Tennessee: Civil lawsuit against Prebul dropped

Tennessee: Civil lawsuit against Prebul dropped

March 3rd, 2009 by Adam Crisp in Local Regional News

The multimillion-dollar civil lawsuit against area auto dealer Joe Prebul has been dropped.

Lawyers for millionaire jazz club owner Danny Bensusan filed papers to have their lawsuit dismissed, but Tennessee law allows them the chance to bring the suit again within a year, state law shows.

The developments come as buyers are bidding on Mr. Prebul's bankrupt auto empire and federal investigators build a wire-fraud case against Mr. Prebul.

Mr. Bensusan, the brother-in-law of Mr. Prebul, was seeking $7.47 million in compensatory damages and $25 million in punitive damages stemming from investments he made with Mr. Prebul.

According to the original lawsuit, Mr. Bensusan invested a total of $15 million with Mr. Prebul between January 2006 and May 2008. The money was supposed to be deposited in an interest-bearing Chrysler cash management account, the complaint says, but Mr. Bensusan claimed that rather than operating the money-losing car dealerships his millions were being used to prop up Mr. Prebul's lavish lifestyle.

Reached Monday by the Times Free Press, Chattanooga lawyers representing Mr. Bensusan declined to comment on the case. Calls to Mr. Prebul's attorney were not immediately returned.

The Friday filing, however, triggered rapid-fire motions on behalf of both parties, with Mr. Prebul's side arguing Mr. Bensusan had been paid $8.5 million between May 2006 and July 2008. Lawyers also contend state law didn't provide relief for Mr. Bensusan because loans between the two men were governed by a promissory note and that limits what Mr. Bensusan can sue for.

"Under New York law, the promissory note (overrides) the underlying state law tort" covering lawsuits, Mr. Prebul's lawyers write. In a separate filing, his attorneys said Mr. Bensusan is seeking to "sensationalize" the case and further harm their client's character.

Both sides will argue the merits of their claims March 16 in Hamilton County Circuit Court.


This dismissal doesn't appear to impact the bankruptcy case involving Mr. Prebul's dealerships or the criminal probe into wire fraud charges against him.

Bids were rolling in Monday on the six automotive dealerships that comprise the bankrupt car lots.

Jerry Farinash, the bankruptcy lawyer charged with overseeing the dealerships while the bankruptcy claim is in motion, said he expected to get offers on all the dealerships and would present the highest and best ones to a bankruptcy court judge either on March 19 or March 26.

"We have told everyone we wanted to receive bids by Monday, and we are receiving bids today," Mr. Farinash said. "We will go through the bids and later this week, hopefully, we'll file a motion with the court to approve the offers."

Mr. Prebul was arrested in mid February on 11 federal wire fraud charges. He is accused of cheating his brother-in-law out of more than $7 million.

The day after his arrest, Mr. Prebul's businesses filed a Chapter 7 bankruptcy petition, listing more than $30 million in debts.

All six dealerships in Mr. Prebul's chain are operating on skeleton crews, mostly selling vehicles to other dealerships and providing maintenance and repair services, Mr. Farinash said. Vehicles are for sale, but buyers must pay cash or obtain financing from an outside bank, he said.

"We are operating, but we aren't doing it with 250 people, obviously," Mr. Farinash said, referring to the dealerships' pre-bankruptcy employment level. "We're providing service. We're fulfilling the demands that are being put on the dealerships."

Keeping the businesses open helps maintain some of the dealerships' value, Mr. Farinash said.

"You've got to keep these stores open in order to sell them," he said. "They are much more valuable as a going concern rather than with their doors locked."


Left hanging are hundreds of Prebul customers who bought vehicles in the days before Mr. Prebul's arrest and bankruptcy filing.

Diana Little and her husband, Steve, thought they were getting a great deal when they used $16,000 of their retirement savings to buy a deeply discounted Kia Sedona minivan. The vehicle was marked down $6,000 from its sticker price, she said.

"It will be a good deal when we actually get the title," said Mrs. Little, who lives in LaFayette, Ga. "But until then, we are just sort of left hanging with no answers."

The couple is driving the van with temporary plates, but they have not been able to register it.

Mr. Farinash admitted there are plenty of people in the Littles' situation. He recommended they all hire lawyers.

"There are about 15 different things that could happen with these title issues that arise when someone buys or trades a car," he said. "If these people didn't get a title or tag after purchasing a vehicle at any of the Prebul dealerships, I would encourage those people to immediately seek the advice of a lawyer."

Glenda Thomas, who is helping her sister, Janet Kanitz, work through her title issues, said the process has left them wondering if they'll ever be able to register her sister's vehicle properly.

"Her drive-out tag was good until March 3. I called every day trying to see the status and was told every time that all paperwork (and) taxes paid to Prebul was frozen," Ms. Thomas said.

The bankruptcy complicates the title process, and though Mr. Farinash said he's been able to help many of Mr. Prebul's customers, some cases are too complex. As a temporary solution, he recommended people with expiring drive-out tags contact the dealership for new tags with extended expiration dates.

"I did pick one up on Thursday," Ms. Thomas said. "I'm unsure what will happen after the new drive-out tag expires at the end of March."