A New Jersey Polestar dealer has accused the automaker of using a federal sales ban as cover for a withdrawal from the U.S. market that it had planned for years. The lawsuit raises franchise-law issues every MADA member should watch.

Background

Prestige Imports operates two Polestar stores in New Jersey. On June 25, 2026, Polestar announced that the U.S. Department of Commerce had denied its request for authorization to sell 2027-model-year vehicles and beyond, under a federal rule restricting Chinese-linked connected-vehicle technology. Two weeks later, Polestar sent Prestige a formal letter invoking force majeure — the legal doctrine excusing a party from its obligations because of an event beyond its control.

Prestige filed suit against Polestar on August 12, 2026, in New Jersey state court. The dealer seeks at least $25 million in damages, a court declaration that Polestar violated New Jersey’s Franchise Practices Act, payment of the franchise’s fair market value, and five years of continued parts and warranty support.

The Dealer’s Core Allegation

Prestige does not dispute that the federal restriction exists. It alleges instead that Polestar had been planning to leave the U.S. for roughly two years and used the Commerce Department’s decision as a convenient exit rather than an unavoidable event. The complaint notes that Europe accounted for the large majority of Polestar’s first-quarter sales while the U.S. represented only a small fraction, and that Polestar has reportedly lost tens of thousands of dollars on every vehicle it sold domestically.

The complaint also points out that Polestar’s corporate sibling, Volvo Cars, received the same regulatory exemption a month earlier by working through a detailed compliance process with U.S. officials. Prestige alleges Polestar was offered a similar path, declined it, and chose not to appeal the denial — undercutting Polestar’s claim that the ban left it no choice.

Prestige further alleges that Polestar kept encouraging U.S. dealers to invest even as it prepared to exit. According to the complaint, after the federal Connected Vehicles Rule was finalized in early 2025, Polestar’s CEO told U.S. retailers the brand was heading into its strongest year and was designing the Polestar 7 with American buyers in mind. As recently as February 2026, the complaint says, a Polestar executive endorsed a multi-year expansion plan for a New Jersey dealership tied to that model’s planned 2028 U.S. launch. Even after the ban became public, Prestige alleges Polestar continued urging dealers to sell down inventory, ran advertising promising ongoing service and support, and encouraged retailers to position for used-vehicle business beyond 2027.

Polestar has said its focus remains on supporting its customers with continued service.

The Legal Theory: Constructive Termination

Prestige is not claiming Polestar issued a formal termination notice. It argues the force majeure letter and market exit function as a termination in substance — legally known as “constructive termination” — without following the process New Jersey law requires.

New Jersey’s Franchise Practices Act requires a franchisor to give a dealer at least 60 days’ written notice before terminating, canceling, or failing to renew a franchise, and requires the franchisor to show good cause for doing so. N.J.S.A. 56:10-5. Under the statute, a manufacturer generally may terminate only where the dealer has failed to comply with its own reasonable franchise obligations. Prestige alleges it met every obligation and that Polestar provided neither the required notice nor good cause.

Polestar has not otherwise commented on the litigation. If the parties don’t settle, a court will decide whether a federal regulatory restriction excuses a manufacturer from state franchise-termination requirements, or whether the manufacturer must still satisfy those requirements despite the restriction.

Why This Matters for Minnesota Dealers

Minnesota dealers operate under a similar statutory framework. Minnesota law also requires a manufacturer to give written notice before terminating, canceling, discontinuing, or failing to renew a dealer’s franchise, and to establish good cause for doing so. Minnesota’s statute likewise entitles a dealer to compensation for inventory, parts, equipment, and other losses when a manufacturer improperly ends the relationship.

The Prestige case matters because the same scenario could happen in Minnesota: a manufacturer cites a federal regulation or invokes force majeure to exit the market, then skips the notice and good-cause process state law requires. If a court rules that a regulatory restriction doesn’t excuse compliance with franchise law, manufacturers will still owe Minnesota dealers notice, good cause, and compensation — regardless of why they’re leaving. 

MADA will continue to monitor this case and will update members as it develops.