Staying open puts dealers at risk for police action

Over five days in late March, police in Norman, Okla., twice cited Oklahoma Motorcars for being open and selling cars despite a city stay-at-home order blocking most vehicle sales.

Norman Police spokeswoman Sarah Jensen said the tickets for violating the city's emergency coronavirus proclamation — each with a penalty of up to a $750 fine and/or 60 days in jail — were issued after the city received several complaints that the used-vehicle store was still operating. The citations followed two visits by officers who shared the health-and-safety reasoning behind the order and issued a warning, Jensen said.

The dealer has a different view.

"This is absolutely without a question targeting," General Manager Chris Mayes, whose family owns Oklahoma Motorcars, a used-car and service center, told Automotive News last week.

Mayes' family also owns a marijuana dispensary that operates in the same building; he claims the dispensary has irked some in the city. As of Friday, April 3, no other dealerships in Norman had been cited, according to police. Mayes, however, said he's driven by other stores in the city that appear to be operating.

Mayes is not alone in receiving increased scrutiny from authorities. From California to the East Coast, dealership lawyers and a state dealer association leader say they have heard reports that police and public health officers have ramped up visits to dealerships to ensure they are complying with various state and local orders that in some cases require showrooms to be closed.

The risks of running afoul of those orders are potentially severe. Dealer lawyers are advising clients to follow the most restrictive rules — or else.

That or else prompted Mayes to close Oklahoma Motorcars on Wednesday, the day after he received his second ticket. The store remained closed as of April 3.

"I was worried they would come in and arrest me," said Mayes, who also owns a Kia dealership in Norman. As of Friday, his Kia store remained open for online sales and service and had not been cited.

Keeping a store open in defiance of orders that ban sales could lead to financial trouble and jail time, or even put dealer licenses in jeopardy, dealer lawyers say.

Stephen Dietrich, a dealer lawyer and partner with Holland and Knight in Denver, said dealerships and dealers first would see an escalation of actions. But a dealer license could be lost in extreme circumstances and over time.
"If you got to that level that the state or local government was that angry with you and you just kept flaunting this law, would they shut you down under a public health issue, where they literally come and lock the doors?" Dietrich said. "And then you have a question, perhaps a longer-term question, of is that violation then going to affect your dealer license."
In Oklahoma, Gov. Kevin Stitt's order to close nonessential businesses names motor vehicle and parts dealers as essential, and the Oklahoma Automobile Dealers Association has advised dealerships they can remain open for sales and service.

The city of Norman is under a separate stay-at-home order that took effect March 25 and lasts at least through April 14. It cites auto supply and repair as essential but requires showrooms be shut.

Norman police issued tickets to Oklahoma Motorcars on March 27 and March 31.

"Our goal is not to put someone in jail at this point," police spokeswoman Jensen said. "We just are trying to work through the seriousness of the proclamation and make people understand that this is serious and it's in the best interest of public safety and public health."

The citations to Oklahoma Motorcars were the first the city had issued, though it had investigated 66 complaints about businesses as of Friday. The majority were in compliance or agreed to comply once visited by the police, including other car dealerships it received complaints for, Jensen said.

Norman's order forbids test drives but does allow online sales to essential businesses and essential employees. On Thursday, police and fire marshals hand-delivered guidance pertaining to car dealerships to the stores, Jensen said.

Norman City Attorney Kathryn Walker, in a statement, said if a business repeatedly refuses to comply, the city could seek a court order requiring it to close.

Mayes said he is considering suing the city and the police department for business interference.

"I believe I should be able to sell cars under the governor's order," Mayes said. "However, if the city's order is going to take precedence over the governor's, I am just fine with complying. But everyone should have to comply. There shouldn't be one store targeted to shut down."

California New Car Dealers Association President Brian Maas said he's heard reports that jurisdictions across the state are increasing enforcement to ensure showrooms aren't open to the public. The San Diego County Sheriff's Department confirmed that it had visited a Honda dealership in the San Diego suburb of Lemon Grove on March 21 after a complaint about a large gathering of people. Deputies spoke to the dealership manager, who said store leaders were developing a plan, "and everyone complied," a department spokesman wrote in an email.

Warnings have been issued to some dealerships, Maas said.

"While we continue to believe limited sales are permissible in California, dealers must heed the requests of local law enforcement or code enforcement officers who ask them to further restrict or cease sales operations," Maas said in an email.

California Gov. Gavin Newsom's indefinite stay-at-home order went into effect March 19. Auto repair has been deemed essential, but auto sales were not included. With some additional clarity and federal guidance on auto leases issued in late March, the dealer association's law firm Scali Rasmussen is advising dealerships to limit in-store sales and leases to customers who work in essential sectors or need transportation for essential travel.

Violators of California's order could face up to six months in jail or a $1,000 fine.

Last week, the association sent a memo to dealers notifying them that six Bay Area counties and the cities of San Francisco and Berkeley had revised shelter-in-place orders to allow online vehicle sales with deliveries to homes or essential businesses. The memo also noted the association had received reports that Palm Springs law enforcement was "taking the position that only online sales are allowed."

Numerous states have restricted vehicle sales under stay-at-home and nonessential-business orders.

Alaska as of last week was allowing only remote sales and those by special appointment, according to the Alaska Automobile Dealers Association. Businesses failing to comply with Alaska's mandate may be ordered to cease operations and/or receive a fine of up to $1,000 per violation.

Alaska's order says that, under certain circumstances, an individual or organization failing to comply could be criminally prosecuted for reckless endangerment, a misdemeanor. If convicted, a person could be sentenced to up to a year in jail and fined up to $25,000, while a business could receive a $2.5 million fine for a misdemeanor charge resulting in death or $500,000 for an offense not resulting in death.

Michigan is among states with stay-at-home orders that allow dealerships to operate service but deem sales as nonessential.

Failing to comply with Gov. Gretchen Whitmer's order could mean a $1,000 fine and/or 90 days in jail per incident, plus potential licensing actions, according to state officials. The Michigan Attorney General's office, as of Friday, April 3, had received no complaints of showrooms staying open under the order, a spokeswoman said.

Christian Scali, managing partner at Scali Rasmussen, said he's heard of police visiting dealerships in San Diego and San Jose demanding they close, while the Los Angeles County Department of Public Health also has told dealerships to close showrooms.

Given changes and confusion with various orders, Scali said his firm has been working on educating local officials about the types of sales dealerships can conduct for the public benefit — such as selling vehicles to keep medical personnel on the road and able to go to work.

"The tension, I believe, is that local authorities may be receiving complaints that dealerships are open (because their service departments are open, even if they are not open for sales or are open for sales by appointment only)," Scali said in an email.

If authorities don't understand how some appointment-based sales are necessary to keep essential workers mobile, "wrong decisions can be made at the local level."