AUTONATION-OWNED DEALERSHIP ORDERED TO PAY $130,000 TO FORMER EMPLOYEE
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Arbitrator Says Huntington Beach Ford and Its Attorney Acted ‘With Malice‘ After Whistle-Blowing Salesman Reports Finance Scheme To Cheat Customers

IRVINE, Calif. (Oct. 21, 2002) -- AutoNation, Inc. (NYSE: AN) and its Huntington Beach Ford dealership have been ordered by an arbitrator to pay penalties of $130,000, including $50,000 in punitive damages, to a former employee who told company executives that he believed customers were being cheated.

From May 1999 until early 2001, Bruce Gillies was a salesman at Huntington Beach Ford, which was formerly Terry York Ford until its acquisition by AutoNation in the fall of 1999. AutoNation is one of the largest chains of new car dealerships in the country, with 374 locations in 17 states. In 2001, AutoNation had revenues of $20 billion and net income of $245 million.

In his arbitration decision, Torres stated that Gillies’s supervisors acted “with malice” and that the testimony of AutoNation attorney Kenneth Rollin, who investigated Gillies’s complaint, was “neither honest nor credible.”

“The decision sends a resounding message about AutoNation’s business practices and is a repudiation of its treatment of our client,” said Gillies’s attorney, Lily Chow, a partner at Irvine, Calif. law firm Peterson Picker Chow & Freisleben LLP. “Bruce Gillies was singled out, harassed and threatened simply for standing up and protesting to his superiors that customers were being defrauded.”

“He (Gillies) courageously stood up and alleged that Huntington Beach Ford was engaged in financing schemes to cheat customers by misrepresenting credit ratings, interest rates and the need to purchase special warranties. In fact, AutoNation’s deemed the allegations over these very practices serious enough to retain teams of lawyers and accountants to investigate the matter, but not before making Mr. Gillies’s life a living hell,” Chow stated.

In 2000, Gillies complained to his sales manager, saying he believed the dealership’s sales and finance staffs were cheating customers. When his complaints were ignored he took them to AutoNation’s grievance hotline.

Acting on the call, Rollin, chief litigation officer in AutoNation’s general counsel’s office, conducted an investigation, bringing in a team of accountants and lawyers, whose investigative work eventually cost over $100,000. (The arbitration decision indicates that Rollin clearly “deemed the complaint a very serious issue” in light of an administrative proceeding by the California Department of Motor Vehicles and an investigation by the Los Angeles District Attorney’s Office into similar finance practices occurring around the same time at Gunderson Chevrolet in El Monte, Calif. AutoNation also owns the Gunderson dealership. In April 2002, four former Gunderson employees entered no-contest pleas to charges of conspiring to defraud customers by including hidden costs in sales contracts.)

(On Oct. 6, 2002 the California Department of Motor Vehicles shut down Toyota of Cerritos, another AutoNation-owned dealership, for one day and placed it on three years’ probation for what the state agency called ”fraud, false advertising as well as contract and document filing violations.” The DMV accused the dealership of failing to selling vehicles at advertised prices and requiring customers to buy additional accessories to obtain an advertised price, among other allegations.)

Meanwhile, according to testimony at the arbitration, Gillies’ ability to sell was being undercut by his managers, who would “low-ball” customer trade-ins. He also was given a negative evaluation from his manager. Suffering stress, Gillies took medical leave.

Around this time, Gillies sought legal counsel from Chow. Chow asked the dealership to compensate Gillies for his medical expenses and lost income. The company refused. Subsequently Rollin ordered Gillies fired, claiming that Gillies was attempting to get another salesman from the dealership to disclose what Rollins characterized as false statements about the dealerships’ business practices to the media.

Gillies denied talking to any journalist. It was Rollin’s testimony about this incident that the arbitrator found “neither honest nor credible,” and contrary to actions that Rollin himself had taken, which included upgrading a defrauded customer's vehicle to “stem a possible widespread DMV investigation,” ordering an end to illegal activities, changing the way employees were paid, and reprimanding the dealership’s management.

The arbitrator’s award states there is "strong public policy interest to insure that the general public is neither subject to misrepresentations by automobile dealerships nor fraud in the purchase of vehicles” and that AutoNation and Huntington Beach Ford "do not dispute that Gillies complained of unlawful conduct.”

The arbitrator found “by clear and convincing evidence” that the dealership “acted with intent” to injure Gillies “in conscious disregard of his rights;” that the supervisor’s retaliatory actions against Gillies’ were “done with malice;” that his negative job evaluation “was fraudulent and in conscious disregard of his rights;” and that attorney Rollin’s actions in firing Gillies was “arbitrary and pretexual” and based on a shallow investigation and conclusions contrary to established facts.

In addition to the $50,000 in punitive damages, Torres awarded Gillies $40,425 in “special” damages (i.e. compensation for specific or out-of-pocket losses), and $40,000 as general damages for emotional stress during the three months he was out of work. AutoNation and Huntington Beach Ford are appealing the arbitrator’s award.

Based in Irvine, Calif., Peterson Picker Chow & Freisleben LLP is a litigation practice specializing in complex commercial matters, including corporate and business disputes, employment issues, real estate, trade secrets and insurance law. The firm is located at 3333 Michelson Dr., Suite 400, Irvine, Calif., 92612, and contacted by telephone at 949-833-8822 or on the Internet at www.pcf-lawyers.com.