If a Car Dealer Says, “it is what it is; you have to pay it”, Should You Believe it? Does the Question Answer Itself?

Fired for a girlfriend’s vehicle purchase.  No cause of action, or can we think of something?

Here we have the basics of the allegations, as framed by the appellate court:

Hedrick began working for Wolfe in October, 2010. On May 26, 2012, Hedrick approached the General Sales Manager, Jason Brink (“Brink”), about his live-in girlfriend’s desire to purchase a Honda. Brink quoted Hedrick a price that was about $600 above that car’s normal price point. Hedrick asked why the price was higher and Brink replied that “it is what it is; you have to pay it.” Following this, Hedrick and his girlfriend shopped around and received a quote from another Honda dealer that was $1,000 below the price that Hedrick received from Brink. Hedrick’s girlfriend then purchased the car from the competing Honda dealer. On June 1, 2012, Brink asked Hedrick whether his girlfriend had purchased the Honda elsewhere and Hedrick confirmed that she did. Later that night, Brink informed Hedrick that he was terminated, stating “[a]s your employer, I can’t have somebody work for me who bought a car somewhere else, so I have to let you go.”

Following his termination, Hedrick submitted a written request for a service letter. Wolfe subsequently issued Hedrick a letter that stated in part:

We do, however, fully expect our employees and members of their household to purchase new Honda vehicles from our dealership … Based on the fact that you or the person with whom you live as husband and wife … purchased a new Honda Accord SE from a direct competitor on or about mid-late May without giving the Company the opportunity to meet the price quoted, we made the decision to terminate the employment relationship …

The odious circumstances are provided by Hedrick v. Jay Wolfe Imports I, LLC, 404 S.W.3d 454, 456 (Mo. App. W.D. 2013).

The court rejects a creative claim that the circumstances fit into a public policy exception to at-will employment:

Hedrick contends that Missouri has a clear public policy of allowing citizens to freely conduct business and that by patronizing his employer’s competitor for a better price in purchasing a Honda, he and his live-in girlfriend acted in accordance with a public policy that Missouri encourages. He asserts that his termination falls under the public policy exception because he was terminated for acting in accordance with public policy. We disagree.

Id. at 458.

Let’s see if we can find an alternative way to frame the claim, shall we?

More after the break …

This author would try to characterize the facts as follows, if they were amenable to that characterization:

A sales manager quotes a prospective customer a price. In response to an inquiry as to the pricing (the other side of the transaction is, one would expect, reasonably well-informed about market prices, noting it was allegedly $600 above normal pricing), the sales manager allegedly states, “it is what it is; you have to pay it.”

I suppose the meaning of this reply is an interpretative matter for a fact finder.  However, it would seem to your author that it is to be understood as a statement as to a reservation price.  Why is that relevant?  Well, it appears the seller in litigation takes the position that was not accurate–that the firm had not determined it would not sell below the quoted above-market price, having written that the employee allegedly was terminated “without giving the Company the opportunity to meet the price quoted”.

What’s the claim?  Why is this not a false statement of fact made in connection with the offer of goods for sale for personal, family or household purposes (Mo. Rev. Stat. 407.025.1)? Certainly it is not the case that mental state cannot be a “fact” for this type of purpose, as jurisdictions often hold that promissory fraud–making a contractual promise to perform, but at the time not intending to perform–can be actionable.

Reservation Price

One may see commentators’ statements that affirmative misstatements of reservation price are not actionable in a typical commercial context.  It is not clear to this why this should be the case.  One supposes that often proof of a misstatement as to this matter will be unavailable.  If the party is an individual, one could expect the truth may well not be revealed merely by questioning of the party, unless there had been some inconvenient communication.

However, a number of cases recognized this kind of misstatement as actionable.  Reflecting the need for actual evidence, this kind of circumstance may be proven where there is an inconsistency between information communicated from a principal to an agent, and the information communicated from the agent to a third party.

