Hyundai Hit with $9.7M Judgment Over Engine Recall Suit

0:00Welcome, once again, to Lato's Law. Here's Steve Lato. Got a story here about a used car dealership in a lawsuit Hyundai and Hyundai getting hit with a big judgment. Use car dealership wins nearly 10 million dollars against Hyundai. After court finds it, the automaker destroyed evidence and lied. James sent this thank you very much. This story is from guessing headlights.com. Olivia Richmond wrote it. I sought reported else for including the automotive news. So if you ever felt like a little guy getting steamrolled by a big company, this one's for you. A Pittsburgh based used car dealership just got a almost 10 million dollar judgment. After Pennsylvania judge essentially told Hyundai Motor America to sit in a corner and think about what they did. Back in 2018 to 2019, this used car dealership and a sister business both out of Pittsburgh and both aimed owned by the same person. Purchased 628 used Hyundai Sonatas at auction.

1:03These cars are from 2011 to 2014. But these weren't just random cars. They're all part of a massive recall involving Hyundai's notoriously problematic Theta 2 engines, which affected over 1.6 million Hyundai and Kia vehicles. The dealerships bought the cars and then brought them to Hyundai franchise dealers for engine replacements or buybacks, which is something that Hyundai was offering on those vehicles. And so rather than honoring the recall obligations like a responsible automaker would, Hyundai looked at the number of claims coming from this one owner and two dealers and decided that that wasn't right. And in May 2019, made with a judge later called a stunning decision to deny all the claims coming from that one entity, two dealers but one owner.

2:05So all at once, no nuance, no individual review. Hyundai referred to this dealership as the frequent buyback club and repeat offenders and took steps reduced or deny their payments. Then in a bold move that Olivia Richmond says can only be described as extremely confident for someone about to get caught, Hyundai sued the dealerships for fraud after already paying out more than five million dollars in buybacks. So an Allegheny County Court of Common Police judge had 16 years in the bench when the case went to trial. And by the end of it, he said that Hyundai's conduct was among the most egregious examples of evidence destruction and courtroom abuse he'd ever seen in all those years. So what did they do exactly? Well, reported by automotive news, the court found that the company crushed hundreds of the recalled vehicles, which were at the center of the lawsuit.

3:06And that would be destroying key physical evidence. Emails from a Hyundai case manager were also deleted. And the judge referenced all of this spolliation and called it rampant. And the word spolliation, I've mentioned it occasionally, is the concept in the law that someone destroys evidence. And it's not spoilation, it's spolliation. But I'm just I'm putting that up because people always mispronounce it. And if you've got evidence in your possession and you think it's going to make you look bad. And of course, if it was destroyed and it can't be used against you, a court can look at that and go, oh, well, you destroyed the evidence presumably because it was going to hurt you. Therefore, we're going to tell the jury or the judge of the judge is sitting as a jury. The judge can then use that against you and say, we will just start with the presumption that it would work against you. Now, you have the right to try to argue against that presumption, but it never looks good in destroy evidence. And you might say, but Steve, I'm curious about this. Was Hyundai supposed to hang on to all these cars? As you can imagine,

4:11a lot of the cases I'm involved in involving the lemon law involve cars. So what happens to a car during litigation? And you better believe it that we don't dispose of the car until we have the right to do so. And if my client finds himself in a position where they have to do something about the car, we will contact the other side, the manufacturer and say, hey, my client's going to get rid of this car. It's evidence. Do you want to examine it? And if they say, no, we're not going to examine it, but you don't, you can't get rid of it. We can go to court and tell the court, your honor, it's evidence, but the situation that clients in is going to make it difficult for them to hang on to it. Can we get a court order allowing us to dispose of it after they examine it? And a judge is going to look at them and go, why don't you examine it? They go, we want to examine it closer to trial. Why? It's more important as evidence now than it is six months down the road, or a year or however long it might take. So what Hyundai could have done is told the other side,

5:15we've got all these cars and we don't want to pay to store them all. Do you want to, do you want to inspect them? Do you know, and there's ways they probably could have done it. But in a case, this big involving millions and millions and millions of dollars, they probably didn't need to hang on to this stuff. So the deletion of emails is a bigger problem because what, you didn't want to pay to store those emails till trial? And so Olivia Richmond writes that spoliation is a legal term for destroying evidence and is generally considered a very bad looking court. Yes, and it's not just the way it looks. It's the fact that a jury will actually get an instruction that says if you find that this party destroyed this evidence, you can start with the presumption it would have hurt them. That's why they destroyed it. So the judge also found that Hyundai's own witnesses weren't exactly forthcoming with the truth and that multiple inspections of the vehicles found a zero

6:16evidence of any tampering or manipulation. So in other words, it's not like these people buying the cars and messing them up just to get them bought back. They were buying the cars and showing and saying, look, this is a car that you guys promised to buy back and that, you know, and just, you know, we didn't contribute this. It's the way you guys made it basically. So the judge's ruling was quite straightforward. He wrote, Hyundai used the court system to commit the very fraud. It was accusing the dealerships of the automaker in his assessment found it cheaper to manufacture a legal case than to simply honor its recall obligations. So as a sanction specifically for the destruction of evidence, the judge ordered Hyundai to pay the dealership $9.7 million, which represents storage costs that the dealership racked up keeping 163 recall vehicles on a lot for nearly seven years at $25 per day per car. Turns out Hyundai also is going to come and get those cars.

