Opinion ID: 202158
Heading Depth: 2
Heading Rank: 3

Heading: Darling's Counterclaims

Text: 36
37 Darling's argued at the bench trial that § 1176 does not permit a manufacturer to reimburse its dealer in a multi-step process whereby the dealer initially receives only partial reimbursement. The district court rejected this argument, finding nothing in the statute requiring a manufacturer to reimburse its dealers at the retail rate in one lump-sum payment. GM-Darling's I, 324 F.Supp.2d at 270. The court also found, as a factual matter, that GM's multi-step reimbursement process is not so complicated and costly that it circumvents the purposes of the statute by preventing or unreasonably interfering with reimbursement at the retail rate. Id. The court found that the administrative costs to Darling's of complying with GM's two-step process are reasonable, and that it would be overly burdensome to GM to modify WINS or to convert to a manual processing system so that GM could reimburse Darling's in one step. See id. at 270-71. 38 Darling's argues on appeal that the plain language of § 1176 mandates that GM fully reimburse Darling's at the retail rate in one payment. Darling's contends that each time GM makes a payment at the uniform WINS rate, it violates the statute by reimbursing Darling's below its customary retail rate. Darling's maintains that its interpretation of the statutory text is consistent with the legislature's intent to treat manufacturers the same as any other service customer. Because ordinary non-warranty customers are not entitled to pay repair bills in incremental steps, Darling's argues, neither should GM. Finally, Darling's contests the court's factual findings that it would be prohibitively difficult for GM to modify WINS to allow full reimbursement at the retail rate in one step, and that it would be overly burdensome for GM to review Darling's claims manually in the first instance. 39 As with Darling's audit and charge back argument, this argument fails because it attempts to extract more restrictions from the statute than the plain language supports. The pertinent language from the statute states: 40 [T]he [manufacturer] shall properly and promptly fulfill its warranty obligations... and ... shall reimburse the [dealer] for any parts ... provided at the retail rate customarily charged by that [dealer]... [and] shall reimburse the [dealer] for any labor ... performed at the retail rate customarily charged by that [dealer].... 41 Me.Rev.Stat. Ann. tit. 10, § 1176 (emphasis added). The properly and promptly language sets forth two goals. Manufacturers must act promptly to reimburse their dealers, but they must also take care that their calculations are proper. As noted above, the statute specifically provides that manufacturers have 60 days (previously 30 days) to approve or disapprove a warranty reimbursement claim, and have an additional 60 days (previously 30 days) after approval to pay an approved claim. Id. The proper reimbursement rate is, of course, the dealer's customary retail rate. Id. We agree with the district court's conclusion that GM properly and promptly fulfills its warranty obligations by reimbursing Darling's at its customary retail rate within 60 days of approval. It is of no consequence that GM pays its reimbursements in increments, so long as the full retail rate is paid within the statutory time-frame. 42 Although the statute sets forth the basic parameters for processing warranty claims, we see no indication, either on the face of the statute or in its legislative history, prescribing how GM must structure its claims processing system. That the legislature sought to equalize the cost of warranty and non-warranty repairs does not mean, as Darling's argues, that it intended that manufacturers would pay for repairs in the same way as non-warranty customers. Moreover, GM's multi-step reimbursement system appears to strike a reasonable balance of the statutory goals: prompt yet accurate reimbursement. The initial step allows dealers to collect a significant portion of their reimbursement in short order. Despite the fact that the statute gives GM 120 days to approve and pay warranty reimbursement claims, 90 percent of all initial WINS claims are approved and paid, albeit at GM's uniform nationwide rate, within ten days of submission. To ensure that the claimed retail rates are bona fide, however, GM manually reviews each supplemental claim seeking reimbursement in excess of GM's uniform nationwide rate. Although GM takes more time to process the supplemental claims, approved claims are paid within the statutory deadlines. 43 We also reject Darling's contention that GM's reimbursement process places administrative burdens on Darling's that effectively defeat the statute's purpose of equalizing the costs of warranty and non-warranty repairs. The district court found that, given the amount of supplemental claims paid by GM to Darling's — over $200,000 in one 20-month period — compared to the minimal administrative costs associated with submitting those claims — approximately $6,500 during that same period — GM's two-step warranty reimbursement process is not unreasonably burdensome. GM-Darling's I, 324 F.Supp.2d at 270. We agree that when these administrative costs are compared to the returns, they are not so out-of-line ... as to raise concerns about whether Darling's is truly being reimbursed at its retail rate. Id. at 271. 44 Because we affirm the district court's rulings that § 1176 does not prohibit GM's claims processing system, and that the administrative costs associated with filing supplemental claims are so insignificant that they do not defeat the purpose of the statute, we need not consider whether GM could modify WINS to allow one-step reimbursement, or whether GM could manually review all warranty reimbursement claims in the first instance.
