By Mike Colias

A federal appeals court ruled in favor of a New York Chevrolet dealer who fought General Motors' attempt to terminate his franchise over subpar sales, a ruling that could alter how auto makers hold dealerships accountable for sales performance.

The Second U.S. Circuit Court of Appeals in Manhattan said GM's method for assessing the sales of Beck Chevrolet, in Yonkers, N.Y., violated New York's franchise laws. GM unfairly relied on a statewide sales average to measure the dealership's effectiveness without taking into account Chevrolet's weak market share in metro New York, the court found in a ruling issued Thursday.

The decision reversed an earlier district court decision that sided with GM. The auto maker is "reviewing the decision and considering our options," a spokesman said in a statement.

Auto makers' agreements with dealers usually allow them to terminate the franchise if the dealer doesn't meet sales targets, which often are based on statewide averages. Dealers say that method often fails to recognize market conditions on the ground. For example, the presence of a large auto plant in one part of the state could inflate the sales of dealers in that area.

Beck Chevrolet owner Russell Geller sued GM in 2011 over the auto giant's use of a statewide average to determine the store's sales targets. He argued the dealership and others in the New York City market, which leans toward import brands, were unfairly compared with stores in the Buffalo area,for example, where Chevy's market share is about four times greater.

Attorneys say the court's ruling could have far-reaching implications because the use of statewide averages to gauge dealerships' sales effectiveness is widespread among major auto makers.

Russell McRory of Arent Fox in New York, an attorney for Beck, declined to comment, citing further aspects of the case still pending.

Mr. Geller, in an interview, called it a "pro-dealer" decision and said he hopes it will "help to equalize the relationship" between manufacturers and dealers.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

December 31, 2016 09:49 ET (14:49 GMT)

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