ST. LOUIS – NextGear Capital's amended complaint in a breach of contract suit against a bank over financing to an automotive dealership has been dismissed.
Magistrate Judge Noelle C. Collins of the U.S. District Court for the Eastern District of Missouri granted Bank of Springfield's motion to dismiss NextGear Capital's second amended complaint on June 19, but granted NextGear leave to file a third amended complaint in the breach of contract suit originally filed in July 2018.
"The court finds that NextGear has failed to sufficiently allege that (Bank of Springfield) and (Gateway Buick GMC) colluded in violating the rights of NextGear in order to avoid the protections of Article 9," Collins wrote.
The ruling states the Bank of Springfield provided funding to a Hazelwood car dealership, Gateway Buick GMC Inc., through a series of promissory notes: One dated for Aug. 11, 2015, in the amount of $10 million; one dated for Sept. 29, 2015, with the balance of $3.15 million; and one dated Jan. 12, 2016 with a credit limit of $500,000. NextGear provided floor plan financing to Gateway pursuant to a demand promissory note and loan and security agreement dated Oct. 27, 2014.
Gateway granted the plaintiff a security interest in all of its assets and property without limitation. On Oct. 1, 2015, Gateway, the plaintiff and the defendant entered into a subordination agreement in which NextGear agreed to subordinate all of Gateway’s open accounts with General Motors that are owed to GM.
The ruling states NextGear subordinated its senior lien position in payments from GM that were not proceeds from vehicles specifically floor planned by it. Gateway received two types of payments: vehicle rebates and holdbacks and various dealer incentive payments.
The plaintiff and Gateway entered into a forbearance agreement in May 2016 that was necessitated by Gateway’s failure to remit payment for vehicles it sold to the floorplan note. The two parties entered into an amended and restated forbearance agreement.
Beginning in May 2016, the ruling states Gateway was in default under the floorplan note and the Bank of Springfield’s note. Gateway and the Missouri Department of Revenue entered into a final settlement in June 2017 and a stipulation agreement about Gateway’s failure to pay sales tax.
The defendant is alleged to have breached the terms of the subordination agreement by sweeping money from Gateway’s accounts that was not theirs to do so with as it was the plaintiff’s vehicle funds. The plaintiff claims that the defendant, by taking possession of and applying the NextGear vehicle funds to its own notes, the defendant prevented the plaintiff from collecting the proceeds of sales from vehicles that was owed to the plaintiff.
NextGear filed its second amended complaint in December 2018 and Bank of Springfield filed a motion to dismiss the following month, arguing NextGear failed to properly allege facts in the breach of contract claim.
U.S. District Court for the Eastern District of Missouri case number 4:19-CV-01086