranty labor rate multiplied by the GM labor time guideline for the particular repair. In situations where a dealer, like Darling's, charges a different retail labor rate depending on the type of repair, WINS uses a single rate based on the weighted average of the dealer's actual customer-pay experience. To make this calculation, GM requests that the dealership submit 100 sequential repair orders that reflect the labor rates actually charged to customers. The average of these charges becomes Darling's effective labor rate for purposes of the initial WINS reimbursement. 23 In September 2000, Darling's requested GM to increase its effective labor rate from $48.95 to $52.00 per hour to match its posted retail rate. Several months later, Darling's submitted a warranty labor rate adjustment application together with supporting documentation (i.e., a form detailing 100 sequential repair orders). This documentation revealed that the average rate Darling's actually charged customers was only $51.58. It was lower than the posted rate because Darling's provides discounts on certain repairs. As a result, GM denied Darling's request for a labor rate increase. After Darling's protested the outright denial, GM advised that it would increase Darling's effective labor rate to $51.58 upon receipt of a revised warranty labor rate adjustment application. GM did not require Darling's to resubmit the supporting documentation. Darling's refused to submit a revised application, so its WINS labor rate remained at $48.95. Nonetheless, under GM's reimbursement scheme, Darling's continued to receive the difference between the WINS rate and its posted retail labor rate in response to supplemental claims.