Navistar, Inc. v. New Baltimore Garage, Inc.

COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Felton, Judges McCullough and Huff
Argued at Alexandria, Virginia
NAVISTAR, INC.
OPINION BY
v. Record No. 2343-11-4 JUDGE STEPHEN R. McCULLOUGH
AUGUST 14, 2012
NEW BALTIMORE GARAGE, INC. AND
COMMISSIONER, VIRGINIA DEPARTMENT
OF MOTOR VEHICLES
FROM THE CIRCUIT COURT OF FAUQUIER COUNTY
Jeffrey S. Parker, Judge
Jonathan P. Heyl (Scott D. Helsel; Smith Moore Leatherwood LLP;
Walton & Adams, P.C., on briefs), for appellant.
Clifford L. Athey, Jr. (C. Todd Gilbert; Kimberly M. Athey; Pond,
Athey, Athey & Pond, P.C., on brief), for appellee New Baltimore
Garage, Inc.
Eric K.G. Fiske, Senior Assistant Attorney General (Kenneth T.
Cuccinelli, II, Attorney General; Janet L. Westbrook, Assistant
Attorney General, on brief), for appellee Commissioner, Department
of Motor Vehicles.
The Commissioner of the Department of Motor Vehicles concluded that a chargeback in the
amount of $57,333.60 and a reduction in the hourly labor rate that Navistar, Inc. imposed on New
Baltimore Garage, Inc. for warranty work were invalid under Code § 46.2-1571. The Circuit Court
for Fauquier County affirmed the Commissioner’s decision. Navistar appeals, challenging the
Commissioner’s interpretation of the statute, as well as the evidence New Baltimore relied upon to
establish a violation of Code § 46.2-1571. We conclude that the Commissioner erred in his
interpretation of Code § 46.2-1571. Therefore, we reverse and remand for a new hearing.
BACKGROUND
I. NAVISTAR IMPOSES A CHARGEBACK AND A LABOR RATE REDUCTION
FOLLOWING CALLS FROM A SECRET SHOPPER.
Navistar manufactures trucks under the “International” brand. New Baltimore sells and
services trucks for Navistar pursuant to a franchise agreement. The franchise agreement spells out
what New Baltimore can charge Navistar when it performs warranty work for Navistar. Section
3.0.4 of the franchise agreement specifies that, for warranty work, Navistar will pay New Baltimore
“[a]n amount equal to the servicing location’s approved warranty labor reimbursement rate (not to
exceed the posted door rate; reference. Section 8.1.2.1) multiplied by the amount of time allowable
for the particular service operation.” Under Section 8.1.2.1 of the Warranty Procedures and
Administrative Policies Manual, a dealer’s “approved warranty labor rate shall not exceed the
posted daytime hourly rate which the Dealer charges its customers.” At the time the dispute arose,
the hourly rate for warranty work approved by Navistar was $102 per hour. By statute, and under
the agreement, New Baltimore can request an increase in the hourly labor rate from Navistar.
New Baltimore also performs warranty work for Nissan and performs diagnostic and repair
services for non-warranty retail customers. For its non-warranty customers, New Baltimore
provides an estimate, but can and does charge an hourly rate based on how long the job takes.
However, because customers believe that a written estimate is what will be charged, at times it is
necessary to adjust a price downward, even though New Baltimore’s mechanics took longer to
complete the job than what was anticipated in the estimate.
Warranty work for Navistar operates differently. Navistar approves an hourly rate for its
franchisees, and then that rate is multiplied by a “Standard Repair Time,” also called an SRT.
Standard Repair Times are set forth in a published guide. If a dealer takes more time to make a
repair than is provided for in the standard repair time, the dealer is still paid based on the Standard
Repair Time. Thus, unlike retail customers, for which there is no hourly cap, the Standard Repair
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Time caps the hours New Baltimore can charge Navistar for warranty repairs. To illustrate, if it
takes New Baltimore five hours to perform a specific repair, New Baltimore can charge the retail
customer for the full five hours. If the same warranty repair for Navistar is capped by a standard
repair time of three hours, New Baltimore can charge Navistar only for three hours, even if it took
five hours to complete the job.
