Jury rules against ruined L.A. Nissan dealer in fraud case
Michael Kahn's Superior Automotive Group collapsed in February 2009 after Nissan Motor Acceptance found Kahn to be selling out of trust. Nissan canceled his financing and seized his inventories.
NASHVILLE – A Los Angeles jury has ruled that former dealer Michael Kahn must pay $40 million to Nissan Motor Acceptance Corp.
The jury rejected Kahn's charges of fraud against the factory finance arm and claims for $250 million in damages -- one of the largest dealer vs. captive finance company lawsuits in history.
Kahn's Superior Automotive Group LLC had been a fast-growing retail chain in 2007 -- with five Nissan stores, two Toyota dealerships and a Chrysler franchise in the Los Angeles and San Francisco markets.
But Superior collapsed in February 2009 after Nissan Motor Acceptance found Kahn to be selling out of trust. Nissan canceled his financing and seized his inventories.
Jurors in the Los Angeles Superior Court case concluded 11-to-1 that they did not agree with Kahn's argument that the factory lender had pulled the rug out from under him.
Kahn had alleged that NMAC canceled his financing only after its parent company, Nissan Motor Co., suffered financial losses in the economic crisis and went on a global push to stop its own flow of red ink around the world.
Kahn claimed that, until then, Nissan had been grooming him as a West Coast retail star, encouraged him to expand and flew him to Tokyo to receive an award for his operations.
But NMAC attorneys countered in court that previous awards did not mitigate selling out of trust, an auto industry term for a retailer's non-repayment of borrowed funds.
At one point in the case, the lender's attorney illustrated to the court the concept of retail floorplanning with a grade school-level chart that tracked a dollar bill's journey from an automaker through a captive finance company to a dealer and back.
Nissan itself originally filed suit in the matter, claiming Kahn owed the financial company $40 million. Kahn counter-sued for nearly $250 million, the amount he estimated as his likely income as a dealer through age 68.
Kahn's attorney on the case in Los Angeles could not be reached for comment.Nissan North America Inc. issued a written statement saying only, "We are pleased with the outcome and that the jury ruled in our favor. We were confident all along that justice would prevail and fully expected the favorable outcome in this case."
You can reach Lindsay Chappell at email@example.com.