A Los Angeles jury has ruled last week that Michael Kahn must pay $40 million to Nissan Motor Acceptance Corp. to settle a claim alleging that he was selling out of trust, the industry's term for a dealer's nonrepayment of borrowed funds. Kahn ran the fastest-growing dealership group in the U.S. in 2007.
Khan's Superior Automotive Group had two Toyota dealerships, five Nissan stores and a Chrysler franchise in Los Angeles and San Francisco.
The group rose to 73rd position on Automotive News' list of the top 125 dealership groups in 2007, a boost from 106th in 2006. However, it collapsed in February 2009 after Nissan's finance unit alleged that he was selling out of trust. The company canceled financing and seized Khan's inventories. It also sued him for $40 million.
Khan countersued, alleging that Nissan Motor Acceptance canceled his financing only after the parent company suffered losses during the economic crisis and went on an international push to stanch red ink.
He also alleged that, until then, Nissan had encouraged him to expand. It also flew him to Tokyo to receive an award. However, the lawyers of Nissan countered that winning an award did not mitigate his selling out of trust. The jury agreed. [source: BusinessWire]