Ford to Appeal Judge’s $2 Billion Award to Truck Dealers
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Ford Motor Co. (F) said it will appeal a $2 billion judgment awarded by an Ohio judge to a class of commercial truck dealers who claimed the company overcharged them for 11 years.
The dealers sued Ford in 2002, claiming the company broke an agreement to sell trucks at published prices, which forced them to pay more from 1987 through 1998 and cut into profits. Cuyahoga County Judge Peter J. Corrigan on June 10 upheld a $4.5 million verdict awarded to one Ohio dealer in February by a Cleveland jury. He also said Ford had to pay similar damages and interest to a class of about 3,000 other dealers.
David Leitch, Ford’s general counsel, said the automaker doesn’t believe it violated its agreement with dealers or that they suffered damages. Corrigan incorrectly applied his findings on one dispute across hundreds of thousands of transactions involving other dealers, Leitch said today in a phone interview.
“We think that step and a number of others are far outside the bounds of the normal legal process,” Leitch said. “We’re confident that the Ohio appellate courts will reach the same conclusion when they get a chance to look at the matter.”
Leitch said he doesn’t expect the ruling to create financial uncertainty for the Dearborn, Michigan-based company during an appeal.
“We do expect to prevail ultimately,” he said. “Even if we’re wrong about that, we’re not writing any checks for quite some time.”
“In the long run and over the long term, this is something that we expect to work our way through without too much of a hiccup,” he said.
The total $2 billion award is five times higher than the largest-ever jury award against Ford in a lawsuit, according to data compiled by Bloomberg News. Ford said it would appeal and expects the judgment to be reversed.
Ford has 30 days to file a notice of appeal to the Ohio Court of Appeals in Cuyahoga County, said Leitch and James Lowe, a lawyer for the dealers. Ford’s prospects of reversal may be limited, he said.
“The court of appeals has already upheld this judge when he certified this as a class action,” Lowe said.
Corrigan allowed the dealers to pursue claims against Ford in a class action, or group suit, in 2005. This decision was upheld on appeal and the Ohio Supreme Court didn’t take Ford’s petition for review, Lowe said in an interview yesterday.
Corrigan on June 10 upheld the jury’s finding that Ford breached a contract with its dealers through its wholesale pricing system.
“Because every potential price was not published, each sale is affected by hidden discounts in each negotiation of the artificially inflated published price,” Corrigan said in affirming the verdict to Westgate Ford Truck Sales Inc. “As to all class members, it is undisputed that the franchise agreements were identical in all material aspects.”
Corrigan added $6.65 million in interest to the $4.5 million verdict awarded to Westgate, a Youngstown, Ohio, dealer. The total $2 billion judgment to the class includes about $1.2 billion in interest. Corrigan said he would stay execution of the judgment pending Ford’s posting of a $50 million bond.
600 Series Trucks
Ford was accused in the lawsuit of breaching an agreement with truck dealers by failing to publish to all of them all price concessions that were approved for any dealer, the company said in a regulatory filing.
The class includes all Ford dealers who bought from the company any 600 series or higher truck over a period of about 11 years, starting in 1987. The court also granted the dealers’ motion for summary judgment on liability, Ford said in its most recent 10-K filing with the Securities and Exchange Commission issued in February after the Westgate verdict.
“If similarly calculated amounts are awarded to other class members, total damages could be substantial,” the company said in that filing.
The interest on some truck sales goes as far back as 1987, said Lowe, the dealers’ lawyer. “All interest was computed on each and every truck, depending on the date of transaction.”
The claims covered sales of 474,289 trucks, Lowe said. The judge awarded the damages requested by the dealers’ attorneys, said Lowe, of Lowe Eklund Wakefield & Mulvihill in Cleveland.
“This was exactly what the experts said was proper,” he said in a phone interview.
The largest-ever jury verdict against Ford was for $369 million in a products-defect case awarded in California in 2004. That verdict was later reduced by trial and appellate courts.
Ford fell 21 cents, or 1.6 percent, to $13.14 in New York Stock Exchange composite trading at 4:15 p.m.
The case is Westgate Ford Truck Sales Inc. v. Ford Motor Co., CV 02-483526, Court of Common Pleas, Cuyahoga County, Ohio (Cleveland).
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