Macquarie Ordered to Face Fraud Claim Tied to Hertz SpinoffBy
Bank loses bid to dismiss ousted executive's defamation claims
Lawsuit stems from FTC-driven sale of Advantage Rent A Car
Macquarie Group Ltd. will have to face the fraud and defamation claims of an executive who says the bank ousted him from running Advantage Rent A Car after they teamed up to buy the business from Hertz Global Holdings Inc.
Macquarie lost a bid to throw out the lawsuit brought by Sanford Miller, an industry veteran who says the company’s conduct cost him millions of dollars when Advantage collapsed into bankruptcy in 2013, according to a Nov. 17 decision by a New York state court judge.
The dispute stems from Hertz’s $2.3 billion acquisition of Dollar Thrifty Automotive Group, a deal that raised concerns among antitrust officials who worried that the combination would raise prices for consumers by cutting the number of major rental-car companies to three from four.
To preserve competition and create a viable new player in the industry, the Federal Trade Commission required Hertz to sell Advantage.
But the FTC’s plan to keep prices in check stumbled when Advantage filed for bankruptcy. A private-equity firm, Toronto-based Catalyst Capital Group, bought Advantage’s assets out of bankruptcy and decided to operate 40 locations. Hertz bought back 10 locations and Avis Budget Group Inc. purchased 12, according to FTC documents.
Hertz said in May that it was raising prices $20 a week at airports and $10 a week in its neighborhood locations.
Miller was pushed out after the FTC approved the spinoff, but before the bankruptcy.
The FTC’s plan called for Advantage to be sold to Franchise Services of North America Inc., which partnered with Sydney-based Macquarie to acquire the assets. The agency expected Miller, the then co-chief executive officer of Franchise Services, to stay on and run Advantage as CEO, according to its consent decree with Hertz.
Macquarie, which received a 49.76 percent stake in Franchise Services, was to finance the company while Miller, a former CEO of Budget, would provide the industry knowledge.
Less than a month after the FTC gave preliminary approval to the Advantage spinoff, Franchise Services’ board fired Miller. In a lawsuit filed in federal court in Mississippi, a subsidiary of the company said he was fired for cause, accusing him of misconduct related to use of company funds. That case was settled.
Justice Jeffrey Oing of New York State Supreme Court in Manhattan said Miller’s claims for fraud, defamation and tortious interference with existing contract could proceed. The judge dismissed a claim for tortious interference with prospective business relations.
“We look forward to moving ahead with prosecuting our claims,” Miller’s lawyer, Thomas Dewey, said in an e-mail. Miller claims he was ousted in a scheme engineered by Macquarie so the bank could gain control of the Advantage assets.
Macquarie’s press office didn’t immediately return a call seeking comment on the ruling. Alan Unger, a lawyer for Macquarie, also didn’t respond to a request seeking comment.
The case is Miller v. Macquarie Group Ltd., 651612-2013, New York State Supreme Court (Manhattan).
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