Honda appears to back controversial dealership group's plans in Texas

American Honda appears to be sticking with a dealership group that plans to open a 100,000-square-foot-plus Honda store in Grapevine, Texas — even though the group has been sued by two captive lenders alleging non-repayment of millions of dollars in floorplan loans.

Honda has helped reach settlements with local dealerships that last year lodged protests against the open point store, arguing that the market area is adequately represented.

Former NFL player Jessie Armstead and auto industry veteran Michael Saporito — already partners in two other Honda dealerships — are working to open the store in Grapevine, a city of about 52,000 near Armstead's hometown of Dallas.

Saporito, Armstead and Antonio Pierce, another former NFL player, and entities they own were sued in August by Nissan Motor Acceptance Corp. and Hyundai Capital America over allegations they sold hundreds of vehicles worth more than $10.5 million out of trust and failed to repay floorplanning loans.

The allegations involved five dealerships: All Pro Nissan of Dearborn, in Michigan; All Pro Nissan Macomb in Clinton Township, Mich.; and Hazleton Nissan, Hazleton Hyundai and Hazleton Kia in Hazle Township, Pa. Hyundai's captive arm also has filed to begin mortgage foreclosure on the Hyundai and Kia dealerships, which have essentially closed.

Grapevine Honda is "the current candidate for this open point," an American Honda spokeswoman wrote in an email to Automotive News. An evidence of franchise form filed with Texas for Grapevine Honda was signed in September 2017 by Jeff Conrad, senior vice president of American Honda, who has since retired.

Armstead, Saporito and Pierce own Hazleton Honda in Hazle Township and Hamilton Honda in Hamilton Township, N.J. Both stores are past winners of Honda's President's Award.

Four Honda dealerships filed protests with the state a year ago seeking to halt the dealership license application. In Texas, same-brand dealers within 15 miles of a proposed new dealership or same-brand stores in the same county can file protests.

Protesting dealerships were Huggins Honda in North Richland Hills, AutoNation Honda Lewisville, and two Berkshire Hathaway Automotive dealerships, Honda of Fort Worth and Vandergriff Honda in Arlington, according to records from the Texas Department of Motor Vehicles.

The dealerships argued Grapevine Honda would significantly harm their businesses and that the market area is already represented adequately.

Honda of Fort Worth and Vandergriff Honda entered mediation and on Feb. 20 asked the state to dismiss their protests. Dismissals were granted two days later.

The AutoNation Honda Lewisville and Huggins Honda cases also went through mediation, but their cases were contested at the Texas Office of State Administrative Hearings. The cases were ultimately dismissed.

AutoNation Honda Lewisville on July 20 filed a motion to dismiss its protest, which was granted on July 25.

Huggins Honda reached a confidential settlement with Grapevine Honda and American Honda and on July 31 sought to dismiss its protest, which was approved Aug. 6.

William Crocker, the lawyer for Huggins Honda and the AutoNation store, said his clients reached independent settlements with American Honda and Grapevine Honda, which he could not disclose. A lawyer representing the Berkshire Hathaway dealerships, the lawyer representing Grapevine Honda and Saporito did not respond to requests for comment.

"Honda normally does not comment on protests/litigation, but under Texas law, existing dealers that meet the requirements of the law have the right to protest an open point," a Honda spokeswoman said in an emailed statement. "Four such dealers did protest, and all such protests have been addressed and have been dismissed by the dealers. Honda has no further comments."

In some protest cases, settlements can include million dollar-plus payments by manufacturers — the payments sometimes split with the proposed dealership group, said Richard Sox, a lawyer in Tallahassee, Fla., who represents dealers.

Sox said other settlement options for protesting dealerships include advertising support, increased vehicle allocation for hot-selling models, delays to new points or offers of new points to the protesting dealers themselves.

Texas received Grapevine Honda's application on Sept. 14, 2017, and the dealer license application remains under review, said Adam Shaivitz, a spokesman for the Texas Department of Motor Vehicles.

On its website, architectural firm GFF Inc. describes Grapevine Honda as a 108,000-square-foot dealership. A letter submitted to the city by GFF says the two-story dealership would sit on about 17.8 acres along State Highway 121 and includes an adjacent 11,000-square-foot car wash along Stone Myers Parkway.

The city in January approved a conditional use permit for an auto dealership on the property. The application was filed by 121 GV Holdings and Saporito.

American Honda Finance Corp. loaned $17 million to 121 GV Holdings to buy the property for the dealership and for a line of credit, according to documents filed in May with Tarrant County, Texas.

As of early October, Grapevine had not issued a construction permit.

At one time, Armstead was interested in becoming a Toyota dealer in Texas and documents in 2014 were filed with the state for Jessie Armstead Toyota. But Gulf States Toyota Inc., the distributorship with oversight in the region, never issued a franchise to Armstead.

Jeff Parent, president of Gulf States Toyota, wrote in an email to Automotive News: "Jessie Armstead did previously express an interest in becoming a Toyota dealer in Texas, but GST is not currently working with Mr. Armstead or any group involving him, nor are there any plans to do so in the future."