Tuesday, 31 August 2004 17:00

Caliber agrees to $5.8M settlement in fraud case

For $5.8 million, Caliber Collision Centers (Caliber) has resolved a consumer fraud lawsuit filed in California and agreed to disciplinary actions initiated by the state Department of Consumer Affairs (DCA) that alleged Caliber billed customers for parts and services that were not provided. 

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Lockyer

Separately, the state Bureau of Automotive Repair (BAR), a division of DCA, reached a $500,000 settlement to resolve its disciplinary actions against Caliber. The BAR launched those proceedings in 2003.

"Caliber violated the trust of thousands of consumers who came to its shops to get their cars and trucks fixed," said Bill Lockyer, California Attorney General. "This settlement will make whole defrauded victims, and ensure Caliber reforms its business practices and serves all customers honestly and fairly."

Caliber denies wrongdoing
In agreeing to settle, Caliber did not admit to any intentional wrongdoing. According to court documents "the parties have consented to the entry of this Judgment for the purposes of settlement only, without this Judgment constituting evidence against or any admission by any party, and without trial of any issue of fact or law, and without this Judgment constituting any admission of liability or wrongdoing by Defendants or any other party."

When asked why Caliber decided to settle, Matthew Ohrnstein, CEO, responded that "Settling is in the best interest of our employees and clients, and settling enables the company to focus on the future."

Caliber, while declining individual interviews, issued the following written statement posted on its web site:

"Caliber is pleased to put this matter behind the company. By entering into this settlement, we will be able to focus on what we do best - provide high quality, high integrity automotive repair services that are backed by one of the best warranties in the industry.

"We are pleased to enter into a new chapter in our dealings with our regulator, and to move forward into a new period of growth for our business.

"Caliber has one of the highest consumer satisfaction ratings in the industry because we provide great service, have wonderful employees and a sound business model.

With this settlement behind us, Caliber expects to continue growing in California, servicing more cars, opening new automotive repair shops and hiring more employees."

Background of the suit

Lockyer filed in Orange County Superior Court a $5.3 million settlement of a consumer protection lawsuit brought against Caliber in December 2003 by Lockyer and Fresno County District Attorney Elizabeth A. Egan. Superior Court Judge Michael Brenner approved the settlement.

Settlement terms

To settle the consumer fraud lawsuit, Caliber will pay $3.3 million in civil penalties and $2 million to cover the costs of investigating and prosecuting the case, and monitoring Caliber's compliance with the settlement. Additionally, Caliber will provide free repairs to victims identified by BAR, and thousands of other eligible customers who had their vehicles repaired at Caliber shops between August 1, 2002 and July 31, 2004.

$500K settlement with BAR

In a separate settlement with the BAR, Caliber will pay $500,000 to cover BAR's investigation expenses, and all 38 Caliber shops in California will be placed on probation for three years. In addition, 19 of the 38 shops will be suspended from operating for a period of one to five days.

"The mission of the BAR is to provide protection, education and assistance to the consumers of this state and the automotive industry," said DCA Director Charlene Zettel. "This agreement with Caliber reinforces our dedication to this mission."

The suspended shops and penalties include:

Miramar, Mission Viejo, Oceanside and San Juan Capistrano, one day; Chino, El Cajon, Escondido, Fresno, Los Angeles (Wilcox and La Cienega), Murrieta, Redlands, Rialto, Riverside, San Bernardino, San Diego (Daggett), San Marcos and Walnut, two days; and Costa Mesa, five days.

Additionally, Caliber must provide its Costa Mesa employees 24 hours of training. During the three-year probation period, the BAR settlement requires Caliber to allow BAR to conduct random inspections of vehicles undergoing repairs.

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Under the settlement of Lockyer's lawsuit, consumers eligible for restitution will fall into two categories. The first includes approximately 100 customers identified by BAR as victims of fraudulent practices alleged in the lawsuit. For those customers, Caliber either will repair the vehicle free of charge, or, if the customer chooses to take the vehicle to another shop, pay for those repairs. If consumers in this category already have had their vehicles repaired at another shop, Caliber will provide full reimbursement of those costs.

The second category of customers eligible for restitution includes about 56,000 consumers who had their cars repaired at Caliber shops between August 1, 2002 and July 31, 2004, and paid more than $1,000 for the repairs.

Caliber must give free inspection

Caliber must send each customer in this category a letter notifying them they are entitled to a free vehicle inspection at a Caliber shop. All such consumers will receive the notification letter within 170 days. If the inspection reveals the repairs failed to conform to accepted trade standards, or to Caliber's initial estimate and final invoice, Caliber must repair the vehicle again at no cost to the consumer.

Consumers in the second category who have their vehicles re-repaired by Caliber can ask BAR to inspect those repairs. If BAR conducts an inspection and deems the repairs deficient, Caliber must repair the vehicle again free of charge.

Lockyer's consumer fraud lawsuit alleged Caliber violated laws prohibiting unfair business practices, and false or deceptive statements.

Specifically, the complaint alleged Caliber invoiced and accepted payment for repairs or parts that were not provided; told consumers parts were new when they were not; misrepresented the quality of parts and repairs; told consumers a part or repair was needed when it was not; performed additional repairs without obtaining prior authorization from customers; departed from accepted trade standards for repair work without customers' approval; and performed work prior to providing customers a written estimate for parts and labor. The settlement of Lockyer's lawsuit includes an injunction that prohibits Caliber from engaging in these alleged business practices.

Besides Caliber and its parent, Caliber Bodyworks, Inc., the other defendant companies in Lockyer's complaint all are wholly-owned Caliber subsidiaries. They include D.R. Long, LTD, Chapparone Auto Body of Miramar, San Marcos Auto Body, Inc., Richard J. Kellejian, Inc., Corwin Industries and F&R Ventures, all doing business as Caliber in Southern and Central California. Certain executives of the businesses also were named as defendants.

 

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