Corporate Misconduct Accountability Project
Volvo Car USA, LLC · Federal lawsuit, summary judgment appeal
How Volvo and Fidelity Underpaid Dealers on Maintenance Contracts
Two Massachusetts Volvo dealers sued Volvo Car USA, Volvo Financial, and Fidelity Warranty Services for allegedly underpaying them on prepaid maintenance work, forcing dealers to service contracts at rates below their actual costs.
HIGH SEVERITY
TL;DR
Colony Place South and 25 Falmouth Road, two Volvo dealerships in Massachusetts, claimed that Volvo and its partners systematically underpaid them for routine maintenance services performed under Volvo-branded Prepaid Maintenance Program contracts. The dealers argued they were forced to honor these contracts at reimbursement rates far below their normal retail prices, losing money on every oil change and brake service. Although the court ruled against the dealers, the case exposed how large automakers use complex affiliate structures to avoid state franchise protection laws, leaving local dealers squeezed while corporate parents collect referral fees.
This case shows how corporate structuring can undermine protections meant to keep franchisors honest with their dealers.
19 of 281
Volvo dealers nationwide who refused to sell the PPM
$105 to $343
Range of dealer reimbursements for same brake pad service depending on tier
30 days
Notice period required for dealers to terminate their PPM agreement with Fidelity
The Allegations: A Breakdown
Core Allegations
What Volvo and Fidelity did to dealers · 8 points
| 01 | Fidelity Warranty Services reimbursed dealers for maintenance services like oil changes and brake pad replacements at rates lower than what dealers customarily charged non-PPM customers. The dealers argued these rates fell below the statutory threshold for fair and adequate compensation required by Massachusetts law. | high |
| 02 | When a customer bought a Volvo PPM contract from one dealer at a low reimbursement tier, any other dealer who later serviced that same contract only received reimbursement at the lower tier, not their own higher tier. This meant dealers lost money honoring contracts they never sold. | high |
| 03 | Volvo Car USA advertised that Prepaid Maintenance would be honored at any authorized Volvo dealership, creating customer expectations that dealers felt pressured to meet. Dealers who refused risked bad reviews and losing customers, even though the franchise agreement did not explicitly require them to service PPMs. | medium |
| 04 | Fidelity paid Volvo Financial Services referral and incentive fees every time a dealer sold a PPM contract. This arrangement ensured that corporate affiliates profited from PPM sales while dealers absorbed the costs of providing the actual services. | high |
| 05 | The Master Services Agreement between Fidelity and Volvo Financial required Fidelity to notify Volvo Financial whenever dealers declined to sell Volvo-branded contracts. Volvo Financial could then contact those dealers to discuss their decision, creating implicit pressure to participate. | medium |
| 06 | Volvo USA and Volvo Financial held mandatory monthly meetings with dealers to review penetration reports showing regional sales of PPMs and other finance products. These meetings reinforced the corporate expectation that dealers should actively sell PPMs despite no formal contractual obligation. | medium |
| 07 | The Administrative Agreement between dealers and Fidelity contained an integration clause stating it comprised the full understanding between the parties and did not incorporate the Retailer Agreements. This structure allowed Volvo to claim the PPM was not a franchise obligation under Massachusetts dealer protection law. | high |
| 08 | Dealers could choose reimbursement tiers when signing their Administrative Agreement, but higher tiers required paying Fidelity higher fees per contract sold. This created a no-win situation where dealers either paid more upfront or risked losing money when servicing contracts from other dealers at lower tiers. | medium |
Regulatory Failures
How corporate structuring evaded state franchise protections · 6 points
| 01 | The First Circuit Court ruled that the Volvo PPM did not constitute a franchise obligation under Massachusetts General Laws Chapter 93B because the program was administered through a separate Administrative Agreement with Fidelity, not directly through the Volvo franchise agreement. | high |
| 02 | Massachusetts Chapter 93B, known as the Dealers Bill of Rights, requires manufacturers to fairly compensate dealers for warranty and maintenance work only when dealers are obligated by their franchise agreement. Volvo structured the PPM to fall outside this requirement. | high |
| 03 | The court found that selling Volvo Accessories under the Retailer Agreement referred to physical inventory items that could be shipped from distribution centers, not intangible financial contracts like PPMs. This narrow interpretation allowed Volvo to argue the PPM was not covered by franchise obligations. | medium |