In the event a repair is not covered by a Standard Repair Time, New Baltimore can charge
“an amount equal to the approved warranty labor reimbursement rate multiplied by the actual time
reasonably spent performing the warranty service, which is subject to audit by [Navistar].” These
charges are known as “T time.” T-time charges can also apply when a particular repair proves
exceptionally difficult. T-time operates in a way that is similar to the rates charged to retail
customers. Navistar carefully monitors those charges and can approve or deny them.
Not all work performed by New Baltimore for Navistar fits into the two basic categories
above. Navistar has developed additional pricing plans for its dealers, such as the Performance PM
program, which allows participating dealers to charge a flat dollar amount for a particular service.
Another such program is the Service Partners program, designed for large fleet customers. Both of
these programs are voluntary; dealers are not required to participate in them. Finally, there are
“policy adjustments.” Policy adjustments, or “policy,” are repairs done out of warranty, but ones
that Navistar covers for the sake of good customer relations. Occasionally, the dealer covers part of
a policy repair.
The evidence established that New Baltimore also charges certain fees to non-warranty
customers. For example, New Baltimore charges a flat fee for computer use to retail customers.
The fee is imposed to offset the cost of the computer. Navistar does not pay this fee for its warranty
work.
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On May 12, 2008, after New Baltimore sought an hourly rate increase from Navistar, a
Navistar employee made a “secret shopper” call to New Baltimore. A New Baltimore employee
quoted the secret shopper a labor rate of $90 per hour. The $90 rate quoted to the secret shopper
was below the $102 posted “door rate” Navistar had approved for New Baltimore. Based on this
discrepancy, Navistar concluded that New Baltimore was charging Navistar $102 for warranty work
while charging its retail customers $90 per hour. This practice, Navistar concluded, placed New
Baltimore in violation of its franchise agreement. On June 16, 2008, Navistar imposed a
“chargeback” on New Baltimore for the twelve preceding months.1 Navistar calculated the
chargeback by multiplying the total number of warranty hours that New Baltimore had billed
Navistar between May 19, 2007 and May 20, 2008, which was 4,778.8 hours, by $90 per hour. The
difference between the quoted $90 and the approved $102 hourly rates for this warranty work is
$57,333.60. Navistar considered this amount to be its “overpayment” to New Baltimore under the
franchise agreement.
In July of 2008, a Navistar secret shopper made another call, and New Baltimore again
quoted a rate of $90 per hour. On July 15, 2008, Navistar unilaterally reduced the hourly rate it
pays to New Baltimore for warranty work to $90 per hour. Effective October 21, 2008, Navistar
approved a rate increase from $90 to $107 per hour.
II. NEW BALTIMORE SEEKS ADMINISTRATIVE REVIEW OF THE CHARGEBACK.
New Baltimore challenged the chargeback and the rate reduction by requesting a formal
hearing before the Commissioner of the Department of Motor Vehicles. See Code § 46.2-1571(F).
1
We note parenthetically that in 2010, the General Assembly reduced the period for
allowable chargebacks to six months from the previously allowable twelve months. Intentionally
false or fraudulent claims submitted by dealers remain exempt from this limitation. 2010 Va.
Acts ch. 284 (amending Code § 46.2-1571(A)(6)). That change, which occurred after the
chargeback imposed by Navistar in this case, has no impact on the present litigation.
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New Baltimore asked the Commissioner to declare both the chargeback and the rate change
unlawful under Code § 46.2-1571.
At the hearing, New Baltimore offered testimony from Bill Jordan, a Certified Public
Accountant. Jordan performed a comparison of the bills New Baltimore submitted to retail
customers and bills submitted to Navistar for warranty work for a single month: from April 1, 2008
through May 1, 2008. New Baltimore performed 234 transactions during this period, 132 for
non-warranty work and 78 for warranty work. George Downes, Jr., the Vice-President and General
Manager for New Baltimore, testified that this was an average month for non-warranty repairs.
