New Berlin Harley franchise faces $6.3M federal lawsuit
Aims at stopping sales, recouping delinquent debts

By Darryl Enriquez - Special to Conley Media

March 5, 2019

The Iron Town Harley-Davidson dealership is at 1925 S. Moorland Road, New Berlin.
File photo

NEW BERLIN — Iron Town, the New Berlin Harley-Davidson dealership and its partner motorcycle shop in Janesville, are defendants in a federal lawsuit that demands a total of $6.3 million in delinquent debts and asks merchandise sales from the businesses be stopped to prevent more losses to Harley-Davidson Credit Corp., a lending agency.

A federal judge has stayed the motion to stop sales but ordered that merchandise only be sold if the agency is notified of sales and sent what is due to repay any debt.

A hearing is pending possibly later this week on the request by Harley-Davidson Credit Corp. to stop all sales at both stores.

The lawsuit filed in the U.S. District Court of Western Wisconsin by Harley’s credit division claimed the dealerships were in breach of contract for selling motorcycles and not reimbursing the credit agency.

Eric and Sara Pomeroy with mailing addresses in Florida own the dealerships, the lawsuit said. Neither of the Pomeroys could be reached for comment.

In addition, the lawsuit claims fraud was committed because the agency was repeatedly told that payments had been sent but actually were never made.

As proof of fraud allegations, the lawsuit claims the agency was provided a receipt of a wire transfer that never was made.

The credit agency claims Iron Town owes $3.7 million and the Janesville shop owes $2.6 million.

Harley-Davidson extended credit to JHD Holding Inc. for its Janesville dealership and to H2D for the New Berlin business at 1925 Moorland Blvd. The location was formerly Hal’s Harley-Davidson.

The credit enabled both dealerships to purchase goods and services, which included motorcycles.

“The most significant risk in inventory financing is that the dealer borrower will sell the collateral at retail and then wrongfully retain the proceeds that should have been remitted to the floorplan lender without informing the lender of the sale,” according to a court document. “The floorplan lender’s main protection is therefore the trust and integrity of the dealer borrower.”

Sales alleged without reimbursing credit agency

Last fall, the credit agency found that the New Berlin dealership had sold $87,000 in merchandise without reimbursing the agency. Other Iron Town’s past due debts amount to $115,500. The agency in a letter to Iron Town demanded reimbursement for the loan, according to the suit.

Also last fall, the credit agency discovered that the Janesville shop had sold inventory in excess of $281,000 without reimbursing the agency. It owed an additional $457,000 in past due debts.

Some payment notes were returned for nonsufficient funds, according to the lawsuit.

In January, Eric Pomeroy on behalf of both dealerships told the agency that wire transfers would be sent to cover the nonsufficient funds. The wire transfers never arrived, according to the lawsuit.

Pomeroy told the credit agency that the New Berlin dealership owed $994,000 and the Janesville business owed $536,000. He agreed to make weekly payments of $80,000 and $50,000 on the debts but only one payment was made, the lawsuit said.

Audits early and late last month of both dealerships found that dozens of additional motorcycles were again sold without reimbursing the lender, prompting the lawsuit, according to court documents.