Rosenberg fails to block store sales again

Prominent Northeast dealer David Rosenberg's attempt to block GPB Capital Holdings and Prime Automotive Group from selling certain dealerships has been denied for the second time.

A Massachusetts court in a June 11 decision denied Rosenberg's request for an injunction, saying Rosenberg, who was fired as Prime's CEO in September, did not prove irreparable harm would come to him or the business without it. Rosenberg's motion also sought for him to be restored as dealer principal of those stores.

"The plaintiffs have again failed to show that they would suffer harm of a nature that could not be compensated by a financial award or that the existence of the business would be threatened without the injunction," Norfolk County Superior Court Judge William F. Sullivan wrote.

Rosenberg and Rosenberg family trusts sued Prime's majority owner, GPB Capital, last July, claiming GPB failed to pay him after he exercised an option in April 2019 to sell his stake in Prime. Rosenberg claims he and the trusts are owed more than $24 million.

GPB, an alternative asset management firm, has been sued by investors and is the target of federal and state investigations described as focused on potential violations of securities law. Prime Automotive, of Westwood, Mass., with 56 stores, is ranked by Automotive News as the 11th-largest dealership group based in the U.S., with retail sales of 40,050 new vehicles in 2019.

Rosenberg made his first injunction request in December, and it was denied in January. A judge, however, said then that the court could entertain a new motion if more automakers moved to terminate dealer agreements or actually terminated them, or if Prime's financial condition changed.

Automotive News reported in December that Volkswagen, Toyota, Subaru and Audi were troubled by Rosenberg's firing. Some automakers said contract breaches allegedly made by GPB were grounds for franchise termination.

Toyota put GPB and Prime on notice in October, giving them six months to cure several issues. That same month, Volkswagen of America told GPB it had breached its business relationship agreement and gave GPB 90 days to submit purchase agreements for three stores.

Rosenberg renewed the injunction request in May, saying circumstances had worsened since January. The request cited in part an April 6 letter from Toyota Motor Sales USA Inc. to Prime demanding the sale of five stores.

And Volkswagen in February sued GPB in New York federal court after GPB told the German brand it wouldn't sell two stores in Massachusetts and Maine. GPB forged an agreement to sell a third Volkswagen store in New York, but the deal fell through in April, according to an affidavit in the case. Audi, in a Feb. 5 letter, informed GPB and Prime it would terminate the retailer's dealer agreement and franchise relationship for Audi Westwood in Massachusetts.

The 11 dealerships involved in Rosenberg's request are five Toyota stores in Maine and Massachusetts; Audi Westwood; three Subaru stores in Massachusetts, New Hampshire and Vermont; and two Volkswagen dealerships in Maine and Massachusetts.

After the June 11 injunction denial, Benjamin Wish, a Boston lawyer for Rosenberg, said in a statement that Rosenberg and other plaintiffs "look forward to taking every step necessary to ensure their rights are vindicated."

Prime Automotive said it was pleased with the decision. "This ruling essentially closes the door on David Rosenberg's efforts to have a court restore him to a position with Prime Automotive in any capacity," Prime said in a statement.

Sullivan's order said Prime had shown no additional automakers sought to terminate dealer agreements since the first motion, while several automakers had approved Prime CEO Todd Skelton as dealer-operator. Prime also showed that its financial condition was "sound" and had improved since January, Sullivan wrote.

Prime told Automotive News last month that Toyota extended its dealer agreements for the stores in question until Aug. 3 and that Skelton had been approved as a dealer principal by 13 light-vehicle brands — though not Toyota, Volkswagen, Audi or distributor Subaru of New England.

"It is not clear that the pending termination and divestment actions will be fatal to the business. There is conflicting evidence regarding the potential impacts of the loss of the dealerships associated with the four manufacturers that have taken issue with Rosenberg's removal," Sullivan wrote. "Nonetheless, it is not certain those dealerships will be lost because the company is in active negotiations with two of those manufacturers and in litigation with the two others."

Prime Automotive in February filed a protest with the New Hampshire Motor Vehicle Industry Board over Subaru of New England's termination notice for Prime Subaru of Manchester. Prime requested a hearing and said Subaru of New England sent it notice Dec. 23 that it planned to terminate the franchise effective April 10.

Prime, in its protest, alleged Subaru said it was terminating because of a change in controlling ownership and management of the dealership without approval, failure to meet current facility standards, failure to comply with a schedule to relocate and build a new store and alleged violations of Subaru of New England's ethical standards by Prime's majority owner.

Prime's filing said Subaru of New England, the distributor for Subaru in six states, "does not have good cause to terminate the franchise as required by New Hampshire's franchised dealer act."

Said a Prime spokeswoman: "We are in active discussions with Subaru of New England to resolve their concerns."

It is unclear whether any hearing has taken place. Officials with the New Hampshire board did not reply to inquiries.