Suing dealers has become a growth industry
10-20-2003, 08:43 PM
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Suing dealers has become a growth industry
Suing dealers has become a growth industry
By Donna Harris
Automotive News / October 20, 2003
Dealing in litigation
Why dealers are being sued
Plaintiffs’ lawyers share data.
Jury awards are going up.
F&I fraud fuels class actions.
Malpractice and personal injury cases are less lucrative.
Bernard Brown is a car dealer's worst nightmare.
The Kansas City, Mo., lawyer makes his living suing dealers and helping other lawyers sue dealers. He has been pursuing auto retail fraud cases for 20 years, with an intensity that has made him admired and hated. At 2 a.m. you are just as likely to find the unmarried 49-year-old beavering away in his office as home in bed.
The hard work pays off. One of his clients just won an $865,500 jury award against a Blue Springs, Mo., Ford dealership that failed to disclose that a used Explorer it sold in 1994 had a salvage title. Brown's client had driven the vehicle almost 200,000 miles.
Brown is a leader in a growing trend. Lawyers are suing car dealers like never before. Lawyers specializing in auto dealer cases have been filling up the ranks of the National Association of Consumer Advocates, an educational group for plaintiffs' lawyers that Brown helped found in 1992.
Membership has grown from 19 in 1992 to about 1,000 in 2003. About a third of the members specialize in auto retail cases.
Deep pockets
Going after dealers makes economic sense. Car retailing is one segment of the economy that has done well during the past three years because buyer incentives have propped up sales. And as tobacco and oil companies and makers of asbestos products gain some protection from changes in tort law, lawyers are looking for new targets.
"There is a growing number of attorneys who are taking on more and more cases involving automobile fraud," says Jonathon Sheldon, a staff lawyer at the National Consumer Law Center in Boston.
Colleagues admire Brown's six-figure judgments. "He is an attorney's attorney," says Leonard Bennett, a Newport News, Va., lawyer who also specializes in dealer cases.
But Brown is anathema in the local dealer community. At the mere mention of his name, Bill Morrison, the executive vice president of the Motor Car Dealers Association of Greater Kansas City, hung up the phone in disgust.
Brown has helped write reference manuals for the National Consumer Law Center, which informs plaintiffs' lawyers about various types of consumer litigation. The center's once-skimpy manual on odometer law has grown from fewer than 100 pages to a volume of more than 600 pages that covers many types of dealer fraud.
2 key factors
One of Brown's colleagues, Ian Lyngklip of Southfield, Mich., suggests two reasons lawyers have dealers in their sights: so-called tort reform, a movement by large, vulnerable industries such as tobacco and oil to reduce litigation and damage awards; and educational programs for consumer lawyers.
"You've got all these attorneys who were formerly doing medical malpractice and personal injury with less and less business," Lyngklip says. "They are looking for things to do."
Meanwhile, organizations such as the National Consumer Law Center and the National Association of Consumer Advocates allow lawyers to swap notes and become sophisticated in a very short time, Lyngklip says.
But dealers say plaintiffs' lawyers are out of control. One class-action suit filed in May in New Jersey alleges that almost all new-car dealers in New Jersey engaged in consumer fraud in connection with documentation fees they charge for vehicle registrations.
"This lawsuit is the latest and most outrageous example of how the legal system is abused by aggressive plaintiffs' lawyers," says lawyer Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.
"There's a new sheriff in town - it's the class-action lawyer," says Dave Robertson, executive director of the Association of Finance and Insurance Professionals.
A victim in 1983
Brown started taking car retailers to court in 1983 after he was a victim of odometer rollback. He says he discovered after a little research that his 1978 Honda Accord - represented as a one-owner car with 48,000 miles when he bought it - actually had four owners and was driven more than 89,000 miles.
When Brown took his case to a local county prosecutor and the National Highway Traffic Safety Administration, he says, they did nothing.
"Prosecutors focus on what they do best - murder, rape, robbery, child molestation and drug crimes," Brown says. "They already have tons to do, and in this (odometer rollback) realm, they are like a fish out of water."
What's more, there is no political pressure being applied, Brown says. "There is no 'Mothers Against Odometer Rollbacks,' " he says.
Rising damage awards have helped awaken lawyers to the possibilities of bringing claims against dealers. When Brown started suing dealers 20 years ago, few lawyers were interested in the kinds of cases he handles. That's because the actual damages generally were $25,000 or less. To make cases worthwhile, lawyers needed to seek punitive damages, which Brown says requires a higher standard of proof.
Now litigators are seeing bigger awards. In 2001, an Oregon plaintiff got $1,011,496 in punitive damages in a case involving odometer rollback and failure to disclose vehicle damage.
Brown's case against Missouri dealership Blue Springs Ford is the second-highest award involving dealers. Owner Bob Balderston, who has two Ford stores and one Honda dealership in the Kansas City, Mo., area, is appealing the verdict.
"The amount was a shock," says William Carr, of Kansas City, Mo., one of Balderston's lawyers. "I have handled defense litigation for other dealers, but I have never seen a verdict this large."
