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Lithia Toyota in Medford, Ore., must pay $100,000 in punitive damages for "egregious" behavior that included intimidation, trickery and deceit in a debt collection case stemming from the sale of a used 1993 Toyota 4Runner, a divided state Court of Appeals has ruled.
A jury awarded the vehicle buyer only $500 in actual damage. But in light of the store's actions, its $100,000 punitive damage verdict wasn't excessive, the court held in a 5-4 decision. The dissenters approved only $25,000 in punitive damages.
A lawyer for the dealership, Matthew Sutton of Medford, said his client disagrees with the decision and is considering an appeal.
Shawn Yovan, a former used-car salesman, bought the 4Runner in 2000 for $13,799, and a third-party lender acquired the sales contract, according to the court. His credit application claimed a higher-than-actual income, itemized accessories the car didn't have and misstated the actual mileage by about 25,500 miles. The store was unaware of the odometer rollback at the time of sale.
After failing to resolve a dispute with Yovan over the 4Runner's reduced value, the store demanded that he either pay the loan balance minus $1,000 or surrender the vehicle in exchange for return of the trade-in and deposit.
'Grand theft auto'
A store manager tried intimidating Yovan to return the 4Runner and became aggressive, threatening criminal charges for "grand theft auto," according to the decision. Store employees then lied to the collection manager of the store's parent company when asking that the vehicle be repossessed for nonpayment while knowing the contract had been assigned.
Yovan explained to the repo agent that the first payment wasn't yet due and that the contract had been assigned, but the agent threatened to call the police for obstruction of justice.
Lithia Toyota repurchased the contract from the lender and offered to cut the purchase price by $1,000 and pay Yovan $500. When Yovan rejected the offer, he was sued by Lithia Motors Inc., the store's parent company, in 2001 to rescind the contract, and he filed a counterclaim.
During the protracted litigation, Lithia Toyota provided misleading documents to Yovan's lawyer and falsely claimed that the lender had rescinded the sales contract, the court said.
A jury awarded Yovan $500 for emotional harm and $100,000 in punitive damages. But the trial judge reduced punitive damages to $2,000, a ruling upheld on initial appellate review.
In its new review, however, the Court of Appeals narrowly voted to uphold the $100,000 award, saying, "The jury's punitive damages verdict comports with due process and should be reinstated.
"The jury could have concluded that Lithia, having been caught after misrepresenting the value of the 4Runner, intimidated Yovan to get it back so that it could recover the full amount it had paid for the car from the seller, rather than having to risk a loss on the car as a result of the sale," the majority said in an opinion by Judge Lynn Nakamoto.
"The jury also understood that Yovan had limited financial resources and limited ability to obtain financing to buy a car," the opinion said. "Lithia knew that he was financially vulnerable. Lithia knew, at the very least from the exorbitant interest rate, if not from a credit report, that he qualified only for a very low-end kind of loan."
'A serious sanction'
The court said Oregon's debt collection law makes it illegal to threaten arrest or criminal prosecution or to threaten seizure of collateral without disclosing the need for a court order. It also emphasized the store's misconduct, including overstatement of the value of the vehicle and "repeated use of trickery or deceit."
In addition, it noted the dealership's "arrogant presentation to the jury of its position that it had done nothing wrong."
Calling $100,000 "a serious sanction," the court said it could discourage Lithia Toyota and others "from engaging in such conduct in the future."
The four dissenters voted to approve $25,000 in punitive damages, the maximum allowed by Oregon law as a civil penalty for unlawful trade practices.
Yovan's lawyer has not responded to requests for comment.