The California New Car Dealers Association has vowed to take legal action against Volkswagen Group of America and Scout Motors over Scout’s plans to sell vehicles directly to California consumers rather than through dealerships.
In a Dec. 20 letter to both VW and Scout, Los Angeles attorney Michael Cypers said the two vehicle manufacturers’ direct sales plan violates the California Vehicle Code because VW and Scout are “affiliates” and consequently barred from competing with their vehicle franchisees. The CNCDA’s members include about 50 VW dealers.
“CNCDA is presently in the process of evaluating its claims and will not hesitate to take immediate legal action to vindicate injuries it has already suffered and to prevent any further wrongdoing by Scout and VW,” Cypers’ letter states. “In the meantime, CNCDA demands that Scout cease marketing Scout vehicles to California consumers and taking deposits from California residents for Scout vehicles.”
Cypers is a partner with the Glaser Weil law firm, which represents CNCDA.
Scout Motors did not respond to requests for comment, but a Jan. 17 letter from the company’s general counsel, Neil Sitron, rejected the CNCDA’s allegations, saying the company was not in violation of California law and that the association had misstated the relationship between Scout and VW.
The Volkswagen Group of America is not authorized by Scout to sell its vehicles and is not involved in Scout’s management or operations, nor has VW made any investments in Scout’s manufacturing plant in South Carolina, according to a letter Sitron sent to attorney Cypers.
“... For obvious reasons, Scout Motors will not do business with anyone that threatens or tries to intimidate it, either directly or indirectly,” Sitron said. “We trust that the CNCDA will reconsider its unwarranted threats and baseless positions regarding potential claims against Scout Motors. Should the CNCDA decide to act on its threats, Scout Motors will vigorously defend against them.”
According to its website, Scout has “the backing of Volkswagen Group,” and VW’s “manufacturing prowess is leveraged in Blythewood, South Carolina,” where Scout produces both electric vehicles and hybrid sport-utility vehicles. It has a workforce of more than 4,000 employees, according to the company.
Cypers’ letter quotes 2023 discussions involving the California Assembly Committee on Transportation, which eventually voted to amend the state Vehicle Code. VW, described as the parent company of Scout, could sell Scout vehicles in California through dealerships, but the law would prohibit Scout from selling its vehicles directly to consumers in the state, according to the letter.
Cypers also alleges that VW invested billions of dollars into the South Carolina plant.
“In anticipation of litigation regarding the foregoing matters, please be advised that you have a duty to immediately preserve all data from any and every source that is or is potentially relevant to this matter,” Cypers told Sitron in the Dec. 20 letter. “CNCDA hereby demands that Scout and VW immediately take all necessary steps to preserve such data. This demand applies not only to paper documents, but also encompasses all data existing in digital or electronic form. …”
The CNCDA president, Brian Maas, said the plans for direct sales of Scout vehicles threaten dealership jobs and consumer protections in California.
“We strongly encourage Volkswagen to heed our call to abide by California law and immediately stop offering Scout vehicles directly to consumers without using their business-partner local dealers,” Maas said in a prepared statement.