This case illustrates the point that when it comes to litigation, the first check you get a chance to write is probably for the lowest amount. Here’s what happened.

Mathew Van Eman bought a car with an odometer reading of 125,850 miles. Van Eman also paid $500 for a C.A.R.S. Protection Plus, Inc. Power Train Value Limited Warranty, which was good for three months or 4,500 miles.

The warranty listed the specific parts that it covered. The warranty explicitly stated that items not covered included diagnostic charges and damage that resulted from the failure of a non-covered component.

The car malfunctioned before the expiration of the warranty. North Hill Marathon determined that one of the engine’s lubricated parts had broken and pierced the oil pan, which was a covered part. North Hill Marathon determined that the damage rendered the engine irreparable.

North Hill Marathon reported its conclusion to C.A.R.S., which ordered additional tear down and diagnosis to discover exactly which engine parts had broken. North Hill Marathon conducted further tear down and found that the damage was caused by lack of oil pressure. Lack of oil pressure could have been caused by a faulty oil pump, an obstructed oil channel or Van Eman’s failure to put oil into the car.

In North Hill Marathon’s experience, a lack of oil pressure was usually caused by a faulty oil pump, a covered part. North Hill Marathon also reasoned that the low oil pressure was not likely caused by Van Eman’s negligence because Van Eman owned the vehicle for only three months and the oil should not have receded to a damaging low level within that time.

North Hill Marathon reported its findings to C.A.R.S., which ordered North Hill Marathon to disassemble the entire engine to find out exactly what caused the damage. The estimated cost to disassemble the engine was $1,500. Van Eman believed that C.A.R.S. had no intention of honoring the limited warranty and would continue to demand additional tear down and diagnosis until the warranty was rendered valueless.

Van Eman paid North Hill Marathon $478 for the diagnosis and had the car towed to another facility that repaired the engine for $4,047. Van Eman then sued C.A.R.S. under the Michigan Consumer Protection Act (MCPA).

The trial court awarded Van Eman damages in the amount of $4,047 and $43,538 in attorneys’ fees. C.A.R.S. appealed to the Michigan Court of Appeals, arguing that the trial judge erred in denying C.A.R.S.’ motion for summary disposition, erred in denying C.A.R.S.’ motion for directed verdict, abused its discretion in issuing a permanent injunction, erred in instructing the jury, impugned judicial impartiality, and abused its discretion in the award of attorneys’ fees. The appellate court rejected all of C.A.R.S.’ claims. The appellate court reviewed the record and found that the trial court properly denied C.A.R.S.’ summary disposition and motion for directed verdict because of the existence of genuine issues of material fact. The appellate court found that a grant of injunctive relief was not an abuse of discretion because Van Eman introduced evidence that C.A.R.S. had a pattern of violating the MCPA and that a real and imminent danger of irreparable injury existed to support the grant of injunctive relief.

Before denying C.A.R.S.’ claim that the trial court erred in instructing the jury, the appellate court read the jury instructions as a whole. The appellate court found that although there were some imperfections, C.A.R.S. had not established plain error regarding the jury instructions.

The appellate court also found that the trial court had not impugned judicial impartiality and had not unduly influenced the jury. Finally, the appellate court found that the trial court had not abused its discretion in the award of attorneys’ fees because the amount awarded was within the range of reasonable attorneys’ fees as opined by C.A.R.S.’ expert witness.

To make matters worse, the appellate court remanded the case for an award of Van Eman’s appellate attorneys’ fees

So, on day one, C.A.R.S. could have stroked a $4,047 check for the reworked engine, but decided on a different course. It ended up paying the $4,047 anyway, along $43,538 for the customer’s legal fees through the trial stage, an unspecified additional amount for the customer’s legal fees in connection with the appeal, plus the fees of its own lawyers for the trial and appeal. Assuming that C.A.R.S.’ lawyers fees were as much as the customer’s through trial and assuming that both parties spent $10,000 on their lawyers for the appeal, C.A.R.S.’ ultimate tab probably topped $100,000.

Van Eman v. C.A.R.S. Protection Plus, Inc., 2007 WL 1491814 (Mich. App. May 22, 2007)

Vol 5, Issue 8