Automobile Dealership and Wholesale Financing

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Avoiding Pitfalls Through In-depth Industry Knowledge

Phillips Lytle understands the challenges faced by secured lenders and, in particular, the unique challenges facing finance companies that provide both wholesale floor plan financing to automobile dealers and retail financing to consumers. Our experienced partners and associates that practice in the area of automobile dealership and wholesale financing law use their legal knowledge, combined with an in-depth understanding of the industry, to help our clients avoid the potential pitfalls that arise when the dealerships that they finance experience financial or other difficulties.

For more than 40 years, Phillips Lytle has assisted finance companies dealing with automobile dealership defaults, workouts, terminations, foreclosures, replevin of collateral, bankruptcy proceedings, and the pursuit of dealer and guarantor obligations. Our team of experienced partners and associates have also handled dealership consolidations, buyouts and mergers, and have prosecuted and defended claims arising out of those transactions.

We pride ourselves on providing pragmatic, strategic advice to our finance company clients that advances their business objectives, protects their security interests, and preserves the value of their collateral. When necessary, we back up that advice with the ability to litigate and protect our clients’ interests in New York State and across the country, in either state or federal court.

Comprehensive Client Support

Our skilled Litigation attorneys have extensive experience representing clients in need of support in wholesale or dealership financing. Our experience includes:

Drafting and negotiating all types of contracts between finance companies and auto dealers, including wholesale financing agreements, security agreements, guaranties and forbearance agreements.
Counseling our clients with respect to their rights and options when a dealership is in danger of default or has already defaulted, including advice concerning forbearance agreements, voluntary surrenders and acceleration provisions.
Advising and assisting our clients as to the appropriate procedures to follow, under state and federal law, in instances where termination of a dealership, or of its financing, is necessary.
Assisting our clients in the preparation of notices of default and/or acceleration, as required by the relevant financing documents and applicable law.
Analyzing security agreements and Uniform Commercial Code (UCC) filings, negotiating intercreditor agreements, and resolving priority disputes among creditors by negotiation (or, if necessary, by litigation).
Identifying and curing defects in UCC filings and related documentation, if necessary.
Resolving lien issues that may arise when dealers fail to meet their tax or other obligations to state or local authorities.
Facilitating and assisting with voluntary surrenders of collateral, litigating to recover possession of collateral (if necessary), assisting with liquidation of collateral, ensuring that the UCC sale of collateral is accomplished in a commercially reasonable manner, pursuing any resulting deficiencies from dealer principals and guarantors, and defending any claims or counterclaims related to the recovery or liquidation of collateral (including wrongful repossession claims).
Protecting the value of collateral where dealerships file for bankruptcy, as well as prosecuting and defending fraudulent transfer or preferential transfer claims.
Defending against lender liability, Automobile Dealers’ Day in Court Act claims, consumer protection and lemon law claims, vicarious liability claims, Fair Debt Collection Practices Act claims, Fair Credit Reporting Act claims and state tort claims.
Defending finance companies in instances where they are named in claims brought before state motor vehicle franchise boards.

Above all, we recognize the importance of efficient and timely responses to our clients’ needs when a dealership default is imminent (or has already occurred), and that delays can result in the loss of assets or asset value or, even worse, the failure of an operating enterprise and the jobs that enterprise sustains. Regardless of the location of the auto dealer and collateral, and whether it is located in New York or out of state, we can quickly bring our resources to bear for our clients and will aggressively pursue legal remedies or protections to minimize our clients’ potential losses and maximize their potential recoveries.

How Can We Help?

Automobile Dealership and Wholesale Financing Representation Matter

In an action involving the bankruptcy and liquidation of a dealership located in downstate New York, we assisted our client in recovering more than 90% of the proceeds from the dealership’s liquidation, despite the dealership owner’s transfer of all assets to a new corporation in a transaction that could have rendered our client an unsecured creditor. In our representation of that particular action, Phillips Lytle attorneys:

Successfully defended a $9 million preference action
Obtained adequate protection for the floor plan financer during the course of the bankruptcy proceeding
Sought the appointment of a Chapter 11 Trustee
Obtained a $4 million deficiency judgment against the guarantor of the dealership’s debts