Lease dispute leads to massive dealer lawsuit.

It was almost midnight when Louis Trygar finished signing all the lease papers on a new 1999 Mercedes-Benz E320. He was tired and wanted to go home, but the dealer kept shoving papers in front of him.

Two weeks later, he heard from someone at the dealership.

"When they called me up to say, 'You owe $800,' it shocked me," he said. "I thought to myself, No. 1, 'Why? What is this for?' and No. 2, I thought, 'There's no way. We already did the deal. We spent five hours doing the deal, I don't owe anybody anything.'"

The Keyes European dealership where he leased the car claimed he had signed a payoff adjustment form, in which he agreed to pay the difference between the actual payoff--the amount still owed from his previous lease--and the payoff figure that was estimated at the time he signed the papers on the new lease.

Trygar, a workers' compensation attorney in Oxnard, refused to pay the $800. Instead, he researched vehicle lease laws and discovered that dealerships must provide lease agreements on a single document. So, he sued the dealership, claiming that the payoff adjustment form was a second document and violated the state's "single document rule" in the Vehicle Leasing Act.

Almost five years later, Trygar's case is still pending.

But now, it includes more than 1,200 new car dealerships in California, eight automobile insurance firms and more than 20 law firms.

No dollar figure is attached to the case. However, it includes a potential class of more than 100,000 customers who Trygar alleges were wrongly charged hundreds of dollars on leased vehicles--a total damage figure estimated to reach millions of dollars, say attorneys involved in the case.

Peter Welch, president of the Motor Car Dealers Association, called the suit "a big deal" to dealerships throughout California.

"Anytime there's a class action in which 90 percent of our members have been named in, it's something we typically monitor," he said. "It is not very often that a class action suit has been filed in California naming every dealer."

Confusing paperwork

Using complex words and multiple documents is common among dealerships to deceive customers and make a profit, according to Remar Sutton, president of the Consumer Task Force for Automotive Issues.

"Dealerships are famous for ... putting at the last minute an enormous amount of paperwork in front of you just as you get delivery of your car," he said. "If you can use paperwork that says, 'We'll tell you later what it costs,' a dealership can manipulate that better than if you're using a technique a smart consumer is able to fight."

At the time Trygar filed suit, several other cases were pending against individual dealerships alleging similar violations of the state's Vehicle Leasing Act and unfair business practices law. In the past few years, hundreds of dealerships have been sued for deceptive advertising, also part of the unfair business practices law, by writing their financial terms in the wrong font on advertisements, among other things.

Such suits led auto dealerships to be one of the top supporters behind Proposition 64, a voter initiative that was passed in November that restricts use of California's unfair business practices law. Under the measure, individuals may no longer file consumer lawsuits as "private" attorneys on behalf of the public but must have actual injuries.

Because he added an unfair business practices claim to his suit, Trygar sued on behalf of the California public and potential members of the class numbering more than 100,000. If Trygar had filed after Proposition 64, all of the class action members would have had to be injured by dealers.

The California Motor Car Dealers Association contributed more than $5 million toward the campaign to support Proposition 64. Since then, it has been used in various industries to dismiss several consumer suits under the theory that it applies retroactively--a key issue that remains unresolved by recent but inconsistent rulings.

The class action case is the first of its size for the auto industry to involve Proposition 64. A Los Angeles Superior Court judge put the case on hold to hear arguments next month about whether it applies in the ongoing class action case.

"Dealers were instrumental in getting it passed, and it's now working to benefit them," said Aaron Jacoby, a partner at Whitwell Jacoby Emhoff LLP, who represents Keyes as the lead defendant in the case.

Since Trygar filed suit, five more customers have been added as named plaintiffs in the case. All allege they were asked by a dealership to pay hundreds to thousands of dollars in payoffs after leasing a car.

If the judge rules that Proposition 64 applies retroactively, the plaintiffs' lawyers would have to find more customers--a challenge made greater by the fact that most dealers no longer make customers sign payoff adjustment forms.

"It was industry-wide practice at some point until after our lawsuit was filed, at which point the dealers' lobbyists had the Vehicle Leasing Act changed," said Nicholas Siciliano, a partner at Masry & Vititoe, who represents Trygar as the lead plaintiff in the case.

Changes in practice

In 2001, amendments to the Vehicle Leasing Act became effective that sought to clarify what should and should not be included in a lease contract. Most dealers now include payoffs in a blank box on lease forms, Welch said.

Further, in September the judge in the class action case ruled that the plaintiffs would not be entitled to any restitution even if they could prove violations of the Vehicle Leasing Act.

Siciliano argued that dealers continue to violate the Vehicle Leasing Act by not adequately disclosing payoff obligations in lease contracts, which is an unfair business practice. Under California law, individuals who prove they were damaged by an unfair business practice are entitled to $2,500 per violation. Further, the class represents customers who leased cars during the four years preceding 2000, when the suit was filed.

Trygar admits he does not know how his case will end. He doesn't even drive the 1999 Mercedes anymore.

"I traded it in--oddly enough, at Keyes European, for another Keyes Mercedes," he said, noting that the lease deal went smoothly this time. "I don't think they knew who I was."