Skip to main content
EVENT TRACKER
Keep track of rescheduled, canceled industry events with our COVID-affected event tracker - Powered by Snap Finance
Close
Sister Publication Links
  • Rubber & Plastics News
  • European Rubber Journal
tb-logo
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • OPINION
    • CORONAVIRUS
    • AUTO INDUSTRY
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • FACTORY FIXES
    • GOVERNMENT & LAW
    • INTERNATIONAL
    • MOTOR SPORTS
    • NEW PRODUCTS
    • RETAIL TIRES
    • SERVICE ZONE
    • SEMA/AAPEX
    • SMALL BUSINESS
    • TIRE MAKERS
    • SPONSORED CONTENT
    • New round of Paycheck Protection Program funding opens
      Vaccine may usher sense of normalcy
      Cover-up: More retailers requiring face masks to curb COVID
      USW alleges COVID-19 violations at Kumho plant
    • Conti starts production of ‘HL' load index tires for select OE customers
      GM banking on 'BrightDrop' EV to build commercial van business
      Stengel promoted to president of NAPA parent Genuine Parts Co.
      Former auto exec Tyrone Jordan joins Cooper board of directors
    • Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      COVID-19 takes huge bite out of European tire markets in 2020 —ETRMA
      U.K. race series extends contract with Goodyear through 2026
      New round of Paycheck Protection Program funding opens
    • Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Evolving delivery trends good for CV tire sector — Cooper exec
      Conti adding light-duty products to General Tire OTR tire lineup
      GM banking on 'BrightDrop' EV to build commercial van business
    • New stimulus package fixes PPP loan confusion
      USW opposes Taiwan tire makers' dumping counterproposal
      New round of Paycheck Protection Program funding opens
      Taiwan tire makers propose settlement of import duties case
    • OK Tire adds Cooper, GT Radial passenger tires, Michelin, BFGoodrich commercial tires
      Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Global OTR Library adds wheels, rims to portfolio
      Conti starts production of ‘HL' load index tires for select OE customers
    • U.K. race series extends contract with Goodyear through 2026
      Goodyear Racing staying on track
      General Tire Canada renews sponsorship deal with Raceline Network
      Indy Autonomous Challenge: High-speed, head-to-head, no drivers
    • Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Hankook doubles size range of Ventus V2 all-season UHP line
      Conti adding light-duty products to General Tire OTR tire lineup
      Goodyear-brand belts back on the market under licensing arrangement
    • OK Tire adds Cooper, GT Radial passenger tires, Michelin, BFGoodrich commercial tires
      Wholesaler K&M Tire hosts virtual dealer conference
      Hankook doubles size range of Ventus V2 all-season UHP line
      New stimulus package fixes PPP loan confusion
    • AMRA to host 5 educational webinars in Feb., March
      Shocks/struts maker KYB unveils video training series
      Bauer Built completes expansion at Neb. facility
      Marinucci: Basic steps to email efficiency
    • WTC hosting webinar Jan. 20 on load-capacity standards
      Denver's Brian Sump named AAPEX Shop Owner of the Year
      DUB, TIS Wheels founder Myles Kovacs is SEMA Person of the Year
      AAPEX: Using social media to promote your business
    • New stimulus package fixes PPP loan confusion
      Vaccine may usher sense of normalcy
      2020 Review: PPP loans give boost to small businesses
      Latest COVID relief bill includes $325B in small-business support
    • Linglong planning U.S. launch of 'Hubtrac' truck tire brand in 2021
      Papadimitriou to leave position with Pirelli after six months on job
      SRNA increasing prices on Dunlop motorcycle tires
      Sentury Tire hires Martin Winter as global OE technical director
    • Sponsored By Yokohama Tire Company
      7 questions to ask consumers when they need tires for a crossover SUV
      Sponsored By Yokohama Tire Company
      Stocking Tires for Crossover SUVs
  • SHOP FLOOR
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Video: Balancing Tire
      Safety tips for wheel balancing
      An introduction to wheel balancing
      Wheel weights: Balancing form with function
    • Video: Demounting
      Tire changer types, tips and trends
      How to clear rim rust and corrosion
      An introduction to demounting, mounting and inflation
    • Video: Safety
      Customers
      Considerations for shop safety policies
      Introduction: Creating a culture of safety
    • Video: Tire Repair
      Essential tools, materials and equipment for tire repair
      An introduction to tire repair
      How to properly patch a puncture
    • Video: TMPS Service
      The life-saving work of TPMS
      An introduction to TPMS service
      The importance of proper relearn procedures
    • Video: Training
      Internship ideas to attract tech talent
      Choosing the right auto service tech school
      Intro: Finding and training technicians
    • Video:Vehicle Lifting
      The gravity of proper lift points
      Safety essentials when using jack stands
      An introduction to lifts and lift safety
    • Video: Wheel Torque
      The importance of torque specifications
      Introduction to proper wheel installation
      Torque check and recheck recommendations
  • Multimedia
    • VIDEOS
    • PHOTOS
    • PODCASTS
  • Events
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
  • Data
    • DATA STORE
  • Resources
    • DIRECTORY
    • CLASSIFIEDS
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
September 05, 1994 02:00 AM

