Opinion ID: 2762418
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Heading: “Rates” in the Ohio Motor Vehicle Dealer Act

Text: There is very little Ohio case law concerning the meaning of “rates” in the Act and no case explicitly defining the requirements of § 4517.52(B) regarding dealer compensation. Ohio Revised Code Ann. § 4517.01 et seq. The definition of the term “rates” is debated by the parties: Kings Dodge argues that the term encompasses not only the amount charged for the technician’s labor per hour, but also the number of hours allotted for a given repair—in sum, the total amount charged. Chrysler argues that “rates” refers only to the amount charged by a dealer for a technician’s labor per hour, and that it does not refer to the number of hours allotted by the dealer or the manufacturer for a given repair. Chrysler argues that the district court is correct in referring to the definition of “rate” supplied by Webster’s Encyclopedic Unabridged Dictionary of the English Language (1989), which defines the term as a “certain quantity or amount of one thing considered in relation to a unit of another thing and used as a standard or measure: at the rate of 60 miles an hour.” Kings Dodge, Inc., 2013 U.S. Dist. LEXIS 168756, at . We find a similar definition in Webster’s Third New International Dictionary 1884 (2002)—“rate” as a “quantity, amount or degree of something measured per unit of something else (as time)”—however, the same dictionary also contains a looser reference to “a reckoned value.” Black’s Legal Dictionary 1452 (10th ed. 2014), denotes “rate” as “proportional or relative value” as well as “an amount paid or charged for a good or service.” The Oxford Dictionaries refer to both “a measure, quantity, or frequency, typically one measured against some other quantity or measure,” as well as “a fixed price paid or charged for something, especially goods or services.” Oxforddictionaries.com (last visited August 27, 2014). Kings Dodge argues that these latter, broader definitions apply. -8- No. 14-3119, Kings Dodge, Inc. v. Chrysler Group, LLC There are clearly multiple common usages for “rate” that include both a narrower reference to a ratio, as well as a broader term for the total “amount” paid for an item or service. In the context of the statute—which requires a manufacturer to reimburse a dealer “for labor and parts used to fulfill warranty and recall obligations of repair and servicing at rates not less than the rates charged by the [dealer] to its retail customers for like service and parts”—the term “rates” also lends itself to application in two different settings: it applies both to labor, which can be quantified by a price per hour, and parts, which cannot be. Kings Dodge argues that “rate” must refer to the overall amount charged for a repair or part, while Chrysler argues that “rate” can mean only the sum charged on an hourly basis for labor. The plain language and its common usage provide support for each party’s interpretation; therefore, we find the statute to be ambiguous. As the Ohio statute does not provide a technical definition of “rate” in the context of the motor vehicle industry, we may turn to other sources, including the decisions of other courts interpreting similar statutes. Hoffman, 865 N.E.2d at 1263-64. Several states have motor vehicle dealer statutes that are similar, although not identical, to Ohio’s, and a few courts in those jurisdictions have addressed the question of warranty reimbursement rates. See John P. Ludington, Annotation, Validity, Construction, and Application of State Statutes Regulating Dealings between Automobile Manufacturers, Dealers, and Franchisees, 82 A.L.R.4th 624 (1990). Here too, however, the case law falls on both sides of the issue, defining “rate” both narrowly and expansively. Kings Dodge draws our attention to the Seventh Circuit, where Judge Posner interpreted a similar Illinois statute and suggested in dicta that “[t]he basic formula for reimbursement of the pure service (labor) component is an hourly wage rate times the number of hours the repair or -9- No. 14-3119, Kings Dodge, Inc. v. Chrysler Group, LLC other servicing in question is estimated to take.” Kronon Motor Sales, Inc. v. Ford Motor Co., 41 F.3d 338, 340 (7th Cir. 1994). That language is not determinative, however, as even there an hourly wage “rate” is distinguished from the “formula” for calculating “pure service” that Judge Posner proposes. The Kronon court, moreover, did not address whether the statute required the manufacturer to accept the dealer’s labor times or if it could impose its own standard times. Indeed, Ford paid its dealers according to its own repair times, as does Chrysler in this case, and Kronon did not challenge that practice. Chrysler responds by citing an analogous case with similar facts, Marler Ford Co., Inc. v. Ford Motor Co., 885 So.2d 654, 659-663 (La. Ct. App. 2004). There, a statute forbade manufacturers to “pay its dealers at a price or rate for warranty work that is less than that charged by the dealer to retail customers of the dealer for nonwarranty work of like kind,” including parts and labor. Id. Despite this statutory language, the Louisiana Court of Appeals held that it was fair and reasonable for the manufacturer to use its own internal labor time standards to determine the rate, rather than those in the Motor guide used by the dealer. Id. As Chrysler also points out, more recently the Virginia Court of Appeals reversed a decision of the Commissioner of Department of Motor Vehicles addressing the statutory provision that “[c]ompensation of a dealer for warranty . . . service . . . shall not be less than the amounts charged by the dealer . . . to retail customers for nonwarranty service.” Navistar, Inc. v. New Baltimore Garage, Inc., 731 S.E.2d 13, 18-20 (Va. Ct. App. 2012). Critical to the court’s reasoning was the observation that the General Assembly had amended the clause by substituting “amounts” for “rates.” Id. at 18. In light of this revised language, the court held that the manufacturer would be obligated to reimburse for warranty work using the same repair times charged to retail customers, as well as for items such as waste-disposal charges or computer-use -10- No. 14-3119, Kings Dodge, Inc. v. Chrysler Group, LLC fees that were charged to such customers. Id. Chrysler argues that the substitution of “amounts” for “rates” in the Virginia statute was critical to the court’s holding, making the case inapplicable to the Ohio statutory language at issue here. Kings Dodge is most persuasive in pointing us to Maine, which has ample case law on this issue. There the pertinent statute required manufacturers to reimburse dealers for labor at “‘the retail rate customarily charged by that franchisee for the same labor when not performed in satisfaction of a warranty.’” Darling’s v. Ford Motor Co., 719 A.2d 111, 115-16 (Me. 1998) (quoting 10 Me. Rev. Stat. § 1176 (2014)). The Supreme Judicial Court held, in response to questions certified from the United States district court, that the statute permitted dealers to use and be reimbursed for “flat rate pricing” according to their own estimations of labor hours, rather than obliging them to accept reimbursement calculated using the manufacturer’s labor time estimates. Id.; see also Darling’s v. Daimler Chrysler Motors Co., LLC, 2004 WL 1598682 (Me. Sup. Ct. May 10, 2004) (following Darling’s v. Ford); Nissan Motor Corp. in U.S.A. v. Darling’s Honda/Nissan, 1999 Me. Super. LEXIS 221 (1999) (same); American Honda Motor Co. v, Darlings’s Honda/Nissan, 1997 Me. Super. LEXIS 225 (1997) (holding “rate” to encompass total amount charged for labor, not merely hourly labor costs). In coming to this conclusion, the Darling’s Court cited legislative history indicating that the Legislature was concerned that manufacturers used their “superior bargaining power to reimburse dealers at artificially low prices for warranty repairs,” and the statutory requirement that the dealer post its labor rate “‘in a place conspicuous to its service customer.’” Darling’s, 719 A.2d at 115-16. No such legislative history exists here, Chrysler argues. Indeed, as the case law in other jurisdictions is persuasive on both sides of this issue, we turn to consider the full context and history of the Ohio statute, which we find to be determinative. -11- No. 14-3119, Kings Dodge, Inc. v. Chrysler Group, LLC