The South Carolina case began when Hendrick Honda Easley charged Julie Freeman a $299 "closing" or "procurement" fee when she bought a used vehicle in July 2006.
Freeman's suit on behalf of more than 5,300 other customers who bought vehicles during a four-year period went to trial in Pickens County, where a jury awarded $1,445,786 in damages. The trial judge doubled that amount under the state's Dealers Act.
On appeal, the dealership argued unsuccessfully that it relied in good faith on its registration of the fee with the South Carolina Department of Consumer Affairs.
That's not enough, the state Supreme Court said, pointing out that the department doesn't determine the amount of document fees or review a store's financial records to assess how the store calculated that amount.
In the majority opinion, Justice Donald Beatty cited testimony by the dealership's general manager that "he didn't sit there and do the math" to determine each customer's specific closing expenses and that he was unsure about his store's actual costs to retrieve and prepare documents.
Wrote Beatty: "While we recognize the difficulty a dealer may face in determining the exact amount of a specific purchaser's closing fee prior to closing, we agree with the trial judge's interpretation that the amount charged must bear some relation to the actual expenses incurred for the closing."
The dissenting South Carolina Supreme Court justices voted to overturn the award, saying the dealership hadn't violated the closing fee law. They also said the state's Department of Consumer Affairs gave dealerships "little guidance in determining what costs may or not be included in a closing fee."
In addition, the dissenters said, it's impossible to predetermine the actual closing costs for a specific transaction.
A lawyer for Hendrick Honda Easley referred a request for comments to the dealership's public relations person, who didn't respond to the Automotive News inquiry. A lawyer for the plaintiff didn't return phone messages.