Bloomberg News

Ford Didn’t Breach Truck Dealer Contracts, Ohio Jury Says (1)

September 11, 2013

Ford Motor Co. (F:US) didn’t breach pricing contracts with commercial truck dealers, a Cleveland jury found in the retrial of a case that previously resulted in a $2 billion judgment against the automaker.

The plaintiffs claimed Ford offered secret discounts to some dealers even though it was obligated by sales and service agreements to publish all prices. The suing dealers said those excluded from discounts wound up paying more for vehicles, hurting their profits (F:US).

Ford denied committing any breaches or overcharging dealers, contending a program that offered some discounts wasn’t barred by the contract. The state court jury today agreed with Ford.

“The men and women who worked for Ford and who have been involved in this program for three decades have been vindicated,” James Feeney, the company’s trial lawyer, said in an interview after the verdict. “Our view all along is that there was no breach of this contract.”

The dealers asked the jury to award $784.7 million in damages. Plaintiffs also sought interest to be added to any judgment.

The dealers are considering an appeal, James Lowe, their lawyer, said after the verdict. The jury’s decision was “surprising,” he said. “We thought we had persuaded them that Ford had breached the contract.”

‘Published Prices’

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 used a competitive price assistance program, known as CPA, that provided discounts to some individual dealers to help them make sales, Feeney, the company lawyer, said in his closing argument at trial yesterday. The contract didn’t bar such discounts, he said.

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

Dealer Agreement

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

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

Added Interest

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.

Ford asked Corrigan to reverse his 2005 decision allowing the dealers to pursue their claims as a group. Corrigan rejected the request yesterday.

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.

‘Ford’s Way’

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.”

The Westgate contract was used at trial to evaluate the dealers’ breach claim.

There was never a contractual price guarantee, and Westgate Ford profited from the CPA program, Feeney said at trial yesterday.

“Prior to the time Westgate sued Ford, there was no evidence they disagreed with each other.”

The original $2 billion judgment 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 is Westgate Ford Truck Sales Inc. v. Ford Motor Co., CV 02-483526, Court of Common Pleas, Cuyahoga County, Ohio (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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