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Ford Didn’t Break Truck Dealer Contract, Jury Is Told

Aug. 26 (Bloomberg) -- Ford Motor Co. didn’t break pricing contracts with commercial truck dealers or overcharge them, a lawyer for Ford said in the retrial of a case that previously resulted in a $2 billion judgment against the carmaker.

Ford used a competitive price assistance program that provided discounts to some individual dealers to help them make sales, James Feeney, a Ford lawyer, said in his opening statement in Ohio state court in Cleveland. The contract didn’t bar such discounts, and all dealers had equal access to the program, he said.

“Discounting was absolutely essential to make sales,” Feeney today told the jury of three men and five women. “The program was fair.”

The dealers sued Dearborn, Michigan-based 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. Cuyahoga County Judge Peter J. Corrigan in 2011 awarded $2 billion, including about $1.2 billion in interest, to a class of about 3,000 dealers.

A state appeals court ordered a new trial last year, finding Corrigan improperly excluded evidence that might have helped the company. The dealers will be seeking $2 billion again, plus more interest, James Lowe, a lawyer for the plaintiffs, said in a pretrial interview.

‘Clear’ Liability

The liability is “pretty clear,” Lowe said. “The contract was breached and if not for that breach the dealers would have gotten lower prices.”

The dealers’ legal team made its opening statement Aug. 23.

Ford has denied any breaches or overcharging. The company has also asked Corrigan, who is conducting the new trial, to reverse his 2005 decision allowing the dealers to pursue the claims as a group.

Corrigan said he will consider Ford’s motion to decertify the class after evidence is presented and before the jury deliberates.

Ford is accused of breaching an agreement with the truck dealers by failing to publish to all of them all price concessions that were approved for any dealer. This cut into their profits, dealers including the lead plaintiff, Youngstown, Ohio-based Westgate Ford Truck Sales Inc., claimed.

“Ford broke a written promise to Westgate and other dealers to sell trucks to dealerships at published prices,” plaintiffs’ lawyer Dennis Mulvihill told the jury in his opening statement. The company promised to “treat all of its dealers equally,” he said.

‘Secret Pricing’

Ford instead engaged in “a secret pricing scheme” that allowed it to take retail profits from dealers, Mulvihill said. “They charged dealers too much money for these trucks.”

There was no secret scheme, Feeney, the Ford lawyer, told the jury today. Ford’s competitive pricing assistance program, or CPA, was designed to aid dealers in making specific sales, he said.

“It’s not shared with other dealers because it’s transaction-specific,” he said.

“Every dealer knew exactly how the program worked,” Feeney said. “There was no secret about how this program worked.”

Westgate used the program and never complained to a Dealer Policy Board that Ford breached the contract, he said. Westgate’s first claim of breach of contract came when the lawsuit was filed, he said.

Westgate Owner

Westgate’s retired owner testified today he repeatedly told the Ford district manager that the program was unfair.

“On numerous occasions, I talked to the district manager about how cumbersome it was and how difficult it was,” Tom Beule testified today.

Under the CPA program Ford introduced in the early 1980’s, the dealership had to call Ford and ask for additional discounts, he said. The dealer had to disclose its retail price to Ford, and the amount of the discount depended on the dealer’s profit, Beule said.

Corrigan let dealers pursue claims against Ford on behalf of a class in 2005, a decision upheld on appeal. The class includes Ford dealers who bought from the company any 600 series or higher truck over about 11 years starting in 1987.

The first trial was on the claims by one dealer, Westgate. The judge found Ford liable before trial for breach of contract, and a Cleveland jury in February 2011 awarded $4.5 million in damages to Westgate.

Reaching $2 Billion

Four months later, Corrigan added $6.65 million in interest to the Westgate award and applied the damages finding to the rest of the class, entering the $2 billion judgment.

“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 upholding the jury award to Westgate. “As to all class members, it is undisputed that the franchise agreements were identical in all material aspects.”

Ford contended on appeal that the judge improperly found Ford liable before trial and prevented the company from defending itself on damages.

The Cleveland-based appeals court found that the contract was ambiguous and Corrigan shouldn’t have decided the issue before trial. It also questioned whether the evidence could support allowing the plaintiffs to pursue class-action claims.

“Once the trial court admits the previously excluded evidence, it will need to determine whether it can continue to certify the class,” the appellate court said.

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).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Harlan Spector in state court in Cleveland at harspector@yahoo.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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