For the second time, the South Carolina Supreme Court has cleared the way for trials on customers' class-action claims that dealerships statewide collected millions of dollars in illegal administrative fees from their customers.
Last month, the court unanimously reaffirmed its April 2010 ruling that the dealerships' contractual ban on arbitration of class-action claims violates the state's public policy.
In their lawsuit, plaintiffs accuse more than 300 dealerships of violating the state's dealer law by improperly charging administrative fees that were excessive, undisclosed or not included in the advertised price of vehicles.
Plaintiffs' lawyer A. Camden Lewis in Columbia, S.C., said the fees ranged from $25 to $850 per vehicle and were itemized along with taxes, licenses and fees. "It was just another little item typed in," he said.
Lewis said some dealerships have discontinued the practice, but others continue to violate the law.
The appeal was led by defendant Century BMW in Greenville, S.C., a Sonic Automotive store. The ruling sets the stage for trials against six other dealerships whose cases were held in abeyance during the appeal.
Claims against the rest of the dealerships were also placed on hold, said Pat Watson, executive vice president of the South Carolina Automobile Dealers Association. Those cases could be tried later.
Plaintiff Michael Watts and his daughter bought a used 2004 BMW Z4 from Century BMW in 2005. The documents they signed included an arbitration agreement waiving the right to file or participate in class-action claims.
The defendants sought dismissal of the suit based on the arbitration agreements. But a Circuit Court judge found the Watts' arbitration agreement to be unconscionable, oppressive and one-sided.
The Supreme Court initially upheld such agreements, except for their prohibition on participation in class actions. That ban, it ruled, conflicts with the consumer protection public policy of the state dealers' law that allows class-action claims.
Sonic asked the U.S. Supreme Court to review whether the Federal Arbitration Act pre-empts, or supersedes, state laws prohibiting class-action arbitration.
The U.S. Supreme Court, in turn, sent the case back to the South Carolina Supreme Court for reconsideration.
In the latest opinion written by Justice John Kittredge, the state Supreme Court said Century BMW had failed to raise the federal pre-emption issue on time. And because the question of whether the federal arbitration law trumps South Carolina's legislative policy wasn't raised in the Circuit Court or in the previous state Supreme Court proceedings, it's too late, Kittredge said.
The pre-emption question still could come up in future lawsuits.
Lewis, the plaintiffs' lawyer, said there will be separate trials for claims against each dealership, with the first expected to begin in May.
The six South Carolina dealerships whose cases were held in abeyance during the appeal are Dick Dyer & Associates Inc., a Mercedes-Benz store in Columbia; Galeana Chrysler-Plymouth Inc., aka Galeana Chrysler-Jeep Inc., of Columbia; J.L.H. Investments, aka Hendrick Honda, in Easley; Overland Inc., dba Land Rover of Columbia, in Columbia; Taylor Toyota, aka Taylor Investments, in North Augusta; and Toyota of Greenville Inc., in Greenville.
Defense lawyers did not return calls seeking comment.
Issue: Did South Carolina dealers wrongfully collect ‘administrative fees' from customers?
Where it stands: State Supreme Court lets customers' claims go to trial, not arbitration