Pa. Hyundai, Kia dealerships seek dismissal of captive suit, arbitration
A trio of dealers accused by two automakers' captive finance companies of failing to repay floorplan loans for hundreds of vehicles in violation of lending agreements is asking a Pennsylvania court to dismiss a lawsuit filed by Hyundai Capital America and send the parties to an arbitrator to settle their differences.
Auto industry veteran Michael Saporito and ex-NFL players Jessie Armstead and Antonio Pierce run corporations that own Hazleton Hyundai and Hazleton Kia in Hazle Township, Pa., as well as three Nissan stores -- one in Hazle Township and two in suburban Detroit.
In lawsuits filed in August, Hyundai Capital America and Nissan Motor Acceptance Corp. accused the dealerships of selling nearly 500 vehicles out of trust -- or selling a vehicle but not repaying the lender for the vehicle that had been financed in time.
Lawyers representing the three defendants and corporations linked to the Pennsylvania Hyundai and Kia dealerships argued in court filings Tuesday in Luzerne County Court of Common Pleas for dismissal of the case and for Hyundai Capital to seek any damage claims through arbitration.
Governed by arbitration?
Court records argue the defendants believe claims made by Hyundai Capital are governed by binding arbitration and loan documents indicate Hyundai Capital and the defendants agreed to a binding arbitration clause.
According to filings, that clause in part read "all claims or disputes arising out of or relating to this agreement, or the breach thereof, whether such claims or disputes sound in contract, tort, trade practices, equity, statutory or common law or otherwise, shall be determined by arbitration." Court filings also argue that by agreeing to the clause, the lender and dealer "give up any and all rights to trial by jury."
Court records filed Tuesday also say part of Hyundai Capital's complaint has been resolved by the court issuing an injunction and allowing seizure of vehicles.
Hyundai's captive filed a lawsuit in August against the dealerships, Saporito, Armstead and Pierce after audits that began July 30 at the dealerships identified 86 vehicles, many of which had been titled to the group's Hazleton Nissan or Hazleton Honda stores, also in Hazle Township. Hyundai Capital said it was owed more than $1 million for those vehicles and alleges that action violated its loan agreements with the dealerships. Days later, in subsequent audits, the 86 vehicles couldn't be located and more vehicles were missing, court filings said.
A lawyer for the dealerships told Hyundai's captive that the 86 vehicles had been sold at wholesale to other dealers, according to court records. In total, Hyundai's captive says it is owned nearly $2.7 million on 184 vehicles. Hyundai Capital also alleges the dealerships missed Aug. 1 loan payments.
An Aug. 29 court order allowed Hyundai's captive to remove collateral from the two dealerships -- about 90 vehicles valued at more than $2 million. The removal of that inventory has left the two dealerships essentially closed.
A lawyer representing Hyundai Capital declined comment on Wednesday and a spokeswoman for Hyundai Capital previously declined comment to Automotive News.
Honda last week said Hamilton Honda and Hazleton Honda were open and operating, while General Motors said the group’s Cadillac store was, too.
The three lawyers for the corporations, Saporito, Armstead and Pierce also did not return emails or phone calls seeking comment. In other court documents, they've denied the allegations.
Nissan Motor Acceptance Corp. also has filed lawsuits in Macomb County Circuit Court in Michigan and in Luzerne County against Saporito, Armstead and Pierce, All Pro Nissan of Macomb in Clinton Township, Mich., All Pro Nissan of Dearborn in Michigan and Hazleton Nissan over allegations of breach of contracts and for allegedly selling more than 400 vehicles out of trust, for which Nissan Motor Acceptance Corp. says it is owed $9.5 million.
'House of cards'
Nissan Motor Acceptance Corp., in court documents, calls the group or its members insolvent and accuses it of defaulting on its loan agreements. An affidavit of Hugh Johnson, Nissan Motor Acceptance Corp.'s manager of special credit, said Saporito confirmed missing vehicles were sent to auction "in part because the business of the Saporito Group entities was a 'house of cards.' "
On Friday, the parties filed to extend restraining orders for the Nissan stores until Sept. 28. While Nissan has said the stores are open and operating, Automotive News found different cases in three visits to the Michigan stores in late August and early September.
A sign at the Macomb store at one point read, "Due to a computer outage, we are unable to sell vehicles at this time." Representatives at the Dearborn store told an Automotive News reporter that the dealership was open but "due to restructuring" was unable to sell or lease vehicles. On Thursday, Sept. 6, a service department employee at the Dearborn store said all the technicians had left to take jobs with other Nissan dealerships.
The ownership group also owns Hamilton Honda in Hamilton Township, N.J., and Englewood Cliffs Cadillac in Englewood Cliffs, N.J. Honda and General Motors told Automotive News last week that those dealerships are open and operating.
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