Panel Upholds Cancellation of Honda Franchise : Autos: Manufacturer’s action comes after Costa Mesa dealership owners pleaded guilty in a kickback probe.

A state auto retailing panel has upheld American Honda Motor Co.’s decision to cancel its franchise with Costa Mesa Honda after the owners of the dealership pleaded guilty to felony charges in the federal government’s ongoing Honda kickback probe.

The dealership owners, Mark L. Benson of Costa Mesa and Edward A. Temple of Newport Beach, have requested a stay while their lawyers prepare an appeal, said American Honda attorney Mark Brooks.

Neither Benson nor Temple was available for comment Tuesday.

The two have been negotiating to sell the franchise to a pair of Los Angeles County auto dealership owners. Honda officials reportedly want to pull the franchise to block Benson and Temple--both former American Honda executives--from completing the sale and making a profit.

If Honda takes back the Costa Mesa franchise, the prospective buyers would have to apply directly to the auto company and would no longer deal with Benson and Temple.

American Honda decided to terminate the franchise by invoking a so-called morality clause after the men pleaded guilty to felonies. That action was challenged by Benson and Temple but was upheld by the California New Motor Vehicle Board. The quasi-governmental agency, made up of auto industry officials, rules on disputes between dealers and the manufacturers whose cars they sell.

Brooks said that Honda has also canceled the franchise of an Atlanta dealer who was involved in the kickback scheme. A total of 13 former Honda officials have pleaded guilty to demanding cash, cars and favors in exchange for awarding dealership franchises during the 1980s, when Honda was one of the nation’s most lucrative franchises.

In the Atlanta case, Brooks said, the dealer appealed the decision. The case went to the U.S. Circuit Court of Appeals, which upheld Honda’s action.