May 5 (Bloomberg) -- Ford Motor Co. won a reversal of a $2 billion verdict and will receive a new trial on claims the automaker overcharged commercial-truck dealers for 11 years.
An Ohio appeals court in Cleveland yesterday rejected the largest judgment ever against Ford and ruled the trial judge improperly excluded evidence that could have helped the company. Dealers can ask the Ohio Supreme Court to review the ruling, which Ford disclosed yesterday in a regulatory filing.
Cuyahoga County Judge Peter J. Corrigan improperly excluded evidence offered by Ford to defend claims that it broke an agreement to sell trucks at published prices from 1987 to 1998, the appellate court ruled. The dealers sued Ford in 2002, and Corrigan last June upheld a $4.5 million jury verdict for a dealer. Extrapolating from there, he said Ford owed $1.98 billion in damages and interest to a class of 3,000 dealers.
“After the evidence is admitted, we question whether the trial court would be able to certify the class at the damages phase,” the appellate court said in its ruling. “Once the trial court admits the previously excluded evidence, it will need to determine whether it can continue to certify the class.”
Ford, based in Dearborn, Michigan, fell 2.3 percent to $10.67 at the close in New York.
“We look forward to trying the case before a jury that will be able to consider all the evidence that was improperly excluded in the first trial,” Marcey Evans, a Ford spokeswoman, said yesterday in an interview.
James Lowe, a lawyer for dealers, declined to comment on the ruling.
The $2 billion award was five times higher than the largest-ever jury award against Ford in a lawsuit, according to data compiled by Bloomberg News. The largest 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.
The case from 2002 involves medium and heavy truck dealers who sold Ford Series 600 trucks and higher. Under Ford’s “competitive price assistance” program, they could petition for discounts on wholesale costs to keep up with competitors. Dealers could seek price breaks on a case-by-case basis, and Ford made decisions without telling other dealers, according to the opinion.
The trial judge certified the dealers as a class in ruling that their contracts “unambiguously required Ford to publish to all dealers the price that it sold to any dealer,” according to the opinion. The appeals court ruled that the contract is ambiguous and “susceptible to more than one interpretation,” meaning the judge erred on the question of liability.
While the judge properly allowed dealers to present their damages model at trial, he also erred by excluding Ford’s rebuttal evidence, according to the opinion. Such evidence “went to whether existing market factors would have made it economically unfeasible for Ford to actually offer the types of discounts contemplated” by the dealers’ model.
One of the three judges on the appellate panel, Larry A. Jones Sr., dissented on the question of the contract language. He said the contract was “unambiguous,” and Ford “nullified the dealers’ right” to “purchase trucks at published prices.”
Ford had said in financial filings that the $2 billion verdict was a financial risk. The total comprised $780.6 million in damages and $1.19 billion in pre-judgment interest.
Corrigan allowed the dealers to pursue claims against Ford in a class action, or group suit, in 2005.
The case is Westgate Ford Truck Sales Inc. v. Ford Motor Co., CV 02-483526, Court of Common Pleas, Cuyahoga County, Ohio (Cleveland). The appellate case is Westgate Ford Truck Sales Inc. v. Ford Motor Co., 2012-Ohio-1942, Court of Appeals of Ohio, Eighth Appellate District, County of Cuyahoga (Cleveland).