Auto dealers across U.S. face lender lawsuits, store closures

On Jan. 31, Andrew Gabler abruptly resigned from his post as president of the National Independent Automobile Dealers Association. Just the day before, the FBI executed search warrants at Gabler's Erie County, Pa., dealerships and a nearby house believed to be his residence.

Oversight of Gabler's Lakeside Auto Group, with a Chevrolet-Buick dealership and two used-only stores, had already been transferred to a court-appointed receiver that month, newspaper website GoErie.com reported. The problem? Lawsuits against Lakeside by S&T Bank of Indiana, Pa., allege that the dealership group sold vehicles without repaying the bank for floorplan loans, known as selling out of trust, according to the newspaper. The bank sued Lakeside in December and January for more than $5.2 million, according to the Erie County Court.

In his resignation notice to NIADA, which represents more than 20,000 used-vehicle dealers in the U.S., Gabler said his decision was "necessary and in the best interests of me, my family and the association."

While it's unclear whether the search warrants were related to the bank's allegations, the visits were part of an investigation, according to the Department of Justice and U.S. Attorney for the Western District of Pennsylvania.

Gabler and his lawyer declined to comment. Representatives from the Hillyer Group of Cuyahoga Falls, Ohio, which was appointed receiver of the dealerships, according to GoErie.com, could not be reached for comment.

Gabler is not alone. Dealers and dealership groups across the country in recent months have faced lender lawsuits, store closures and even the loss of their entire businesses after allegedly selling vehicles out of trust. Here are some of those stories.

Last month, Republic Bank & Trust Co. of Louisville, Ky., sued Stuart Roffman, Anthony Mirabella, Samantha Bianco and Amstar Tampa, which operates as Tampa Mitsubishi. The lender, in its complaint filed in Hillsborough County, Fla., said it entered into agreements with the dealership in May 2018 for a $3.5 million new-vehicle floorplan line and in September for a $3 million used-vehicle floorplan line. By January, the dealership had allegedly defaulted on the loans and had overdrafted operating accounts, according to court records. Republic gave the owners until April 30 to pay what it owed.

Republic, in court filings, said that after Jan. 31, it learned the dealership had sold or financed 72 vehicles but didn't repay the more than $1.9 million due. A later audit found seven vehicles missing. Republic sought payment of nearly $5.7 million in loans on May 3.

Tampa Mitsubishi surrendered numerous vehicles, and the court required the company to give Republic the rest. The bank seized property and is seeking to foreclose on a residence. The dealership claims items and vehicles were illegally seized and is fighting for their return. The dealership closed abruptly in mid-May, according to the Tampa Bay Times.
A Mitsubishi spokesman confirmed the store is no longer providing sales or service to customers and had been under ownership of this operator since December 2016. The newspaper reported that at least five customers claimed the store failed to pay off vehicles they traded in, while other customers had not received titles, or their temporary tags had expired. A lawyer representing the dealership and dealer-operator Mirabella declined to comment, while a lawyer for Republic Bank did not respond to a request for comment.

In late February, Volkswagen Credit filed a lawsuit in federal court in New York seeking more than $7 million from Nikolaos Letsios and Spyro Avdoulos, owners of Northern Boulevard Automall, which operates Long Island City Volkswagen in Woodside, N.Y., after the dealership's payments on loans and floorplan financing ceased. Part of the suit included allegations that the dealership had sold 34 vehicles out of trust worth about $938,000. In early March, VW Credit sought to seize inventory and asked the court for a temporary restraining order, but that was put on hold when the dealership company filed for Chapter 11 bankruptcy on March 7. The bankruptcy court has permitted an auction of the dealership and a service and parts center, set for Aug. 7. The trustee for the case declined to comment, while messages left for the dealership's bankruptcy lawyer weren't returned.

Nissan Motor Acceptance Corp. last week filed a lawsuit in federal court accusing a Hummels Wharf, Pa., dealership and owner Timothy Slike of selling at least 16 vehicles out of trust. It is seeking to recover nearly $650,000, seize remaining vehicles, gain access to keys and titles, prevent staff from moving vehicles or collateral, and have a court-appointed receiver oversee property and collateral, according to court records.

The lender said that during a routine audit April 29 at Northwoods Auto, which operates as Northwoods Nissan, it discovered that the dealership had sold eight vehicles out of trust and failed to pay the captive nearly $274,000. Nissan Motor Acceptance said in court filings that it believes the dealership is insolvent, has no way to repay it for vehicles sold out of trust and may file for Chapter 11 bankruptcy.

Slike declined to comment. The case was first reported by The Daily Item in Sunbury, Pa.

Carl Leckner was a general manager with Sheehy Auto Stores group before he branched off in 2015 and began acquiring dealerships, including Nissan stores. That year, he acquired two Nissan dealerships in Virginia and Maryland and added a third in 2016 when he bought Sheehy Nissan in Virginia.

Last year, Nissan Motor Acceptance sued Leckner in Maryland and Virginia circuit courts over contract issues, including out-of-trust allegations.