45 Darling's argued below that GM violated § 1176 by refusing to increase Darling's approved warranty reimbursement labor rate used by WINS in the initial step of the reimbursement process. As explained above, the labor rate used by WINS is calculated by averaging the labor rates charged in 100 sequential non-warranty repairs. GM calls it the effective labor rate. Darling's submitted an application requesting an increase in its effective labor rate from $48.95 to $52.00 per hour to reflect its posted labor rate, but the paperwork submitted by Darling's only supported an increase to $51.58. GM indicated to Darling's that it would increase Darling's labor rate to $51.58 upon submission of a revised warranty labor rate application, but Darling's never filed a revision. 46 The district court upheld GM's refusal to increase Darling's labor rate to $52.00. The court noted that since GM's multi-step reimbursement system is permissible under § 1176, the issue of GM's `refusal' to increase Darling's labor rate in the initial reimbursement stage is probative only as to whether GM has complicated the reimbursement process to the extent that dealers are discouraged from making supplemental claims. GM-Darling's I, 324 F.Supp.2d at 272. Because Darling's did not allege that GM failed to reimburse Darling's at its full labor rate following submission of its supplemental claims, the court concluded that the evidence did not support such a conclusion. The court also noted that GM had expressed a willingness to increase Darling's labor rate following its submission of a revised application, and the court found that the administrative burden of submitting such a revised application would be virtually nonexistent. Id. 47 On appeal, Darling's focuses on GM's practice of calculating the initial WINS reimbursement based on Darling's effective or average rate. Essentially repeating its argument that GM must reimburse its Maine dealers in a single step, Darling's contends that the statute does not contemplate payments at the effective rate, but rather, requires that its labor costs be reimbursed at the customary retail rate only. Because it has established its customary retail labor rate by posting its labor rates in a place conspicuous to its service customers, see Me.Rev.Stat. Ann. tit. 10, § 1176; id. tit. 29-A, § 1805, Darling's argues that GM must reimburse at that rate. Darling's further argues that GM's initial use of an effective rate amounts to arbitrary and capricious behavior because the evidence establishes that WINS is capable of assigning a unique labor rate to each dealer. Darling's contends that WINS could reimburse Darling's at its actual retail labor rate — i.e., its posted labor rate — in the first instance without requiring the submission of unnecessary warranty labor rate applications. 48 As the district court properly concluded, Darling's statutory argument cannot stand in light of our holding that GM's multi-step reimbursement system is lawful. That Darling's receives less than its full retail reimbursement rate in the initial step is not a violation of the statute so long as GM pays Darling's its full retail rate within the statutory period for approval and payment. And Darling's does not dispute that GM has paid it the difference between its retail rate and its effective rate in response to its supplemental reimbursement requests. 49 Darling's fares no better in its alternative argument — that, because WINS has the capability of fully reimbursing Darling's in one step, requiring the submission of unnecessary documentation to establish an effective rate, and thus unnecessarily dragging out the reimbursement process, is arbitrary and capricious behavior in violation of the statute. Darling's argument fails because of its stipulation that it charges different retail labor rates depending on the type of repair. Although WINS has the capability of programming one unique labor rate for each dealer, the court supportably found that it is not capable of accounting for multiple labor rates for each dealer. Therefore, it is not unreasonable for GM to reimburse Darling's based on an average labor rate in the first instance, and then for the difference between that average rate and the actual retail rate in response to a supplemental claim. 50
51 As noted above, after nearly a year of negotiating with Darling's concerning the information required for a supplemental claim, and after repeatedly reminding Darling's of the 180-day submission deadline provided in the Service Manual, GM denied several of Darling's supplemental claims as untimely. When Darling's retaliated by submitting short form claims omitting the VIN and date of service, GM denied those as well. GM's amended complaint sought declarations that § 1176 does not bar GM from requiring Darling's to include the VIN and date of service with each supplemental claim, and that GM is not obligated to pay any warranty reimbursement claim that is not submitted within 180 days of the repair. Darling's countered that its short form claims provided all the information required by Maine law. Darling's also argued that the only deadline for the submission of a warranty reimbursement claim is set forth in the statute of limitations provision of the Dealer Act. See Me.Rev.Stat. Ann. tit. 10, § 1183 (setting a four-year limitation period for [a]ctions arising out of any provision of the Dealer Act). Thus, Darling's sought damages for the over $122,000 in warranty claims denied by GM. 52 With regard to 180-day submission deadline, the district court granted GM's motion for judgment on the pleadings, holding that the 180-day limit set forth in the Service Manual is binding on the parties as to both initial warranty claims and supplemental claims. In so doing, the court rejected Darling's argument that the Dealer Act's limitation period sets the time period for submitting a claim for reimbursement. Cf. Darling's-Ford II, 719 A.2d at 117 (answering certified questions posed by the federal district court in Darling's-Ford I, and holding that because § 1176 does not bar a manufacturer from imposing a reasonable time limit for warranty submissions, the district court was correct in concluding that Ford's 180-day limit was permissible under the statute). 