## Facts

- Bronx Auto Mall, Inc., doing business as Bronx Acura, operated an authorized Acura dealership in the Bronx, New York, owned and controlled by Harold Schlanger.
- American Honda Motor Co., Inc. (AHMC) distributed Honda and Acura vehicles in the United States and built a nationwide Acura dealer network beginning in 1986.
- AHMC initially granted Schlanger an Acura franchise despite knowing his facilities were outdated and that the Bronx location and discount strategy did not match a luxury-brand image, because AHMC wanted rapid market coverage.
- In the early 1990s, Acura sales declined, and AHMC sought to reduce and reposition its dealer network toward a higher-prestige brand image.
- In 1995, AHMC issued a notice stating it would not renew Bronx Acura’s franchise at expiration, citing failure to complete substantial facility renovations and upgrades.
- The required renovations were expensive, would have displaced space used for other brands, and were found economically unreasonable given Bronx Acura’s sales and profitability.
- Bronx Acura alleged the renovation demands were used as a pretext to remove a Bronx dealer viewed as inconsistent with Acura’s desired image and competitive with suburban dealers.

## Issues

1. Whether AHMC’s demanded facility renovations as a condition of renewal were reasonable and supported “due cause” under the New York Franchised Motor Vehicle Dealer Act.
2. Whether stating a false or pretextual reason in a nonrenewal/termination notice constitutes an unfair or deceptive business practice under the Act.
3. Whether Bronx Acura was entitled to injunctive relief barring termination or nonrenewal based on the existing notice and renovation demands.

## Decision

- The court held AHMC failed to prove the renovation demands were reasonable and thus could not condition renewal on completing them or treat noncompliance as grounds for nonrenewal.
- The court held that using a termination/nonrenewal notice that states a false or pretextual reason violates the Act’s prohibition on unfair or deceptive business practices.
- The court permanently enjoined AHMC from terminating or refusing to renew based on the existing notice and from relying on failure to complete the specified renovations as the basis for termination/nonrenewal.
- On appeal, the judgment was affirmed on the district court’s opinion, and a supplemental award of attorney’s fees and costs to Bronx Auto was affirmed.

## Legal Principles

- Under the New York Franchised Motor Vehicle Dealer Act, a franchisor’s conditions for renewal must be demonstrably reasonable; unreasonable facility-upgrade demands cannot supply lawful grounds for nonrenewal.
- A termination/nonrenewal notice that states a false or pretextual reason is an unfair or deceptive business practice under the Act, even if the franchisor may have had other potentially permissible reasons not stated in the notice.
- Injunctive relief is appropriate to prevent enforcement of a defective notice and to require compliance with statutory standards of reasonableness and truthful notice in franchise termination/nonrenewal.

## Conclusion

The court blocked AHMC’s attempted nonrenewal because the renovation conditions were not shown to be reasonable and because the written notice relied on a pretextual rationale, conduct treated as an unfair business practice under New York’s dealer protection statute.


Bronx Auto Mall, Inc. v. Am. Honda Motor Co., 934 F. Supp. 596 (S.D.N.Y. 1996)