KMART FACES CLASS ACTION LAWSUIT: CHARGES OF SYSTEMATIC AUTO REPAIR FRAUD COULD COST RETAILER BILLIONS

  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    TULSA, Okla.-A lawsuit charging Kmart Corp. with deliberately defrauding automotive service customers across the country has been granted class action status by an Oklahoma judge. If successful, the suit could cost the nation's second-largest retailer billions of dollars in damages.

    Tulsa County District Judge Ronald Shaffer entered an order on Aug. 26 certifying a national class action on the basis of allegations by a pair of Oklahoma women and a Texas man that Kmart ``engaged in a systematic scheme of fraud relating to the sale of automotive repairs and services'' in its more than 1,000 automotive repair centers nationwide.

    Kmart has more than 2,500 retail stores nationwide, but not all provide auto service.

    Included in the class action are all businesses or consumers who purchased vehicle repairs-including parts and services-from Kmart's automotive division from July 7, 1988, to the Aug. 26 date.

    During that period, Kmart's repair centers averaged nearly $400 million in sales to more than seven million customers annually, the suit said.

    The giant retailer, based in Troy, Mich., reported total sales in excess of $35 billion for 1992.

    Last November, the U.S. District Court in Dallas consolidated into one action a suit filed July 9, 1993, against Kmart by a Tulsa, Okla., attorney, and a similar one filed in Austin, Texas.

    The class action also named Joseph E. Antonini, president, CEO and chairman of Kmart, charging that he directed a ``corporate-wide fraudulent scheme'' that included pay incentives and a quota system for mechanics.

    A spokeswoman said Kmart believes ``the trial court's decision is in error and we plan to immediately ask the Oklahoma Supreme Court to review the case.''

    Shawn Kahle, Kmart's divisional vice president for corporate and international communications, emphasized that the lower court's decision ``has nothing to do with whether or not there was any wrongdoing on Kmart's behalf.''

    She said the company ``has never had any sort of significant problems in our auto service areas, and we have very specific and longstanding company policies that would forbid any kind of dishonest behavior.''

    Kmart is hoping the state Supreme Court will rule that the case has no merit, she added.

    Court papers identified the original plaintiffs as Tulsa residents Lorine Bunch and Patty Walker, and Ron Jones of Austin, Texas.

    According to the lawsuit, Ms. Bunch brought her auto to a Tulsa Kmart auto service center because of a water leak and was told the car needed new hoses and a new water pump.

    She was charged $227.04 for installation of a water pump she alleges was never installed.

    A Kmart repair center allegedly told Ms. Walker her car's brakes were in such bad condition they could cause her to have an accident. She authorized a brake job.

    She claims a Kmart mechanic called later saying her car also needed new struts and shocks. Because she had a warranty on the struts and shocks from a Goodyear shop, she refused the Kmart mechanic's recommendation.

    Instead, she returned to the Goodyear store where, she said, the struts and shocks were again inspected and found to be in perfect condition.

    Mr. Jones, who operates Handy Andy Janitorial, claims he had in excess of 16 business vehicles serviced and repaired by Kmart, at a cost of more than $10,000. The suit alleges he was overcharged as well as charged for unnecessary parts and services.

    Now that the suit has cleared the class action hurdle, an attorney handling the case for the plaintiffs said he will submit to the Tulsa court a plan to notify the public of the class action.

    Within two weeks, James Clinton Garland, counsel to the Tulsa law firm Frasier & Frasier, said he expects approval to begin advertising the suit in 17 of the country's largest newspapers.

    He also will mail notices to thousands of individual Kmart auto service customers and fleet accounts he has been able to identify from an extensive search of Kmart corporate records.

