Cancelled Nissan dealer in Calif. wins a retrial

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Former Los Angeles dealer Michael Kahn, who was shut down when Nissan Motor Acceptance Corp. ended his finance arrangements during the 2009 economic meltdown, has won a new trial in his lawsuit against the company.

The Fourth District Court of Appeals in California ruled Thursday that the Superior Court of Orange County, Calif., erred in limiting the scope of Kahn's 2011 trial.

In that trial, a jury was instructed to decide narrowly whether Kahn's Superior Automotive Group was delinquent in repaying its Nissan loans.

Kahn has acknowledged all along that it was delinquent, and that all parties in the matter knew it. But his lawsuit against the finance company alleged that Nissan had made special repayment arrangements with him -- and then reneged on the arrangements when the economy worsened.

The jury in that case awarded Nissan $40 million in damages from Kahn for breach of contract.

This week's appeals ruling allows Kahn and his lawyers to present a broader version of the case to a new Superior Court jury.

Kahn's lawyer, Skip Miller of Los Angeles, said the now-unemployed dealer will seek "well over $100 million" in damages from Nissan when the trial goes forward this year.

"Mike Kahn was a superstar dealer, and Nissan destroyed his business and destroyed him," Miller said in a phone interview.

A statement issued by Nissan on Friday said that a second trial will not change the jury’s award of $40 million to Nissan -- but only address Kahn’s counterclaims for damages.

“The judgment for Nissan against Mr. Kahn stands and is unaffected by this outcome,” the statement said. “The jury's verdict awarding $40 million was not affected, and we are confident that in any retrial, Mr. Kahn's claims will once again be rejected.”

The company and its once-high-flying dealer have been battling since February 2009, when Nissan declared him delinquent on his factory loans and cancelled all financing for six of Kahn's seven California dealerships.

Nissan later sued to reclaim $40 million in outstanding loans, which covered five Nissan stores and a Toyota store.

Kahn countersued for approximately $100 million, contending Nissan officials had permitted him to operate despite delinquent payments.

It is standard industry practice for automakers to cut off financing to dealerships that fail to repay factory loans as scheduled. Many dealerships closed during the economic turmoil of 2008-10.

Kahn's 2010 lawsuit alleged that Nissan officials promised in late 2008 and January 2009 to help him work through the economic crisis and pay off his delinquent loans.

The suit alleged that Nissan then abruptly pulled the financing in the first quarter of 2009 and seized his inventories, his home and other assets.

You can reach Lindsay Chappell at lchappell@crain.com.


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