11 Following the bench trial, the court also upheld GM's contractual right to require the VIN and date of service as part of a 'sufficiently individualized' claim. GM-Darling's I, 324 F.Supp.2d at 274. The court found that GM had a reasonable basis for requiring the VIN and date of service, and that Darling's refusal to provide such readily available information was unreasonable. Id. at 273. 53 On appeal, Darling's abandons its argument that the statute's limitations period sets the claims submission deadline. Instead, it presents a new argument that attempts to distinguish the present case from Darling's-Ford I and Darling's-Ford II by arguing that its late claim submissions were justified by GM's delay in creating a supplemental claims procedure. Darling's contends that, because GM did not provide it with a mechanism within which to bring its ongoing and past due warranty reimbursement rights to the attention of GM, we should not enforce GM's 180-day submission deadline. As this argument was not raised below, we do not consider it now. See B & T Masonry Constr. Co. v. Pub. Serv. Mut. Ins. Co., 382 F.3d 36, 40 (1st Cir.2004) (holding that in the absence of extraordinary circumstances, legal theories not raised squarely in the lower court cannot be broached for the first time on appeal) (quotation omitted). 12 54 With respect to the VIN and date of service dispute, Darling's hinges its argument on a faulty interpretation of the SJC's opinion in Darling's-Ford II. Darling's contends that the SJC set forth a definitive statement of what information the statute requires a dealer to include in its claims for reimbursement: (1) the original computerized claim number, (2) the retail amount claimed, (3) the amount the dealer received under the uniform nationwide system, (4) the nature of the claim (i.e., parts or labor), and (5) the difference between the amount received and the retail price. See 719 A.2d at 114-15. 13 Because the SJC did not include the VIN and date of service in this list, Darling's argues, the statute does not require such information to accompany its supplemental claims. 55 Darling's argument is again premised on the faulty assumption that GM can only exercise rights vis-á-vis its dealers that are expressly provided for in the statute. This is not so. We agree with the district court's interpretation of Darling's-Ford II. The SJC's opinion does not suggest that the five items considered in that case were the only items that a manufacturer could require a dealer to provide in its warranty reimbursement claims. See GM-Darling's I, 324 F.Supp.2d at 273 n. 14; Darling's-Ford II, 719 A.2d at 114-15. Again, where the statute does not expressly regulate a particular issue, we will not interpret it to control an area that is governed by the terms of a dealer-manufacturer agreement. See supra at 109-10. 56 The district court supportably found that, under the Dealer Agreement, GM has a right to such information and assistance as may reasonably be requested by [GM] to facilitate compliance with applicable laws, regulations, investigations and orders relating to products. GM-Darling's I, 324 F.Supp.2d at 266, 274 (quoting the Dealer Agreement). The Dealer Agreement further provides that the refusal to provide such information constitutes a breach. See id. Thus, although the statute may not require Darling's to submit the VIN and date of service with its supplemental claims, the GM-Darling's Agreement does require it so long as the request is reasonable. 57 We conclude that the court's finding — that inclusion of the VIN and date of service on supplemental claims greatly facilitates the claims administration process while imposing only a marginal burden on Darling's — was not clearly erroneous. See id. at 273. The evidence establishes that the most efficient way for GM to pinpoint a particular repair is through use of the VIN and date of service. Moreover, Darling's warranty administrator acknowledged that it is actually less burdensome for Darling's to provide the VIN and date of service data because omission of that data requires the extra step of creating a short form claim. Given the added administrative efficiencies, and the lack of any burden imposed on Darling's, we hold that GM may reasonably require Darling's to furnish the VIN and date of service with each supplemental claim, and that, pursuant to the GM-Darling's Agreement, Darling's is not entitled to reimbursement where such information is withheld.
58 Finally, Darling's argues that GM's failure to honor the deadlines of § 1176, its refusal to reimburse Darling's claims that were submitted without the VINs and dates of service, its refusal to approve Darling's application for a labor rate increase, and its insistence on the right to debit previously approved and paid warranty reimbursement claims constitute arbitrary and unconscionable conduct in violation of Me.Rev.Stat. Ann. tit. 10, § 1174 (providing, in relevant part, that [i]t shall be unlawful for any ... [m]anufacturer... to engage in any action which is arbitrary, in bad faith or unconscionable and which causes damage to any of said parties or to the public). In light of our holdings above, finding no violations of § 1176 and no other indication that GM's conduct was arbitrary or in bad faith, we affirm the district court's ruling rejecting this claim. 14