The California New Car Dealers Association’s lawsuit against Scout and Volkswagen will continue after a federal judge Thursday (Oct. 22) denied the defendants’ second attempt to dismiss the case.
Driving the news: The CNCDA sued Scout and Volkswagen in April 2025, alleging that Volkswagen was violating the state’s franchise laws and illegally competing against dealer partners through its affiliated brand, Scout Motors.
In its suit, the CNCDA pointed out that a 2023 law forbids auto manufacturers from selling affiliated brands without using franchises.
In violation of the law, the CNCDA stated Scout bypassed dealers entering deposit agreements with California consumers for $100 through its website.
Dismissals denied: In March of this year, Chief Judge Cynthia Bashant of the United States District Court for the Southern District of California denied the Scout and Volkswagen motion to dismiss the case of violating California’s Unfair Competition Law but did accept the dismissal of the California False Advertising Law case.
Last week, Bashant again said the case on the unfair competition allegations could proceed.
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From the CNCDA: “No one should mistake this ruling for the end of the case. What it does show is that Volkswagen and Scout have now made two unsuccessful attempts to avoid answering these claims on the merits,” said Brian Maas, CNCDA President. “We believe the court's decision underscores the strength of our legal arguments and puts us in a strong position as the case moves into its next phase. Discovery will be important, and we're prepared to keep pressing forward with the support of our franchised dealer members."
Bottom line: The case will move forward against Scout and Volkswagen with discovery, with the CNCDA emphasizing Assembly Bill 473 specifically to keep manufacturers from competing with its dealers.
“There are nearly 650 franchised dealer owners in California, and every one of them has a stake in whether manufacturers can compete against their own business partners. Dealers will continue to fight for their right to offer all models to their customers,” Maas said.
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