SANTA ANA, Calif. — An Orange County jury awarded $256.5 million to a former California dealer who claimed Nissan Motor Acceptance Corp. (NMAC) put him out of business in 2009, the former dealer and his attorneys announced this week.
On May 17, an Orange County Superior Court jury sided with Michael Kahn, whose Superior Automotive Group operated dealerships in the greater Los Angeles and San Francisco Bay areas, and awarded him $121.9 million in compensatory damages and $134.6 million in punitive damages.
“After eight years, this was a hard-fought and well-deserved victory and vindication for Michael Kahn,” said Kahn’s lead attorney Amnon Siegel. “I’m happy for Mr. Kahn and his family.”
Nissan’s captive originally sued Kahn and his dealer group for breach of contract and was awarded $40 million back in 2011, but the ruling was reversed in California appeals court in 2014. The decision sent the case back to retrial before a different judge, and Kahn’s attorneys were allowed to pursue his fraud claims and other allegations.
Nissan’s captive provided financing two Superior Automotive’s four Nissan dealerships and two Toyota dealerships. The group also operated a Chevrolet store that did not receive NMAC financing.
According to his attorneys, Kahn was a leading Nissan dealer before the Great Recession took hold of the economy in 2009, sending car sales plummeting 21.2% that year. NMAC then “pulled the plug” on Superior’s financing.
“From 2001 through 2008, Superior was Nissan’s go-to dealer in California, having been awarded a sought-after open point dealership and having constructed new dealerships in Carson and Oakland,” Siegel claimed, adding that Superior sold more than $1 billion in vehicles during that time period. “Superior was so successful that NMAC even financed Superior’s two Toyota dealerships.”
But just like most dealers during the recession, Superior’s sales and revenues suffered. But according to Siegel, the dealer group continued to meet its obligations with NMAC, although “a bit slower” than the captive’s payback guidelines.
“NMAC led Mr. Kahn to believe that it would continue to support him, the recession notwithstanding, while at the same time internally planning to pull the plug on his financing and put him out of business,” Siegel said. “Without financing, an auto dealer cannot survive.”
Kahn and his attorneys alleged that NMAC required him to put his personal assets, including his home, and all of his business assets, including all the dealerships, up as collateral to maintain financing. He was also forced to sell one of his Toyota dealerships, which generated $30 million in proceeds — all of which went to NMAC.
“He had no way of knowing that, behind his back, NMAC was going to pull his financing and put him out of business,” Siegel charged.
On Feb. 11, 2009, NMAC did just that, claiming Kahn had defaulted on about $1.6 million in inventory financing. “NMAC then cross-defaulted all of Superior and Kahn’s real estate, capital and other loans, totaling over $100 million, despite none being in default,” Siegel said.
That “caused the demise of all its dealerships and the loss of over 800 jobs.”
Originally posted on F&I and Showroom