7:21So all of Hyundai's original fraud claims were tossed. The dealerships counterclaims were all ruled in their favor, which was fraud, breach of contract, intentional interference and abuse of legal process. A future trial may still determine additional damages. Hyundai's appealed ruling and a judge granted a stay of the order in early March. The dealerships attorney says he's confident the ruling will hold. And by the way, understand that when you get hit with a big judgment and you ask the court to stay that is a very good chance the court will say, yeah, we'll stay it. As long as you post a bond, put some money up. So it turns out this isn't the first time it's happened. It also happened in Florida where Hyundai went after a franchise dealership over these similar engine recall claims. A magistrate in that case noted that Hyundai had, among other things, bungled the recall with faulty tests, delayed replacement engines and persistent misinformation. Case went to trial on January 23 and ended with no damages awarded on either side. So there's

8:24a quieter conclusion that would happen in Pennsylvania. Meanwhile, dealership nearly seven years of fighting here. It finally paid off. And for the rest of us watching with the sidelines, it's a useful reminder that we recalled the car. Now stop asking questions is not in fact a completely legal defense. So that's the situation where Olivia Richmond wrote the article for guessing headlights.com and James sent it to me. And you know, it's an interesting situation because you hear these kinds of stories involving all kinds of different auto parts. I'm talking about the recalls. And for instance, I get calls and I'm pretty close in the exact number here. Four or five calls a week from people who say, I've got a car, brand new car. It's got a problem. It's at the dealership. It's been sitting there for weeks. They're waiting for a part. They're waiting for a part. Now these are warranty claims. People buy a brand new car. Something goes wrong

9:30with it. They take it to dealership dealership because we know what's wrong with it. We need to replace this part. This part is not available. And what's worse is when it's a recall, and I'm talking about recalls in general, recalls are usually safety issues. So if you've got a recall that's been mandated by NHTSA because your car's got a safety problem and they say, hey, your car's got a safety problem bringing in for recall. We'll let you know when the parts are in. I've seen situations where they notified people and said, try not to drive your car between now and when we fix it. We don't know when the fix is because we haven't got the parts. I've also seen where they said, your car could potentially burst into flames on its own. Try not to park it in or near your house. Don't park it indoors in any structure. Don't put it in garage. Try to leave it outside where it'll cause less damage when it spontaneously combusts. And so I mean,

10:31these recalls and repairs and all this stuff run all over the place in terms of how seriously they are and what they involve. But occasionally here about one where they're like, oh, these engines are bad. We will replace them. And so if all of these cars been bought by individuals and brought back by individuals, presumably the manufacturer wouldn't have complained so much. They wouldn't have been, you know, they wouldn't have been so upset. And the big question is, so what's the problem here? And it sounds like the dealership figured something out. We can buy these vehicles with bad engines and they're covered by that recall. And when we buy it and then take it for the recall work and then when we sell it works out for us because we can tell people, hey, it's got the brand new engine in it. And they're basically putting themselves through the hassle of getting the work done and then selling the car. And are they benefiting? Yes. Yes. But the average person out

11:37there who looks at a car and goes, wait, I can buy it. But I've got to then go and get the engine replaced and go through that whole hassle. A lot of people wouldn't do that. So there probably was a thing in the market where these cars were selling for less than they would have otherwise. And they become more valuable once these guys do this. So it's a crazy case. But the ugly part of it is that it looks like the manufacturer sued the dealer, dealer of counter sued. And the original lawsuit got zeroed out. And the dealerships counter claim. Oh, nine point was at nine point eight million dollars. Something like that. Yeah. Pretty, pretty, pretty big number there, my friends. So again, James, thanks for sending that from guessing headlights.com. And I'm assuming that's a reference to the old days when you're driving down the road, when you identify car bites headlights because in the old days, there were fewer cars in a road. And you could, you know, your different kinds of cars in a road. And you could actually guess them by their headlights.

12:39And I'll leave you rich when I wrote that. Use car dealership wins nearly 10 million dollars against Hyundai. After court finds automaker destroyed evidence and lied in court. Questions, comments, put them below those talks you later. Bye bye. Thank you for watching Lato's Law. It's your road and yours alone. Others may walk it with you, but no one can walk it for you.