| 04 | At least nineteen Volvo dealers nationwide chose not to sell the PPM at all, and neither side claimed these dealers breached their franchise agreements. This fact supported the court’s conclusion that PPM participation was truly optional, not required. | medium |
| 05 | The dealers’ corporate representative testified that dealers had discretion over which Fidelity finance and insurance products to sell. The dealers could not explain why the Volvo PPM should be treated differently from other optional products in terms of franchise obligations. | medium |
| 06 | The Retailer Agreement allowed Volvo USA to terminate the franchise if a dealer breached a separate agreement with a Volvo Affiliate. However, the dealers failed to show how refusing to service a PPM sold by another dealer would breach their own Administrative Agreement with Fidelity. | low |
Profit Over People
How Volvo prioritized corporate returns over dealer welfare · 6 points
| 01 | Volvo Financial Services received referral and incentive fees every time dealers sold a PPM contract. These fees channeled revenue upward to corporate affiliates while dealers shouldered the burden of providing the actual maintenance services at reduced rates. | high |
| 02 | Fidelity designed a multi-tier reimbursement system that calibrated how much the company paid dealers for service work. This system gave the corporate financial arm a net advantage by controlling payment rates while the Volvo brand benefited from customer loyalty. | high |
| 03 | Dealers had complete control over PPM contract sale prices but received only Fidelity’s predetermined reimbursement amounts when servicing contracts. This structure allowed Fidelity to recommend retail prices while limiting dealer profits on the backend. | medium |
| 04 | The Volvo brand marketed the PPM as a manufacturer-backed program that would be honored at any authorized dealership. This branding gave Volvo the marketing benefits and customer goodwill of a premium service plan without accepting direct legal or financial accountability for dealer compensation. | high |
| 05 | Fidelity sells finance and insurance products through franchise dealers who act as middlemen. The company does not sell any products directly to consumers, creating a buffer that shields it from direct consumer complaints while extracting value from dealer relationships. | medium |
| 06 | When dealers complained about tier-based reimbursement problems, Fidelity told at least one dealer to simply stop selling and honoring the Volvo PPM. This response demonstrated that corporate interests prioritized avoiding liability over supporting dealers who had already invested in the program. | medium |
Economic Fallout
The financial squeeze on local dealers · 6 points
| 01 | Dealers who serviced PPM contracts sold by other dealers at lower tiers received reimbursements below their own cost structures. For example, a dealer operating at Tier 41 who serviced a Tier 39 contract only received Tier 39 rates, even though their labor and parts costs were priced for Tier 41. | high |
| 02 | The tiered reimbursement structure created unpredictable revenue for dealers. They could not control which customers with PPM contracts would visit their service departments or what tier those contracts were sold under, making financial planning nearly impossible. | medium |
| 03 | Dealers paid Fidelity a fee for each PPM contract sold according to a preset schedule. Higher reimbursement tiers required higher fees, forcing dealers to calculate whether they could afford to operate at tiers that would actually cover their service costs. | medium |
| 04 | Service departments that became unprofitable due to below-market PPM reimbursements faced pressure to reduce staff, cut wages, or limit investments in equipment and training. This erosion threatened the long-term viability of dealer service operations. | medium |
| 05 | When local dealerships lose profitability on service work, they may compensate by raising prices on non-PPM repairs or reducing inventory investments. These adjustments ultimately harm consumers who rely on competitive local markets for fair pricing. | low |
| 06 | Brand-affiliated dealerships that are locally owned must balance Volvo’s brand requirements with local overhead costs. When reimbursements shrink, these small businesses lose the ability to expand or compete with larger corporate-owned locations. | medium |
Worker Exploitation
How underpayment affects dealership employees · 4 points
| 01 | Service technicians at dealerships rely on a combination of hourly wages and performance-based incentives tied to the volume and profitability of repair jobs. When dealerships receive less reimbursement for PPM work, management may tighten pay scales or refuse to authorize overtime for technicians. | medium |
| 02 | Employees faced increased workloads as dealerships tried to fulfill PPM contract obligations while managing regular retail repair work. This uptick in tasks came with no corresponding pay increase, effectively diluting workforce bargaining power. | medium |
