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Wednesday, April 3, 2013

Western District Court of Appeals Affirms $500,000 Punitive Damages Verdict against Chad Franklin and CFS Enterprises, Inc.

On March 19, 2013, the Missouri Court of Appeals for the Western District affirmed a $500,000 punitive damages award against Chad Franklin and his dealership, CFS Enterprises, Inc. despite actual damages of only $2,144.87 being awarded in the case. The Respondents, David and Diana Heckadon, purchased two vehicles from Chad Franklin’s dealership, CFS Enterprises, Inc., as part of a promotional program. Upon learning the promotional program was a scam, the Heckadon’s filed suit against CFS Enterprises, Inc. and Franklin for violation of the Missouri Merchandising Practices Act (MMPA).

Noland Law Firm, LLC. represented David and Diane Heckadon who were awarded actual damages of $2,144.87 against both Chad Franklin and CFS Enterprises, Inc. and $100,000 in punitive damages against CFS Enterprises, Inc. and $400,000 in punitive damages against Franklin.

One of the three issues on appeal was the amount of punitive damages awarded to the Respondents. The Appellants argued that the punitive damages awarded were excessive and thus violated Appellants’ due process rights. The United States Supreme Court uses a three factor test to determine whether a punitive damages award is grossly excessive. The second factor of the test looks at the “disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award”. Heckadon v. CFS Enterprises, Inc. and Chad Franklin, WD74288, 14, citing Estate of Overbey v. Chad Franklin Nat’l Auto Sales N., LLC, 361 S.W.3d 364, 372 (Mo. banc 2012).

In this case, the jury awarded a ratio of actual to punitive damages of 47:1 for CFS Enterprises, Inc. and 187:1 for Franklin. The Appellants had argued that Section 510.265 indicates that Missouri law favors a limit on punitive damages of a 5:1 ratio. In response, the Court held that “in the case of small awards, due process does not prevent large ratios if necessary, given particular facts, to impose punishment and deter future misconduct.” Heckadon, at 20.

The Court noted that the Missouri Supreme Court would deviate from the single-digit ratio of actual to punitive damages “where a particularly egregious act has resulted in only a small amount of economic damages.” Id. at 19, citing Estate of Overbey, 361 S.W.3d at 373.

The Court of Appeals affirmed the jury verdict of $500,000 in punitive damages between the two Appellants (CFS Enterprises, Inc. and Franklin), ruling such an award was not a violation of the Appellant’s due process rights. The Court held that the Appellant’s “repeated use of trickery and deceit to sell Suzuki vehicles to financially vulnerable targets such as Respondents constituted reprehensible conduct, the degree of which…was sufficient to justify the amount of punitive damages awarded against Appellants.”

Heckadon v. CFS Enterprises, Inc. and Chad Franklin Opinion.

 

Summary of Heckadon v. CFS Enterprises, Inc. and Chad Franklin.

The Noland Law Firm, LLC. also represented the Estate of Max E. Overbey, and Glenna J. Overbey in a suit against Chad Franklin National Auto Sales North, LLC. that was argued in front of the Missouri Supreme Court in 2011. In Overbey, the Missouri Supreme Court upheld a punitive damage award of $500,000 against Franklin for similar conduct as was discussed in Heckadon, when actual damages were only $4,500, resulting in a 111:1 ratio between actual and punitive damages.


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