A Maryland dealership that offered a customer full reimbursement of damages in a service contract dispute is still subject to class-action claims by the customer and other consumers, the state's highest court has ruled.
In addition, the store's tender of individual compensatory damages doesn't prevent a demand for punitive damages, the majority held in a suit against Castle Ford Ltd. in Silver Spring.
The decision returns the case to a lower court to decide whether to approve a class, allow punitive damages and potentially go to trial.
Castle Ford is out of business, according to its lawyer, Douglas Biser of Towson. But plaintiff's lawyer Leslie Gladstone of Baltimore says discovery is needed to determine whether the company has any assets or insurance coverage.
In 2004, Anthony Frazier bought a $1,700 Ford Premium Care Extended Service Plan for his 2003 Explorer, which had almost 36,000 miles. A Castle finance employee misinformed him that it would cover 48 months from the purchase date or 100,000 miles.
In reality, the 48-month period was calculated from the build date, meaning it expired more than two years earlier than Frazier had believed. He discovered the discrepancy when another Ford dealership informed him that repairs were no longer covered.
Frazier's suit for unfair trade practices and fraud also alleges that the dealership employee admitted selling other service contracts with the same discrepancy.
After litigation began, the dealership paid to extend Frazier's service contract through the fourth anniversary of its purchase and sent a $408 check, after subtracting a $100 deductible, for repair costs he incurred. Frazier didn't cash the check.
His lawyer, Gladstone, also helped other customers receive compensation, and Biser says the dealership rewrote all the affected service contracts and paid the cost of extending them.
A lower-court judge dismissed class-action and punitive damage claims because Castle had tendered full compensation but awarded $20,950 in attorney fees for Gladstone's work for Frazier and other members of the potential class.
However, the Court of Appeals ruled that the dealership couldn't "abort a class action prior to class certification by tendering individual damages to the plaintiff who initiates the case."
Appeals Judge Robert McDonald said that would let a defendant kill a "meritorious class action by picking off" the lead plaintiff.
Gladstone says the most important part of the decision is that a defendant can't "pick off a plaintiff like that and throw money to him" to avert class-action litigation.