A number of cases hold a misstatement of a reservation price can be actionable.   One is  Booker v. Pelkey, 180 N.W. 132 (Wisc. 1920), which states:

The appellants’ counsel also rely on their claim that false representations by which plaintiff was induced to pay $2,000 more than was asked or wanted by the owner, and that he would not take less than that amount, were not actionable. Although in other states there is authority for this contention, we cannot agree to it. Such misrepresentations are not mere statements of opinion, but relate to facts known to defendants, and unknown to the plaintiff. They are statements well calculated to influence a buyer, and on which he has a right to rely. The rule that such misrepresentations are actionable was declared by this court in a recent case.

Additional supporting authority includes the following: Lear v. Bawden, 225 P. 831 (Colo. 1924); Dunshee v. Novotny, 233 P. 1114 (Colo. 1925); Stevens v. Reilly, 156 P. 157 (Okla. 1919) (cited with approval inBeavers v. Lamplighters Realty, Inc., 556 P.2d 1328 (Okla. App. 1976)); Hokanson v. Oatman, 131 N.W. 111, (Mich. 1911) (cited with approval in Harper v. Adametz, 113 A.2d 136 (Conn. 1955)) (citing with approval Kice v. Porter, 53 S.W. 285 (Ky. App. 1901); and Kice v. Porter 61 S.W. 266 (Ky. App. 1899); (Kice was subsequently limited by Ripy v. Cronan, 115 S.W. 791 (Ky. App. 1909), to circumstances where the broker’s fraud also induced the plaintiff not to make further inquiry).

There is significant contra authority, such as Restatement (Second) of Agency § 348, McLennan v. Investment Exch. Co., 156 S.W. 730 (Mo. App. 1913) (rejecting Hokanson and Kice); Huttig v. Nessy, 130 So. 605 (Fla. 1930) (rejecting Hokanson).

A plodder’s approach might be something like saying there is not a lot of authority finding misstatements of reservation price actionable.  And, since there must be many misstatements as to that, a court should follow the pack, like a lemming.

A more intelligent approach is to ask which of these two approaches is better?  Well, one would ask whether there is a societal benefit for misstatements as to reservation price?  Why should the law be solicitous of those who seek to convince a counterparty with false statements?  The trend in the common law since Booker increasingly allows one to bring a claim based on statements that may not relied-upon often.  The Restatement (Second) of Torts § 538(2) includes in material statements ones where the speaker has reason to know the other is likely to regard as important in deciding how to proceed, although a reasonable person would not.

Significantly, transactions covered by the MMPA are subject to a duty of good faith in formation/negotiation, unlike the common law of contracts, where the duty of good faith does not arise until the contract has been formed.  So, were one to find the distinction is that misstatements of reservation price in negotiation are not available absent some duty beyond that “trodden by the crowd” (Meinhard v. Salmon), the MMPA imposes such a higher duty (interestingly, similar to the informational duties among partners under the RUPA).

Now, there is one further problem.  A private cause of action requires damage.

Damage

The Missouri act requires a private plaintiff prove damage (… and thereby suffers an ascertainable loss of money or property …. Mo. Rev. Stat. 407.025.1).  In this author’s view, that is unfortunate.  Many of the prohibited acts will arise before a contract is formed–and may result in a contract not being formed.  In such a case, damages may be particularly difficult to prove.  Simply leaving it to the Attorney General to police deceptive practices that do not result in provable damage will not result in elimination of these activities, given other priorities.  So, we have statutory proscriptions that can be often flouted–an awkward state of affairs, and one that could be fixed by providing small statutory minimum damages.

Be that as it may, the question arises whether the employee could prove damage.  This author cannot tell what facts could have been proved in a trial.

There may be damage in the form of travel costs to arrange to purchase the car from a different dealership when, had the initial communication from the dealership not disclaimed the possibility of lower pricing, a deal would have been struck at the employer/dealer.  The actual damage there would likely be minimal, though perhaps it would have been enough to allow a court to consider punitive damages.

