Davis Auto Group — which operates the Jerry Ray Davis Chrysler, Dodge, Jeep, Ram auto dealership — is embroiled in a legal battle involving its leadership and operations. Minority owners Matthew Hayden and the Estate of Jack T. Wells are accusing majority owner and manager Jerald “Jerry” Ray Davis of self-dealing and mismanagement, including the failure to fulfill tax obligations and misuse of company funds for personal expenses. Davis has filed counterclaims in the case.
Court filings show that Hayden and Wells initially formed Davis Auto with Davis in 2019 to acquire a Chrysler dealership in Owensboro. Documents show Hayden and Wells contributed $1.1 million each in startup capital, while Davis contributed $500,000; however, Hayden and Wells each own 20% of Davis Group while Davis owns the remaining 60%.
According to court documents, Davis was named manager, granting him authority over daily operations under the company’s operating agreement. An amendment later established that profits would first reimburse Hayden and Wells until capital contributions were equalized, a provision the plaintiffs allege Davis ignored.
Also according to the filing, the owners agreed to a salary of $156,000 for Davis. A court document says Davis’s salary grew to $314,590 in 2021 and $410,916 in 2022, without approval from Hayden and the Estate. Additionally, Davis’s K-1 tax form for 2023 shows he received $711,690 in total compensation from Davis Auto in 2023, but listed his salary as only $410,400, according to the court document.
The complaint alleges that Davis misused company funds for personal expenses, including luxury travel, real estate, and entertainment. Records filed in Daviess Circuit Court detail expenditures of more than $300,000 on personal items, including $67,000 on Tiffany & Co. jewelry; more than $100,000 on airline tickets, cruises, and hotel stays unrelated to business; and more than $20,000 on concert and sporting event tickets. Additional expenses, according to court records, included frequent dining at local restaurants, a personalized poker table, nightclub tabs exceeding $11,000 on a single night, and the purchase of a dog with associated training costs.
Documents also show the plaintiffs allege that Davis used company funds to cover living expenses for a personal condominium he shared with his child and dog and that he chartered a private plane to travel with his girlfriend to Nashville.
The lawsuit also alleges Davis’s failure to fulfill tax obligations, leaving Davis Auto with more than $223,000 in payroll tax liabilities and unpaid sales taxes from 2021. According to court documents, the company has also incurred penalties exceeding $12,000 for late tax payments.
Court filings indicate the dealership’s working capital falls $600,000 short of the level recommended by Chrysler, with Hayden and Wells saying Davis Auto is at risk of losing its status with Chrysler if it continues to be non-compliant with dealership standards.
Further allegations involve Davis’s undisclosed dealings with EQ Business Services, LLC, and EQ Group Reinsurance, Inc., both of which he solely owns. The lawsuit claims Davis directed Davis Auto to engage in transactions benefiting these entities without approval from Hayden or the Wells Estate.
According to documents, EQ Business received commissions for vehicle sales and leased equipment to Davis Auto. At the same time, EQ Reinsurance profited from warranty and insurance sales that were originally intended to benefit the dealership, the complaint alleges.
The lawsuit also notes that “Hayden recently discovered that Davis was previously convicted of numerous felonies, including theft by deception and forgery” in Jessamine and Fayette counties in 1993, 1997, 2001, and 2002. Owensboro Times independently confirmed Davis faced dozens of such charges in those counties; most were dismissed, but Davis pleaded guilty to approximately 10 counts, according to court records.
The plaintiffs are requesting Davis’s removal as manager and expulsion as a member in addition to monetary compensation for damages and a trial by jury, according to court documents.
In a counterclaim, Davis alleges Hayden and Wells failed to make their full capital contributions, further claiming they “demanded” he execute an amendment to Davis Auto’s Operating Agreement and they “unilaterally decided that Davis Auto’s ‘allocation of ownership [was] disproportionate to the cash contributed’ by its purported members, and that Jerry Ray Davis should contribute an additional $3,850,000 of his own funds ‘in order for the capitalization and ownership to be proportionate.'”
According to the counterclaim, Davis said he was forced to execute the amendment “or suffer the consequences of Hayden and Well’s threat to breach the Operating Agreement by withdrawing their capital investments, effectively crippling Davis Auto.”
Davis is asking the court to declare he was coerced to execute the purported amendment under duress and to declare the purported amendment as void or voidable. He is also seeking compensatory damages and a jury trial.
On December 6, a group of creditors filed an involuntary Chapter 11 bankruptcy petition against Davis Auto. According to the U.S. Bankruptcy Code, this legal process is often initiated when creditors believe debts are not being repaid and seek court intervention to manage liabilities and ensure fair treatment for creditors.
Davis and Hayden both declined to comment at this time.
Below are court documents obtained by Owensboro Times, including the initial complaint filed; a memorandum detailing the allegations; answers and counterclaims by Davis; Hayden and the Estate’s reply to the counterclaim; and the notice of bankruptcy proceedings.