Jordan excluded from these figures transactions that were neither warranty nor non-warranty. Most
of those transactions were coded as “I” for “internal.” After examining the total hours billed under
the warranty and non-warranty rates, Jordan testified that the billed warranty labor rates averaged
$74.27 per hour, whereas the billed non-warranty rates averaged $81.08 per hour.
Jordan explained that to determine which repairs were warranty repairs, he relied on the “C”
and “W” code listed on Navistar’s billing records. “C” indicates non-warranty work and “W”
generally stands for warranty service. Jordan did not know which “W” repairs were performed for
Nissan and which were done for Navistar. Downes, however, stated that he examined the
documentation submitted to Jordan for that month and could not find any that were labeled “Nissan
UD,” indicating that there were no Nissan warranty repairs for the month in question. The “W”
code also could signal that the repair was a policy repair. Jordan also was not aware of promotional
programs or other discount programs utilized during that period.
Aside from the testimony of the secret shopper, Navistar presented no evidence or testimony
with regard to the chargeback or the reduction in the hourly rate.
The hearing officer’s decision focused on the franchise agreement. The franchise agreement
forbids the dealer from billing Navistar at a higher rate than the “posted rate” for retail customers.
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The posted rate for New Baltimore was $102, the same as the rate at which New Baltimore billed
Navistar for warranty work. The hearing officer concluded, based on this contractual language, that
the twelve-month chargeback was invalid. The hearing officer also concluded that the reduction in
the warranty rate to $90 per hour was not permitted under the statute. The Commissioner reviewed
the record and upheld the decision of the hearing officer. Navistar filed a petition for appeal of this
decision to the Circuit Court for Fauquier County.
The circuit court reversed the Commissioner’s decision, concluding that
the ultimate legal issue in this case is the actual rate of compensation,
which takes into account the calculation of hourly rate times hours
expended on the job. Neither the Commissioner nor the Hearing
Officer ever made an explicit factual finding on this issue. Without
that finding, no legitimate comparison between the two rates can be
made, nor can a legal conclusion on the ultimate issue in this case be
reached.
The court reversed and remanded for reconsideration.
On remand, the hearing officer accepted the testimony offered by New Baltimore that
[t]he average labor rate per warranty customer based on the hourly
rate times the hours expended on the job was $74.24 per hour,
whereas the average labor rate for non-warranty customer work
was $81.08 per hour. Therefore, the compensation by Navistar of
New Baltimore Garage in this case was less than the amount
charged by the dealer to the retail customers, in violation of Code
§ 46.2-1571.A.1.
The hearing officer again ruled that the chargeback and the reduction in the hourly rate for warranty
work from $102 to $90 were invalid. The Commissioner upheld the decision of the hearing officer,
as did the circuit court. Navistar then appealed to this Court.
ANALYSIS
Although decisions by administrative agencies regarding
matters within their specialized competence are “entitled to special
weight in the courts,” Johnston-Willis, Ltd. v. Kenley, 6 Va. App.
231, 244, 369 S.E.2d 1, 8 (1998), “when, as here, the question
involves an issue of statutory interpretation, ‘little deference is
required to be accorded the agency decision’ because the issue falls
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outside the agency’s specialized competence.” Sims Wholesale Co.
v. Brown-Forman Corp., 251 Va. 398, 404, 468 S.E.2d 905, 908
(1996) (quoting Johnston-Willis, Ltd., 6 Va. App. at 246, 369 S.E.2d
at 9). “In sum, pure statutory interpretation is the prerogative of the
judiciary.” Id.
Va. Imps., Ltd. v. Kirin Brewery of Am., LLC, 41 Va. App. 806, 821, 589 S.E.2d 470, 477 (2003).
Therefore, we review questions of statutory construction de novo. Specialty Bev. Co. v. Va.
