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Ford Overcharged Truck Dealers, Jury Told at End of Trial

Sept. 10 (Bloomberg) -- Ford Motor Co. broke pricing contracts and overcharged commercial truck dealers for years, a lawyer said at the end of the retrial of a case that previously resulted in a $2 billion judgment against the carmaker.

Ford offered secret discounts to some dealers even though obligated by sales and services agreements to publish all prices, James Lowe, a lawyer for the dealers, said in his closing arguments in state court in Cleveland. Dealers excluded from discounts wound up paying more for vehicles, hurting their profits, he said.

“If you promise a published price to the dealer, then you have to give the dealer a published price,” Lowe told the jury. The published price is “the only protection” that a dealer is “playing on a level playing field,” he said.

Lowe asked the Cleveland jury to award $784.7 million in damages. “You are on the cusp of history here,” he told the jury.

Plaintiffs will be owed interest on any award if they win, Lowe said in an interview before trial. The jury began deliberating today.

The dealers sued Dearborn, Michigan-based Ford in 2002, claiming the company broke an agreement to sell trucks at published prices, forcing them to pay more from 1987 to 1998.

In the first trial on the claim, Cuyahoga County Judge Peter J. Corrigan awarded $2 billion, including about $1.2 billion in interest, to a class of about 3,000 dealers in 2011. A state appeals court ordered a new trial last year, finding Corrigan improperly excluded evidence that might have helped the company.

Ford’s Stance

Ford denied any breaches or overcharging. The company 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 rejected the request today.

“It’s a standard contract,” he said. “All dealers are subjected to it. Ford treated all the dealers the same.”

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 closing argument today. The contract didn’t bar such discounts, he said.

“CPA was a transaction specific discount” whereby Ford, based on a request from the dealer, made a decision to give up some of the company’s profit margin to make the sale, Feeney told the jury. “CPA was neither a scheme nor an attempt to control dealer profits.”

Company’s Lawyer

The allegation that giving discounts to some dealers through the CPA program violated the contract “is just not accurate,” Feeney said. “Ford’s pricing strategy was to follow its competitors. Isn’t that exactly what you’d expect a manufacturer to do?”

The dealers said the agreement required Ford to publish to all of them all price concessions that were approved for any dealer. Failing to publish discounts given to some meant the others paid more, dealers including the lead plaintiff, Youngstown, Ohio-based Westgate Ford Truck Sales Inc., claimed.

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.

$2 Billion Judgment

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.

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.

The competitive price assistance program, under which dealers would call Ford seeking discounts, allowed the company to control the truck dealers’ profits, said Lowe, their lawyer.

The program was “Ford’s way of just taking the dealers to the cleaners,” he said. “Ford took money out of the dealers’ pockets that belonged to the dealers.”

Westgate’s retired owner, Tom Beule, testified at the start of the trial that he repeatedly told the Ford district manager that the program was unfair. The Westgate contract is being used at trial to judge the dealers’ breach claim.

Price Assistance

Beule knew the competitive price assistance process existed years before he purchased the dealership, Feeney, the Ford lawyer, said today.

‘He knew the way it worked was by Ford reducing its margin,” Feeney said. “He knew every one of those pricing strategies.”

There was never a contractual price guarantee and Westgate Ford profited from the CPA program, he said. “Prior to the time Westgate sued Ford, there was no evidence they disagreed with each other.”

The dealers’ lawyers are misreading the contract between Westgate and Ford, Feeney said today. “There is no obligation in the Westgate Ford contract to publish anything to any other dealer.”

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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