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DEALER SERVICES CORPORATION takes their Unlicensed Lending show to the CALIFORNIA COURT OF APPEALS (D053162)
Dealer Services Corporation says car theft is sanctioned by the Uniform Commercial Code. After being convicted of the conversion of Behyar Fariba's cars by a San Diego jury in May 2008, DSC filed an appeal.
DSC claims that they had no knowledge of Fariba's consignment agreement at the time DSC gave loans in 2005. However, DSC ran off with over fifty employees of Automotive Finance Corporation, another floor plan lender, who had just finished making loans.
However, Fariba probably didn't know that both DSC and their cohorts AFC were both unlicensed as lenders in California at that time. AFC did not obtain a California Finance Lenders License until August 7, 2007. DSC just got their California Finance Lenders License on May 27, 2009. AFC made loans in California for more than eight years before obtaining a license, DSC only waited a short four years.
AFC & DSC both paid attorney Mark Gillett of MORRISON FOERSTER to get them a lenders license in 2007. Mark Gillett changed Automotive Finance Corporations name to "AFC CAL, LLC" claiming that billion dollar ADESA was a $250,000 company named AFC CAL, LLC. Fortunately for Mark Gillett he had some connections at the California Department of Corporations from his time there doing consulting.
John Fuller, the president of DSC, used to be president of AFC. Fuller and AFC parted on bad terms and lawsuits. Fuller opened DSC in 2005, and AFC sued DSC for stealing their employees. Fuller said he had some dirt on AFC but his lawyers told him to keep quiet.
DSC was mad that AFC had refused, and continued to refuse, to enter into a blanket inter-company creditor agreement with DSC.
When DSC and AFC provide inventory capital funding services to automotive dealers, the company with the prior UCC filing has priority over a dealer's entire inventory, irrespective of whether a competitor provides funding for any of that inventory.
"In order to avoid this inequity, companies that provide floor planning routinely enter into creditor agreements, whereby they agree that each company shall have priority over the inventory that they respectively funded," Indiana-based DSC's attorneys continued. "DSC (of Indiana) has entered into such blanket agreements with AFC's competitors, including Manheim Automotive Financial Services and a number of regional floor plan companies. AFC, however, refuses to enter into a blanket enter-company creditor agreement with DSC. As a result, DSC was unable to do business with some dealers."