| 03 | When dealership finances are squeezed by low reimbursement rates, any employee efforts to unionize or demand higher wages may be met with claims that profit margins cannot accommodate such requests. This dynamic suppresses labor organizing before it begins. | medium |
| 04 | Dealerships that cannot secure fair compensation for warranty or maintenance work may freeze hiring or cut staff hours. This reduction directly harms local workers’ incomes and job security in communities where car dealerships are significant employers. | medium |
Community Impact
How corporate structures harm local economies · 5 points
| 01 | Locally owned dealerships often sponsor charity events, support community fundraisers, and provide crucial tax revenue to small towns and cities. When corporate strategies undermine dealer profitability, these community contributions decline. | medium |
| 02 | Nineteen Volvo dealers nationwide simply opted not to sell PPMs at all, limiting consumer choice in those markets. This fragmentation eroded the competitive principle that franchising was supposed to ensure across dealer networks. | medium |
| 03 | When residents learn that a product sold as Volvo Prepaid Maintenance might not be honored at equitable rates everywhere, their confidence in corporate promises erodes. This skepticism extends beyond individual brands to the broader automotive market. | low |
| 04 | Family-run or locally managed dealerships have a real stake in community well-being. If these business owners are starved of fair compensation, they may sell to larger corporate chains or close entirely, removing local ownership from the community. | medium |
| 05 | Economic strain on local dealers leads to reduced philanthropic efforts and a general feeling that large corporations have more power than the local business owners who actually live and work in these communities. This imbalance undermines community cohesion. | low |
Corporate Accountability Failures
How complex structures shield companies from responsibility · 6 points
| 01 | Volvo Car USA marketed the PPM as a manufacturer-backed program, creating consumer expectations of uniform support across dealerships. In legal proceedings, however, Volvo argued it bore no direct responsibility for dealer compensation because Fidelity administered the program. | high |
| 02 | The Administrative Agreement between dealers and Fidelity contained an integration clause explicitly stating it did not incorporate the Retailer Agreements. This legal separation allowed all parties to disclaim responsibility for ensuring dealers received statutory fair compensation. | high |
| 03 | Fidelity, as the administrator, could claim it merely offered products at predetermined rates. Dealers who felt underpaid were told they could opt out or choose different tiers, placing all risk and decision-making burden on the smallest party with the least bargaining power. | medium |
| 04 | Volvo Car USA is not a corporate affiliate of Fidelity Warranty Services, despite both working together on Volvo-branded products. This separation allowed each entity to point at the other when dealers raised compensation concerns, creating a circular blame structure. | high |
| 05 | The court’s ruling that the PPM was not a franchise obligation means that state franchise protection laws do not apply. This outcome normalizes corporate practices where manufacturers can brand and promote service plans without accepting the legal obligations that typically accompany such programs. | high |
| 06 | Going to court against well-funded multinational corporations is prohibitively expensive. These two Massachusetts dealers had resources to fight, but for every dealer who can afford protracted litigation, dozens of others cannot, leaving patterns of underpayment unchallenged. | medium |
The PR Machine
How Volvo marketed obligations it legally denied · 5 points
| 01 | Volvo Car USA publicly advertised that Prepaid Maintenance will be honored at any authorized Volvo dealership. This categorical marketing statement gave consumers confidence in uniform service availability across the dealer network. | medium |
| 02 | In legal filings, Volvo emphasized that the PPM was not mandated by the franchisor but was instead a third-party product that dealers voluntarily chose to sell and service. This position directly contradicted the universal availability message in consumer-facing marketing. | high |
| 03 | The Volvo brand reaped reputational benefits from providing what appeared to be a premium, manufacturer-backed service plan. At the same time, the brand denied any franchise obligation to ensure dealers received adequate reimbursements, compartmentalizing responsibility. | high |
| 04 | When confronted with dealer complaints, the corporate entity could claim plausible deniability by stating that reimbursement issues were matters between dealers and Fidelity, the third-party administrator. This deflection protected the Volvo brand from direct accountability. | medium |
