The Jeff Schmitt Auto Group has paid $625,000 to resolve 16 civil lawsuits and five other complaints alleging unfair and deceptive business practices since December 2012.
A dozen other disputes are still pending against one of the area’s biggest car dealerships, all filed by the same local attorney. The Dayton Daily News began investigating after seeing a high number of lawsuits filed against the company.
“While literally thousands upon thousands of our customers are satisfied with their purchases and terms of purchases, we recognize that, periodically, a very small number of customers may not be satisfied with their purchase or their purchase terms,” the auto group’s owner, Jeffrey Schmitt said in a a statement through the public relations firm vellaINC.
“We would hope that, when a customer has an issue, they would come to us to seek fair resolution,” the statement continued. “We also recognize that there are a handful of individuals who prefer to bring a lawsuit hoping to reap financial rewards that are often wildly out of proportion to whatever harm they may feel they have experienced. It is unfortunate that some believe litigation is their opportunity to be rewarded financially and to damage our company.”
Schmitt declined to answer questions about the allegations, the payouts, or any settled or pending litigation.
Former general manager and advertising pitchman Steve VanGorder, also named in the lawsuits, said he no longer works for Jeff Schmitt. He would not comment on the litigation.
Local attorney Ronald Burdge, who specializes in consumer law and motor vehicle sales cases, shared the settlement agreements with the newspaper. Lawyers in these cases typically receive one-third of the settlement. Burdge declined to release the terms of his compensation for these lawsuits. He said he typically handles car sales fraud cases on a “fee shifting” basis in which the car dealer must pay him for his time. “I know some attorneys handle cases like this on either a fee shifting basis or a 33 to 40 percent contingency fee,” he said.
What the records and settlements from December 2012 until mid-July 2013 show:
• 24 lawsuits were filed in Montgomery and Greene county courts; 16 have settled and eight are pending.
• 10 other individuals have contacted Burdge’s firm to lodge complaints against Schmitt’s dealerships; five have been resolved and five are pending.
No other local dealer had this many lawsuits during this time period.
The civil lawsuits allege a “systematic and organized pattern” of deceptive practices that led to customers seeing added charges – sometimes thousands of dollars – above advertised or agreed to prices on new and used cars at several Jeff Schmitt dealerships. The settlements have ranged from $550 to nearly $38,000, with the majority above $19,000.
The lawsuits allege a “five-finger close” in which a salesperson holds his hand over paperwork that contains different terms than the customer verbally agreed to, charging up to $1,299 for “rust-proofing,” charging and overcharging for Etch Theft Guard, which the lawsuits call nearly worthless window theft protection, and inflating customers’ monthly payments to make the total cost of a vehicle thousands of dollars above the original price.
The most recent five lawsuits filed by mid-July also include allegations of racketeering for inflating the income or decreasing the housing costs of prospective car buyers to make lending institutions more likely to finance loans. Allegations also include listing optional equipment on vehicles – such as sunroofs, running boards, an upgraded stereo or leather seats – which were not on purchased vehicles, but inflated the value of the vehicle in the view of the lenders.
Burdge said his current clients have discovered these financing issues while attempting to trade their cars to other dealers or when making a car payment to lenders.
The Jeff Schmitt Auto Group has paid $513,446.46 to Burdge’s clients for compensation, attorney fees and court costs and to a non-profit consumer watchdog group, plus $112,465.60 to third-party lenders in car loans for vehicles they took back, Burdge said.
The Jeff Schmitt Auto Group operates six local auto dealerships selling Chevrolet, Cadillac, Mitsubishi, Nissan and Mazda vehicles in Montgomery and Greene counties.
The auto group has high scores from Motor Trend’s customer sales certification program, which the company says gives used car buyers added benefits and a warranty to help assure customer satisfaction.
Larry Dorfman, CEO of Easy Care, the group that oversees the certification program, said he was surprised by the lawsuits. “We haven’t seen it,” he said. “The allegations are a little bit shocking. It’s certainly not how I know Jeff and his thought process and his values to be.”
In addition to the Jeff Schmitt Auto Group, the lawsuits name Schmitt, VanGorder and more than a dozen other staff members as defendants, depending on the specific dealer location.
VanGorder confirmed that his last day working for the dealership was July 5. VanGorder said that on the advice of his attorney, he would not comment about the lawsuits or the dealership’s sales practices.
In an article published by the auto trade publication Automotive News on July 8, 2013, VanGorder explained how the best finance employees packed in added money to many deals. VanGorder said under his leadership the past six years that the group’s average finance and insurance revenue per vehicle has increased from $700 or $800 to $1,600 or $1,700. The story quotes the industry average at $869 per vehicle.
Patrick Cade, named in the online story as the business manager for the group’s Chevrolet dealership in Miamisburg, is also named in some lawsuits. In the Automotive News story, Cade said finance managers could be put back into the sales force if they don’t hit certain goals: “If they see us not performing like they expect us to, they’re going to call us out on it.” Cade did not dispute anything in the article but would not comment further.
The Jeff Schmitt Auto Group is one of the biggest auto dealers in the Dayton area, with VanGorder telling Automotive News that the group sold 7,800 new and used vehicles in 2012 and was on pace to move 10,000 units in 2013. VanGorder did not return messages seeking comment on the online article.
Burdge said that as part of the settlements, the Jeff Schmitt Auto Group agreed to pay more than $50,000 to the National Association of Consumer Advocates — a non-profit watchdog group that monitors car dealers’ actions. Burdge has been a member of the NACA’s Board of Directors.
“Part of the requirement of the settlement of those cases was that the dealership put in place written procedures and instructions to personnel that they were no longer to do a five-finger close on people,” Burdge said. “They were no longer to (ever) use the words rust-proofing.”
Besides the lawsuits in Montgomery and Greene counties, there have been similar complaints against Jeff Schmitt Auto Group by consumers to the Ohio Attorney General’s Office and to the Better Business Bureau.
The Ohio Attorney General’s Office logged 24 complaints against the Jeff Schmitt Auto Group from Jan. 1, 2012 to April 2013. These complaints are recorded independently of any lawsuits. Only one other area dealer came close with 17 complaints. Most dealers had zero to one complaint each.
Jeff Schmitt Auto Group has an A+ rating from the Dayton Better Business Bureau, which has recognized the dealer as an accredited business since Aug. 9, 2010.
Since August 2010, the BBB said 56 complaints have been logged, 30 of them relating to advertising or sales issues and 19 relating to problems with products or service. The BBB website said Jeff Schmitt maintained its A+ rating in part because they have resolved many of the complaints.
Dayton BBB President and CEO John North said civil lawsuits by themselves “would not impact the letter grade with us” but that the BBB recognized and notified the auto dealer of a “pattern of complaints” in September 2012. North said if similar complaints continued, it could impact the dealership’s grade. No change has been made as of the date of this publication.