Miller Barondess Wins Appeal – Client Super Automotive Gets New Trial Against Nissan Motor Co

Miller Barondess Wins Appeal – Client Super Automotive Gets New Trial Against Nissan Motor Co

Calif. Panel Revives Fraud Claims Against Nissan Lender

By Kurt Orzeck

Law360, Los Angeles (January 17, 2014, 4:24 PM ET) — A California state appeals court on Thursday revived fraud allegations accusing lender Nissan Motor Acceptance Corp. of promising financial support to California dealerships and then pulling the plug, finding a jury was blocked from hearing key evidence favoring the dealerships.

Reversing in part a judgment by Superior Court Judge Ronald L. Bauer, the three-judge panel determined that the jury hadn’t heard evidence that Nissan Motor Acceptance Corporation President Steve Lambert allegedly made false oral promises to continue financing Superior Automotive Group LLC’s dealerships regardless of untimely inventory payments.

Judge Bauer dismissed fraud claims made by Superior Automotive principal Michael A. Kahn, who accused the lender of ending its financing to the dealerships after the global recession hit, before the trial began.

But the appeals court decided that the judge wrongly stopped a jury from reaching Kahn’s tort claims in his cross-complaint against the lender, remanding those claims for retrial.

“[Superior Automotive] did manage to present substantial evidence that Kahn reasonably relied on [Lambert’s] oral promises of continued funding regardless of [untimely inventory payments,” Thursday’s opinion said.

According to Kahn, Superior Automotive was one of the larger auto dealership groups in the U.S., with more than $500 million in revenues and about 800 employees in 2007. The company allegedly owned seven dealerships in California, six of which were financed by Nissan’s financial services arm.

The now-feuding parties allegedly began their relationship in 2001, after which Kahn found himself acquiring troubled dealerships and turning them around at the behest of the automaker. In 2004 and 2006, he passed on lucrative opportunities to sell his business when Nissan insisted he was a key to the company’s future plans in California, court papers said.

By December 2008, the plaintiff had a $140 million lending relationship with Nissan — the largest in the U.S., according to court filings. But by early 2009, due to the recession, Nissan cut off Kahn’s financing, forcing his dealerships out of business.

In February 2009, Nissan filed five lawsuits against Superior Automotive, holding it in default, and also sued Kahn and his wife on the guarantees for its loans to the company. Kahn and Superior Automotive filed a cross-complaint, alleging fraud and breach of contract.

After Judge Bauer granted nonsuit to Superior Automotive’s fraud claims accusing Nissan of not disclosing its intent to stop financing the dealerships, a jury granted Nissan $40 million in damages.

Superior Automotive argued on appeal that its fraud evidence shouldn’t have been excluded under the parole evidence rule in light of the California Supreme Court’s January 2013 decision in Riverisland Cold Storage Inc. et al. v. Fresno-Madera Production Credit Association. In that case, the court overturned a long-standing rule limiting the situations in which evidence of contract fraud could be presented.

The appeals court ruled Thursday that Riverisland could be applied retroactively to Kahn’s dispute with Nissan because the state’s high court had intended to remove an unwarranted judicially-created limitation on the fraud exception.

Amnon Z. Siegel of Miller Barondess LLP, which is representing the car dealership owners, told Law360 on Friday that they look forward to a new trial that will allow the jury to hear all the evidence.

“We look forward to having our day in court and telling the full story about the destruction of our client’s dealerships … and to recover for all his losses,” he said.

An attorney for Nissan declined comment Friday.

Judges David A. Thompson, Eileen C. Moore and Richard M. Aronson sat on the panel for the appeals court.

Nissan is represented by Jan T. Chilton and Mark Joseph Kennedy of Severson & Werson.

Superior Auto Group is represented by Louis R. Miller, Amnon Z. Siegel and Mira Hashmall of Miller Barondess LLP.

The case is Nissan Motor Acceptance Corp. v. Superior Automotive Group et al., case number G046914, in the Court of Appeal of the State of California, Fourth Appellate District, Division Three.

–Additional reporting by Pete Brush and Beth Winegarner. Editing by Philip Shea.