Ex-dealer wins $256M jury award from Nissan finance unit

NASHVILLE -- Eight years after the collapse of his California dealership group, a jury has awarded ex-Nissan dealer Michael Kahn more than $256 million in damages from Nissan Motor Acceptance Corp.

Kahn has argued since 2010 that Nissan's finance unit defrauded him by canceling his dealership financing, including floorplan and customer financing, in the midst of the 2008-10 economic crisis despite giving him assurances that it would not.

A jury rejected that argument in an earlier case. But an appeals court threw out that verdict and approved Kahn’s case for a retrial.

The jury verdict this week in Orange County Superior Court in Southern California awarded him $121.9 million in compensatory damages from NMAC and $134.5 million more in punitive damages.

“This verdict vindicates Mr. Kahn and allows him to begin to restore his reputation and his life,” said Skip Miller, managing partner of Miller Barondess, the Los Angeles law firm that represented Superior Automotive.

Kahn blamed NMAC for the failure of his multifranchise Superior Automotive Group in 2009. The group -- four Nissan stores, two Toyota dealerships and a Chrysler-Jeep-Dodge store in the Los Angeles and San Francisco markets -- was NMAC’s largest borrower at the time, according to court documents.

But when the U.S. economic crisis erupted in Sept. 2008, auto companies and other businesses adopted emergency measures to conserve cash and limit credit.

Kahn had been a strong performer for the Nissan brand prior to the crash, and Nissan had encouraged him to obtain more retail points, according to Miller.

But the relationship changed suddenly in 2009 when Kahn became delinquent on NMAC financing for between 30 and 40 vehicles, representing about $1.6 million in loans.

NMAC called in the loans and Kahn was unable to meet the company's demands. NMAC sued for breach of loan guarantees and was awarded $40 million from Kahn.

In his 2010 countersuit, Kahn claimed that NMAC representatives had previously acknowledged his delinquency and told him that dealers everywhere were facing similar situations. According to documents from the earlier lawsuit, NMAC assured Kahn that it would continue working with him despite the delinquent loans.

“Mike owed them $40 million at the time, and that was never in question,” Miller told Automotive News Tuesday. “He knew he owed them that and he was attempting to repay it.

“The question was whether fraud took place. And this $256 million verdict was an award for fraud.”

NMAC said in a statement Tuesday that it intends to appeal the verdict, which is still under review by the court.

“We are disappointed with the jury’s decision,” NMAC said in the statement. “A prior trial based on similar facts led to a substantial, multi-million dollar jury verdict and judgment in NMAC’s favor. If the jury award stands, we plan to appeal and are confident that justice will ultimately prevail.”

The blistering verdict issued Monday is a reminder of the brutal disruption that hit car dealers and automakers during the 2008-10 economic crash.

Thousands of auto dealers went under as a result of a collapse in new-vehicle sales -– many of them eliminated intentionally by General Motors and what was then Chrysler as part of their bankruptcy reorganizations.

In Kahn’s case, jurors heard testimony that NMAC was under corporate pressure to clamp down on bad loans as part of a campaign by its parent company, Nissan Motor Co., to conserve cash during the crisis.

At one point Kahn owed NMAC at least $70 million. Kahn sold a Toyota store for $30 million and turned those proceeds over to NMAC. But another $40 million in loans remained outstanding at the time, according to Miller.