LOS ANGELES--(BUSINESS WIRE)--On May 22, 2017, in Nissan Motor Acceptance Corporation v. Superior Auto of Fremont, LLC, et al., Orange County Superior Court Case No. 30-2009-00305125-CU-BC-CJC (Judicial Council Coordination Proceeding No. 4613), a jury awarded $256,450,000 against Nissan Motor Acceptance Corporation (NMAC). NMAC is the financing arm and a subsidiary of Nissan Motor Limited, the worldwide owner of the Nissan automobile brand. The jury’s award included $121,900,000 in compensatory damages; and the jury found Nissan’s conduct so reprehensible that they found by clear and convincing evidence that Nissan acted with fraud, malice or oppression and awarded $134,550,000 in punitive damages.
The plaintiffs in this litigation are the Superior Automotive Group, a group of Nissan and Toyota dealerships owned by auto dealer Michael Kahn. Superior was financed by NMAC and put out of business by NMAC in 2009 during the recession. The dealerships were located in greater Los Angeles and in the San Francisco Bay area. Mr. Kahn resides in Orange County. The plaintiffs prevailed on claims for fraud by concealment and negligent misrepresentation. Amnon Siegel, lead trial lawyer for Superior and Mr. Kahn, said: “I want to thank the jury for their hard work and diligence. After eight years, this was a hard-fought and well-deserved victory and vindication for Michael Kahn. I’m happy for Mr. Kahn and his family.”
Here’s a synopsis of what occurred at the trial:
In 2009, at the bottom of the recession, NMAC pulled the plug on Superior’s financing and caused the demise of all its dealerships and the loss of over 800 jobs. Prior to that time, beginning in 2001, Mike Kahn was one of NMAC’s leading dealers, having received numerous awards of excellence and having been flown to Tokyo and named one of Nissan’s top three dealers in the world. From 2001 through 2008, Superior was Nissan’s go-to dealer in California, having been awarded a sought after open point dealership and having constructed new dealerships in Carson and Oakland. Superior sold more than $1 billion of vehicles during that time period and always met its obligations to NMAC. Superior was so successful that NMAC – Nissan’s wholly owned financing arm – even financed Superior’s two Toyota dealerships.
When the recession took hold, and car sales plummeted, Superior like just about every dealership in the country experienced lower revenues. But Superior weathered the storm and continued to operate and meet its obligations, sometimes paying for inventory a bit slower than the NMAC 2/10 day guideline but always paying – like practically every other dealer in the country. What Mr. Kahn and Superior did not know, and what NMAC did not tell them, is that NMAC had other ideas. NMAC led Mr. Kahn to believe that it would continue to support him, the recession notwithstanding, while at the same time internally planning to pull the plug on his financing and put him out of business. Without financing, an auto dealer cannot survive.
At trial, internal NMAC emails and other documents came into evidence indicating that before NMAC actually pulled the plug, a covert plan was afoot to pull Superior’s financing without telling Kahn. With this plan underway, NMAC took as collateral all of Kahn’s personal assets, including his home, and all of his business assets, including all the dealerships; and caused Kahn to sell one of his Toyota dealerships generating proceeds of $30 million all of which went to NMAC. Given their longstanding relationship, Kahn trusted and relied on NMAC. He had no way of knowing that, behind his back, NMAC was going to pull his financing and put him out of business.
Having made the decision, on February 11, 2009, NMAC defaulted Kahn for paying for about $1.6 million in inventory outside the 2/10 day guideline as he (and most other dealers) had been doing during the recession. NMAC then cross-defaulted all of Superior and Kahn’s real estate, capital and other loans, totaling over $100 million, despite none being in default. $1.6 million equates to about 40 cars spread over seven dealerships. Just a week earlier, Superior had caught up and been current on the 2/10 day guideline. There was evidence at trial that NMAC made the decision to “pull the plug” several weeks earlier, and that the 2/10 day guideline was used as an “excuse.” When NMAC sent the 24-hour default notice on February 11, 2009, there was an email indicating that it was game over no matter what Superior did during the 24-hour notice period.
There was also evidence at trial that when the 24-hour notice was sent, NMAC knew that Superior’s CFO was going in for heart surgery, and when he asked for some time to arrange for payment, NMAC refused. When Mr. Kahn reached out to NMAC to make arrangements to cure the 2/10 day late payment, his calls weren’t returned; and he was told there’s nothing he could do, that NMAC is coming to pick up the inventory and shut him down. There also was evidence that Kahn and his wife, Tami, gave their residence as collateral to NMAC the day before they were defaulted; and there were internal NMAC emails about “grabbing” the Kahn collateral and saying “take everything,” “grab the valuable ones” and “the uglier it is the more I like it.” The jury heard all this evidence, and a lot more, in reaching its verdict of $256,450,000.
There was evidence that Nissan itself was in cash conservation mode during the recession and that, after it took Superior’s and Kahn’s collateral, NMAC realized over $60 million in proceeds. The case was tried in Department CX-105 of the Orange County Superior Court, Complex Division, before the Honorable Thierry Patrick Colaw. It was originally filed in 2009, tried to a jury before a different Judge in 2011 at which time NMAC obtained a $40 million judgment on its contract claim, then the fraud and other tort claims were reversed on appeal in 2014 and remanded for retrial. A copy of the California Court of Appeal opinion reversing and remanding the case for retrial is attached at Nissan Motor Acceptance Corporation v. Superior Automotive Group, et al., 2014 WL 185718 (2014).
Superior Auto Group and Mr. Kahn are represented by Miller Barondess, LLP located in Los Angeles, California; the lead trial lawyer for plaintiffs is partner Amnon Siegel assisted by associate Adithya Mani. Per Skip Miller, the firm’s managing partner, “I’m pleased by this result and very proud of Amnon for all his excellent and very hard work in bringing in this verdict; and most of all, I’m happy for our client, Mike Kahn, who has finally obtained justice for what was done to him and his business and family. Mike is a great guy, and a great car dealer, and he deserves this so he can get his life back.”