A California man has sued BMW and BMW Financial Services alleging their ban on buyouts by third-party dealers blocked the sale of his off-lease 2019 X3 at a profit to a Toyota store.
The federal lawsuit by Allen Ozeran filed Dec. 27 also seeks class-action status on behalf of anyone whose BMW lease ended after Oct. 1, 2021, the date the complaint says BMW ceased to allow other dealerships to pay off-lease residual values.
The complaint accused BMW of interfering with potential economic advantage and contractual relations; misrepresentation; violating the California Unfair Competition Law; demonstrating a lack good faith and fair dealing; and unjust enrichment.
BMW spokesman Phil DiIanni said this week that company policy was not to comment on pending litigation. But in September, DiIanni described the company's lease policy to Automotive News.
"Our primary goal is to support BMW franchise dealers by creating opportunities to keep more vehicles in our franchise network," he said then. "Therefore, we're prioritizing franchise dealers on our online auction platform to ensure they have more opportunities to purchase off-lease vehicles. In addition, we will temporarily suspend payoffs from third-party dealers as of Oct. 1."
Culver City Toyota in California agreed in September to buy Ozeran's crossover when the lease ended in October, according to attorney Leon Ozeran, who is representing his son.
The lease on Allen Ozeran's 2019 X3 carried a residual value of $27,078.05, but by October 2021, the crossover's market value had climbed to $40,000. Allen Ozeran entered into a contract to sell the crossover to Culver City Toyota for $31,000 — almost $4,000 above the buyout cost.
However, BMW Financial refused to provide payoff instructions to Culver City Toyota when the dealership contacted it a few days before the lease end, according to the lawsuit. Instead, BMW Financial sent Allen Ozeran a letter stating that under the lease agreement, he could either buy the vehicle or return or trade it at a BMW dealership.
"BMW Financial will not honor payoffs received from third-party dealerships," the letter said, according to the lawsuit.
BMW also told him that state regulations stipulated only the lessee or a BMW dealership could receive the vehicle title.
The automaker's claims mischaracterized the lease agreement and state regulations, according to the suit.
"In fact, those representations were false and Defendants knew the statements were false when ... they made the representations," the lawsuit alleged.
The contract between Culver City Toyota and Allen Ozeran collapsed, and he couldn't afford to cover the residual value on his own. He agreed to sell his stake in the vehicle to a nondealership third party, which provided the funds to cover the buyout cost, according to Leon Ozeran.
"Plaintiff relied on Defendants' false and misleading representations and entered into the contract with a private party to sell his car for the same price of $27,078.05 as in the Lease to avoid additional charges," the lawsuit stated.
Allen Ozeran would need to pay more than $3,000 in surrender and wear-related fees were he to return the vehicle "rather than receiving a benefit of more than $3,000 in profit but for Defendants' new policy," according to the lawsuit, which called it an "insult to injury" situation.
The lawsuit follows another complaint in the same federal court regarding BMW's off-lease policy. Calabasas Luxury Motorcars sued the automaker and BMW Financial on Nov. 9, claiming the ban on lease returns to third-party retailers interfered with dealer and lease rights under California code.