Auto dealer megadeal could become a legal headache
Asbury Auto Group last month agreed to pay $1.34 billion to acquire a New England auto dealership network called Herb Chambers.
Why it matters: It's a huge deal by sector standards, but also could exacerbate legal headaches for Herb Chambers, which is being sued by a dealership finance manager for allegedly failing to pay overtime and related wages.
Catch up quick: The finance manager sued Herb Chambers nearly four years ago, as part of what is intended to be a class action that could include hundreds of finance managers.
In its defense, Herb Chambers has essentially argued that it doesn't really employee finance managers. Instead, it claims that specific dealerships are the finance managers' sole employer, and thus Herb Chambers isn't liable for the overtime (particularly for the broader class).
It's a legal strategy that Herb Chambers tried once before, related to a dealership parts adviser, albeit unsuccessfully.
Zoom in: Asbury's announcement, however, didn't resort to such hair-splitting. Instead, the publicly traded company said that it had:
"[S]igned a definitive agreement to acquire various automotive dealerships owned by The Herb Chambers Companies ... and includes 33 dealerships, 52 franchises, and three collision centers."
In other words, Asbury is saying that Herb Chambers owns the dealerships. And thus would seem to employ the people who work at them.
What they're saying:"The announcement is relevant legally, beyond the obvious hypocritical part of it," says plaintiff's attorney Robert Richardson, who also acknowledged the philanthropy of Herb Chambers' namesake founder.
Georgia-based Asbury, which is publicly traded with a $5 billion market cap, didn't respond to a request for comment.
Look ahead: A court will hear the motion for a class action designaton next month. If the plaintiffs are successful, Herb Chambers could be on the hook for more than $13 million — although that's obviously a rounding error on the merger size.
It's unclear if Asbury would assume the liability, or if Herb Chambers is holding a possible verdict in escrow.
The bottom line: Press releases sometimes disclose more than is intended.
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