LEGAL FILE

Ex-Suzuki dealer who ran sales scam loses punitive damages fight

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A former Kansas City Suzuki dealer who ran a too-good-to-be-true sales promotion has lost a bid to overturn a jury’s $500,000 punitive damage award to two customers.

The Missouri Court of Appeals upheld the punitive damages against Chad Franklin Suzuki and owner Chad Franklin for their “reprehensible conduct” in the promotional scheme that promised consumers they could buy brand-new Suzukis and trade them in for years at little cost.

But the court halved a $4,290 compensatory damage verdict against Franklin and the Kansas City, Kan., dealership, which closed in August 2008 after what the Missouri attorney general’s office describes as an arson fire.

Defense lawyer Patric Linden of Kansas City, Mo., said his clients are considering a further appeal.

The bogus promotional scheme by Franklin and the dealership has been the subject of multiple lawsuits -- including one brought by Franklin’s brother, Jeremy Franklin, a competing Suzuki dealer in Kansas City, Mo., who claimed the negative publicity over the sales scheme ruined his business -- and more than 400 complaints to the Kansas and Missouri attorneys general.

Linden said several other cases are pending against Chad Franklin and his former stores.

The new decision favored plaintiffs David and Diana Heckadon, who visited the dealership in 2007 after seeing TV ads claiming consumers could buy new vehicles and trade them in for low payments for as long as four years.

The finance manager told the Heckadons that the terms of the loan application for a new Forenza were only a formality. After financing was approved, the dealership gave them a check to cover the difference between their promised $43 monthly payment and the amount on their monthly statement.

When they traded the Forenza for a 2008 SX4 six months later, they filled in a new credit application, which the dealership altered to raise their monthly income by $2,180. They paid $1,112 for a service contract, $540 for a GAP policy and a $500 administrative fee.

After news coverage of the scam, the Heckadons went back to the dealership, but the store refused to take back the vehicle, the suit said. Their lawyer negotiated a deal with the lender, which forgave the loan, and the Heckadons surrendered the SX4.

They sued the dealership, Franklin and American Suzuki Motors Corp. Suzuki settled before trial.

At trial, the defendants put on no witnesses. Franklin, who was called as an adverse witness, pleaded the Fifth Amendment 222 times.

The jury awarded $2,245 compensatory and $400,000 punitive damages against Franklin and $2,245 compensatory and $100,000 punitive damages against the dealership for unlawful merchandizing practices.

In a unanimous decision, the appeals court limited the compensatory amount to $2,245 total because that was the Heckadons’ actual loss and thus the original verdict represented a double recovery.

However, the court rejected the defense effort to lower the award by the amount of Suzuki’s confidential settlement because the defendants offered no evidence on how much Suzuki had paid. Linden said that amount was never disclosed to the defense.

Finally, the panel let stand the full punitive damages, saying that Franklin and the dealership engaged in “reprehensible conduct” and “trickery and deceit” and that Franklin showed no remorse for his behavior.

The promotional program “targeted financially vulnerable individuals,” the court said, including the plaintiffs: The husband was a disabled Navy veteran with multiple sclerosis and the wife had no job.

You can reach Eric Freedman at freedma5@msu.edu.

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