A federal appeals court in St. Louis has upheld a $210,000 punitive damage award against two dealerships and three employees for fraudulently concealing damage to a used 1984 GMC Jimmy.
The 8th U.S. Circuit Court of Appeals rejected defense arguments that the punitive damages were excessive in light of an award of only $7,835 in compensatory damages. It also said the customer is entitled to attorney fees.
The decision has wide implications for consumers who are defrauded when they buy rebuilt vehicles, according to the plaintiff's lawyer, Bernard Brown of Kansas City, Mo.
According to the appeals court, Blue Springs Ford Sales Inc. in Blue Springs, Mo., took the Jimmy in trade in 1993. Its used-car manager offered it to the business manager of Blue Springs Ford Wholesale Outlet Inc., a used-car lot handling older vehicles. At the time, there was one-third overlapping ownership of the two corporations, according to their lawyer, Lawrence Swain of Kansas City.
Vicki Grabinski bought the Jimmy from the used-car dealership after a salesman told her it was in 'A-1 condition,' had never been wrecked, had had only one owner and ran perfectly, according to trial testimony.
After she obtained financing and returned to close the deal, she contends the dealership's employees insisted she sign a so-called 'tow-away affidavit' acknowledging that the vehicle had not been state inspected, was considered mechanically unsafe and was being purchased to be rebuilt, salvaged or junked. She refused to sign until employees persuaded her that 'use of the affidavit was universal' for used vehicles in Missouri and that the Jimmy 'was not a piece of junk,' the court said.
A week later, the engine began overheating and Grabinski discovered the heads were cracked. Even after repairs, problems remained, including lack of power and swaying. She then learned the Jimmy had been salvaged after a rollover, the court said. The dealership then offered to repurchase it, but only at a substantially reduced price.
Grabinski sued in U.S. District Court in St. Louis, alleging fraud and consumer-protection law violations based on the misrepresentations about the sport-utility's history and condition.
A jury awarded Grabinski compensatory and punitive damages.
In a prior review of the case, the 8th Circuit had affirmed the amount of compensatory damages but ordered the trial judge to review the amount of punitive damages. In the latest ruling released Feb. 16, the appeals court said punitive damages were justified and refused to reduce the amount.
'We conclude that the defendants' conduct was egregious and that it demonstrated a clear and disturbing disregard for Grabinski's safety and her economic interests,' the court said.
It also ordered the trial judge to award Grabinski attorney fees. The trial judge previously had denied her request because of the 'generous' punitive damages.
Swain, the dealerships' attorney, said his clients have not decided whether to appeal further.
Eric Freedman can be reached at [email protected]