Brown says he is seeing more cases with punitive damages of $200,000 to $300,000. Awards of $100,000 are fairly common, he says.
"This has become a cottage industry," says Keith Whann, a Dublin, Ohio, lawyer who represents dealers. "All you need is two of those $840,000 cases and if you get a third of the damages, that's a half-million dollars. That's a pretty good year for a small firm."
F&I is a growth area
Brown expects more class-action suits against dealers, the kinds of cases that can result in multimillion-dollar recoveries. As new-vehicle grosses shrink, dealers are focusing more on finance and insurance profits. Brown says F&I cases lend themselves to class actions because they involve patterns of conduct rather than the testimony of individual experts about the safety or performance of individual vehicles. "The facts the plaintiffs are complaining about are more uniform," Brown says.
He says he knows of three lawyers who specialize in just one target-rich aspect of dealer finance cases: spot deliveries in which the dealer gives the customer the car but makes the deal dependent on the store's ability to find financing.
In these so-called "yo-yo" cases, Brown says dealerships tell customers they can't get financed and then change the terms of the deal, sometimes jacking up interest rates.
Brown says he's not out to get car dealers. There are many dealers he respects, he says. He considered posting the dealerships that have received no complaints on a Web site but abandoned the project as too labor-intensive. "I was afraid I might leave out the names of some honest dealers," Brown says.
In his first big case, in 1984, Brown represented a dealer who had claimed to be cheated by an auction chain. Brown was able to document odometer rollbacks in more than 100 of the 133 vehicles the auction sold to the dealer.
If he were doing this for the money, Brown says, he could have worked for the auction chain, which told him it could use his legal services.
"He is a bright and upstanding guy despite what some of those people in (Kansas City) think," says Whann.
But Whann says that not all plaintiffs' lawyers are as virtuous as Brown. Some "big shops just turn for fees," he says.
Brown agrees, and delights in telling lawyer jokes in speeches to consumer groups. He says he would like to reform the legal profession as much as he would the car business.
"There are a lot of people who live internally conflicted lives," Brown says. "I could maximize my profits - but I won't."
By Donna Harris
Automotive News / October 20, 2003
Dealing in litigation
Why dealers are being sued
Plaintiffs’ lawyers share data.
Jury awards are going up.
F&I fraud fuels class actions.
Malpractice and personal injury cases are less lucrative.
Bernard Brown is a car dealer's worst nightmare.
The Kansas City, Mo., lawyer makes his living suing dealers and helping other lawyers sue dealers. He has been pursuing auto retail fraud cases for 20 years, with an intensity that has made him admired and hated. At 2 a.m. you are just as likely to find the unmarried 49-year-old beavering away in his office as home in bed.
The hard work pays off. One of his clients just won an $865,500 jury award against a Blue Springs, Mo., Ford dealership that failed to disclose that a used Explorer it sold in 1994 had a salvage title. Brown's client had driven the vehicle almost 200,000 miles.
Brown is a leader in a growing trend. Lawyers are suing car dealers like never before. Lawyers specializing in auto dealer cases have been filling up the ranks of the National Association of Consumer Advocates, an educational group for plaintiffs' lawyers that Brown helped found in 1992.
Membership has grown from 19 in 1992 to about 1,000 in 2003. About a third of the members specialize in auto retail cases.
Deep pockets
Going after dealers makes economic sense. Car retailing is one segment of the economy that has done well during the past three years because buyer incentives have propped up sales. And as tobacco and oil companies and makers of asbestos products gain some protection from changes in tort law, lawyers are looking for new targets.
"There is a growing number of attorneys who are taking on more and more cases involving automobile fraud," says Jonathon Sheldon, a staff lawyer at the National Consumer Law Center in Boston.
Colleagues admire Brown's six-figure judgments. "He is an attorney's attorney," says Leonard Bennett, a Newport News, Va., lawyer who also specializes in dealer cases.
But Brown is anathema in the local dealer community. At the mere mention of his name, Bill Morrison, the executive vice president of the Motor Car Dealers Association of Greater Kansas City, hung up the phone in disgust.
Brown has helped write reference manuals for the National Consumer Law Center, which informs plaintiffs' lawyers about various types of consumer litigation. The center's once-skimpy manual on odometer law has grown from fewer than 100 pages to a volume of more than 600 pages that covers many types of dealer fraud.
2 key factors
One of Brown's colleagues, Ian Lyngklip of Southfield, Mich., suggests two reasons lawyers have dealers in their sights: so-called tort reform, a movement by large, vulnerable industries such as tobacco and oil to reduce litigation and damage awards; and educational programs for consumer lawyers.
"You've got all these attorneys who were formerly doing medical malpractice and personal injury with less and less business," Lyngklip says. "They are looking for things to do."
Meanwhile, organizations such as the National Consumer Law Center and the National Association of Consumer Advocates allow lawyers to swap notes and become sophisticated in a very short time, Lyngklip says.
But dealers say plaintiffs' lawyers are out of control. One class-action suit filed in May in New Jersey alleges that almost all new-car dealers in New Jersey engaged in consumer fraud in connection with documentation fees they charge for vehicle registrations.