    The newspaper ads, he said, ``will bring out literally hundreds of thousands of people.''

    Mr. Garland also has a motion pending with the court to force Kmart to produce numerous documents he said the retailer has refused to provide.

    ``They've got a hell of a lot to hide,'' Mr. Garland told TIRE BUSINESS, ``and I can't much blame them for not wanting to give (the documents) to us. But they're going to, one way or another.''

    Among the almost 4 million documents Mr. Garland has already obtained from Kmart-and he is seeking approximately 80 million more, including computer records-are internal auditors' reports to Kmart's management.

    He claims those reports, which cover only a two- to three-year period from a sampling of Kmart stores, show that ``some 26 percent of their stores were consistently overcharging auto service customers. We're convinced it's even greater than that.

    ``Kmart's own auditors were bringing it to the board's attention, and they didn't do a damn thing about it. They've analyzed their own thefts internally and encouraged them. But we're going to undress (them) now.''

    Although Kmart attempted to retrieve those reports, Mr. Garland said a judge in Dallas recently ruled that the documents are admissable as evidence.

    Meanwhile, the attorney said the discovery process continues.

    For months he and a team have sifted through a staggering amount of material from Kmart, while attempting to analyze service data from at least 101 Kmart auto centers across the nation.

    He said he has identified tens of thousands of consumers who have been ``ripped off'' by Kmart.

    The service fraud allegedly falls into three categories:

    Basic overcharges-``Sometimes the labor rates that are charged, depending on how far behind in their quotas Kmart's mechanics are, may be 300 to 400 percent of what they base their labor charges on,'' he said.

    No specifications listed on invoices-``Almost universally'' Kmart does not put specifications on invoices for what is needed on a vehicle before a customer's order is taken, he charged. ``They do not do that because, if they sell a full brake job that includes all of the (parts) connected to the repair, they might just put brake shoes on and charge for everything else.''

    Work billed but not done-``We've discovered many, many instances where Kmart sells items that they don't even put on a car,'' he said, ``but still charge the customer as if the work was done.''

    The attorney claimed he has also uncovered what he called one of Kmart's ``favorite notations'' on its auto service invoices: a nondescript code listed as CAR.

    That stands for ``clean and replace,'' he said-``make the old part look nice and shiny and put it back on the vehicle,'' but charge the customer for a new part.

    Mr. Garland said Kmart mechanics admitted to him this situation has occurred. ``We have (interviewed) over 100 current Kmart employees and ex-employees who have laid it out for us like it is.

    ``We didn't contact a one of them. When they (heard about) the lawsuit, they contacted us from all over the country.''

    The litigation came about by chance, when the attorney took on the wrongful discharge case of a former 27-year Kmart employee who asserted he was pressured to quit after repeatedly complaining to the company about its auto repair practices.

    Mr. Garland's conservative estimate was that monetary damages against Kmart could easily reach at least $1.5 billion.

    The lawsuit seeks customer reimbursement for the costs and expenses of completing any repairs that may still be necessary on vehicles, as well as the refund to class members of all sums paid for unnecessary or inappropriate parts and services.

    It also asks for restitution for all amounts paid by the plaintiffs for repairs, together with interest from the date of payment for the services rendered.

    Mr. Garland anticipates the case will be tried next spring.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    tb-logo
    Reader Services
    • Contact Us
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber & Plastics News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Plastics News China
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • List Rental
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • OPINION
      • CORONAVIRUS
      • AUTO INDUSTRY
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • FACTORY FIXES
      • GOVERNMENT & LAW
      • INTERNATIONAL
      • MOTOR SPORTS
      • NEW PRODUCTS
      • RETAIL TIRES
      • SERVICE ZONE
      • SEMA/AAPEX
      • SMALL BUSINESS
      • TIRE MAKERS
      • SPONSORED CONTENT
    • SHOP FLOOR
      • BALANCING
      • DEMOUNTING
      • SAFETY
      • TIRE REPAIR
      • TPMS
      • TRAINING
      • VEHICLE LIFTING
      • WHEEL TORQUE
    • Multimedia
      • VIDEOS
      • PHOTOS
      • PODCASTS
    • Events
      • ASK THE EXPERT
      • LIVESTREAMS
      • WEBINARS
      • SEMA LIVESTREAMS
    • Data
      • DATA STORE
    • Resources
      • DIRECTORY
      • CLASSIFIEDS
    • ADVERTISE
    • DIGITAL EDITION