The sale of five Long Island dealerships to a Miami lawyer and entrepreneur has touched off a legal fight involving Jaguar Land Rover and an Illinois dealership group that tried unsuccessfully to buy the stores.
Napleton Dealership Group of Westmont, Ill., is suing Jaguar Land Rover North America, Long Island Automotive Group Inc. and the eventual buyer of the stores, Miami lawyer Manuel Kadre.
Napleton claims it had an agreement to buy the dealerships before Jaguar Land Rover said in May it would exercise its right of first refusal.
In its lawsuit, Napleton says it spent six months performing due diligence on the $50 million deal. Yet Kadre agreed to the transaction within a month after the agreement was canceled, which Napleton says is suspicious.
The lawsuit alleges that Long Island Automotive breached its contract to sell three Jaguar Land Rover dealerships, one Honda dealership and one Volvo dealership to Napleton for an undisclosed price late last year. The stores are all on Long Island, in Glen Cove, Huntington, Southampton and Manhasset, N.Y.
According to the suit, the asset sale agreement did not specify that approval was needed from other parties and did not disclose Jaguar Land Rover's right to block the deal.
Napleton says it received a letter from Jaguar in late May indicating that it would exercise its right to veto the sale of its stores. The seller then backed out of the agreement, the lawsuit says.
Less than a month later, Long Island Automotive negotiated the sale of the dealerships to Kadre, the lawsuit says.
Napleton alleges that Kadre could not have enough time to do sufficient due diligence, suggesting "impropriety on the part of [Jaguar], Kadre" and Long Island Automotive, the lawsuit said.
"[Jaguar] and the [defendants] must have improperly provided Kadre with the confidential and proprietary information that plaintiffs had generated during the preceding months which allowed Kadre to get comfort in quickly agreeing to spend approximately $50 million," to buy the dealerships, the lawsuit states.
Napleton's suit seeks $50 million. It asks reimbursement for the time spent conducting due diligence, as well as $125,000 in out-of-pocket costs and damages for lost future profits.
Jaguar Land Rover, Long Island Automotive and Kadre declined to comment.
Kadre once owned Sunshine Ford in Miami before selling it to AutoNation Inc. about 20 years ago, an AutoNation spokesman said. Kadre also did periodic consulting work with AutoNation on political and legislative issues, he said.
Napleton's lawyer, Leonard Bellavia, declined to comment. But a legal news service recently quoted him as saying the use of the right to block buy/sells by automakers has been on the rise and poses a threat to dealers.
He said the right is written into the franchise agreement by some manufacturers.
"The inappropriate use of rights-of-first-refusal will have a chilling effect on a dealer's ability to attract a buyer if manufacturers unlawfully step in to frustrate transactions," Bellavia was quoted in Law360 as saying.
Napleton ranks No. 41 on the Automotive News list of the top 125 dealership groups in the United States, with retail sales of 17,944 new vehicles in 2013.