The October 2020 “Legal Files,” co-authored with Prescott Kelly, reported about a lawsuit filed against Coys of Kensington involving a 1973 Porsche Carrera RS. That lawsuit seems to be the tip of a large iceberg. Once again, we want to point out that the previous Coys, owned by Chris Routledge, is the target of the lawsuits. After it filed for bankruptcy in April 2020, its business was sold to a new Coys company, which is presently operating and is uninvolved in any of the litigation in this story. The Coys saga “Legal Files” came across an excellent report about Coys written […]
The October 2020 “Legal Files,” co-authored with Prescott Kelly, reported about a lawsuit filed against Coys of Kensington involving a 1973 Porsche Carrera RS. That lawsuit seems to be the tip of a large iceberg.
Once again, we want to point out that the previous Coys, owned by Chris Routledge, is the target of the lawsuits. After it filed for bankruptcy in April 2020, its business was sold to a new Coys company, which is presently operating and is uninvolved in any of the litigation in this story.
The Coys saga
“Legal Files” came across an excellent report about Coys written by Laurens Klein, owner of PreWarCar.com, an interesting online magazine and marketplace for cars built before 1945. With Klein’s consent, we will summarize his excellent article:
Coys started in London in 1919 and had a rich and grand history. It started as an antique dealer, then was sold to a car enthusiast who earned success in buying and selling classic cars. It later expanded to be one of the leading auction firms.
A 2003 management buyout resulted in a new firm founded by Chris Routledge and Douglas Jamieson. In 2004, it went into bankruptcy and £1.65m vanished, leaving 33 creditors with empty hands. Another new company was founded; Routledge and Jamieson took it out of bankruptcy, and Jamieson left the company around 2010.
According to the several sources we spoke to, Coys was going from auction to auction, trying to pay previous sellers with the money from the next one. On April 17, 2020, Coys went back into bankruptcy, leaving numerous people with empty hands — a total of 95 creditors, adding up to a total sum of at least £5,856,897.30. Among the deceived were people who sold their cars at Coys auctions, even as the Coys directors had known at the time of the auction that it had been insolvent.
In 2019, Routledge was taken away in handcuffs by German policemen at the Techno Classica show. A German collector sold his Miura at a Coys Monaco auction. The new buyer paid the selling price right there and then, but Coys made repeated excuses about not paying the seller. A year later, the seller still had not received the money. Coys acknowledged it didn’t have the money and offered a Porsche 959 instead. The seller agreed (as it was better than nothing). Routledge assured the seller that Coys owned the Porsche and a deal was made. The car went to the seller’s garage in Germany, but within a week, the car was seized by German police. It turned out that the car did not belong, nor had ever belonged, to Coys at all. It belonged to a German garage.
The seller’s complaint to the German police led to their showing up at the start of the Coys Techno Classica auction, marching up to Routledge (who was standing on the auction rostrum), and leading him away with a pair of silver bracelets on — traditionally worn with one’s hands tied behind one’s back. The seller was paid up the next day.
Another customer wanted to sell their Bugatti Type 37. The seller received a deposit and waited for the final payment. They received no money and, according to Coys, there was no deal yet. However, the seller then saw photographs of his car… participating in the Mille Miglia with the so-called “buyer.”
Many facets of fraud
The old Coys is certainly an extreme example, and it seems to have earned its reputation for dishonesty, but there are many, many other situations where the same sort of thing has happened.
Many collectors have had trouble collecting sales prices from consignment dealers, and others have had trouble getting restoration shops to do work they were paid for in advance. In each of these situations, the money (and sometimes the car) is gone and all that is left is a legal claim against the dealer or shop.
Of course, the fraudulent business usually insists that it has no money. What should you do if you find yourself in this situation?
Never-finished restorations
Say you’ve given your car to a restoration shop far away from your home. You left a good deposit up front, and you’ve been receiving numerous photos of your car in various stages of disassembly, usually accompanied by a bill for work done to date. The payments exceed the original estimate, and progress seems to have slowed dramatically.
The months or years slip by. You push, and the shop tells you it needs tons more money to finish the car. You’re already well into the project, but you are reluctant to dig a deeper hole. What should you do?
The unhappy answer is quite obvious to the dispassionate lawyer. This shop is never going to finish the car. Stop sending money, go pick up the car and all the parts, and take everything to a new shop to finish the project.
The new shop will likely charge you as much or more than you’ve already paid the first shop, but that is the reality of the situation. The money paid to the first shop is lost.
Should you sue?
Whether or not to sue to recover your lost money is a tough question. The only guarantee given in litigation is that you will spend a lot of money on legal fees.
If the shop is really out of money, you will be throwing good money after bad. But crooks are willing to plead poverty at the slightest hint of a claim, as they know that often works. So maybe it’s just a bluff.
Let’s be realistic — you are probably just one of many victims. Once word gets out about your lawsuit, there can be more to come. That gives the crook an incentive to work out a settlement with you to keep the lid on their problems.
But that only works if you are one of the first in line. Once other lawsuits have been filed, there’s little incentive to pay anything to you, as it doesn’t solve the other problems. For that reason, the wait-and-see approach is doomed to failure. If you are going to get anything, you need to be the first in line. If you take time to “think about it,” you are only allowing some other plaintiff to get ahead of you.
The key is to make sure you have the right lawyer who knows how to put maximum pressure on the culprit at minimum cost to you. You don’t want to give a lawyer a $50,000 retainer to analyze your claims and advise you about the best course of action. You want a lawyer who will charge $5k–$10k to file a reasonably solid lawsuit and see what happens.
If the response tells you it’s going to be a huge or futile battle, you can rethink your strategy then. If you’re clever, you can take simple steps, such as discovery requests, that don’t cost much to file but force the defendant to spend a lot of time and money responding.
Beware the bankruptcy
If you’re lucky enough to get a monetary settlement from the crook, don’t go spending all the money just yet. You have to be concerned about the defendant filing bankruptcy.
Once a bankruptcy is filed, the trustee’s first order of business is to look back and see which creditors were paid soon before the bankruptcy was filed. Any payments made to creditors out of the ordinary course during the 90 days before the filing are treated as “preferences” and have to be repaid. You then go back to being an unsecured creditor, sharing with others in any eventual distribution. That will probably be some fraction of your claim.
Crooked dealers
Defaulting dealers, like the old Coys, present much the same analysis. However, there are two additional considerations.
All U.S. states require car dealers to post a bond to protect their customers from claims. Unfortunately, the bond amounts are usually pretty low — as low as $20,000 in some states — but they can be a source of partial recovery. These bonds pay on a first-come-first-paid basis, so it is crucial to make a claim on the bond as early as possible.
Just as with Coys, dealers often get in financial trouble and start using a second sale to pay what is owed on the first sale. If you are the first sale, steady pressure and a little patience can sometimes get you paid.
Our firm has had three cases involving the same restoration shop/dealer who gets paid up front to restore a car in its inventory and then never delivers the finished car. In two of them, we kept pushing until someone else paid them up front, and our client got paid.
The third time, our client had to take a car out of inventory to get paid, which was better than nothing. And at least he did like the car. But rest assured, we checked the title with a microscope before we agreed. ♦
John Draneas is an attorney in Oregon and has been SCM’s “Legal Files” columnist since 2003. His recently published book The Best of Legal Files can be purchased on our website. John can be contacted at john@draneaslaw.com. His comments are general in nature and are not intended to substitute for consultation with an attorney.