Alcoholic Bev. Contr. Bd., 51 Va. App. 154, 161, 655 S.E.2d 740, 743 (2008). With respect to the
agency’s factfinding, however, “we defer to the agency just as we would a jury or a trial court.”
Citland, Ltd. v. Commonwealth, 45 Va. App. 268, 274, 610 S.E.2d 321, 324 (2005).
“Under basic rules of statutory construction, we determine the General Assembly’s intent
from the words contained in the statute. When the language of a statute is plain and unambiguous,
courts are bound by the plain meaning of that language.” Volkswagen of Am., Inc. v. Smit, 266 Va.
444, 452, 587 S.E.2d 526, 531 (2003).
Franchise agreements must conform to the Code. See Code § 46.2-1569(9). Code
§ 46.2-1571(A)(1) provides 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.”
Code § 46.2-1571(B)(5) further provides that it is unlawful for any motor vehicle manufacturer
to . . . [f]ail to fully compensate its motor vehicle dealers licensed
in the Commonwealth for warranty parts, work, and service
pursuant to subsection A either by reduction in the amount due to
the dealer or by separate charge, surcharge, or other imposition by
which the motor vehicle manufacturer . . . seeks to recover its costs
of complying with subsection A.
These statutes are component parts of a statutory scheme designed to “prevent unfair methods of
competition and unfair or deceptive acts or practices.” Code § 46.2-1501.
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I. CODE § 46.2-1571 REQUIRES A COMPARISON OF AMOUNTS, NOT RATES,
MINUS STATUTORILY SPECIFIED DEDUCTIONS.
A. Navistar’s exclusive focus on labor rates is not supported by the plain text of the statute.
We first examine Navistar’s proposed construction of Code § 46.2-1571. For Navistar, the
hourly labor rate, rather than the compensation amount, constitutes the linchpin to determine
compliance with Code § 46.2-1571(A)(1). Navistar contends that “the proper application of th[e
statute’s] language requires a comparison of two rates: (1) the standard hourly warranty rate that
a manufacturer and dealer have agreed on, prior to adjustments, and (2) the standard hourly
nonwarranty rate that a dealer quotes and charges as its base rate to its retail customers, again
prior to adjustments.” Appellant Br. at 23.
The difficulty with Navistar’s exclusive focus on an hourly labor rate is that the statute
does not mention approved hourly labor rates or quoted hourly labor rates. Instead, it speaks of
amounts. See Code § 46.2-1571(A)(1) (“Compensation of a dealer for warranty . . . service . . .
shall not be less than the amounts charged by the dealer . . . to retail customers for nonwarranty
service.” (emphasis added)). Indeed, in 1992, the General Assembly specifically amended this
clause by deleting the word “rates” and substituting the word “amounts.” 1992 Va. Acts ch. 135.
“As a general rule, there is a presumption that a substantive change in law was intended by an
amendment to an existing statute.” Dale v. City of Newport News, 243 Va. 48, 51, 412 S.E.2d
701, 702 (1992). “Amount” is a broader term than an hourly labor rate. The amount is the “total
number or quantity.” Webster’s Third New International Dictionary 72 (1981). An hourly labor
rate, on this evidence, is a subset of the total “amount.” Other components of the “amount” include
certain charges, like waste disposal charges or computer use fees charged to non-warranty
customers. Such fees or charges are not captured by an exclusive examination of the hourly rate. In
addition, when a manufacturer has capped the hourly rate based on predetermined Standard Repair
Times, comparing hourly labor rates charged for warranty work with hourly labor rates that a dealer
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charges for non-warranty work may prove misleading. It is certainly possible that the capped
hourly rate could result in a significant shortfall compared to the uncapped hourly rate. New
Baltimore might bill a retail customer at an hourly rate of $90 per hour and still receive the same
amount or less than the amount it receives from Navistar for a rate of $102 per hour due to the cap
Navistar imposes. Therefore, we reject Navistar’s proposed construction of the statute.
B. The statute requires a series of concrete steps to compare warranty compensation with
non-warranty compensation in order to ensure that compensation for warranty work is
“not less than” compensation paid by retail customers.
