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Lewellen v. Franklin

Supreme Court of Missouri, En Banc

September 9, 2014

LILLIAN M. LEWELLEN, Appellant/Cross-Respondent,

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[Copyrighted Material Omitted]

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For Lewellen: Douglas F. Noland, Noland Law Firm LLC in Liberty.

For Franklin and the dealership: Patric S. Linden, Kevin D. Case of Case & Roberts PC, Kansas City.


Patricia Breckenridge, Judge

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This appeal arises from an action brought by Lillian Lewellen against Chad Franklin and Chad Franklin National Auto Sales North, LLC (National), for fraudulent misrepresentation and unlawful merchandising practices under the Missouri Merchandising Practice Act (MMPA), section 407.010, et seq., RSMo. A jury awarded Ms. Lewellen actual damages of $25,000 and punitive damages of $1 million against Mr. Franklin and National on both counts. She took judgment against Mr. Franklin under her fraudulent misrepresentation claim and take judgment against National under the MMPA claim. Pursuant to section 510.265,[1] the circuit court reduced the punitive damages awards against Mr. Franklin and National to $500,000 and $539,050, respectively. Ms. Lewellen appeals her punitive damages award against Mr. Franklin, claiming section 510.265 violates her rights to a jury trial, equal protection, and due process and violates the separation of powers doctrine. Mr. Franklin and National cross-appeal, claiming the circuit court abused its discretion by imposing discovery sanctions in a vague and ambiguous order and by overruling their motion to reduce the punitive damages awards as a violation of their due process rights. Because Ms. Lewellen challenges the validity of a statute, this Court has exclusive jurisdiction over this appeal. Mo. Const. art. V, sec. 3.

In accordance with Watts v. Lester E. Cox Medical Centers, 376 S.W.3d 633, 638 (Mo. banc 2012), this Court holds that the mandatory reduction of Ms. Lewellen's punitive damages award against Mr. Franklin under section 510.265 violates Ms. Lewellen's right to a trial by jury as guaranteed by article I, section 22(a) of the Missouri Constitution. This Court rejects Mr. Franklin and National's claims that the amount of the punitive damages awards violates their due process rights and that the circuit court abused its discretion in ordering discovery sanctions. Because there is no need for further proceedings in the circuit court, this Court may enter judgment as the circuit court ought to have entered to reflect the punitive damages award against Mr. Franklin assessed by the jury. Rule 84.14; DeBaliviere Place Ass'n v. Veal, 337 S.W.3d 670, 679 (Mo. banc 2011). Accordingly, this Court affirms the circuit court's judgment except for the portion reducing the punitive damages award assessed against Mr. Franklin pursuant to section 510.265. That portion of the judgment is vacated, and this Court enters judgment awarding Ms. Lewellen $1 million in punitive damages against Mr. Franklin for fraudulent misrepresentation.

Factual and Procedural Background

At all relevant times, Mr. Franklin was the owner of National, a motor vehicle

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dealership in Kansas City, Missouri. Mr. Franklin became frustrated by the low number of sales at National and at another dealership he owns. To bring more customers into the dealership, Mr. Franklin sought to use aggressive and creative print and television advertisements. Some of these advertisements promoted a program in which customers could purchase a vehicle for only $49, $69, or $89 per month.

When Ms. Lewellen, a 77-year old widow, needed a new vehicle after the transmission on her van went out, she visited National because she had seen several of National's advertisements for vehicles with a $49-per-month payment plan. Upon arriving at the dealership, Ms. Lewellen told one of National's employees that she was interested in the $49-per-month payment plan, and she picked out a 2002 Lincoln that qualified for the program.[2] Throughout her visit, Ms. Lewellen repeated that she could afford to pay only $49 per month for a vehicle.

A salesperson at National explained to Ms. Lewellen that the $49-a-month program was a five-year plan in which National would send her a check for the difference between her monthly payment and her $49-per-month obligation. At the end of each year, Ms. Lewellen would trade in her vehicle for a different vehicle for the same $49 monthly payment.[3] Ms. Lewellen agreed to buy the Lincoln through the $49-per-month program in part because she felt pressure by the salesman to purchase a vehicle during that visit.

