Consumer Protection Act applied to attempted used car sale even tho not yet “purchasers”: CRAIG & BISHOP, INC. V. PILES (SC 3/20/2008)

In this case, the Kentucky Supreme Court addresses the scope of the Kentucky Consumer Protection Act (KCPA) and the legislative intent behind it in order to determine whether Appellees Piles and Warner presented sufficient evidence to recover damages from Appellant stemming from an attempted used car sale. The factual background of the case is as follows: Piles and Warner (who were dating) went to Appellant in response to a used car ad (1997 Mustang for $5,000) that apparently sounded too good to be true. Once at the car lot, Appellees were first told the car was still available before later being informed it had been sold after traveling to a separate car lot. But as luck would have it, Appellant had a 2000 Camaro available for a mere three times the price of the Mustang. Even though Appellees expressed concern about the higher price and the ability to afford it, Appellant’s salesman guaranteed he could get them financing for it. Appellees ultimately agreed to the deal in kind, and signed over the title to Warner’s Nissan sedan valued at $1,000 before leaving the dealership that evening in the Camaro. Over the next two days, Appellant tried unsuccessfully to find financing for the entire purchase amount and tried to pursuade Appellees to make up the difference in cash, which they explained they could not afford to do. At this point, Appellees decided they wanted out of the deal, first refusing Appellant’s offer to finance the remaining portion through it directly and later refusing Appellant’s offer to simply knock the remaining portion off the $14,000 purchase price. Over the next several days, Appellees tried to return the Camaro and take back Warner’s Nissan with no success, Appellant giving different excuses each time on why the Nissan wasn’t immediately available. The manager finally informed Appellees that the Nissan had been sold AND that payment for the full $14,000 Camaro purchase price had to be made that day or the Camaro would be repossessed. Appellees immediately returned the Camaro to the dealership, and in response their attorney was notified in writing that Appellant considered the Camaro repossessed and would be sold at auction. Appellees then filed suit alleging KCPA violations, common law fraud, conversion and breach of contract, and Appellant counterclaimed for breach of contract and reimbursement for the cost to store the Camaro. The case proceeded to trial where the jury found in Appellees’ favor on the KCPA violations, fraud and conversion, and awarded them $8,600 in compensatory damages and $50,000 in punitive damages. Appellant appealed and the COA affirmed the decision with the exception of vacating the fraud finding and the award of inconvenience damages as duplicative of the loss of use damages also awarded. The Appellant again appealed and the SC granted review.

The SC began by declining to weigh in on the COA’s reversal of the fraud finding (which was on the basis that the alleged misrepresentations concerned predictions of future events) since it was unnecessary to the case’s resolution in light of their decision on the KCPA violations under which the same awarded damages could be sustained. Concerning those KCPA claims, Appellant had argued that since the sales transaction was never completed Appellees were not "purchasers" and therefore ineligible to bring an action for KCPA violations under KRS 367.220(1). The SC noted the purpose of the KCPA was to provide broad protection to consumers victimized by unlawful and deceptive trade practices, and concluded that under the facts of this case Appellees qualified as purchasers since they took possession of the Camaro after a period of negotiation and after giving value by signing over the Nissan title. The SC also rejected Appellant’s contention that they could not be purchasers since there was no valid contract executed, noting that nowhere in the KCPA is a binding contract explicitly required before a purchaser has a private right of action for unlawful trade practices. The SC also refused to address Appellant’s argument that the COA erred by finding that liability for future promises (such as financing guarantees) is possible under the KCPA, noting that this argument was not preserved for review in the TC and therefore was not properly before the COA. The SC did offer some dicta on this particluar issue by stating the argument that sellers could never be held liable for future predictions is suspect given the KCPA’s broad range of protection and especially where the future predictions might relate to the seller’s own conduct or other events under seller’s control. The SC did point out that the Appellees alleged a number of other deceptive acts by Appellant that did not involve future events or predictions on which the jury could reasonably base its award for the KCPA violations.

Next, the SC addresses Appellant’s argument that the punitive damages instruction was improper since there was no way to tell whether the award was based solely on the conversion or was based, at least in part, on the fraud and KCPA violations claims. The SC again held that this issue had not been properly preserved since the record failed to show that Appellant requested the TC to instruct the jury to indicate on which specific claim it was basing its punitives award. At any rate, the SC noted that the KCPA expressly provides that punitive damages may be awarded in appropriate cases, and that they may also be awarded for conversion if the defendant’s conduct is especially reprehensible. Turning to the amount of punitives awarded, the SC rejected Appellant’s argument that the $50K award was grossly excessive. The TC had determined that the award did not appear excessive "at first blush," and the SC expanded that ruling by holding that the award passes muster under the US Supreme Court’s constitutional factors (categorizing the 6.0 compensatory to punitives ratio as significant but not ridiculous) and that the "degree of reprehensibility of the conduct at issue was significant." By reference to the Kentucky AG’s Office discussion on this topic contained in its amicus brief, the SC also implies that a higher than average damages ratio may likely be more acceptable in consumer protection cases where the deterrent effect of punitive damages is more crucial since the economic harm actually suffered by the claimant will generally be small.

To conclude, the SC agreed with Appellees’ cross appeal argument that the COA erred by vacating the jury award ($3,000 to Warner and $1,500 to Piles) for inconvenience damages as duplicative of the $2,100 award to Warner for loss of use of the Nissan (that he solely owned) from the time the Camaro was returned to when he purchased another vehicle (6 months later).  No loss of use was awarded to Piles so without the inconvenience award she would not recover any compensatory damages at all, a result the SC clearly found erroneous in light of the alleged conduct of Appellant. The SC pointed to the trouble Piles encountered trying to return Camaro several times, the numerous telephone calls between the parties affecting her work, being deprived of transportation, etc. as evidence of "real injuries with significant monetary ramifications" for which the inconvenience damages award to both Appellees was proper and not duplicative of the loss of use award, which was only for the period after the Camaro was returned.