Last updated on June 27th, 2019 at 12:48 pm
Harley-Davidson’s financing business is seeking nearly $6.3 million from the owner of dealerships in Janesville and New Berlin, alleging check and inventory fraud and breach of contract.
In addition, court records also show the owners of Iron Town Harley-Davidson, located at 1925 S. Moorland Road in New Berlin, plan to sell the dealership to focus on their Janesville dealership, Broadtracker Harley-Davidson.
Sara and Eric Pomeroy bought the Iron Town dealership, formerly known as Hal’s Harley-Davidson, in 2016.
Eric Pomeroy did not respond to an email seeking comment on the case. Harley-Davidson declined to comment citing the ongoing nature of the litigation.
Harley-Davidson Credit Corp. filed a lawsuit this week in the U.S. District Court for Western Wisconsin alleging the dealerships had been selling merchandise and retaining the proceeds instead of repaying loans made by Harley.
The complaint alleges that HDCC discovered last fall that JHD Holding Inc., which runs Broadtracker, and H2D Motorcycle Ventures LLC, which runs Iron Town, owed the credit company more than $1.3 million.
The total allegedly included nearly $760,000 for sale out of trust transactions where HDCC had financed the dealerships’ purchase of motorcycles. The dealerships had sold the bikes but not yet paid the financing company back.
Harley sent letters to the dealerships seeking payment and expressing “series concerns” about the dealerships “declining financial condition and is ability to pay its debts.”
The dealerships scheduled electronic transfers on multiple occasions that allegedly could not be completed because of a lack of funds. The transactions were completed several days later, according to the complaint.
In a Jan. 18 email to Harley, Eric Pomeroy acknowledged the New Berlin dealership owed $994,000 and the Janesville store owed $536,000. He proposed having the stores pay $80,000 and $50,000 weekly to resolve the debt.
He also described a number of financing options he was pursuing and indicated he planned to sell the Iron Town location.
“I have engaged George Chaconas to sell of the New Berlin location and simply focus on the Janesville store, make it healthy and operate as it should. I recognize that right now the balances are large and my goal is to systematically retire this balance while the selling process happens,” the email, included in court documents, says.
Chaconas runs the Harley-Davidson and power sports division of California-based Performance Brokerage Services and helped broker the Pomeroys’ purchase the Janesville and New Berlin dealerships.
Performance Brokerage Services also sued the Pomeroys in the U.S. Middle District of Florida court last year over roughly $524,000 in commissions related to the purchase of the New Berlin dealership. The parties settled the case in December.
Harley created forbearance agreements with both dealerships in late January that established payment schedules. It also allowed the dealerships to get financing for an additional new motorcycle for every two that Harley received full payment for.
The New Berlin agreement also gave the Pomeroys until March 25 to reach an agreement with a buyer for the Iron Town dealership.
The forbearance agreements were never signed, but the parties followed and intended to execute them, the complaint says.
There were allegedly other instances of payments not being completed after establishing that the two sides agreed to payment schedules. In one email, Pomeroy faulted subzero temperatures in late January that he said prevented anyone from getting to the store to close out purchases and work orders.
“I’m sorry,” Pomeroy wrote. “Certainly ‐50 degrees and multiple snow days in the last 8 days wasn’t in our plan and not conducive to the motorcycle business. The good news is it will be 40 by Saturday. I will get us back in line once we can open!”
A Harley audit in February allegedly revealed 32 motorcycles that were financed through Harley had been sent to an auction and had not been paid for. The auction company allegedly had already advanced the dealership payment for the bikes in some cases three weeks before the audit, but Harley had not been paid at all by the dealership, according to the complaint.
Harley filed its lawsuit on Tuesday, seeking a combined $6,290,340 from the dealerships. The company also sought a temporary restraining order blocking the dealerships from selling additional products financed through the company.
Federal court judge James Peterson declined to grant that order, noting it “would essentially require defendants to temporarily close their business.” Peterson did issue an order requiring the dealerships to pay any proceeds from financed merchandise sales to the company.
Another hearing in the case was also set for next week.