Nissan sues Ill. dealership for fraudulent warranty repairs

A suburban Chicago dealership's service department had a "pervasive culture of fraud" and "a pattern of false and/or fraudulent warranty schemes" that "undermined consumer confidence in the brand," according to a $2.5 million lawsuit filed by Nissan North America.

The automaker sued Woodfield Nissan in Hoffman Estates, Ill., and its former service director Roy Carr for fraud, misrepresentation, unjust enrichment and breach of contract. The Nov. 17 complaint in Illinois federal court said the dealership's conducted an array of schemes that led to massive multimillion-dollar fraudulent payments from 2016 through at least 2019.

But a protest filed in June by Woodfield Nissan and a second store — Glendale Nissan in Glendale Heights, Ill., owned by the same dealer principal, William Slevin — called the accusations untrue. It accused Nissan of acting in bad faith in violation of the Illinois Motor Vehicle Franchise Act and said the stores' business records "reflected that the warranty repairs were actually performed and necessary at the time."

In September 2018, Nissan conducted an on-site audit of 358 warranty and repair claims Woodfield Nissan had submitted between Sept. 24, 2017, and Sept. 18, 2018. Illinois law allows manufacturers one year to audit warranty claims, according to the protest.

"Woodfield Nissan was unable to substantiate" 343 of them, or 95 percent, the complaint said.

However, the protest said Nissan failed to share its audit findings with Woodfield Nissan until April 2022. The suit gave no reason for the 3½-year delay.

Chicago attorney Ira Levin, who represents Woodfield Nissan, said the store never received a termination notice or any other communication from Nissan about the audit during that period.

"They never came to us. They waited years," he said.

Nissan has conducted no subsequent on-site warranty audits of Woodfield Nissan, Levin said.

The protest said the automaker's "practice of auditing dealers, lying in the weeds with the results for several years and then springing threats of litigation on them and their principals to extort settlements is not only a bad faith practice but reflects an attempt to avoid the procedures and limitations on warranty audits and chargebacks envisioned by [the state dealer law] and avoid the jurisdiction of the Illinois Motor Vehicle Review Board."

The parties failed to resolve the dispute at a settlement conference with a review board hearing officer, Levin said.

He described Slevin as a "longstanding, well-honored dealer in the Nissan system." The protest said the present dispute notwithstanding, "Slevin and his (three) dealerships have historically had a positive relationship with Nissan and have been recognized for their sales and service performance many times."

The protest said Nissan's threats to sue other non-Tennessee dealers in Tennessee state courts "appears to be part of an effort to offset the cost of remedying well-known defects in the vehicles."

Nissan's suit described Carr, who left the dealership years ago, as "the architect of many of the fraudulent warranty schemes" and said he benefited from higher commissions or revenue-sharing compensation. It also identified two service advisers who "actively aided" him, as well as four technicians who "provided material assistance." Nissan didn't sue them as co-defendants.

Carr, the service advisers and technicians "routinely manufactured false and/or fraudulent repairs under factory and extended warranty programs as a means to increase the revenues generated in the service department," the suit alleged.

Among the alleged rip-offs listed in the suit, the store:

• Used aftermarket parts such as radiators, brake pads and alternators but charged Nissan for reimbursement of genuine parts
• Had uncertified technicians perform work that required certification, altered technician's ID numbers and falsified the related warranty claims
• Added bogus warranty repairs to repair orders, "invented alleged defects out of whole cloth" and misled customers on the need for warranty work
• Invented nonexistent warranty defects on used vehicles and submitted warranty claims for repairs that were never made to them
• Abused policies and procedures for free goodwill repairs as a "marketing device" to attract service customers
• Falsified VINs to get reimbursed for warranty work on vehicles that were ineligible because they had branded titles

"All of these actions served to undermine the credibility of Nissan North America to consumers by creating the false belief that vehicles were in need of repairs they were not, in fact, in need of, thus impacting Nissan's ability to compete in the marketplace," the suit asserted.

Levin said Nissan had originally sued Woodfield Nissan in a Tennessee state court although the dealership didn't do business there. That case was transferred to Tennessee federal court, where Nissan dropped the fraud and misrepresentation claims and later withdrew the suit. It then initiated the new case in Illinois federal court, where the automaker has reasserted the fraud and misrepresentation claims.

Levin said Woodfield Nissan will seek to have the new suit dismissed.