On the way to earning an “F” rating with the Better Business Bureau, White Plains Nissan was criticized by several customers who said they had been unable to get permanent registrations for their cars.
The dealership, they claimed, was making lots of excuses and stringing them along, according to BBB complaints registered in 2016 and 2017.
The clue as to what really was going on can be found in a Sept. 11 court order by Katherine B. Forrest, a U.S. District Judge in Manhattan. She ruled that White Plains Nissan and other dealerships controlled by the same owners must pay $40.2 million to Nissan Motor Acceptance Corp.
The car dealers, according to court documents, had been selling vehicles “out of trust.” Instead of repaying loans to Nissan when vehicles were sold, the dealers were “pocketing the sale proceeds.”
And when Nissan was not repaid, the car company would not release titles that would enable buyers to register their vehicles with the state Department of Motor Vehicles.
At one point in early 2017, White Plains Nissan owed Nissan $3.6 million for “floor plan” loans on cars. Nissan of Mount Kisco, controlled by the same ownership group, owed $2.2 million.
Nissan had provided the ownership group with several types of financing, according to the car company’s pleadings, including $12.1 million that was secured by a mortgage on White Plain Nissan’s property. In all, the owners were indebted to Nissan for $56 million at one point.
The dealership group was controlled by Gary B. Flom of Manhattan. Flom, who was born in Russia and served in the U.S. Marine Corps, according to news accounts, had built an impressive record as a general sales manager.
He was president of a Ford-owned dealership from 1998 to 2014. He had managed Jaguar, Land Rover, Lexus, Mazda and Volvo franchises.
In 2014, he formed BNF Partners NY LLC, an umbrella company for his new ventures in Westchester and Manhattan. His partners were Veniamin Nilva, a Russian businessman with ties to Brooklyn, and Alexander Boyko, an investor with Russian interests. Nilva and Boyko live in Aventura, Florida.
They opened the White Plains store at 500 Tarrytown Road in Greenburgh in 2014. Nissan of Mount Kisco opened the following year. Both have since ceased operations.
A lot of the Nissan financing was for establishing and building Nissan and Infiniti dealerships on Auto Row in Hells Kitchen on the West Side of Manhattan.
Eventually, as construction costs rose, the Flom group ran out of money and the Manhattan project was abandoned.
The enterprise collapsed because of how the Flom group had structured its finances. The partners had crafted a series of interlocking franchise, financing and real estate agreements, in part, to fund the Manhattan construction. Every loan was cross-collaterized.
If one deal defaulted, they all defaulted.
Nissan argued that the Flom group was using the proceeds from vehicles sold out of trust to run the businesses. They were selling cars without promptly paying off the loans.
Nissan pulled the plug in late 2016.
It suspended all financing and demanded repayment, according to court records, but the dealerships refused to pay off the loans or to surrender unsold vehicles that Nissan had financed.
In one instance cited by Nissan, the Mount Kisco dealership allegedly financed the purchase of a vehicle with Nissan but failed to pay off a previous bank loan on the customer’s trade-in vehicle. Nissan didn’t get its money back and the customer was left with liability on two loans.
Customers were unhappy with Nissan, because it held the titles they needed to register their vehicles. Nissan said it felt compelled to surrender titles to “innocent purchasers,” and in doing so it sacrificed its priority security interests.
Last year, the Flom group’s Manhattan dealerships sued Nissan for breach of contract. Forrest summarized their position in a May opinion: “Nissan had embarked on a pattern of bad faith, whereby the dealerships were set up from the beginning to fail.”
Nissan North America Inc. and Nissan Motor Acceptance Corp. filed a counterclaim, naming the business partners and the Westchester dealerships, citing the intertwined loans and accusing the owners of breach of loan agreements.
The dispute, Forrest noted, has generated countless motions, a mountain of briefings, protective orders, “a Byzantine series of show-cause hearings, interlocutory appeals, findings of contempt” and more than 500 docket entries.
“At the end of the day, however, this case is a straight-forward breach of contract claim,” she said in the May opinion.
The Flom group acknowledges that it owes debts to Nissan and signed contracts that provide for damages, she said in the Sept. 11 ruling.
“They seek to avoid payment of those damages, but do not raise any triable issue regarding the reasonability of NMAC’s (Nissan) proposed and well-documented damages.”