A former Chevrolet dealership and its principals can pursue most of their claims that a cash-strapped GMAC forced their family-owned store to fail, a federal judge in Pennsylvania has ruled.
The suit claims that GMAC reduced their floorplan financing and revolving line of credit and demanded accelerated payments.
The decision lets stand a contract and tort suit by Weed Chevrolet Co. Inc. in Bristol, its affiliated real estate company and family members. Weed did business with GMAC from 1926 until closing in 2008.
The suit alleges that GMAC acted in bad faith by targeting Weed and other dealerships for termination, foreclosure and liquidation. It names GMAC's successor, Ally Financial Inc., as defendant.
U.S. District Judge Petrese Tucker let the plaintiffs seek compensatory and punitive damages for fraud and tortuous interference with contractual relations, plus damages for breach of contract. The principals also seek pain and suffering damages.
The complaint doesn't ask for a specific amount but the plaintiffs' lawyer, William Narwold of Hartford, Conn., said, "Weed Chevrolet lost a dealership that was worth millions, Weed Properties lost valuable real estate worth millions and the Weed family lost millions -- not to mention the needless destruction of a family-owned business, started by their grandfather."
Ally attorney Mark Tunnell of West Chester, Pa., declined to comment on the case. But Ally's court filings deny liability.
Weed had floorplan financing and revolving line of credit agreements and a commercial real estate loan from GMAC, secured by mortgages and personally guaranteed by the principals. It was never in default or out of trust, the suit says.
The suit cites the collapse of the subprime mortgage industry and GMAC's "internal liquidity crisis" as GMAC's motivation. The suit alleges that GMAC reduced Weed's floorplan financing and revolving line of credit agreements in 2008 and ordered a business plan showing lowered costs and better performance. It demanded more working capital, which Weed raised by selling inventory at a loss. GMAC also demanded accelerated payments on inventory, reduced used-vehicle financing and didn't respond to Weed's request to approve the sale of its real estate.
When GMAC terminated financing, the companies and family sold dealership assets and real estate at "distressed" prices and borrowed $1.15 million from a bank to wind down the business and make accelerated payments, the suit said.
Tucker's decision rejected Ally's argument that most of the tort claims are barred because they arise from a contractual dispute. She dismissed only a negligent misrepresentation claim, saying it mirrors the bad-faith contract claim. Other pretrial motions are pending.