Honda dealer lawsuits joined U.S. judge in Baltimore makes bribery cases a class action

October 16, 1997|By Scott Higham | Scott Higham,SUN STAFF

A federal judge in Baltimore ruled yesterday that Honda Motor Co. dealers can band together to sue the automaker for claims that the company conspired to send shipments of cars to those willing to pay bribes while punishing dealers who refused to take part in the kickback scheme.

In his long-anticipated ruling, Chief U.S. District Judge J. Frederick Motz sided with Honda dealers who argued that the best way to pursue the largest commercial bribery case in American history was by creating a class-action law suit.

Honda lawyers had asked the judge to deny the class action and force one test case to court -- an all-or-nothing trial that would be used to determine the outcome of dozens of lawsuits filed around the nation against the automaker.

Instead, Motz decided to certify a "limited" class of Honda dealers. Those dealers would take a single case to trial that would decide whether the automaker, its executives and its lawyers took part in a national racketeering scheme and are liable for the kickbacks.

If the jury decides that Honda is liable, separate trials would be held to determine the extent of the damages the dealers suffered. Potentially, nearly 800 dealers could wind up becoming part of the class-action suit.

"I conclude that class-action treatment is superior to any available alternative," Motz wrote in his 12-page opinion.

The ruling has broad implications for Honda and the dealers who have filed suit. If the dealers convince a jury that Honda participated in a racketeering scheme, hundreds of other dealers will have a clear legal opinion to use in pursuing settlements or jury verdicts.

For Honda, the cost could be high. Damages in racketeering cases are tripled, and experts for the dealers say Honda could potentially lose billions. But if Honda convinces jurors that the firm is not responsible for the actions of its managers and didn't know about the scheme, dealers will have a hard time winning verdicts against the auto giant.

Two years after 19 Honda employees were convicted in the largest commercial bribery case in the country, the automaker is now facing more than 50 civil suits filed by dealers around the nation, including several in the Baltimore-Washington region. Dealers who didn't pay bribes claim that the cars they needed to stay competitive were diverted to dealers willing to part with cash, jewelry and vacation trips for Honda executives and sales managers.

The lawsuits -- filed around the country and consolidated in Baltimore -- allege that Honda executives at the highest levels, including those in Japan, looked the other way while their employees took the bribes during the 1970s and 1980s.

It was a time when Hondas were the hottest-selling cars in America, fetching as much as $2,000 over sticker price. Dealers couldn't keep them on their lots. The demand created the perfect climate for corruption, according to court records, trial testimony, interviews and FBI field reports.

The suits pending in Baltimore claim that certain dealers profited from the scheme because they were able to secure larger allotments and wider selections than their competitors. The suits also say dealers made Honda executives silent partners in exchange for licenses to open new dealerships.

Honda denies that its top executives knew about the schemes.

Some of the earliest bribes took place in the mid-Atlantic region. A court document filed by the dealers calls the Baltimore-Washington area "one of the dirtiest" Honda sales zones. The scheme started to unravel four years ago in New Hampshire, where claims of criminal wrongdoing and perjury surfaced during a lawsuit filed against Honda by a local dealer.

The judge referred the claims to federal prosecutors and FBI agents.

In the ruling yesterday, Motz said there were several advantages to Honda's request that the litigation proceed with one test case. But denying class-action status to the dealers would create confusion and undercut a team of lawyers for the dealers who have been trying to keep the complicated case on track.

"This is a material concern, not only to the plaintiffs, but also to the orderly and efficient resolution of this litigation," Motz wrote.

Pub Date: 10/16/97

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