Prime Automotive Group's majority owner GPB Capital Holdings agreed to pay New England dealer and former Prime CEO David Rosenberg $30 million to settle a lawsuit filed by Rosenberg in 2019, according to a Monday regulatory filing.
The settlement comes within days of GPB's planned sale of Prime dealerships to Group 1 Automotive Inc.
In July 2019, Rosenberg and Rosenberg family trusts filed a lawsuit in Massachusetts Superior Court against GPB, alleging GPB failed to pay them after they exercised an option in April 2019 to sell their stake in the dealership group. The suit also alleged that GPB, an alternative-asset management firm, was retaliating against Rosenberg because he was trying to address alleged fraudulent activity at GPB.
Rosenberg in his complaint said he had exercised a "put option" to sell the family's stake in Prime for a total of $23.6 million, to be paid in four payments of $5.9 million each. The first payment was past due at the time of the lawsuit's filing, according to the complaint. Rosenberg also was seeking interest.
GPB fired Rosenberg in September 2019, citing reasons of alleged misconduct, failure to cooperate with the board and refusal to cooperate with audits. In November of that year, Rosenberg and the Rosenberg trusts amended the lawsuit, adding defendants and new allegations of financial misconduct.
GPB and Rosenberg this month "agreed to a full and final settlement of the pending litigation and arbitration of $30 million," according to GPB Automotive Portfolio limited partnership's third-quarter report filed with the U.S. Securities and Exchange Commission. GPB Automotive Portfolio is a holding company that owns all but one of Prime's dealerships.
"Upon full execution of the settlement, the parties filed a joint stipulation, dismissing with prejudice the pending litigation in Massachusetts and withdrawing from" arbitration, the SEC filing said.
Other terms of the agreement weren't disclosed.
A stipulation hadn't yet been filed in the case, according to online court records, which show the case remains open. A GPB spokesman in a statement to Automotive News reiterated that GPB agreed to settle the claims and lawsuit with Rosenberg.
Rosenberg referred Automotive News to his lawyer.
"Mr. Rosenberg is happy to put this dispute behind him so that he can put his energy back into the car business rather than into the litigation business," Benjamin Wish, a Boston lawyer with the Todd & Weld law firm, said in a statement to Automotive News.
The settlement was reported just more than a week before Group 1 Automotive Inc.'s planned acquisition of 30 Prime Automotive dealerships for $880 million. The deal is slated to close by Nov. 26, Group 1 has said in regulatory filings.
GPB is embroiled in numerous lawsuits and this year was accused by the SEC of operating a Ponzi-like scheme. GPB's former CEO David Gentile and two others connected with GPB were indicted in February on charges on conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. Gentile also was charged with wire fraud.
A federal monitor was appointed to oversee GPB Capital and dealership operations as part of the SEC case, filed in February. That monitor has approved the sale of the dealerships to Group 1, according to Monday's SEC filing.
Prime Automotive of Westwood, Mass., ranks No. 18 on Automotive News' list of the top 150 dealership groups based in the U.S., with retail sales of 31,529 new vehicles in 2020.
