Evidence — continued from Page 34 A Structured
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purposes of applying the state lemon laws. In addition, when customers asked Ford to buy back their vehicles as lemons, Ford would instead offer them “owner appreci- ate certificates” (“OACs”) that acted as credits on trade-ins for new Ford vehicles. This not only avoided having to brand the repurchased vehicles as “lemons,” but also saved Ford thousands of dollars for each transaction. Plaintiffs presented further evidence that Ford’s San Francisco and Los Angeles offices issued about 1,200 to 1,400 OAC’s per year in the year of trial and the previous year (2000 and 2001). The average face amount of OAC’s issued over the four previous years was between $2,700 and $3,200. Finally, testimony was given to the effect that the cost of reac- quiring a vehicle as a lemon (i.e., the cost of repurchasing or replacing the vehicle less its resale or salvage value) was between $8,500 and $13,500, depending on the year and the method of reacquisi- tion (refund or replacement). Based on this evidence, the plaintiffs’
attorney argued to the jury that Ford saved $6,000 to $10,000 on each OAC for a vehicle that would otherwise have had to be reac- quired, and that approximately 1,000 such OAC’s were issued per year to California customers (excluding some issued out of California offices to customers in other states). Counsel estimated Ford’s savings in California from “this whole scheme of owner appreciation certificates” – that is, the practice of issuing OAC’s for vehicles that
should have been reacquired as lemons, and of failing to provide warranty buyback notices on all vehicles traded in with OAC’s, thus concealing the vehicles’ defects from subsequent buyers – to be $6 to $10 million per year for 2000 and 2001. He urged the jury, in order to deter Ford from continuing that conduct, to impose punitive damages in an amount that would, at least, take from Ford all those wrongful profits. The jury found in plaintiffs’ favor
and awarded them $17,811.60 in compen- satory damages, and $10 million in puni- tive damages. The Court of Appeal, hold- ing Ford could constitutionally be pun- ished only for its fraud on plaintiffs and not for its overall course of conduct, reduced the punitive damages award to $53,435, approximately three times the compensatory damages. The Supreme Court reversed. The
Supreme Court’s decision was based on its holding that, although the Court of Appeal correctly rejected the aggregate disgorgement approach (because, among other things, it created an end-around the requirements of the class-action device by awarding damages based on profits earned from transactions with a large class of similar claimants without ever hav- ing to prove the specifics of those “hypo- thetical claims”), it did not properly con- sider the evidence of Ford’s policies and practices, and their scale and profitability, in analyzing the reprehensibility of Ford’s
See Evidence, Page 38
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