Prafull Koli
05-23-2003, 03:05 PM
Lawsuit vs. car dealer is ruled class-action
By Linda A. Moore
moore@gomemphis.com
May 23, 2003
A Shelby County chancellor authorized a class-action lawsuit against Covington Pike Toyota and its owner, UnitedAuto Group, on Thursday that could include as many as 40,000 plaintiffs.
Chancellor Walter L. Evans granted the class-action status in a case over a practice called dealer reserve, which adds, without the consumer's knowledge, additional percentage points to the interest rate for cars financed through the dealership.
Memphian Lori James, 31, who filed the lawsuit, claims she didn't know the interest rate she was being charged included a dealer reserve and that thousands of consumers were also misled.
"It's wrong," she said. "People shouldn't have to know the law to go buy a car."
She also claims the practice violates the Tennessee Consumer Protection Act.
The class, which can be modified, now includes all customers of Covington Pike Toyota since July 1, 1998, for whom the dealership arranged financing and added the dealer reserve without telling them.
Attorneys for UAG and Covington Pike Toyota declined comment on the ruling, but said in court they would file an appeal.
The dealership and UAG argued in a hearing on the class-action status that the lenders' rate, or buy rate, is the wholesale cost of money and that car dealers do not have to divulge their profits for providing financing.
"Like every other retailer in this country, . . . we are free to establish our prices, and our customers are similarly free to accept or reject those prices, without us having to disclose our wholesale costs," Covington Pike spokesman Kent Ritchey said in a prepared statement.
The dealer also has said that its practices comply with federal truth-in-lending laws.
The Tennessee Automotive Association, a dealership group, took issue with Evans's ruling.
"We respectfully disagree with the decision of the Chancellor to grant class certification," TAA said in a statement. "Due to the highly individualized and personalized nature of these types of consumer transactions, we believe these matters lack commonality to form the basis for a class action."
James Andrews, lead attorney for James, said the ultimate size of the class is not known, but, "we're thinking in the neighborhood of 20,000 to 40,000 people."
According to testimony in the class-action hearing, Covington Pike Toyota makes between $500,000 and $1 million a month from its finance office.
And although the dealership claims those figures are high, it also says that all dealers include some sort of dealer reserve or commission when they arrange financing.
A finding for James would set a precedent for lawsuits against other dealerships, said Nichole Bass, one of James's attorneys.
Based in Bloomfield Hills, Mich., UAG also operates Covington Pike Dodge in Memphis, Landers Ford in Collierville and Landers Dodge in Southaven.
By Linda A. Moore
moore@gomemphis.com
May 23, 2003
A Shelby County chancellor authorized a class-action lawsuit against Covington Pike Toyota and its owner, UnitedAuto Group, on Thursday that could include as many as 40,000 plaintiffs.
Chancellor Walter L. Evans granted the class-action status in a case over a practice called dealer reserve, which adds, without the consumer's knowledge, additional percentage points to the interest rate for cars financed through the dealership.
Memphian Lori James, 31, who filed the lawsuit, claims she didn't know the interest rate she was being charged included a dealer reserve and that thousands of consumers were also misled.
"It's wrong," she said. "People shouldn't have to know the law to go buy a car."
She also claims the practice violates the Tennessee Consumer Protection Act.
The class, which can be modified, now includes all customers of Covington Pike Toyota since July 1, 1998, for whom the dealership arranged financing and added the dealer reserve without telling them.
Attorneys for UAG and Covington Pike Toyota declined comment on the ruling, but said in court they would file an appeal.
The dealership and UAG argued in a hearing on the class-action status that the lenders' rate, or buy rate, is the wholesale cost of money and that car dealers do not have to divulge their profits for providing financing.
"Like every other retailer in this country, . . . we are free to establish our prices, and our customers are similarly free to accept or reject those prices, without us having to disclose our wholesale costs," Covington Pike spokesman Kent Ritchey said in a prepared statement.
The dealer also has said that its practices comply with federal truth-in-lending laws.
The Tennessee Automotive Association, a dealership group, took issue with Evans's ruling.
"We respectfully disagree with the decision of the Chancellor to grant class certification," TAA said in a statement. "Due to the highly individualized and personalized nature of these types of consumer transactions, we believe these matters lack commonality to form the basis for a class action."
James Andrews, lead attorney for James, said the ultimate size of the class is not known, but, "we're thinking in the neighborhood of 20,000 to 40,000 people."
According to testimony in the class-action hearing, Covington Pike Toyota makes between $500,000 and $1 million a month from its finance office.
And although the dealership claims those figures are high, it also says that all dealers include some sort of dealer reserve or commission when they arrange financing.
A finding for James would set a precedent for lawsuits against other dealerships, said Nichole Bass, one of James's attorneys.
Based in Bloomfield Hills, Mich., UAG also operates Covington Pike Dodge in Memphis, Landers Ford in Collierville and Landers Dodge in Southaven.