We hold that a dealer who seeks relief under Code § 46.2-1571 for a chargeback imposed by
the manufacturer, or a unilateral reduction in the hourly rate of compensation imposed by a
manufacturer, bears the burden of proving that the chargeback would result in compensation that is
“less than the amounts charged by the dealer for . . . service to retail customers.”2 In order to make
the comparison of warranty compensation with amounts charged to retail customers for
non-warranty service, Code § 46.2-1571 contemplates specific steps. First, the dealer must gather
data for the applicable time frame. If a chargeback is at issue, the relevant time frame is the period
of the chargeback – in this instance, twelve months. With regard to a unilateral reduction in the
hourly labor rate by the manufacturer, the applicable time frame is the period for which the rate was
reduced, here July 15 to October 21, 2008. Second, in order to determine the amount of
compensation, the dealer should calculate the total billing for the warranty work performed for the
manufacturer who imposed the chargeback3 and separately calculate the total billing for
non-warranty work for the relevant period. The hours billed for labor are one component of this
total amount. Fees or surcharges, if any, that are passed on to the manufacturer or to the retail client
2
In formal hearings under the Administrative Procedure Act, “[t]he burden of proof shall
be upon the proponent or applicant.” Code § 2.2-4020(C); see also Code § 2.2-4027.
3
New Baltimore also performs warranty work for Nissan. Those charges are irrelevant
in assessing whether the chargeback imposed by Navistar offends the statute.
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also should be included. As noted above, such fees are subsumed under the term “amounts.” Third,
certain charges should be excluded from this total amount. The statute specifies that “group
discounts, special event discounts, and special event promotions shall not be considered in
determining amounts charged by the dealer to retail customers.” Code § 46.2-1571(A)(2).
Likewise, “[f]or purposes of determining labor compensation for warranty body shop repairs paid to
a dealer by the manufacturer or distributor, internal and insurance-paid repairs shall not be
considered in determining amounts charged by the dealer to retail customers.” Id. Fourth and
finally, to establish compensation amounts, the warranty and non-warranty amounts thus derived
should be divided by the number of labor hours expended during the applicable time frame. The
evidence establishes that warranty work and non-warranty work are billed in different ways, with
warranty work subject to a cap that does not apply to non-warranty work. This final step will
allow the Commissioner to make a meaningful comparison of the hourly compensation amounts
of warranty and non-warranty work.
To the extent the manufacturer-imposed chargeback or the lower hourly labor rate imposed
by the manufacturer results in an amount of compensation for warranty work that is “less than” the
amount of compensation for non-warranty work, the statute precludes such a chargeback or lower
hourly labor rate.4
II. THE RULING OF THE COMMISSIONER, ADOPTED BY THE CIRCUIT COURT,
OMITS SOME OF THE KEY STEPS REQUIRED BY CODE § 46.2-1571.
The Commissioner’s interpretation and application of the statute omits a number of key
steps noted above. First, as Navistar notes, although the chargeback was for twelve months, New
Baltimore’s expert offered evidence concerning billings for one month only. The Commissioner
responds by noting Downes testified on behalf of New Baltimore that the month of April 2008 was
4
Code § 46.2-1571 also regulates compensation for parts. There is no dispute about
compensation for parts. Therefore, we do not address that component of the statute.
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a “typical” month and, therefore, these typical results could be extrapolated to the remaining eleven
months. The actual testimony is as follows:
Q. How many non-warranty repairs do you do in a year,
approximately?
A. I can’t answer that.
Q. Well, you’ve got 134 non-warranty repairs that Mr. Jordan
analyzed covering a month. Do you think that’s about an average
month?
A. I would say that was an average month, yes.
Q. So if you multiplied that by 12, you’d have approximately the
number?
