Affordable Car Hire is being sued for $2.2 million by Avis Budget in a dispute over payment.
Court documents filed at the District Court of the District of New Jersey claim Affordable has not met monthly payments since August last year.
The legal action named Affordable Car Hire and 11 associated companies along with directors Angela Day and her husband James Moore as defendants in the action.
The court documents state that Day and Moore had told Avis Budget that “attempting to pay even a significant portion of the funds would render Affordable Car Hire bankrupt”.
Moore told Travel Weekly the issue is in the hands of lawyers and that they were working towards an amicable solution for both sides.
Auto Europe, which is in discussions with Affordable over a possible merger, has agreed to act as a mediator between the two sides.
Chief executive of Auto Europe Imad Khalidi said: “As a partner with Avis, I want to talk to them to see if I can mediate. I’m trying to help both parties.
“Affordable has an excellent business model and reputation and the UK travel agency business for car hire is very strong.”
Avis Budget and Affordable agreed the most recent version of a long-standing agreement last year, but the filing says Day and Moore signed personal guarantees on March 18, 2005.
Avis Budget claimed this made the two directors personally liable should Affordable fail to pay monthly invoices within 30 days, as well as for any legal fees.
The case against Affordable also alleged that “alter ego entities” – other firms associated with Affordable – were being used to “move funds away” to shield Day and Moore from liabilities.
Avis Budget claimed in the filing that the defendants are focusing on moving funds into the newly formed AffordableXtras and Affordable Cruising as they “recognise that Affordable is sinking”.
Avis Budget said it had thousands of bookings with Affordable for which it has not been paid and is demanding the broker provide it with customer details.
The court filing said Avis Budget needed to contact the customers to prevent harm to its brand and to inform them of the situation and so it can be paid for its services.
It requested the court to impose a temporary restraining order to prevent the defendants transferring assets and compelling them to provide customer details.
The legal case is ongoing and no allegations have yet been proven.
An Avis Budget spokesperson said: ‘we do not comment on pending litigation.’
Day said she “would like to thank the UK travel agency community for their continued loyalty and support” and was “excited” about the possibilities of the Auto Europe merger.
Auto Europe added it believed the merger “will strengthen both company’s product and service as well as provide a solid financial basis for Affordable Car Hire’s future growth”.