NMAC Could Pay $256M For Fraud in Pulling Dealer's Funding, Jury Finds | Auto Finance News | Auto Finance News

NMAC Could Pay $256M For Fraud in Pulling Dealer’s Funding, Jury Finds

Nissan Motor Acceptance Corp. could pay a former California dealer owner $256.4 million in compensatory and punitive damages for acting in fraud, malice, or oppression in 2009  –when the captive stopped funding the dealer’s loans, a jury in the Orange County Superior Court ruled this week.

The court’s decision includes $121.9 million in compensation for lost business over those years and seized collateral, as well as $134.5 million in punitive damages against NMAC, according to a press release from Miller Barondess LLP, the firm representing the dealer.

UPDATE: The verdict was vacated in December 2017 for juror misconduct related to probable bias against NMAC from the onset of the trial, a Superior Court judge ruled. A new trial will be held but a date has not yet been set. An earlier 2009 ruling in favor of NMAC that awarded the company $40 million still stands the lender told Auto Finance News. 

“We are pleased that justice has been served and that the court has vacated the prior verdict,” NMAC told AFN in a statement. “The court’s decision is clearly warranted and necessary to rectify the impact of juror misconduct that NMAC brought to the court’s attention. We are confident the facts remain on NMAC’s side, as shown in the prior trial which resulted in a substantial, multi-million-dollar jury verdict in NMAC’s favor. We also remain confident that NMAC will ultimately prevail in any future proceedings.”

Michael Kahn owned Superior Automotive Group, a California-based organization of Nissan and Toyota dealerships, but in 2009 was forced to close his business after NMAC pulled funding during one of the worsts times of the recession, court documents explain. Kahn’s legal representation successfully argued NMAC had done this through “fraudulent  concealment,” and “negligent misrepresentation,” according to the release.

“We are disappointed with the jury’s decision,” a spokesman at NMAC told AFN. “A prior trial based on similar facts led to a substantial, multi-million dollar jury verdict and judgment in NMAC’s favor. If the jury award stands, we plan to appeal and are confident that justice will ultimately prevail.”

From 2001 to 2008, Kahn’s dealership group was considered one of NMAC’s best in the state and he was even flown out to Tokyo to be named one of Nissan’s top three dealers in the world, according to the release. However, when the recession hit, sales slowed and Kahn fell behind on inventory payment guidelines set by NMAC, yet still completed all his payments eventually.

Internal NMAC emails, used as evidence during the case, showed that the lender had made the decision to “pull the plug” on Superior’s financing weeks before the 24-hour notice was given, and showed that the late payments were used as an “excuse” to seize collateral assets, the release states.

After Kahn paid late on $1.6 million in inventory — about 40 cars across all the dealerships — NMAC then cross-defaulted the group’s real estate, capital and other loans, totaling over $100 million, according to the release. Internal NMAC emails showed correspondence that read “take everything,” “grab the valuable ones,” and “the uglier it is the more I like it.”

“After eight years, this was a hard-fought and well-deserved victory and vindication for Michael Kahn,” the plaintiff’s lead lawyer said in a release. “Mike is a great guy, a great car dealer, and he deserves this so he can get his life back,” added Skip Miller, the firm’s managing partner.

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3 thoughts on “NMAC Could Pay $256M For Fraud in Pulling Dealer’s Funding, Jury Finds

  1. […] be used as a touch point for mobility in the future. A court also recently ruled that NMAC is to pay $256.4 million in compensatory and punitive damages for maliciously withholding funding from a California dealer […]

  2. […] be used as a touch point for mobility in the future. A court also recently ruled that NMAC is to pay $256.4 million in compensatory and punitive damages for maliciously withholding funding from a California dealer […]