Group of terminated Suzuki dealers asks bankruptcy court to reinstate franchises UPDATED

Publish Date: 
Apr 26, 2013
By Holly J. Wagner

Another line of the dealer argument contends that for dealers to be assigned to the “Other Settling Creditor” category that would be paid at 100 percent, they would have had to send ballots accepting that status to Suzuki, but could not since the plan had been approved before the offer was made. The court docket lists a deadline of Feb. 21.

An amended plan supplement Suzuki filed with the court March 29 included language stating the emerging company would assume only the contracts it had listed earlier in the asset purchase agreement; all other contracts were deemed rejected. The dealers are challenging that language as “boilerplate” that didn’t give any indication that powersports dealers would be terminated. SMA attorneys are relying on that and a similar statement in the original bankruptcy filing to argue dealers should have raised their objections sooner.

“The rejected dealer agreements were not designated contracts, nor were they specifically assumed by [ASMC], and thus they were rejected on the effective date [March 29],” SMA’s response states.

Most of the protesting dealers said in court declarations that their first calls after receiving the notice were to their Suzuki district and regional managers, who for the most part said they were also unaware of the terminations until the letters went out.

ASMC's court filings from as early as Feb. 12 repeatedly stated the company would provide a list of the powersports dealers it planned to terminate, but no such list has been submitted to the court to date.

“On the day the plan was confirmed…the debtor apparently changed its mind (without any accompanying press release) and transmitted to the dealers, as well as at least another 100 motorcycle dealers, the Hobson’s choice it had foisted on the automotive dealers: Agree to accept a payout … by March 27, 2013 (which was less than 10 days’ notice considering none of the dealers received this ‘offer’ by overnight mail) and release its parent [American Suzuki Motor Corp.] as of the effective date (March 31, 2013), or receive 20 percent on account of its claim.” 

Attorneys for the dealers say ASMC did not have authorization to make the offer at all, much less after the liquidation plan was approved. They cite what they call Suzuki’s “underhanded conduct by which it lulled the dealers into complacency only to suddenly reject the dealer agreements without notice, after confirmation, without giving the court an opportunity to consider the merits of rejection.”

Attorneys for the dealers argue that unless Suzuki knew before the plan was approved that it was going terminate these dealers, their termination could not possibly be part of the approved plan.

SMA attorneys are arguing that SMA was a good faith buyer and should not be held to account for what ASMC did in its bankruptcy.

SMA “was formed just prior to the petition date and has engaged in no business unrelated to the [asset purchase agreement],” they argue. “The motion goes to great lengths to describe the alleged misleading actions taken by [ASMC] during its bankruptcy case with respect to the motorcycle dealers. But there is not a single assertion in the motion relating to any action or statement by SMA, the third-party purchaser of [ASMC]?s assets.”

The dealers say that since they were summarily terminated March 31, they are unable to sell the vehicles and parts they have on their lots except at a severe loss because they can no longer offer a Suzuki warranty.

“Between Nov. 5, 2012, when [ASMC] filed its Chapter 11 petition, and …about March 5, 2013, in reliance on [ASMC's] filings and public statements, the dealers purchased, in the aggregate, 43 motorcycles in an amount exceeding $376,629, and spent an additional $26,306 on parts. Moreover, the dealers are now saddled with inventory costing a total of over $758,443 for motorcycles and approximately $245,970 for parts, none of which can be sold at cost, let alone at a profit,” their claim asserts.

The hearing is set for 2:30 p.m. April 30 at the U.S. District Court in Santa Ana, Calif., courtroom 5C.

Download the dealers' motion to compel Suzuki to honor the contracts here.

Download the dealers' declarations regarding their termination letters here.

Download SMA's opposition to the dealer motion here