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Noteworthy LDF-Supported Lawsuits

Kings Dodge, Inc. v. Chrysler Group, LLC.  

In 2012, the OADA Legal Defense Fund supported a dealer seeking enforcement of Ohio Revised Code § 4517.52, which provided, “Each franchisor shall compensate each of its franchisees for labor and parts used to fulfill warranty and recall obligations of repair and servicing at rates not less than the rates charged by the franchisee to its retail customers for like service and parts for non-warranty work.”  Although the law was clear, manufacturers did not often pay retail rates.  LDF funds were used to protect all dealers’ right to be paid retail rate for warranty work, including both parts and labor.

Kings Dodge took their manufacturer, Chrysler Group, to federal court to enforce the law.  The manufacturerargued that “labor rate” only meant the dollar amount a dealer charges, but the manufacturer had the ability to determine the time allotted for the repair. The manufacturer would be free to use “time studies” to determine the amount of time they are willing to pay on a warranty repair. Typically this is much less than the amount of time a repair takes or is allotted for on a nonwarranty repair. Thus the amount the dealer is actually compensated for warranty work is less than the amount charged by the dealer for nonwarranty work. At the trial level, the District Court  agreed with the manufacturer. 

The dealer appealed and OADA’s Legal Defense Fund provided both financial support and an Amicus Brief which can be found HERE. Unfortunately, the US Court of Appeals for the 6th Circuit affirmed the District Court's decision. 

Ultimately, in 2016, OADA worked with the Ohio Legislature to amend 4517.52 to ensure that Ohio dealers receive their retail rate of compensation for both parts and labor.   

Felix, et al. v. Ganley Chevrolet, Inc., et al.

A class action lawsuit against Ganley Chevrolet, Inc. and Ganley Management Co. (“Ganley”) was certified that included all customers of all Ganley dealerships from 1999 to 2006 whose Buyer’s Orders contained a certain arbitration clause, or one similar to it. At trial, this arbitration clause was held to be contractually unenforceable and violated the CSPA.

The basis for class certification was that the mere inclusion or presence of the arbitration clause in the contracts was a violation of the Ohio Consumer Sales Practices Act (CSPA) because the clause did not include information such as the fact that AAA would handle the arbitration or information about the fees of arbitration. The trial court reasoned that the mere inclusion of the contracts in the Buyer’s Order, whether or not the customer actually had a purchase-related dispute, was a basis to award “discretionary damages” of $200 per transaction.

This case raised two significant issues that could have had a severe impact on all dealers throughout the state. First, the court ruled that the mere inclusion of a contract term in the Buyer’s Order can be the basis for class action relief under the CSPA if that term is found to be unconscionable. This means that if a term in a contract, such as a jury waiver, venue provision, spot agreement, etc., is found to be unconscionable, every person who bought a vehicle using that document could be awarded discretionary damages in a class action lawsuit. Typically, under the CSPA, plaintiffs in a class action lawsuit must show actual damages rather than merely alleging discretionary or statutory damages. This could have had far reaching impact on class action lawsuits under the CSPA for all dealers within the state.

Second, for a class action lawsuit under the CSPA, the plaintiff must show that a dealer had prior notice that the conduct alleged was a violation of the CSPA. Here, the court determined that because certain generic contract provisions, unrelated to arbitration clauses, were found to be violations of the CSPA in the past, this constituted prior notice that this arbitration clause was unconscionable under the CSPA and thus class action certification should be granted. OADA and the dealership believed this approach is overbroad. If businesses are expected to have “prior notice” that an act violates the CSPA, then the “prior notice” must be more specific.

Ganley contested class certification based on the fact that the class was overbroad because it included customers who never had a dispute and therefore were not impacted, harmed, or damaged by the presence of the arbitration clause in their contract. The 8th District Court of Appeals affirmed the trial court’s decision granting class certification and that the arbitration clause was contractually unenforceable. Ganley then appealed to the Ohio Supreme Court to hear the case and the court accepted. Oral arguments were held in front of the Supreme Court of Ohio on September 24, 2014. In August 2015, the Court decided in the dealership's favor, concluding that there is no authority in the statutory scheme or in  precedent to support a damages award to a class member in class-action litigation arising from the Ohio Consumer Sales Practices Act, absent a showing that the class member was injured and sustained damages as a result of the defendant’s conduct. 

 

Did this outcome help you?  LDF is committed to protecting our members and our industry, but your donations are needed to help fund the fight.  Please take a few minutes to make a contribution to LDF today.  Remember, Legal Defense Fund contributions can be made with corporate funds.  Thank you for your continued support.  Any questions regarding LDF or this case should be directed to Sara Bruce at OADA.