A Stratford auto dealership has sued Volkswagen and several related companies, accusing the automaker of bypassing franchised dealers to sell a new line of electric vehicles directly to consumers.
Curran Volkswagen, a franchised dealership at 2785 Main St. in Stratford, and Sunrise Imports, a dealership in West Islip, New York, filed the proposed class-action lawsuit Tuesday in U.S. District Court in Virginia against Volkswagen AG, Volkswagen Group of America and two Scout Motors entities.
The dealers accuse the automaker of violating franchise agreements by creating Scout Motors to sell new electric vehicles directly to consumers.
Under Volkswagen’s standard dealer agreement, automakers sell vehicles to franchised dealers, who then sell them to consumers. The complaint alleges Volkswagen is attempting to sidestep that system by establishing Scout Motors and Scout Motors Sales as separate companies to handle direct-to-consumer sales.
Connecticut state law generally requires automakers to sell vehicles through franchised dealerships rather than directly to consumers.
“In truth, Scout is simply an offshoot of Volkswagen,” the lawsuit states, arguing the companies were created to evade contractual and legal obligations to the dealer network.
Scout Motors has been accepting $100 reservations online for its upcoming electric vehicles, including the Scout Traveler SUV and Terra pickup truck. According to the complaint, more than 150,000 reservations have already been made.
Scout Motors has said it plans to build the vehicles at a new, $2 billion manufacturing plant under construction in South Carolina as part of Volkswagen’s push to expand electric vehicle production in the United States.
The dealers say selling directly to consumers deprives them of revenue from vehicle sales, financing and insurance commissions, service work and other related business.
Curran Volkswagen and Sunrise Imports say they would otherwise be able to sell and service Scout vehicles if the company followed the traditional dealership model.
The lawsuit seeks to represent all Volkswagen dealerships nationwide operating under the company’s standard franchise agreement. Including Curran, there are 14 VW dealerships in Connecticut and more than 650 nationwide, according to the VW website.
Dealers argue Scout is closely tied to Volkswagen, noting it is owned by the automaker and led by several former Volkswagen executives.
The lawsuit alleges breach of contract, tortious interference and conspiracy to injure the dealers’ business relationships.
The plaintiffs seek damages, punitive damages and a court order blocking Volkswagen from selling Scout vehicles directly to consumers.
