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$10 MILLION IN PUNIS AGAINST FORD REVERSED

A jury's $10 million dollar punitive damages award against Ford has been reduced to $175,000 by the Fifth Appellate District Court of Appeal after being determined to be excessive.

In this case, when plaintiffs Greg and Jo Ann Johnson purchased a used Ford Taurus from a Ford dealership, they asked to see the vehicle's repair history. In response to this request, Ford provided the Johnsons with a computer printout indicating that NO significant repairs had been made to the vehicle.

After experiencing continuing transmission problems post-purchase, however, the Johnsons went back to the dealership and again asked to see the car's repair file. This time, the repair file indicated that vehicle's previous owners had experienced repeated and seemingly unrepairable difficulty with the car's transmission system. In fact, after numerous trips to the dealership for these problems, one transmission replacement, and an incident in which the transmission locked in low gear on the freeway, the previous owners requested that Ford repurchase the car as a "lemon."

In response to this repurchase request made by the former owners, Ford's district customer service manager decided that the car did not qualify for mandatory repurchase under California's lemon law and instead issued a $1,500 "owner appreciation certificate" which was applied toward their trade-in of the problematic Taurus for a new pickup truck.

After learning the true history on their used vehicle, the Johnsons sued Ford for intentional and negligent misrepresentation and concealment, and violations of the Song-Beverly Consumer Warranty (Lemon Law) Act (among other things).

The jury apparently agreed with the Johnsons and, in addition to compensatory damages of $17,811 and an attorneys' fees of $379,348, issued a punitive damages award against Ford in the amount of $10 million dollars.

At trial, substantial evidence was presented establishing that not only had Ford concealed material facts from the Johnsons by failing to provide them with a warranty buyback notice, but also Ford's entire customer response program was structured to short-circuit lemon laws and ignore the possibility of non-presumption lemons. Accordingly, the jury wanted to sufficiently punish Ford and deter it from continuing with these business practices.

Ford appealed, and the Court of Appeals, in an unpublished decision on November 25, 2003, found that the $10 million dollars in punitive damages was "constitutionally excessive." Based on this determination, the Appellate Court reduced the punitive damages portion of the award to $53,435 (three times the compensatory damages), after which plaintiffs Johnson petitioned the Supreme Court for review.

The Supreme Court granted plaintiffs' petition and agreed with the Court of Appeals that the punitive damages award of $10 million was excessive and unconstitutional. However, the Supreme Court reversed and remanded on the grounds that it felt the Court of Appeals did not take into consideration evidence concerning the scope and profitability of Ford's "owner appreciation certificate" program in California. The Supreme Court determined the level of reprehensibility established by plaintiffs' proof was not so overwhelming as to support punitive damages "anywhere near" the $10 million dollars awarded by the jury and should be reduced. The Supreme Court found that part of the problem with the $10 million dollar punitive damages award was that it would unjustly punish Ford for these business practices on behalf of all other "non-party" Ford consumers - and did not relate to plaintiffs' $17,811.60 compensatory damages award.

Once remanded to the Appellate Court, the Court of Appeal reduced the punitive damages award to $175,000 - just less than 10 times the compensatory award.

Johnson v. Ford Motor Company - filed December 23, 2005, Fifth District
Cite as 2005 SOS 5800

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Related Attorney(s):
Stephanie Forman

Related Practice Area(s):
Business and Intellectual Property Law