A. If you’re looking for an approximation, I would say yes.
Downes’ testimony was that the 134 warranty repairs represented an “average month.” As Navistar
points out, this testimony did not specify that the period at issue was an average period for warranty
service. The context of Downes’ testimony means that the extrapolation that New Baltimore
presses from one month to twelve is not supported by Jordan’s testimony. In addition, Downes was
clear that multiplying the number of transactions in April numbers by 12 was an “approximation.”
An approximation based on only non-warranty repairs is not sufficient to show that the
compensation Navistar paid to New Baltimore for warranty work is deficient under the statute.
Second, Navistar points out that Jordan did not eliminate from his calculations warranty
work New Baltimore may have performed for Nissan. Jordan acknowledged that he did not
eliminate any warranty work performed for Nissan from his total calculation of warranty work.
Instead, he relied on the presence of the Code “W” indicating warranty work. Although Downes
testified that he could not find any Nissan work in the documentation submitted to Jordan, the
hearing officer, in her factual findings – findings that are binding on this Court – concluded that
“[s]ome of the ‘W’ or warranty repairs on the printouts might have been for other makes.” The
Commissioner agreed with this factual finding. This finding casts further doubt on the accuracy of
the conclusions New Baltimore’s expert drew from his data because warranty repairs for Nissan
may have been incorrectly included in Jordan’s calculations.
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Third, Navistar notes that some non-warranty policy repairs may have been incorrectly
included in Jordan’s assessment of warranty repairs. The hearing officer noted in her factual
findings that “sometimes a ‘W’ could mean a ‘policy’ repair, for which Navistar pays part and New
Baltimore pays part.” Moreover, New Baltimore’s own evidence established that policy repairs
were not warranty repairs. Downes testified that “policy” was an “[o]ut of warranty adjustment,
good will.” The statute is concerned with a discrepancy between warranty payments by a
manufacturer and non-warranty payments by retail customers. Policy repairs constitute neither
repairs done for retail customers nor, according to the testimony, do they constitute warranty
repairs. The possible inclusion of policy repairs in Jordan’s calculation was error.
Fourth, Jordan’s testimony does not establish whether he factored in promotional or
discount programs for New Baltimore’s retail customers. With respect to “menu-priced . . .
services, group discounts, special event discounts, and special event promotions,” Code
§ 46.2-1571(A)(2) specifies that these items “shall not be considered in determining amounts
charged by the dealer to retail customers” when “determining warranty . . . and service
compensation paid to a dealer by the manufacturer.” The record does not establish whether there
were any such menu priced services, group discounts, special event discounts, and special event
promotions, but, if there were, Jordan did not exclude them as required by Code § 46.2-1571(A)(2).
With respect to voluntary service programs, such as the Performance PM or Service
Partners, the record does not establish if they are warranty programs or non-warranty programs.
Although these programs are developed by Navistar, the evidence adduced indicates that the flat
rate prices are paid by the customers, not Navistar. The purpose of the programs is to create a
nationwide uniform pricing system for customers with Navistar vehicles. The evidence suggests,
but does not clearly establish, that these programs are not warranty programs. If the Performance
PM or Service Partners programs are retail programs, billing under those programs should be
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included as a part of the amount of compensation New Baltimore receives from retail customers
unless they fall within the exclusion of “menu-priced . . . services, group discounts, special event
discounts, and special event promotions” under Code § 46.2-1571(A)(2). If these programs are
warranty programs, they should be included under that category as part of the amount of
compensation New Baltimore receives for warranty work.
In sum, the testimony offered by New Baltimore was limited to one month rather than the
full twelve months of the chargeback or the time period of the rate reduction. Based on the facts, as
found by the Commissioner, it is not clear whether warranty work performed for another
manufacturer, Nissan, was included in the calculation. It does not appear that New Baltimore’s
expert factored into the compensation amounts any fees that New Baltimore charges to retail
customers, despite evidence in the record that it assesses such fees. Finally, the calculation below
does not address group discounts or special event promotions, if any.
