The owners of now-defunct New Jersey dealership Vineland Mitsubishi have filed a lawsuit against Mitsubishi Motors Corp. and subsidiaries Mitsubishi Motor North America (MMNA) and Mitsubishi Motors Credit of America Inc., citing nine counts of fraud and violations of the state’s franchise laws, according to WardsAuto.com.
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Wayne Mack, a lawyer with Duane Morris LLP, a Philadelphia-based law firm that is representing the plaintiffs, told the motor trade website it may be the first of many lawsuits filed by current and former Mitsubishi dealers against the brand. “Certainly, other dealers are looking at the suit with interest,” he reportedly said.
An MMNA spokesman told WardsAuto.com it had no comment.
According to the report, the three plaintiffs, Gregory Morrett, Richard Hess and Darlene Hess, claim in the suit that MMNA misrepresented the health of the brand while urging them to take ownership of a Mitsubishi dealership in 2001.
Morrett, previously general manager at another Mitsubishi dealership, attended the 2001 Mitsubishi National Dealer meeting in Las Vegas at the brand’s invitation and was told MMNA would be selling 500,000 vehicles in the US by 2005, WardsAuto.com said.
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By GlobalDataThe suit reportedly says MMNA also presented Morrett with studies showing a dealership in the proposed market area could support annual sales of 447 new Mitsubishi vehicles but the plaintiffs assert they later learned the studies were false.
WardsAuto.com added that MMNA, according to the suit, also assured the plaintiffs the parent company’s 21-year practice of illegal behaviour and subsequent cover ups of vehicle defects were over – a claim that proved to be false when several Mitsubishi executives were arrested in Japan in May 2004 and charged with falsifying safety records.
According to WardsAuto.com, the Hesses and Morrett say they signed an interim agreement with MMNA and invested their life savings to open a new dealership in Vineland in 2001, based on the promises Mitsubishi made. For the first couple of years, business at the dealership was good. Sales were up, the dealership was winning awards for sales and service and Morrett was named to both the National Dealer Advisory Board and the Mitsubishi Motors Credit Council.
But by the summer of 2004, Vineland Mitsubishi was out of business – victim, the plaintiffs argue – to an environment created by Mitsubishi that led to sales plummeting from 345,922 units in 2002 to 257,501 in 2003 and to 162,279 in 2004, the report said.
WardsAuto.com said MMNA also persuaded Morrett and his partners to invest more than $2 million to build a new and more expensive dealership, which they moved to in December 2002 and, sometime in 2001, MMNA, with MMCA, began forcing dealers to take vehicles they did not order so the company could report public sales figures that met Wall Street’s expectations, according to the suit.
WardsAuto.com said Mitsubishi dealers watched as their finance charges accumulated for the unsold vehicles and many resorted to selling vehicles at a loss, just to help get rid of excess inventory.
The lawsuit reportedly also alleges MMCA provided financing and charged Vineland for vehicles not yet delivered to the dealership.
WardsAuto.com said that, also in 2001, MMCA loosened its credit standards in the now infamous “0%-no money down for 12 months” strategy. The financial captive began providing financing to customers with little or no credit but the plan backfired and, when the 12 months were up, many customers were unable to pay, and defaulted on their loans.
Dealers bore the brunt of the ill-advised strategy, facing angry customers, along with the task of having to take back vehicles at a loss, the report noted.
MMCA declared Vineland “out of trust” and cut off funding in 2004, after the dealership began to use money from car sales financed by the captive arm to pay off other creditors. It was only a matter of time before Vineland was out of money and had to close its doors, the suit says, according to WardsAuto.com.
