A suburban Denver dealer group has sued Kia Motors America Inc. and two vehicle brokers for allegedly fraudulent and deceptive practices connected with fleet sales to small rental-car companies in several states.
The federal court suit stems from transactions involving hundreds of vehicles in 1997 and 1998.
According to the complaint, Kia invited Burt Subaru Inc. of Englewood, Colo., to sell vehicles to the brokers for sale or lease to rental fleet operators. At the time, Burt Subaru, a unit of Burt Automotive Group, also did business as Burt Kia Inc. and was an authorized Kia dealer. Burt discontinued its relationship with Kia earlier this year.
Under the arrangement, the brokers designated the vehicle delivery points, with the documents to pass from Kia to Burt to lenders designated by the brokers, the suit said. Burt never took physical possession of the cars.
However, Burt claims the lease payments were often late or never made, and in one situation the dealership sued a rental company in New Orleans to force the return of vehicles. Under a repurchase agreement, Kia paid Burt for the principal owed on those vehicles, but Burt absorbed the lost interest and other expenses, according to the suit.
FRAUD IS ALLEGED
Burt seeks $250,000 to $500,000 in damages, according to John Held, the company's senior vice president, and outside counsel Michael Dommermuth of Denver.
The litigation is based on business and financial issues, they said, with no allegation that the vehicles were defective or unsatisfactory.
Among the other defendants are Thomas Pieroni, who allegedly does business as Automotive Fleet Leasing Co. in Amherst, N.Y., and James Gauntt, identified as doing business as Nevada Fleet Sales in Henderson, Nev.
Burt contends that the defendants intentionally made false and misleading representations about financing and about the fleet operators' creditworthiness and ability to pay. It seeks damages for breach of contract, breach of good faith, fraud, negligence, misrepresentation and deceptive trade practices.
'These fleet deals with rental companies are low margin, about $30 a unit. The second we don't get paid immediately, we start losing money,' Dommermuth said. 'Kia brought us into this deal then turned their backs on us, despite a promise by high management to take care of us.'
KIA DISPUTES CHARGES
Kia disputes the allegations and has asked U.S. District Judge Daniel Sparr of Denver to throw out the case, said Lawrence Treece, the company's lawyer in Denver. No hearing is scheduled on the motion.
'Kia sold cars to Burt, and Burt sold them downstream,' Treece said, adding that there is no legal basis for any claims against his client.
'Kia's defense is simply that it did not promise Burt that it would pay for the cars, either at the beginning of the transaction or later, and that it made no misrepresentations about the financial capabilities or integrity of the people downstream in the channel of the transaction.'
He said the suit fails to identify specific fraudulent statements and said Colorado's consumer protection law does not apply since the transactions there did not involve the public or consumers at large.
Pieroni's defense lawyer, Michael Jones of Denver, said his client denies any wrongdoing. He also said Pieroni will ask to be dismissed from the case since Burt's arrangement was with the corporation, not himself as an individual.
Gauntt has not filed any response to the suit, lawyers said.