Salesman's Experience Motivates Jury

August 2006, Auto Dealer Today - WebXclusive

by Thomas B. Hudson, Esq. - Also by this author

Experience can be a double-edged sword. Usually it’s a good thing to have experienced people at your dealership. But what happens when a court concludes that a salesman’s experience should have alerted him to the fact that the car he’s trying to sell had suffered extensive previous damage? Let’s take a look at such a case.

Stuart Cohen bought a Suzuki Sidekick from Quality Cars and Credit, Inc. Cohen later sued the dealership and its salesman, William Hodson, under the Missouri Merchandising Practices Act.

Cohen alleged that Hodson knew but failed to disclose that the Sidekick had been extensively damaged in an accident and had been improperly rebuilt. After a jury trial, the trial court awarded Cohen actual damages of $8,775 and punitive damages of $25,000 against the dealership, and actual damages of $8,775 and punitive damages of $1,000 against Hodson.
The dealership appealed. It argued that punitive damages should not have been awarded in the absence of evidence that Hodson knew that the car had been damaged and rebuilt and acted with reckless indifference or evil motivation, that the amount of the punitive damages award against the dealership should not be greater than the amount awarded against Hodson, and that the decision to award punitive damages should not have been made by the jury.

The Missouri Court of Appeals ruled in favor of Cohen. The appellate court rejected the dealership’s first argument based on Hodson’s own testimony. The appellate court concluded that Hodson knew of the damage because he testified at trial that he had worked in the auto sales business for many years and was able to detect the signs indicating that a vehicle had been damaged and improperly rebuilt. The appellate court concluded that it was reasonable for the jury to infer that Hodson’s nondisclosure was done with reckless difference or was evil, motivated solely by his desire to make the sale.

The appellate court rejected the dealership’s second argument because of the dealership’s conduct after the sale. When Cohen discovered the car’s defects, he returned to the dealership, only to be rebuffed and thrown off the lot by the sales manager. The appellate court ruled that the jury was free to consider this conduct when assessing punitive damages. Given these facts, the jury assessed a higher degree of culpability to the dealership than to Hodson.

Because the dealership failed to object to the trial judge’s instruction to the jury on punitive damages, the appellate court ruled that the dealer failed to properly preserve the error for appellate review. Thus, the court declined to address the jury instruction.

It is important to note that there is no mention in the court’s opinion that Hodson or the dealership had actual knowledge of the vehicle’s repair history (we’ll leave it up to you to draw your conclusions as to whether there was actual knowledge or not). The court found that it was reasonable to conclude that Hodson knew of the prior damage and repair solely because he was experienced! Scary.

And also note the cost of not responding properly to a customer’s complaint. While it is possible that the customer’s behavior might have justified him being “rebuffed and thrown off the lot,” there’s nothing in the court’s opinion to indicate that was the case. This case is worth pointing out to your employees as an example of the potential cost of treating customers in anything but the most businesslike and polite manner. If our arithmetic is correct, this dealer paid over $40,000 for his lesson in being nice to folks.

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