Arizona dealership group gets green light to pursue suit over raid by state AG

An Arizona dealership group claims that a raid by the state attorney general’s office that focused on vehicles imported from Mexico shut its stores and caused “substantial damages,” including lost sales and profits.

A federal judge in Phoenix is allowing the dealership group, Mark Enterprises Car Co., to pursue its lawsuit against agents of the attorney general’s office over the October 2019 raid. The agents were investigating allegations that the retailer put fake Ford Motor Co. stickers on vehicles imported from Mexico.

In its September 2021 lawsuit, Mark Enterprises claims armed agents violated its constitutional rights by wrongfully obtaining and executing a search warrant as well as by seizing vehicles, deal jackets and business records.

“The raid was a 2½-day affair. Over 70 agents were involved,” said Robert Tolman, a Tempe, Ariz., lawyer representing the dealership group.

The raid involved Mitsubishi stores in Phoenix and Scottsdale, Ariz., and a Kia store in Scottsdale. The dealership group sold the Mitsubishi stores after the raid. It now operates the Kia store and a Mazda dealership.

The allegations against Mark Enterprises came after the dealerships started purchasing more used trucks in 2018 to meet customer demand. They included Fords assembled in Michigan and Kentucky and later imported from Mexico and sold by an auction house, the lawsuit claims. The dealership group purchased the Fords at the auction house.

The vehicles had been inspected by the Department of Homeland Security, received clean titles from the state of Arizona, had required EPA stickers showing compliance with U.S. environmental mandates and were covered by Ford warranties, the lawsuit said. Customers were told of the vehicles’ imported status, the dealership group said in its complaint.

In October 2019, the agents “appeared at three locations of Mark dealerships, told everyone to step away from their desks, sent all customers away, blocked all exits to the property and told everyone inside the business they could not leave. The dealerships were unable to function,” the suit contends. The complaint did not say how long operations were suspended because of the raid and investigation.

During the raid, agents “boxed up thousands of pages of documents without any concern with whether they were authorized to do so,” seized records “concerning other confidential information with little to do with the investigations” and took personal cellphones and tablets, the complaint said. Most of the seized items were later returned, said Tolman.

No arrests or civil charges resulted from the raid, and the attorney general’s office announced in January 2021 that “after extensive investigation” it was “unable to file criminal charges … involving the trucks that were imported and being sold,” according to the suit.

The retailer claims its stores were the only ones investigated, although at least seven other dealerships bought used vehicles imported from Mexico by the same source.

“Mark Enterprises was singled out,” Tolman told Automotive News.

The dealerships and their three shareholders suffered “substantial financial damage and harm to their reputation in the community” from the search and seizure, the suit claims.

Tolman said the attorney general’s office agreed to release all but one of the 18 seized vehicles, but the dealerships were told they couldn’t sell them in the U.S.

“So they had to sell them in Canada and lost a lot of money,” he said. “They have lost a boatload of money.”

Neither Tolman nor the lawsuit estimated the amount of money lost on the vehicles or because of the disruption to operations. Mark Enterprises’ lawsuit is seeking an unspecified amount of compensatory and punitive damages.

The suit claims the state’s fraud investigation began “based on anonymous tips and unverified suspension” and that one of the attorney general’s special investigators, Dilsher Ali, provided a “deceptive, false and misleading” affidavit to obtain a search warrant and seize more than $1 million worth of vehicles and inventory.

Ali and three other agents are named as defendants. Three other agents are included as unnamed “John Does.” The suit accused the agents of carrying out an unreasonable search and seizure in violation of the Fourth Amendment and of violating the dealership group’s right to substantive due process of the law.

The state is not a defendant because it is shielded by governmental immunity, and Ali, who led the investigation, still works for the agency and has not been disciplined, Tolman said.

In September, U.S. District Judge Douglas Rayes dismissed the due process claims because they duplicate the Fourth Amendment claims. The defense had moved for the due process claims to be dismissed.

The case will now proceed to pretrial discovery, according to Tolman, who said lawyers for the dealership group are going through “thousands and thousands and thousands of pages” of documents provided by the attorney general’s office.

The attorney general’s office referred questions from Automotive News to Rusing Lopez & Lizardi, an Arizona law firm that represents its employees. A partner in the firm, Daniel Torrens, said, “It is not our policy to comment on pending court cases.”

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