March 11, 2025|Publications
March 11, 2025 | Supreme Court of Appeals of West Virginia | Published Opinion
Executive Summary
In a certified question proceeding, the Supreme Court of Appeals of West Virginia held that W. Va. Code § 17A-6A-10(1)(i)’s ten-year “grandfather clause” protects dealers who complete facility renovations or install franchisor image elements under an optional incentive program, even when participation was voluntary. Dealers argued that Ford Motor Company violated the statute by conditioning incentives under the Lincoln Commitment Program (“LCP”) on construction of exclusive “Vitrine” facilities, despite their recent Trustmark renovations funded through Ford’s earlier Facility Assistance Program. Ford countered that the statute applies only when renovations were required, not when undertaken voluntarily. The Court sided with the dealers, finding that even incentive-driven programs constituted installations of franchisor image elements “required and approved” by Ford. Two justices dissented, stressing that the majority ignored the plain meaning of “required.”
Relevant Background
Between 2013 and 2016, dealers Thornhill Auto Group, Moses Ford, and Astorg Ford of Parkersburg undertook costly renovations under Ford’s Trustmark Facility Assistance Program. Participation was optional but tied to incentives of up to $750,000 in matching funds. To qualify, dealers had to meet detailed “Trustmark” design standards approved by Ford, including entry towers, signage, showroom layouts, customer lounges, and even furniture specifications.
In 2020, Ford revised the LCP to increase incentives for exclusive Lincoln “Vitrine” facilities. Dealers with dual Ford-Lincoln Trustmark facilities received only 1% of MSRP in incentives, while those who converted to Vitrine exclusivity received up to 2.75%. The dealers sued, alleging that Ford’s new requirements violated W. Va. Code § 17A-6A-10(1)(i), which bars manufacturers from requiring dealers to replace or substantially alter franchisor image elements installed within ten years if they were “required and approved” by the manufacturer.
The federal district court certified to the West Virginia Supreme Court whether renovations performed pursuant to an optional incentive program qualify as “required and approved.”
Decision
The Court concluded that the ten-year grandfather clause does apply to renovations completed under Ford’s voluntary incentive program. Writing for the majority, Justice Wooton stated:
“It is of no moment that the dealers opted into the program voluntarily; the focus of the statute is on Ford’s conduct in requiring those dealers to install signs and franchisor image elements that were both ‘required and approved’ by Ford.” W. Va. Auto. v. Ford Motor Co., 913 S.E.2d 534, 543 (W. Va. 2025).
The Court emphasized the Legislature’s intent to prevent manufacturers from exercising “undue control” over dealers, adding:
“By participating in [the Facility Assistance Program], the dealers installed franchisor image elements that were undeniably required and approved by Ford. The clear intent of the relevant statute is to protect the dealers’ investments in Ford’s required and approved franchisor image elements for a period of ten years.” Id. at 544.
Rejecting Ford’s argument that “required” should mean mandatory participation, the Court pointed to the statute’s reference to an “agreement, program, incentive provision or otherwise” as evidence that the Legislature intended to encompass incentive-driven programs as well:
“The focus is on the manufacturer’s conduct…not the dealer’s decision to participate in an optional, voluntary incentive program.” Id. at 543.
Two justices disagreed. Justice Walker, joined by Chief Justice Armstead, warned that the majority “runs roughshod over the plain language of the statute.” Id. at 545. In their view, “voluntary improvements—such as the Trustmark 3 improvements made under the Facility Assistance Program—by definition simply cannot be considered required by the manufacturer when compliance with such programs is optional.” Id. The dissent stressed that the “ordinary, common, and accepted meaning” of “required” should control, quoting dictionary definitions and prior West Virginia precedent:
“To define the term ‘required’…effect must be given to its common, ordinary, and accepted meaning. Merriam-Webster defines required as ‘stipulated as necessary to be done.’ Black’s Law Dictionary defines a requirement as ‘something that must be done because of a law or rule.’ Clearly…the term ‘required’…leaves no room for the choice given to the dealers.” Id. at 545–46.
Looking Forward
For franchisors, this decision is unfortunate. Although limited to West Virginia law, it illustrates how incentive or “voluntary” renovation programs may be treated as mandates if they require franchisor-approved image elements. Key considerations include:
- Careful program drafting. Simply labeling a program “voluntary” may not insulate it from statutory protections if participation conditions include franchisor-approved design or signage. Courts may focus on whether the elements themselves were required, not whether enrollment was optional.
- Awareness of statutory protections. Many states have enacted dealer or franchisee “grandfather” clauses designed to prevent repeated renovations within short cycles. Franchisors should account for these provisions when designing brand refresh cycles and consult with legal counsel to verify each state’s laws before moving forward with a renovation request, as many, if not most, franchise agreements generally do not account for each state’s requirements.
- Balancing brand standards with flexibility. While brand uniformity is critical, franchisors should consider providing alternative compliance paths or extended timelines that respect recent franchisee investments.
- Evaluating litigation risk. Even where textual arguments support franchisor discretion, as the dissent showed, courts may adopt expansive readings to protect dealers. Franchisors should anticipate this risk when crafting and enforcing image programs.
While West Virginia Automobile is a setback for franchisors, its reach is jurisdictionally limited. The dissent provides strong textual arguments for future cases, and other courts may take a narrower approach. Franchisors should consult counsel to evaluate renovation or image programs in light of each state’s statutory scheme.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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