One matter that comes to this author’s mind is whether one could characterize the loss of employment as damage.  Loss of profit on some other transaction is, of course, typically cognizable for breach of contract where foreseeable.  Marsu, B.V. v. Walt Disney Co., 185 F.3d 932 (9th Cir. 1999), involving recovery of very poorly estimated lost profits on ancillary transactions, is a case this author often shares with his students.

As it turns out, at this time this author has just finished discussing with his students D & G Stout, Inc. v. Bacardi Imports, Inc., 923 F.2d 566 (7th Cir. 1991), where a court holds a claim of promissory estoppel is adequately alleged in connection with a false promise made by an obligor under an at-will contract.

With more thought, one may instead try to claim damage in the form of termination of the at-will employment relationship.  The point would be that the prospective buyer relied on the statement (re. reservation price) and that resulted in the employee taking acts that resulted in termination of the at will employment.  In an ordinary case, this would not be the kind of injury recoverable in contract, because it would not be foreseeable.  But more thought may be warranted than initially apparent–let’s not be a plodder, shall we.

One might claim that

  • what appears to be a statement of reservation price was inconsistent with the actual mental state revealed in the subsequent letter;
  • that the reservation price was materially above-market; and
  • that any difference between the allegedly above-market offer and the actual market price is something that would have been known by the prospective buyer.

Could one find to be in the contemplation of the dealer/employer that an employee would buy from another dealer where the dealer is sticking to an allegedly above-market price?  The sales manager asked a week later whether a car was purchased elsewhere.  So, it would seem likely to have been in the contemplation of both parties at the time of breach.  See Hadley v. Baxendale.

The dealership’s brief reports that, in short order following notice of termination, the dealership wrote to the then-former employee:

We do, however, fully expect our employees and members of their household to purchase new Honda vehicles from our dealership ….

Perhaps this “full[]” expectation was recently formed.  Alternatively, the expectation may have been long-lived, and present at the time the “you have to pay it” statement was made.  So, your author wonders whether this termination was not in fact within the contemplation of the former employer as a probable result of reliance on what could have appeared to be a statement of reservation price.

Tedious Quibble

Of course, one might quibble that the ordinary statement of foreseeability contemplates both parties are aware of the possible consequences.  Here we have focused on only one party.  A thoughtful professional does not parse an opinion like computer code.  Rather, one focuses on the purposes.  It is simply not the typical case where the defendant is aware of remote consequences and the ultimately injured party is not.  Why is that relevant?  We need to focus on the reason for the principle.  The reason for the principle of Hadley is so that the party who would bear the burden has the opportunity to reflect that possible consequence in deciding how to proceed.  Hence, for example, awareness is assessed as of time of contract formation.  Knowledge by the defendant satisfies the underlying rationale.

Mills v. Wyman

 

Parker, C.J., authored these words in deciding Mills v. Wyman, 20 Mass 207 (1825):

General rules of law established for the protection and security of honest and fair-minded men, who may inconsiderately make promises without any equivalent, will sometimes screen men of a different character from engagements which they are bound in foro conscientiae to perform. This is a defect inherent in all human systems of legislation. The rule that a mere verbal promise, without any consideration, cannot be enforced by action, is universal in its application, and cannot be departed from to suit particular cases in which a refusal to perform such a promise may be disgraceful.

The promise declared on in this case appears to have been made without any legal consideration. The kindness and services towards the sick son of the defendant were not bestowed at his request….  The defendant, his father, on being informed of this event, influenced by a transient feeling of gratitude, promises in writing to pay the plaintiff for the expenses he had incurred. But he has determined to break this promise, and is willing to have his case appear on record as a strong example of particular injustice sometimes necessarily resulting from the operation of general rules.

Perhaps we have been provided another illustration where the need to develop a legal framework produces detailed principles that inevitably allow some dubious conduct to slip through the gaps.