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Thursday, 20 September 2012 22:49

Shop Owner Nets $3.4 Million in Paint Contract Lawsuit

In a two-year battle about waterborne paint and paint company contracts, Austin, TX, shop owner Richard Wood, 48, recently won a $3.7 million jury verdict against paint companies BASF and jobber FinishMaster, but the jury also found that he should pay damages for breach of contract.

Wood owns Richard’s Paint and Body Shop, which operates under the name Custom Car Crafters. Wood, who has been in business since 1984, has two shops, a 30,000 square-foot building on the north side of Austin and a 12,000 square-foot shop on the south side of town.

On Aug. 30, a federal jury unanimously found BASF and FinishMaster guilty of fraud and breach of warranty to paint supplied to Custom Car Crafters, awarding the shop punitive damages of $1.5 million from BASF and $750,000 from FinishMaster. Custom Car Crafter’s was also awarded $1.5 million in compensatory damages.


The legal troubles began in 2010 when the paint companies sued Custom Car Crafters for breach of a paint contract. Wood quickly countersued. The court also found that BASF suffered as a result of the shop’s breach of contract and they were awarded $176,000. Additionally, the jurors found that the body shop failed to prove that its failure to pay FinishMaster liquidated damages was excused, awarding $100,000 in damages to FinishMaster.

Custom Car Crafters will net $3.4 million.
At the heart of the matter is Wood’s claims that the BASF 90-line waterborne paint they sold the shop was “unfit and defective” in Austin’s heat and humidity and that instructions for easy-to-use standardized mixing ratio of 2:1 was inaccurate.

Custom Car Crafters was obliged to follow the paint instructions to maintain the BASF and FinishMaster warranty on cars they painted, but Wood said in the Texas climate, the paint would not dry in a timely fashion or sometimes not at all. In court documents, the paint was described as resulting in “seediness, bubbling, fish eyes, side casting, dye back and delamination, among other problems.” Wood said he notified BASF and FinishMaster in a timely fashion about the defective paint and instructions and of the severe impact these defects were having on his business. In response, BASF and FinishMaster blamed the problems on shop employees and their application of the paint. So Wood requested that the BASF send himself and another employee, along with a FinishMaster rep, to a training course.

According to court documents, while at the training course in California, a BASF instructor informed Wood that BASF and FinishMaster’s training and instructions were inappropriate for the Texas heat and humidity and that no proper manual existed for that region. The BASF instructor also told Wood that BASF and FinishMaster failed to sell him the correct supplies and additives. After a year of struggling with the paint, Wood claims the companies admitted there was not a set 2:1 formula for the paint. After repeated failed efforts, the shop acted to mitigate its damages by terminating its contract, halting use of the BASF and FinishMaster Paint, and obtaining the paint that was necessary for the shop to conduct its business. Wood said he tried to return the paint and materials back to the paint companies but that they refused to collect them.
Wood noted that as a result of the defective paint and its instructions, his shops had to repaint 565 vehicles and that it incurred costs in excess of $100,000 for labor and materials and another $100,00 for rental cars during repainting. Wood expects these costs to increase as additional vehicles are returned for repainting under their lifetime warranties.

“I did not track most of the repaints for the first three to four months due to the fact that BASF blamed the painters. I also was already spraying [another] water base for over four years and had the same painters with no problem,” Wood said.

He also said he spent $500,000 on paint materials, but only collected $320,000 from insurance companies for reimbursement of paint materials. In addition, the shops had to turn down other work in order to repaint the cars. To make matters worse, three of his painters quit due to the paint companies ‘blame game’ and the number of re-dos required. Wood also claims the defective paint and instructions harmed his shops’ highly valuable reputation and relationships with insurance carriers.
Wood said the defective paint caused his business to suffer from loss of earnings and profits, loss of earning capacity, damage to reputation, loss of staff, out-of-pocket costs and costs of storing the paint when the companies refused to take it back.

Wood also said BASF and FinishMaster told him if he switched to 90-line he could end his previous PPG paint contract without penalty. Wood said he still had to pay $73,000 to PPG.

In its suit, BASF and FinishMaster said the shop failed to purchase BASF products for five years as part of a contract in which the shop received $320,000 cash from BASF and FinishMaster.

According to co-counsel Broadus Spivey, the court has not yet entered a judgment on the verdict, which means the judge orders the jury’s verdict into judgment. “I am sure there will be an appeal. We are ready for that too,” Spivey said.

“It is a privilege to represent Richard Wood, who worked so hard to build his business and his reputation,” said co-counsel Karen Burgess. “The jury system worked for justice.”

“I feel justice was served,” Wood said. “We won because there was a legitimate problem. They knew they had a problem and they tried to cover it up.”

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