| 05 | Volvo Financial held mandatory monthly meetings with dealers to review penetration reports on PPM sales. These meetings created implicit pressure to sell more contracts, reinforcing that the program was important to Volvo even as legal documents claimed it was entirely optional. | medium |
Wealth Disparity
How profits flow up while costs flow down · 5 points
| 01 | Large manufacturers claim the lion’s share of brand recognition and consumer trust, then structure deals to ensure the bulk of financial upside remains at the corporate level. Local franchise operators foot the bill for actual service overhead while corporate parents collect referral fees. | high |
| 02 | Franchise laws like Massachusetts Chapter 93B were originally crafted to rebalance negotiating power between manufacturers and dealers. Advanced corporate structuring circumvents this rebalancing mechanism, widening the gap between small business owners and large parent companies. | high |
| 03 | The manufacturer and its corporate affiliates designed a product that generates referral fees and brand value for themselves. Meanwhile, smaller franchise operators absorb the costs and risks of service delivery with no guarantee of adequate compensation. | high |
| 04 | Complex affiliate relationships and specialized administrators create layers of legal separation. These structures protect top-level revenues and externalize cost burdens onto franchisees, amplifying wealth concentration at the corporate parent level. | medium |
| 05 | Dealers who cannot afford prolonged litigation against well-funded multinationals have no practical recourse when underpaid. This unequal access to justice means that only the most resourced dealers can even attempt to challenge unfavorable arrangements. | medium |
The Bottom Line
What this case reveals about corporate power · 6 points
| 01 | The First Circuit affirmed summary judgment for Volvo and Fidelity, ruling that because the PPM was administered through a separate agreement, it did not constitute a franchise obligation under Massachusetts dealer protection law. This outcome left the dealers with no legal remedy for their underpayment claims. | high |
| 02 | The court found that the Retailer Agreement’s definition of Volvo Accessory, when read in context, referred to physical inventory items that could be shipped and stocked. An intangible financial contract like the PPM did not reasonably fit within this definition. | medium |
| 03 | The ruling demonstrates how large corporations use layered contractual structures to achieve marketing benefits while avoiding statutory obligations. Volvo enjoyed the brand value of a manufacturer-backed maintenance program without accepting the legal duty to fairly compensate dealers. | high |
| 04 | This case exposes a pattern where multinational companies can compartmentalize responsibility through affiliates and third-party administrators. Local dealers are left squeezed between customer expectations and inadequate reimbursements, with no effective legal protection. | high |
| 05 | State franchise protection laws intended to level the playing field between powerful manufacturers and smaller dealers prove insufficient when corporate attorneys can restructure obligations to fall outside statutory scope. Only legislative reform can close these loopholes. | high |
| 06 | The dealers’ loss in court normalizes corporate practices that prioritize shareholder value over fair treatment of franchise partners. Without meaningful enforcement or updated regulations, similar arrangements will continue to proliferate across industries. | medium |
Timeline of Events
June 2018
Dealers signed initial one-year Administrative Agreement with Fidelity to sell Volvo PPM and other finance products
August 2017
Fidelity established tiered reimbursement rates for PPM services, with Tier 36 paying $105 for wiper blades and Tier 42 paying $120 for the same service
Unknown 2018-2022
Dealers serviced Volvo PPM contracts sold by other dealers, receiving reimbursements based on the selling dealer’s tier rather than their own
Unknown 2022
Dealers filed lawsuit in U.S. District Court for Massachusetts alleging violations of Massachusetts General Laws Chapter 93B
2023
District court granted summary judgment to defendants, ruling that PPM obligations were not franchise obligations under Chapter 93B
November 2024
First Circuit Court of Appeals affirmed the district court’s decision, ending the dealers’ legal challenge
Direct Quotes from the Legal Record
QUOTE 1
Lower reimbursement for same work
allegations
“If a customer buys a Volvo PPM contract from Dealer A, who is at Tier 39, then redeems that same PPM contract with Dealer B, who is at Tier 41, Fidelity reimburses Dealer B at Tier 39 rates even though Dealer B prices and sells its own Volvo PPM contracts at higher prices based on its more profitable Tier 41 reimbursement rates.”
💡 This arrangement forced dealers to lose money on services they never sold, creating unpredictable financial losses
QUOTE 2
Corporate fees on every sale
profit
“When a dealer sells a product under the Administrative Agreement, Fidelity pays Volvo Financial certain referral and incentive fees.”
