Owners of Closed Dealership Sue Mitsubishi

The owners of Vineland Mitsubishi, a now-defunct New Jersey dealership, are suing Mitsubishi Motors Corp. and subsidiaries Mitsubishi Motor North America (MMNA) and Mitsubishi Motors Credit of America Inc., citing fraud and violations of the state's franchise laws.

It may be the first of many lawsuits from current and former Mitsubishi dealers against the ailing brand, says Wayne Mack, an attorney with Duane Morris, a Philadelphia law firm representing the plaintiffs.

“Certainly, other dealers are looking at the suit with interest,” he says.

A spokesman with MMNA says the company has no comment at this time.

Plaintiffs Gregory Morrett, Richard Hess and Darlene Hess claim MMNA misrepresented the health of the brand while urging them to take ownership of a Mitsubishi dealership in 2001, according to the federal lawsuit.

Morrett at the time was a general manager at another Mitsubishi dealership. At the brand's invitation, he attended the 2001 Mitsubishi National Dealer meeting in Las Vegas. While there, MMNA told Morrett it would be selling 500,000 vehicles in the U.S. by 2005, according to the suit.

Based on that, the Hesses and Morrett say they invested their life savings to open a new dealership in Vineland, NJ, in 2001.

At first, dealership sales were up, the dealership was winning sales and service awards 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, a victim, plaintiffs argue, of 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 plaintiffs say that although the original building was adequate, they invested more than $2 million to build a new dealership at the auto maker's insistence.

In 2001, MMNA, with MMCA, began forcing dealers to take vehicles they did not order, according to the suit, and many dealers resorted to selling vehicles at a loss to get rid of excess inventory.

Also in 2001, MMCA began providing financing to customers with little or no credit. Many customers defaulted on their loans. Dealers bore much of the brunt.

MMCA declared the Vineland dealership “out of trust” and cut off funding in 2004, after the store began to use money from car sales financed by the captive arm to pay off other creditors. Vineland closed soon afterwards.