The two Nissan dealerships in Virginia were sold this spring to Patrick Dibre and PSD Automotive Group of Bridgewater, N.J. George Chaconas, an agent with Performance Brokerage Services Inc., handled the sales. He had been named by court-appointed receiver KMN Consulting of Delaware to sell the three Nissan stores. Chaconas said the sale of Leckner Nissan of Ellicott City, Md., is slated to close this month.

Leckner owns five other dealerships in Virginia, including Ford, Chevrolet and Chrysler-Dodge-Jeep-Ram stores. Leckner, through Chaconas, declined to comment.

Dealer Danny Sauro and his Pensare company were sued in November by Nissan Motor Acceptance, accusing his two Maryland stores — Tischer Nissan and Tischer Acura — of selling millions of dollars of vehicles out of trust and defaulting on floorplan loans. Pensare planned to sell both dealerships to pay down what it owed, according to court records.

Ourisman Automotive Group of Marlow Heights, Md., bought the Nissan store this year. Norris Automotive Group of Baltimore in March purchased the Acura dealership.

Sauro and Pensare had reduced the amount allegedly owed to Nissan Motor Acceptance from about $17 million to about $2.3 million, according to an April status report in the federal court case in Maryland. A lawyer for Sauro did not respond to requests for comment.

Led by Brad Fenton, who as recently as 2014 was head of Nissan's dealer advisory board, Fenton Motor Group faces at least a dozen lawsuits.

Nissan Motor Acceptance, Capital One, a credit union and an Oklahoma bank have sued over allegations ranging from selling millions of dollars' worth of vehicles out of trust to not placing lenders as lien holders on titles. Fenton and others also face a suit in Oklahoma from buyers of two stores that sold last year, over allegations of fraud. In Texas, Fenton Motor faces more than 250 consumer complaints over title and temporary-tag missteps.

Fenton proposed selling some stores to resolve his default with Nissan Motor Acceptance, according to court records. He told Automotive News in March that some of his woes were results of a slow sales process involving four or five of his dealerships, which he was trying to sell to managers. He said those managers couldn't get financing and in the process "got a little sloppy" operating the stores.
Fenton said he is retiring and selling his last five or six stores. A few years ago his group had more than 20 dealerships in five states.

A group that includes former NFL linebackers Jessie Armstead and Antonio Pierce and auto veteran Michael Saporito was sued in August by Nissan Motor Acceptance and Hyundai Capital America over out-of-trust allegations at five stores in Michigan and Pennsylvania, including Hazleton Hyundai in Hazle Township, Pa. The stores all closed, and the cases remain pending.

The captive lenders filed mortgage foreclosure lawsuits for three Pennsylvania stores. Two Michigan stores sold in December to Alan Jay Automotive Network. Saporito and Armstead last month sold Hamilton Honda in New Jersey to Lithia Motors Inc. Two stores are believed to remain in the group's portfolio, plus it has been awarded a Honda open point for a store in Grapevine, Texas.

The group's four stores in Arizona and New Mexico closed in April after a March Chapter 11 bankruptcy filing. The group is battling two of its primary lenders — Ford Motor Credit Co. and Nissan Motor Acceptance — in court over allegations of selling vehicles out of trust and violating contractual obligations.

Tate's Auto co-owner Richard Berry previously told Automotive News that fallout from its lending relationship with Santander Consumer USA ultimately led to the bankruptcy. The two remain locked in litigation.
Tate's is trying to sell its stores, while Fiat Chrysler Automobiles moves to terminate one of the franchises, according to court records.

Ford Motor Credit in June 2018 accused Reagor Dykes Auto Group of Lubbock, Texas, of selling at least 147 vehicles out of trust. Ford Credit sued the group on July 31, alleging fraud. Six stores filed for Chapter 11 bankruptcy the next day; five others filed later.

Ford Credit said it found 15 instances in which Reagor Dykes — which ranked No. 131 on Automotive News' 2018 list of the top 150 dealership groups based in the U.S. — sold a vehicle and then "floorplanned that same vehicle with Ford Credit," court records say. Known as double-flooring, that is illegal.

In total, Ford Credit said, Reagor Dykes obtained advances under false pretenses and sold more than 1,100 vehicles without repaying $41 million to fund their acquisition. The lender said it was owed more than $112 million.

A judge in the bankruptcy case has allowed major floorplan lenders to seize inventory. An attempt last fall to auction the group failed. In Ford Credit's suit, the group's principals, Bart Reagor and Rick Dykes, have been ordered to pay what is owed to the floorplan lender.

The Northern California group owned by Rahim Hassanally, who was one of Automotive News' 40 Under 40 in 2013, abruptly closed seven dealerships in November. The group, ranked 124th on Automotive News' 2018 list of the top 150 dealership groups based in the U.S., faces lawsuits by three floorplan lenders over out-of-trust allegations.

A lawyer for Momentum told Automotive News at the time that the group was hit by challenges including wildfires, the bankruptcy of a lender and delays in a facility upgrade.
A court-appointed receiver was named to help manage assets and help sell some dealerships. A representative with the receiver, GlassRatner, confirmed it has purchase deals for three stores that could close within 60 days.

Jackie Charniga, David Muller and Danielle Szatkowski contributed to this report.