What is Dollar Rent A Car's stated intention regarding the Third Circuit's decision?
Dollar_Rent_A_Car Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company has also announced its intent to seek review of the Third Circuit's decision by the Supreme Court of the United States (the "U.S.
Supreme Court").
The Company's current deadline to file a petition for writ of certiorari with the U.S.
Supreme Court is March 6, 2025.
The Company has commenced negotiations with certain holders of the Unsecured Notes (the "Noteholders") with respect to a possible settlement of this litigation (a "Potential Settlement").
The Company has not reached an agreement with the Noteholders, and there can be no assurance that a Potential Settlement will be agreed upon between the Noteholders and the Company.
The Company cannot predict the ultimate outcome or timing of this litigation; if, however, the Delaware Bankruptcy Court were to enter judgment against Hertz, payment of such judgment could have a material adverse effect on the Company's financial condition, results of operations or cash flows.
Source: Item 23 — RECEIPTS (FDD pages 102–301)
What This Means (2025 FDD)
According to Dollar Rent A Car's 2025 Franchise Disclosure Document, the company intends to seek review of the Third Circuit's decision by the Supreme Court of the United States. This stems from a case, Wells Fargo Bank, N.A. v. The Hertz Corp., et al., where the Third Circuit ruled that Hertz (Dollar Rent A Car's guarantor) must pay a make-whole premium on certain notes and post-petition interest, even though these amounts were initially disallowed under the Bankruptcy Code. As a result, Dollar Rent A Car has accrued approximately $320 million as of December 31, 2024, for this litigation, comprising approximately $260 million in underlying claims and approximately $60 million in pre-judgment interest.
The company's decision to pursue a Supreme Court review indicates a disagreement with the Third Circuit's ruling and a desire to potentially overturn it. The case has been remanded to the Delaware Bankruptcy Court to determine the exact amount owed, but Dollar Rent A Car and the Indenture Trustee disagree on the proper calculation, adding another layer of complexity. The company's current deadline to file a petition for writ of certiorari with the U.S. Supreme Court is March 6, 2025.
For a prospective Dollar Rent A Car franchisee, this ongoing litigation and the potential financial implications are important to consider. The outcome of the Supreme Court review, or any subsequent settlement, could significantly impact the financial condition of Dollar Rent A Car and its guarantor, Hertz. While the company is taking steps to challenge the Third Circuit's decision, there is no guarantee of a favorable outcome, and the accrued $320 million liability represents a substantial financial risk. Franchisees should closely monitor the developments of this litigation and understand its potential effects on the stability and performance of the Dollar Rent A Car franchise system.