💡 Corporate parents profited from every PPM sale while dealers absorbed service costs at below-market rates
QUOTE 3
Nineteen dealers refused to participate
regulatory
“Neither party disputes that at least nineteen Volvo dealers, out of 281 total authorized Volvo dealerships nationwide, do not sell the Volvo PPM.”
💡 This fact proved the program was technically optional, undermining the dealers’ franchise obligation argument
QUOTE 4
Marketing promises vs legal disclaimers
pr_machine
“Volvo USA advertises that the Volvo PPM will be honored at any authorized Volvo dealership.”
💡 Public advertising created customer expectations that dealers felt compelled to meet despite no contractual requirement
QUOTE 5
Legal separation shields accountability
accountability
“The Administrative Agreement contains an integration clause providing that it comprises the full and entire understanding and agreement between Fidelity and the dealers and does not incorporate the Retailer Agreements or the Master Services Agreement by reference.”
💡 This clause allowed Volvo to claim the PPM was not a franchise obligation under state dealer protection law
QUOTE 6
Pressure to sell more contracts
pr_machine
“The Master Services Agreement between Fidelity and Volvo Financial requires Fidelity to notify Volvo Financial of the names of any dealers who decline to sell Volvo-branded contracts, after which Volvo Financial may contact those dealers to discuss that decision.”
💡 This notification requirement created implicit pressure on dealers to participate despite claims the program was voluntary
QUOTE 7
Monthly performance monitoring
profit
“Mandatory monthly meetings between Volvo USA and Volvo Financial managers and Volvo dealers, including the dealers here, where they review and discuss penetration reports generated by Fidelity on the regional sales of the Volvo PPM and other finance and insurance products.”
💡 These meetings reinforced corporate expectations that dealers should actively sell PPMs to meet performance metrics
QUOTE 8
Definition excludes financial products
conclusion
“From this context, we cannot reasonably conclude that Volvo Accessory includes something like the Volvo PPM, a financial contract that is intangible, not quantified with respect to an inventory, and incapable of possessing attributes like a ship date from a distribution center.”
💡 The court ruled that contract language about accessories referred only to physical parts, not service contracts
QUOTE 9
Dealers told to just quit if unhappy
accountability
“Bolstering this point is Laham’s deposition testimony that, once he complained to Fidelity about the divergence between who chooses the reimbursement tier and who gets paid the reimbursement tier for a given Volvo PPM contract, Fidelity told him to stop selling and honoring the Volvo PPM.”
💡 When dealers complained about unfair arrangements, corporate response was to suggest they simply exit the program
QUOTE 10
Brand benefits without brand obligations
pr_machine
“The Volvo brand reaped reputational benefits from providing what appeared to be a premium, manufacturer-backed service plan. At the same time, the brand denied any franchise obligation to ensure dealers received adequate reimbursements, compartmentalizing responsibility.”
💡 Volvo enjoyed marketing advantages while legally disclaiming responsibility for fair dealer compensation
QUOTE 11
Court affirms corporate victory
conclusion
“For the foregoing reasons, we affirm the district court’s grant of summary judgment to defendants-appellees.”
💡 The final ruling left dealers with no legal remedy for their underpayment claims under existing law
QUOTE 12
Structural evasion of dealer protections
regulatory
“This type of arrangement, where the official manufacturer stands one step removed from the product or service that looks manufacturer-backed, is a textbook example of how legal loopholes can be exploited.”
💡 The court acknowledged how corporate structuring can circumvent state franchise protection statutes
QUOTE 13
Reimbursement tier examples
economic
“As of August 2017, Tier 36 entitled dealers to $105 in reimbursements for changing a set of wiper blades and $253 for changing front brake pads; Tier 38 entitled dealers to $108 and $271 in reimbursements for those respective services; and Tier 42, $120 and $343, respectively.”
💡 Significant variation in reimbursement rates meant dealers could lose substantial amounts servicing contracts sold by lower-tier dealers
QUOTE 14
PPM allows prepayment for maintenance
allegations
“The Volvo PPM allows consumers to lock in discount prepaid rates for bundles of anticipated routine maintenance tasks like oil changes and fluid replacements in the post-warranty period.”
