An award was handed down in the Jackson
County Circuit Court in Michigan for $2.9
million last month following a lawsuit
against Corrigan Oil Co. The lawsuit, filed
by plaintiffs C-BAM Enterprises, Inc., MTDC
Enterprises, Inc./Renco Transmissions, and
Malco Automatic Transmissions, Inc.
asserted that Corrigan Oil supplied them with
defective
transmission fluid.
And as a result of the defective
ATF, damage was done to the transmissions of
their customers.
Concern about the fluid was first realized in
2006 when the plaintiffs experienced an
inordinate number of repeated repairs and
warranty claims. Specifically, C-Bam
Enterprises (dba as Gattshalls Transmission),
reported it became concerned about the ATF
when a transmission required rebuilding only
weeks after a prior rebuild. In addition,
they noticed the fluid was discolored. C-Bam
had the ATF tested and found it had very high
levels of silicon and other contaminants.
Silicon is typically associated with such
abrasive materials as sand and dirt.
Laboratory testing by Renco and Malco found
similar results on the ATF it received from
Corrigan.
Corrigan was made aware of this concern by
the plaintiffs and reportedly indicated it had
heard similar complaints from other customers
and would investigate and respond to the
concerns.
Although Corrigan reportedly drafted a
letter on October 31, 2006 advising its
customers about the issue and of a recall on
the product, the letter was not sent. The
decision to take no further action was based
on discussions Corrigan had with its
management team and insurer AIG.
The plaintiff's lawsuit alleged that it had
installed the ATF in question in
approximately 650 cars and had to recall
close to 235. In addition, they incurred a
cost of $750,000 to rebuild the affected
transmissions.
Following one day of deliberation, a jury
concluded Corrigan was negligent in its
handling of the ATF and that its breach of
implied duties of fitness and merchantability
of the ATF resulted in the damages set forth
in the claim. As a result, it awarded the
plaintiff's $2.9 for direct damages,
lost profits and damage to the plaintiff's
reputation resulting from the negative
publicity it received.
Interestingly, the jury rejected Corrigan's
claims against its supplier of the ATF.
Based on JobbersWorld's read of the court
documents, we suspect this case is
not over. In fact, Corrigan Oil is
reportedly planning to file a motion
for a new trial. It will be interesting, and
certainly educational to see
where the buck
(and legal action)
stops in the supply chain, and why it stops
where it does in this case.
Moreover,
as this plays out, there may be plenty
to learn about what lubricant distributors
can do to avoid finding themselves in a
similar position. JobbersWorld will keep you
posted.
With regards to how the money awarded will be
allocated, the Judge says, "To me it
is a giant mess, and I'm concerned about it."
Click link below for more on this matter.
