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You've Been Sued, Now What?

No matter how long you've been in business, sooner or later your dealership will likely be sued.

No matter how long you've been in business, sooner or later your dealership will likely be sued.  It may be due to a car with unknown mechanical issues, a representation by a salesperson, contract dispute, repossession, or the result of one of those customers that is just never happy with any service outcome and knows an attorney.

First and foremost, answer the lawsuit!  The first step you need to do is file an answer after you have received a notice of a lawsuit (called a citation).  Failure to do so within 21 days may result in a default judgment.  Game over.  The best bet is to hire an attorney to file an answer on your behalf.  This is probably not a good time to read a few online articles and try to do it yourself.  Even attorneys hire other attorneys to represent them when they are sued. 

Don't ignore Texas Deceptive Trade Practices Act letters also known as DTPA letters.  Attorneys will often send a DTPA before they file a lawsuit in order to treble or “triple” damages.  Example, that $4,000 demand just became a $12,000 potential claim with attorney fees and costs of court if you lose.  PRO TIP:  DTPA require very specific responses and objections.  Failure to property respond to a DTPA letter can cost you later on.

Stop talking to the customer after suit.  Even after service of suit, many dealers will still try to negotiate a good deal after the fact to get out of the lawsuit. Not a good idea.  If you think you are about to be sued or have already been sued and the customer or their spouse, partner, or cousin calls on their behalf, you should assume you are being recorded.   The customer or their agent is probably trying to get recorded information to be used against you later or.  You should have your attorney talk to the customer's attorney.  Instruct office staff and employees to send all customer calls to your attention and to not provide any additional information without your express permission.  

Get ready for discovery.  Every written email, text, note, file, loan, contract that relates to that customer is going to be subject to discovery and is generally available to the other side.  This can even include prior loans and cars.  Be careful!  Don't text or email anything to anyone about the plaintiff.  Pick up the phone or speak in person.  PRO TIP:  Don't scrub or delete folders, emails, texts, file jackets after the fact.  This is a violation of the Texas Rules of Evidence and could expose your dealership to significant sanctions by the court.

If you've been sued by a current customer that wants routine payment or payoff information, you still need to provide this.  However, be careful and watch what you say and provide.  Give the minimum amount of information on the note, payment, payoff, etc.

Document, document, document!   Receive a strange call from the customer or an associate?  Did the customer come by the dealership and say something or make a demand or admission about certain facts in dispute or that some third party worked on car or operated the vehicle?   Send yourself and email and document what was said. 

Don't ever put extra comments or notes in a deal jacket that are not required.  Don't make notes about their race, sex, or orientation.   Accepting regular late payments?  As noted before, this could open up a waiver claim that your dealership allows late payment.  Don't let a side note or other “handshake” agreement modify a contract.   Again, it is a best practice to have written procedures and guidelines in place and to follow them every time.  Dealers that make a special exception to a customer often become the subject of litigation.

Comments

 
By: Steve Levine
On: 01/16/2020 16:51:55
Nice job, Chris, very good information. I've seen plenty of dealer's make the situation worse by failing to follow your points.

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