Twelve Indiana auto dealership groups this summer agreed to collectively pay about $13.5 million to settle allegations they charged illegal document fees to an estimated 169,375 consumers.
The deal reached in Benosky v. Butler Motors, the consolidated case for 14 class-action lawsuits against Indiana dealerships, comes after the Indiana Supreme Court in March refused the dealerships’ request to dismiss the case. The Indiana Court of Appeals in November 2021 had agreed with Marion County Superior Court Judge Heather Welch that the consumers’ lawsuit could proceed.
The settling defendants—Butler Motors Inc.; D-Patrick Inc.; Dorsett Auto Sales Inc.; Ed Martin 236 Inc.; Terry Lee Companies Inc.; Bill Estes Automotive Holdings Inc.; Twin City Dodge Inc.; Andy Mohr Automotive Group Inc.; Circle Buick-GMC Inc.; Beck Automotive Group Inc., Lockhart Automotive Group Inc. and Rohr Indy Motors Inc.—admitted no wrongdoing in the settlement. They said they made the decision “solely to compromise and settle the claims … and to avoid the expense and uncertainty of continued litigation.”
Two cases involving the Hubler Automotive Group were also part of the appellate court decision. Neither was addressed in the settlement, and that litigation remains open.
Rohr Indy parent Rohrman Automotive Group, of Layfayette, Ind., ranks No. 47 on Automotive News‘ list of the top 150 dealership groups based in the U.S., with retail sales of 20,024 new vehicles in 2021.
The decision and settlement are reminders that Indiana retailers could still face exposure to litigation over document fee practices despite a 2019 Indiana law defining fees of $200 or less as fair if certain conditions were met. The fees from the dealerships in the Benosky case all were less than $200, and the defendants had unsuccessfully argued all fees of $200 or less were legal.
The consolidated cases collectively involved document fees charged between 2013 and 2020. The class-action settlement covers plaintiffs charged document fees as far back as April 4, 2017, and as recently as March 31, 2022. The end date of the settlement period is fixed; the start date depends on when the respective dealership was sued in 2019 or 2020.
Defendant attorney Donn Wray of Stoll Keenon Ogden LLC, said none of the dealerships was charging above the guidance provided by the Indiana Attorney General’s Office. But the plaintiffs’ attorneys “made hay of it,” he said. Wray represented Circle Buick-GMC, Beck Automotive Group and Lockhart Automotive Group, though he said he was offering his individual opinion rather than speaking for those clients.
Indiana state Sen. Aaron Freeman in 2019 told the television station WRTV a “gentleman’s agreement” had existed between dealers in the state and the Indiana Attorney General’s Office. As long as dealerships kept document fees under $200, the attorney general wouldn’t investigate, Freeman told the station.
Welch’s lower court opinion also noted a dealership association had told the defendants and other members about the existence of such an agreement.
Emails to attorneys for the other nine settling dealer groups Monday have not yet been returned, nor have Tuesday emails to the Hubler group’s counsel.
Document fees in Indiana between July 2013 and May 2019 were governed by state law holding that such charges were unfair unless they reflected dealership expenses, were disclosed and had been negotiated by the dealer and customer.
But a 2019 Indiana Court of Appeals ruling in Sanders v. Gasbi determined a violation of the document fee law could count as a violation of the state’s Deceptive Consumer Sales Act — which meant buyers could sue dealerships over the fees even though the fee law lacked the recourse of a private right of action.
The Legislature proceeded to rewrite the document fee law to declare fees of $200 or less were fair as long as they were part of the advertised vehicle sale price, disclosed in writing during negotiations and on a bill of sale or purchase contract. The $200 figure could be adjusted for inflation.
That 2019 document fee amendment also contained a provision making the law retroactive to 2013. The Indiana Court of Appeals in 2021 noted this could pose a question of constitutionality, but the judges didn’t rule on that topic and the issue ended up being moot.
In a 3-0 decision, the appellate judges agreed with Marion County Superior Court Judge Heather Welch’s determination that customers could sue dealerships over document fees, even after the dealer-friendly 2019 law.
Both courts rejected the dealerships’ argument that any document fee of $200 or less was permitted.
“While the plain language of the 2019 Doc Fee Amendment provides that the charging of Doc Fee ‘in excess’ of $200 is ‘an unfair practice’ by a dealer, the amended statute contains no language expressly permitting Dealers to charge Doc Fees of $200 or less,” the appellate court opinion by Judge Rudolph Pyle III states.
Pyle noted the amended 2019 law still set conditions on $200 document fees.
“Specifically, the amended statute requires that a dealer’s Doc Fee must be included in the advertised sale price of a vehicle and be affirmatively disclosed in writing by the dealer during negotiations and as a separate line item on the purchase contract,” he wrote.
The appellate court also agreed consumers could pursue a deceptive sales case against dealerships for acts outside of the two-year statute of limitations window if concealment was alleged.
Pyle said the plaintiffs had “alleged that Dealers had violated the DCSA in various ways, including by affirmatively misrepresenting the Doc Fee as a fee incurred by the Dealers for preparation of documents, failing to negotiate the fees, and failing to include fees in the advertised price.”
This was a sufficient enough concealment allegation for the case to survive a motion to dismiss, Pyle and the other appellate judges found.
Dealerships also had tried to shut down the consumers’ common-law allegations of unjust enrichment and constructive fraud with a similar argument to the Gasbi case: The revised 2019 document fee law contained no permission to sue retailers for those actions.
But lawmakers didn’t specifically define violations of the 2019 doc fee law as behavior outside the scope of common-law litigation, Pyle and the other appellate judges ruled. Consumers could use allegations of those violations to sue dealerships on common law grounds, they said.