Whirlpool Corp. was ordered to pay $581 Million, nearly all of it in punitive damages, after an Alabama state court jury found that two borrowers were misled and over-charged on loans to buy satellite-TV dishes.

Whirlpool, an appliance maker that until last year owned a large finance company, said it would challenge the verdict.

The decision, reached in Hale County court, is believed to be the largest punitive damage award in Alabama, a state whose courts are among the most widely feared by corporate defendants.  The obscure case seems certain to gain prominence in the national debate over punitive damages and big jury awards.

Thought the size of the award is stunning, and almost certain to be reduced by the trial court or an appeals court, a decision against Whirlpool in the case isn’t all that surprising.  Seven other major lenders, including Household International Inc. and Bank One Corp., in recent years settled satellite-dish-loan cases in Alabama for millions of dollars and ended those loan programs in the state.

During the early-to-mid 1990s, hundreds of thousands of satellite dishes were sold across rural America, where cable-TV wire has yet to reach, with loans provided by big consumer-finance companies.  Door-to-door salesmen for dish retailers, in many cases, misrepresented terms of the financing and preyed on poorer and less educated consumers, according to state attorneys general, consumer advocates and lawyers for some borrowers.

Whirlpool, Benton Harbor, Mich., got into the dish-loan business because its finance unit provided loan programs to appliance and home electronics retailers.  Last year it sold the finance unit, which had about $2 billion in assets, to Transamerica Corp., but the potential legal liability of this case remained with Whirlpool, the company said.

A Whirlpool spokesman said he believes the company ceased making dish loans sometime before the sale of the finance unit, but wasn’t sure precisely when that was.

Whirlpool shares closed up $1.0625 at $70 in New York Stock Exchange composite trading yesterday.

Whirlpool called the case “a gross mis-carriage of justice” and said it did nothing wrong.  Tom Methvin, the Montgomery, Ala., lawyer for the plaintiffs, disagreed.  “The jury system in Alabama is working fine,” he said.  “This is a  large verdict and was designed to call attention to a problem.  Ultimately, it will be reduced but the message will remain.”

According to a lawyer for Whirlpool in Birmingham, Ala., Robert Spotswood, plaintiffs Barbara Carlisle and her parents, George and Velma Merriweather, all of Greensboro, Ala., separately bought 18-inch satellite dishes through a retailer, Gulf Coast Electronics, in 1995 and both parties financed their $1,124 purchases through Whirlpool.

The buyers alleged they were misled about the duration of the loans.  They said they were told by the retailer that they would pay $34 a month for just 36 months.  But, according to Mr. Spotswood, at that minimum payment and the 21.9% interest rate being charged it would take 52 months to repay the loan.

The loans were made on a credit-card program, using revolving or open-ended credit.  Like a Visa or MasterCard, where the account balance may go up and down depending on purchases and payments, it’s impossible to predict the number of payments on a revolving loan.

Opponents of the dish-loan programs say they should have been installment, or closed-end, loans of a fixed term, which require under the federal Truth in Lending Act prominent disclosure of the actual number of payments.  Relatively few dish buyers used the credit-card accounts for any other purchase, making it specious open-ended credit, opponents of the programs say.

After a three-day trial, and about two hours of deliberation, the jury awarded the plaintiffs $975,000 in compensatory damages and $580 million in punitive damages.

For most of the dish lenders, the programs were big money losers because many borrowers refused to pay.  The programs were busiest when the seven-foot-wide dishes were popular, costing between $2,000 and $5,000.  When the 18-inchers hit the market, costing as little as $199, the big ones were seen as obsolete and many borrowers stopped paying.  Lenders didn’t bother to repossess the dishes because they were essentially worthless.

Most of the litigation and state investigations involving satellite-dish loans has been wrapped up.

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