In February 1995, a telemarketer from Gulf Coast Electronics contacted Barbara Carlisle and offered here an 18 inch RCA satellite dish with no down payment and installation costs built into the monthly fee. The telemarketer allegedly told Carlisle her payments would be $34 per month for three years. That totaled about $1,200 roughly $1,000 more than the price retail stores were charging for the same dish.
Gulf Coast arranged credit card financing for Carlisle through Whirlpool Financial National Bank at the annual percentage rate of 22 percent. Under the Federal Truth in Lending Act, 15 U.S.C. 1601 et seq., a lender who uses open-ended credit financing instead of a more traditional method-for example, an installment loan-is not required to disclose the number of payments or the total cost of the product in writing. Allegedly using this statute to conceal their activities, Gulf Coast and Whirlpool actually signed Carlisle up for five years of payments without telling her-increasing the cost of the dish to approximately $2,000, not including the 22 percent interest.
Six months after Carlisle purchased the dish, her parents bought one and were signed up for the same financing arrangement by Gulf Coast. Her father, who has a third grade education, reportedly did not read the sales agreement or know what he was signing.
The three did not suspect anything was wrong until they heard several companies were being sued for fraudulent sales of satellite dishes in Alabama. They contacted ATLA member John Gibbs of Demopolis, Alabama who suggested they contact fellow ATLA members Thomas Methvin, LaBarron N. Boone, and C. Lance Gould, of Montgomery, Alabama, to file suit against Whirlpool Financial. James H. Seale III of Greensboro, Alabama, also a member of ATLA, helped with jury selection.
Methvin and his Colleagues represent 49 other Alabama plaintiffs in lawsuits involving sales of satellite dishes. Whirlpool was one of eight finance companies engaged in fraudulent sales practice aimed at elderly, poor, and illiterate consumers, according to Methvin. Seven of these companies have settled claims against them and stopped operations in Alabama. Whirlpool financial did not.
“Whirlpool made up to $8 Million from the financing scheme,” said Methvin. “Even if a few customers managed to file lawsuits, settling for a few thousand dollars was an acceptable business cost.”
At trial, Whirlpool argued that it knew nothing about the misrepresentations made by Gulf Coast employees and that it was not responsible for their actions. Methvin countered that Gulf Coast employees served as Whirlpool’s agents. A former employee of another retailer that used Whirlpool’s financing program testified that he had trained other salespeople to tell potential buyers that payments would last only three years. In fact, many buyers took as long as eight years to pay their debt. The former employee-who quit when he learned that he was training people to lie-told Whirlpool about the problem. The company did nothing. A whirlpool official testified that the company received thousands of complaints each week about its credit card program.
Methvin, who had asked the jury for $6.9 million, was surprised when it awarded his clients $581 million, including $580 million punitive damages. Acknowledging that this amount will probably be drastically reduced on appeal, Methvin said the jurors were aware of this but “wanted to send a message to corporate America. Alabama has become a dumping ground for flim-flam artists. The jurors wanted this to stop.”
Alabama has since instituted a punitive damages cap. In personal injury cases, punitive damages are limited to three times the compensatory damage award or $1.5 million, whichever is greater. In noninjury cases against large businesses, punitive damages are capped at three times the amount of the compensatory damages or $500,000, whichever is greater. Such legislation, says Methvin, means that there will be “less consumer protection and more cheating of the most vulnerable people in our society.”