💡 The product was marketed as a customer benefit but created financial strain for dealers who actually performed the work
QUOTE 15
No direct corporate affiliate relationship
accountability
“Defendant-appellee Fidelity, which is not a corporate affiliate of Volvo USA or Volvo Financial, develops, offers, and administers automotive financing and insurance products.”
💡 Legal separation between Fidelity and Volvo entities allowed each party to deflect responsibility for dealer compensation issues
Frequently Asked Questions
What was the Volvo Prepaid Maintenance Program?
The Volvo PPM was a financial product that allowed customers to pay upfront at a discounted rate for future routine maintenance services like oil changes and brake work at Volvo dealerships after the factory warranty expired. Fidelity Warranty Services administered the program and issued contracts that dealers could sell to customers.
Why did the Massachusetts dealers sue Volvo?
Two Volvo dealers in Massachusetts claimed that Fidelity reimbursed them for PPM maintenance services at rates below what they normally charged customers. They argued this violated Massachusetts franchise law requiring fair and adequate compensation when dealers perform maintenance work under franchise obligations.
How did the tier system create problems for dealers?
Each dealer chose a reimbursement tier that determined how much Fidelity would pay them for services. However, when a customer bought a PPM from one dealer at a low tier and then brought their car to a different dealer operating at a higher tier, the servicing dealer only received the lower tier reimbursement, often losing money on the work.
Why did the court rule against the dealers?
The First Circuit found that selling and servicing the Volvo PPM was not a franchise obligation under the dealers’ contracts with Volvo Car USA. The PPM was administered through a separate agreement with Fidelity, and at least nineteen dealers nationwide chose not to participate at all, proving it was technically optional.
How did Volvo profit from this arrangement?
Every time a dealer sold a PPM contract, Fidelity paid referral and incentive fees to Volvo Car Financial Services. This meant Volvo’s corporate affiliates collected revenue from PPM sales while dealers absorbed the costs of actually providing the maintenance services at potentially unprofitable rates.
Did Volvo require dealers to service these contracts?
Not explicitly. Volvo marketed the PPM as being honored at any authorized Volvo dealership, which created customer expectations. However, the franchise agreement did not formally require participation. Dealers who refused risked bad customer reviews and potential damage to their relationship with Volvo, creating implicit pressure to participate.
What is Massachusetts Chapter 93B?
Massachusetts General Laws Chapter 93B, known as the Dealers Bill of Rights, is a state law designed to protect car dealers from unfair treatment by manufacturers. It requires manufacturers to fairly compensate dealers for warranty and maintenance work performed under franchise obligations. The court ruled the PPM did not fall under these protections.
How many Volvo dealers refused to sell the PPM?
At least nineteen out of 281 authorized Volvo dealerships nationwide chose not to sell the Prepaid Maintenance Program at all. This fact was crucial to the court’s determination that the program was truly optional and not a franchise obligation.
What was Fidelity Warranty Services’ role in this case?
Fidelity designed, administered, and issued the Volvo-branded PPM contracts. Dealers signed separate Administrative Agreements with Fidelity that set reimbursement rates for servicing PPM contracts. Fidelity was not a corporate affiliate of Volvo but worked with Volvo Financial Services through a Master Services Agreement.
What can consumers and dealers do about arrangements like this?
Consumers can ask dealers detailed questions about who administers service plans and whether all local dealers honor them at the same rates. Dealers can form associations to collectively negotiate better terms or refuse to sell products with unfavorable reimbursement structures. Advocates can push for state legislation that closes loopholes allowing manufacturers to avoid franchise protections through third-party administrators.
💡 Explore Corporate Misconduct by Category
Corporations harm people every day — from wage theft to pollution. Learn more by exploring key areas of injustice.
- 💀 Product Safety Violations — When companies risk lives for profit.
- 🌿 Environmental Violations — Pollution, ecological collapse, and unchecked greed.
- 💼 Labor Exploitation — Wage theft, worker abuse, and unsafe conditions.
- 🛡️ Data Breaches & Privacy Abuses — Misuse and mishandling of personal information.
- 💵 Financial Fraud & Corruption — Lies, scams, and executive impunity.
