Both the Ohio Motor Vehicles Dealers Board and the courts said that Ohio’s motor vehicle law did not give the Board the power to prevent the seller from selling to another party pending resolution of the buyer’s Board protest.
M&A Stories
April 15, 2022
Introduction:
Buying a business franchise can be complex as the franchisor’s consent is required for the acquisition. In this case, a buyer sought to purchase an auto dealership with a Honda franchise but faced challenges when Honda refused to approve the acquisition.
The Deal:
The buyer and seller agreed to an asset purchase agreement for the auto dealership, including the Honda franchise. However, Honda declined to give its consent, prompting the buyer to file a protest with the Ohio Motor Vehicles Dealers Board, arguing that Honda’s denial lacked valid reasons.
As the protest was underway, the buyer discovered that the seller intended to sell the dealership’s assets to another party. To prevent this transfer, the buyer filed a motion with the Board, requesting to halt Honda’s approval of the sale. However, the motion was denied as the Board lacked the authority to issue such a stay.
The Lawsuit:
In response, the buyer initiated a lawsuit in the state court to prevent the sale to the other dealership. Unfortunately, during the legal process, the dealership was already transferred from the original seller to the other dealership.
Court Rulings:
Both the trial court and the intermediate appellate court determined that the Ohio Motor Vehicles Dealers Board did not have the authority to halt the sale to the other dealership while the buyer’s administrative protest was ongoing.
This case is referred to as Ironwoods Frye v. American Honda Motor Co., 532949, Court of Appeals of Ohio, Ninth District, Lorain County, (March 21, 2022.)
Comment:
In hindsight, the buyer might have wanted a provision in the asset purchase agreement that would prevent the seller from selling the dealership to another party while the buyer’s administrative protest was still in progress.
By John McCauley: I write about recent legal problems of buyers and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
Telephone: 714 273-6291
Check out my book: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles
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