Where the Commissioner’s legal conclusion rests upon a flawed interpretation of the statute,
a remand for factfinding under the correct interpretation is the appropriate remedy. See Smit, 266
Va. at 453, 587 S.E.2d at 532 (remanding the case for further factfinding in light of the flawed
interpretation of the statute accepted by the lower courts and the Commissioner).
III. CODE § 46.2-1571 DOES NOT SUFFER FROM UNCONSTITUTIONAL VAGUENESS.
Navistar argues that averaging the non-warranty and warranty amounts, after appropriate
deductions, renders the statute unconstitutionally vague. Navistar notes that an effective labor rate
might fluctuate over time, depending on the type and complexity of repairs performed under both
the warranty and non-warranty category. For example, in a given month the dealer may have many
complex non-warranty repairs, but only a few simple and inexpensive warranty repairs.
Consequently, Navistar argues, a manufacturer would have no way of knowing, at any given point
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in time, whether the manufacturer is in compliance with the statute. Navistar’s argument rests on a
misreading of the statute.
Code § 46.2-1571 does not require manufacturers constantly to monitor the compensation
paid to dealers for warranty versus non-warranty work on an hourly, weekly, or monthly basis.
First, the plain language does not require the sort of constant monitoring of warranty versus
non-warranty compensation that concerns Navistar. Second, the statute contemplates discrete
triggering events that, when challenged, require a comparison of the amounts of compensation paid
for warranty versus non-warranty work for discrete periods of time. These triggering events include
a manufacturer imposed “reduction in the amount due to the dealer or by separate charge, surcharge,
or other imposition” pursuant to Code § 46.2-1571(B)(5), applications for increases in service
compensation under Code § 46.2-1571(A)(3), and chargebacks as set forth in Code
§ 46.2-1571(A)(6).
As noted above, if a manufacturer imposes a chargeback, the applicable time frame for
purposes of the analysis under Code § 46.2-1571 is the period of the chargeback. Code
§ 46.2-1571(A)(6). With regard to increases in the labor rate, the statute specifies that the
applicable period is “100 consecutive repair orders or all repair orders over a ninety-day period.”
Code § 46.2-1571(A)(3). For a unilateral decrease in the labor rate imposed by a manufacturer, the
applicable time frame is, in this instance, July 15, 2008 to October 21, 2008. That is the period of
time for which Navistar unilaterally lowered the hourly rate for New Baltimore. See Code
§ 46.2-1571(B)(5) (prohibiting a reduction in the amount due to the dealer that “[f]ail[s] to fully
compensate” the dealer). Therefore, a manufacturer is not required to monitor compensation
amounts for warranty and non-warranty work on a daily or hourly basis. Instead, the comparison
contemplated by Code § 46.2-1571 comes into play when a manufacturer takes a specific step, such
as imposing a chargeback, unilaterally lowering the hourly rate for warranty work, or refusing a rate
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increase requested by the dealer. Although the plain language and structure of the statute dispose of
Navistar’s vagueness argument, our reading of the statute also is consistent with the well-established
view that, “whenever possible, we will interpret statutory language in a manner that avoids a
constitutional question.” Commonwealth v. Doe, 278 Va. 223, 229, 682 S.E.2d 906, 908 (2009).
Therefore, when a manufacturer decides to impose a chargeback, refuse a rate increase, or
unilaterally decrease the labor rate, it has “fair notice” of what the statute requires and whether such
an action will be in compliance with the statute. Volkswagen of Am., Inc. v. Smit, 279 Va. 327,
337-38, 689 S.E.2d 679, 684-85 (2010). To the extent Navistar is uncertain whether a unilateral
labor rate reduction or a chargeback would lead to a violation of the statute, it can request applicable
documentation from the dealer to ensure that the rate reduction or the chargeback does not offend
the requirements of Code § 46.2-1571.5
CONCLUSION
We reverse and remand to the Circuit Court of Fauquier County, with instructions to remand
to the Commissioner for further proceedings consistent with this opinion.
Reversed and remanded.
5
Based on our resolution of this appeal, we do not consider Navistar’s remaining
arguments and assignments of error.
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