"This lawsuit is the latest and most outrageous example of how the legal system is abused by aggressive plaintiffs' lawyers," says lawyer Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.
"There's a new sheriff in town - it's the class-action lawyer," says Dave Robertson, executive director of the Association of Finance and Insurance Professionals.
A victim in 1983
Brown started taking car retailers to court in 1983 after he was a victim of odometer rollback. He says he discovered after a little research that his 1978 Honda Accord - represented as a one-owner car with 48,000 miles when he bought it - actually had four owners and was driven more than 89,000 miles.
When Brown took his case to a local county prosecutor and the National Highway Traffic Safety Administration, he says, they did nothing.
"Prosecutors focus on what they do best - murder, rape, robbery, child molestation and drug crimes," Brown says. "They already have tons to do, and in this (odometer rollback) realm, they are like a fish out of water."
What's more, there is no political pressure being applied, Brown says. "There is no 'Mothers Against Odometer Rollbacks,' " he says.
Rising damage awards have helped awaken lawyers to the possibilities of bringing claims against dealers. When Brown started suing dealers 20 years ago, few lawyers were interested in the kinds of cases he handles. That's because the actual damages generally were $25,000 or less. To make cases worthwhile, lawyers needed to seek punitive damages, which Brown says requires a higher standard of proof.
Now litigators are seeing bigger awards. In 2001, an Oregon plaintiff got $1,011,496 in punitive damages in a case involving odometer rollback and failure to disclose vehicle damage.
Brown's case against Missouri dealership Blue Springs Ford is the second-highest award involving dealers. Owner Bob Balderston, who has two Ford stores and one Honda dealership in the Kansas City, Mo., area, is appealing the verdict.
"The amount was a shock," says William Carr, of Kansas City, Mo., one of Balderston's lawyers. "I have handled defense litigation for other dealers, but I have never seen a verdict this large."
Brown says he is seeing more cases with punitive damages of $200,000 to $300,000. Awards of $100,000 are fairly common, he says.
"This has become a cottage industry," says Keith Whann, a Dublin, Ohio, lawyer who represents dealers. "All you need is two of those $840,000 cases and if you get a third of the damages, that's a half-million dollars. That's a pretty good year for a small firm."
F&I is a growth area
Brown expects more class-action suits against dealers, the kinds of cases that can result in multimillion-dollar recoveries. As new-vehicle grosses shrink, dealers are focusing more on finance and insurance profits. Brown says F&I cases lend themselves to class actions because they involve patterns of conduct rather than the testimony of individual experts about the safety or performance of individual vehicles. "The facts the plaintiffs are complaining about are more uniform," Brown says.
He says he knows of three lawyers who specialize in just one target-rich aspect of dealer finance cases: spot deliveries in which the dealer gives the customer the car but makes the deal dependent on the store's ability to find financing.
In these so-called "yo-yo" cases, Brown says dealerships tell customers they can't get financed and then change the terms of the deal, sometimes jacking up interest rates.
Brown says he's not out to get car dealers. There are many dealers he respects, he says. He considered posting the dealerships that have received no complaints on a Web site but abandoned the project as too labor-intensive. "I was afraid I might leave out the names of some honest dealers," Brown says.
In his first big case, in 1984, Brown represented a dealer who had claimed to be cheated by an auction chain. Brown was able to document odometer rollbacks in more than 100 of the 133 vehicles the auction sold to the dealer.
If he were doing this for the money, Brown says, he could have worked for the auction chain, which told him it could use his legal services.
"He is a bright and upstanding guy despite what some of those people in (Kansas City) think," says Whann.
But Whann says that not all plaintiffs' lawyers are as virtuous as Brown. Some "big shops just turn for fees," he says.
Brown agrees, and delights in telling lawyer jokes in speeches to consumer groups. He says he would like to reform the legal profession as much as he would the car business.
"There are a lot of people who live internally conflicted lives," Brown says. "I could maximize my profits - but I won't."
10-21-2003, 04:09 AM
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That guy is an ASSHOLE and the world would be a better place without him.
And we can thank people like him whenever our insurance rates go UP.
Shawn S
And we can thank people like him whenever our insurance rates go UP.
Shawn S
10-21-2003, 06:07 AM
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Now litigators are seeing bigger awards. In 2001, an Oregon plaintiff got $1,011,496 in punitive damages in a case involving odometer rollback and failure to disclose vehicle damage.
10-22-2003, 06:40 PM
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Originally posted by danny25
how is an odometer rollback worth over a million?? Maybe 30-60K for a new car, but no way a million.
how is an odometer rollback worth over a million?? Maybe 30-60K for a new car, but no way a million.
if someone steals your car and wreck it, do they just buy you a replacement after they got caught?
in this case, i will side with the lawyers. most dealers are crooks.
10-22-2003, 06:48 PM
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Originally posted by danny25
how is an odometer rollback worth over a million?? Maybe 30-60K for a new car, but no way a million.
how is an odometer rollback worth over a million?? Maybe 30-60K for a new car, but no way a million.
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