Chicago Automobile Trade Association

Money-back guarantee lawsuit bankrupts Kansas City dealership

November 17, 2010
Creditors list 1,758 pages long

A Kansas City dealer filed for Chapter 7 bankruptcy this month after a "100 percent money-back guarantee" the dealership offered on vehicle service contracts led to a $7.8 million verdict in a class-action lawsuit.

The named plaintiffs, Keith and Deborah Shackelford, bought a 1995 Honda Accord from John Chezik Honda in 1999. They also bought a 3-year, 36,000-mile service contract for $1,335, which Chezik representatives said would be refunded in full if no claims were made on it.

The Shackelfords said they made no claims against the contract. But when they returned to the dealership in 2002 to request their refund, they alleged they were told the money-back guarantee applied only if the contract owner bought an additional vehicle from Chezik.

The dealership eventually offered to refund the Shackelfords’ money after talks with their lawyers, but refused to pay legal fees and other costs, prompting them to sue.

The Chezik dealerships have been sold, so no active franchises or their assets are involved. But Chezik’s remaining corporate entity was forced to seek bankruptcy as the only option against a list of creditors reported to be 1,758 pages long.

The suit’s class consisted of 1,186 customers who bought contracts from Jan. 1, 1997 to Dec. 22, 2003. Jurors initially awarded $8.4 million, but Missouri law adjusted the amount given for punitive damages.

Chezik’s attorney, Robert Jester, said the legal system failed the 25-year-old dealership. Jester also blamed the auto industry’s reliance on commission-based paychecks, which he said encourages salespeople to do "things that are not in the corporation’s best interest to generate income."

 

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