The total sales price of the Lincoln was $19,940.45, including $2,500 for a service contract fee and $599 for gap insurance. The salesperson did not discuss these additional fees in the contract with Ms. Lewellen, nor was she aware of them. The contract also listed the trade-in value for Ms. Lewellen's van as $1,365. While the figure was in the contract, Ms. Lewellen was not otherwise made aware of that trade-in value. One of the documents presented to Ms. Lewellen by the employee stated, " No investment, $49 first six months."

Ms. Lewellen met with another National employee who helped her fill out a credit application, which required Ms. Lewellen to state her monthly income. The National employee wrote down Ms. Lewellen's monthly income as $920, which Ms. Lewellen testified was the correct income at that time. Another document labeled " Applicant's Credit Statement" was also filled out by a National employee, and this document listed Ms. Lewellen's monthly income as $18,000. Based on the information provided, Ms. Lewellen's monthly payment was $387.45. Like the salesman, this employee assured Ms. Lewellen that she would be obligated to pay only $49 per month.

When Ms. Lewellen did not receive a check from National soon after the sale, she contacted National multiple times to inquire about payment. She eventually received a check from National for $3,287.30, which was intended to cover the difference between the monthly payment listed on Ms. Lewellen's credit application and $49 per month. Ms. Lewellen used that money and her own $49 to make the $387.45 payments to Harris Bank, the

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lender holding Ms. Lewellen's loan. The check from National, however, only covered the difference for nine months, and National never sent Ms. Lewellen another check for the remaining months. When the money from National was expended and Ms. Lewellen became unable to make her payments in full, she contacted Harris Bank to explain the situation and continued to make the $49 monthly payments. Harris Bank eventually repossessed Ms. Lewellen's vehicle and sued her for breach of contract. Ms. Lewellen continued to make $49 monthly payments for a while but later reduced her monthly payments to $25.

Ms. Lewellen filed a petition against Mr. Franklin and National for common law fraudulent misrepresentation and unlawful merchandising practices under the MMPA.[4] Prior to trial, Ms. Lewellen moved for an entry of sanctions against Mr. Franklin and National for Mr. Franklin's repeated failure to appear for depositions personally or as a representative of National. The circuit court sustained the motion, ordering that the pleadings of Mr. Franklin and National be struck and that any documents produced by Mr. Franklin or National through discovery could be admitted in evidence against them. The court stated it would provide further guidance as to how Mr. Franklin and National would be allowed to participate in the trial. At a subsequent pretrial conference, the court explained that its order striking the pleadings caused Mr. Franklin and National to be in default. They would be permitted to participate in voir dire " to the extent that an appropriate voir dire question had not been asked by any of the remaining non-sanctioned and not in default parties." Further, cross-examination of witnesses would be limited to the issue of damages.

At the trial, Ms. Lewellen testified about her dealings with National. She also presented testimony from two other persons who were similarly misled by employees of National or Mr. Franklin's other dealership after seeing the advertisements. Ms. Lewellen presented evidence of 73 complaints against National and Mr. Franklin's other dealership filed with the Missouri attorney general and numerous similar complaints filed with the Kansas attorney general. There was also evidence of National's print and television advertisements promoting the $49-per-month program and of Mr. Franklin's advertising strategy.

The jury awarded Ms. Lewellen $25,000 in actual damages for her fraudulent misrepresentation claims against Mr. Franklin and National and $25,000 in actual damages for her MMPA against Mr. Franklin and National.[5] It also found Mr. Franklin and National liable for punitive damages and awarded Ms. Lewellen $1 million in punitive damages for each claim.[6] Ms. Lewellen elected to take judgment for actual and punitive damages for fraudulent misrepresentation against Mr. Franklin and judgment for actual and punitive damages for the MMPA violation

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against National.[7] Having found Ms. Lewellen's actual damages for her fraudulent misrepresentation claim are the same as her actual damages for her MMPA claim, the circuit court ordered that Ms. Lewellen would receive only $25,000 in actual damages, assessed jointly and severally against Mr. Franklin and National. Ms. ...

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