An appeals court in Texas has tossed out a dealership's antitrust and breach-of-contract lawsuit against Ford Motor Co. in a 5-year-old dispute involving alleged fraud in the use of a pricing discount program for truck sales.
The decision vacated an $800,000 award that Metro Ford Truck Sales Inc. of Dallas had won for attorney fees.
At the same time, the Texas Court of Appeals reinstated Ford's counterclaims against the truck dealership and its dealer principal, Daniel Foley Jr., for fraud, breach of contract and racketeering.
James Pikl, a lawyer in McKinney who represents Metro and Foley, has asked the court to reconsider the decision.
Meanwhile, a separate appeals panel in Austin heard arguments Jan. 12 in a challenge to Texas Motor Vehicle Board orders in the same dispute. 'It was a lively argument,' Pikl said.
The conflict centers on Ford's Competitive Price Assistance program.
According to the court, the program was a pricing system that reduced a participating dealership's cost of medium- or heavy-duty trucks based on information the franchisee provided to Ford. The system included different levels of Competitive Price Assistance, starting with a base-level discount that required only the customer's name, vehicle specifications and options.
Additional wholesale price reductions were available under an 'appeal-level CPA' that required dealers to also provide details of the competitive situation concerning each prospective sale.
Ford then analyzed each situation and determined whether to grant an additional amount of Competitive Price Assistance, the court said.
Beyond that, Ford offered standardized allowances for large-volume purchasers without requiring dealers to demonstrate individualized competitive need.
The appeals court said it was undisputed that Metro provided Ford with incorrect customer names to get a higher Competitive Price Assistance on some transactions. However, Metro claimed Ford representatives had advised it on techniques to get the larger allowances and to bypass the regular appeal and review process.
Ford spokeswoman Susan Krusel said a competitor had tipped off the company.
'Ford was made aware of the situation through one of its dealers, who claimed Metro must be receiving greater CPA allotments than other dealers because Metro was selling trucks at lower prices than the competing dealers could sell,' she said. 'Ford conducted a dealership audit at Metro, which confirmed the allegations.'
The appeals court said: 'When Ford discovered Metro's misrepresentations, it threatened to terminate Metro's franchise.
After an audit of Metro's books, Ford sought to charge back $3.1 million of allegedly improperly obtained CPA under a provision of Ford's sales and service agreement with Metro.'
Metro responded by suing Ford in Dallas County District Court.
In part, the lawsuit accused Ford of using the Competitive Price Assistance program to control indirectly the retail price of trucks sold by its dealers; it sought compensatory and punitive damages.
In addition, Metro claimed Ford violated the sales and service agreement in its implementation of the CPA program.
Ford then counterclaimed, asserting that Metro's misrepresentations violated the sales and service agreement, as well as the federal racketeering law.
Metro also filed a protest with the Texas Motor Vehicle Board to contest the proposed termination and chargeback. The board prohibited Ford's proposed chargeback for 317 trucks but dismissed Metro's claim of unreasonable discrimination. It authorized Ford to terminate the franchise if it found a new dealer who would pay Foley fair market value. The board also upheld Ford's refusal to allow Foley to sell to a relative.
Both sides are challenging aspects of the board's order before the appeals panel in Austin. Metro's lawyer, Pikl, said the decision likely will take six months because of the complex issues involved.
In the meantime, the proposed termination and chargeback are on hold, he said.
Ford successfully asked to move Metro's lawsuit from state court to U.S. District Court in Dallas, where a judge rejected the federal antitrust allegations, saying Ford merely set wholesale prices, while leaving Metro to determine the retail price of trucks it sells. The judge returned the rest of the case to state court.
Dallas County District Judge Candace Tyson held Ford liable on Metro's claims for state antitrust violations and breach of contract and threw out Ford's counterclaims against the dealership and Foley.
At trial on the issue of damages, Metro's expert witness testified that Ford's breach of contract had cost Metro more than $4.9 million. However, the jury concluded that Metro had suffered no damages, although it awarded the dealership $800,000 in attorney fees.
The appeals court, in a unanimous Dec. 9 decision by Judge John Roach, said the federal ruling on the antitrust issue precludes Metro from pursuing any antitrust allegations in state court.
And while the three-judge panel upheld the finding that Ford had violated its contract with Metro, it said Metro is not entitled to any damages or attorney fees for breach of contract.
'We conclude the evidence was legally and factually sufficient to support the jury's zero-damage award,' the court said, and attorney fees can't be awarded when a plaintiff wins only nominal damages.
The Texas Court of Appeals allowed Ford to proceed with fraud, contract and racketeering claims against Metro and Foley.
It also noted that the contract authorized Ford to charge back any improper payments or credits.
Krusel said Ford will try at the new trial to recoup more than $1 million in improperly obtained Competitive Price Assistance funds.
Pikl said if a retrial is held, Metro and Foley will ask the new jury to order Ford to pay damages for breach of contract.