Ah, the joys of a bubble economy until Kahn's and Nissan's burst. Now who pays?
One of Nissan’s largest dealers today filed a $250 million fraud and breach of contract lawsuit against Nissan Motor Co., Ltd, Nissan North America, Inc. and Nissan Motor Acceptance Corp.
The Los Angeles Superior Court filing claims the automaker lied to one of its largest dealers, acted dishonorably and forced Orange County businessperson Michael A. Kahn to close his dealerships, sell his private jet and lose millions of dollars.
As of late October 2008, Kahn’s dealerships were, allegedly, “out of trust” about $7.7 million, meaning Kahn had sold cars financed by Nissan but used the funds for other purposes rather than paying off the loans.
According to the allegations, “Kahn was Nissan’s ‘go-to’ dealer in California.” At the request of Nissan, he acquired troubled or under performing dealerships and turned them around. “When a large automotive company sought to buy out Kahn in 2004 and again in late 2006, Nissan insisted that he not sell and told Kahn he was a key component of Nissan’s future plans in California.”
However, Superior Automotive Group was forced into bankruptcy in 2009 when Nissan cut off financing to Kahn and “forced” all his dealerships out of business.
“Nissan took this action — and destroyed Kahn’s business,” the suit says, “despite its prior promises and agreements to provide Kahn with the funding necessary to support the Dealerships through 2009 so Kahn could survive the economic crisis. Kahn believed Nissan, relied on its promises and was induced and deceived.”
Nissan has a different view of the contentious issue.
“Last year, we had to resort to taking legal actions against Superior Auto Group in California after the dealer group defaulted on its loans from NMAC. Those actions are pending in Orange County, Calif. We understand that Superior Auto Group has recently filed claims against Nissan in Los Angeles Calif., as a reaction to NMAC’s pending legal action. Nissan views these allegations as totally without merit and will vigorously defend itself,” the company said in a statement to TheDetroitBureau.com.
According to the lawsuit, Kahn and the dealerships have suffered damages in excess of $250 million, with the amount of damage — if any — to be determined at trial.
As usual these days, this is about “who pays” for reckless financial practices of over extended businesses that collapsed after the Wall Street meltdown in the fall of 2008, which led to the ongoing Great Recession.