A February 2022 decision by the Montana Supreme Court upheld a Summary Judgment Order by Hon. Mike Menahan, First Judicial District Judge in Helena, in favor of Lithia Motors, dismissing a consumer lawsuit brought over the installation of a replacement engine in an 8-year-old Subaru Legacy with 100,000 miles on the odometer.
On Sept. 12, 2017, Lee purchased a used 2008 Subaru Legacy from Lithia. At the time of purchase, the vehicle was eight years old and had almost 100,000 miles. Lee also purchased a two-year extended service agreement on the vehicle from First Extended Service Corporation (FESC) to cover the cost of any unexpected repairs to the vehicle. In November 2017, Lee began experiencing problems with the engine. He took the vehicle back to Lithia for repair. FESC paid the service department to rebuild a portion of the vehicle’s engine pursuant to its extended service contract. The engine continued to experience issues following this repair, and Lee took the vehicle back to Lithia. Lithia recommended a full engine replacement with a remanufactured engine. FESC approved payment for the replacement engine under Lee’s extended service agreement. Lee initially declined FESC’s offer to have the engine replaced. The remanufactured engine had already been delivered to Lithia, so Lithia had to pay over $1,000 to have the remanufactured engine returned. Lee then filed suit.
After Lithia’s counsel inquired why Lee had declined the benefits of his extended service agreement with FESC, Lee changed his mind and agreed to allow FESC to pay for the installation of a remanufactured engine. An appointment to install the new engine was scheduled. As the date approached, Lee’s counsel advised Lithia that Lee was also experiencing issues with the vehicle’s clutch. Lithia’s counsel telephoned Lee’s counsel to discuss a settlement agreement. During this call, Lithia offered to have its service department replace the clutch on Lee’s vehicle at Lithia’s expense in exchange for a release of Lee’s claims against Lithia. Lee’s attorney sent a one-line email to Lithia’s counsel stating: “Mr. Lee will accept the offer to have the clutch replaced in exchange for settling all his claims against Lithia.” Later that day, Lithia’s counsel sent a reply email stating that this was “great news” and scheduled the repair work for the clutch. In his reply, Lithia’s counsel also promised to send a more formal release for Lee to sign at a later date.
Lithia installed the remanufactured engine for which FESC paid, and replaced the clutch at its own expense. The total cost to FESC to replace the engine was $7,352.06, and the cost to Lithia to replace the Subaru’s clutch was $1,293.99. After the clutch was replaced and the remanufactured engine installed, Lee continued to drive the Subaru for nine more months and 17,349 miles. He then took it back to Lithia, claiming the new engine had many issues. Lithia’s inspection revealed no significant issues with the vehicle. Lee ultimately traded in the Subaru to Lithia for a new Jeep Compass at a discounted price.
After purchasing the Jeep, Lee went back to court demanding $11,000 in damages and $4,500 in attorney fees. Lithia asked the court for Summary Judgment dismissing the case because it had already been settled. Judge Menahan granted Lithia’s motion because the November 2018 email correspondence between the parties’ counsel formed a valid settlement agreement that barred Lee’s continued litigation of his misrepresentation and MCPA claims against Lithia.
The Supreme Court held it did not matter that Lee had not signed the formal release sent by Lithia, concluding “[i]t is established case law that an unconditional acceptance may bind parties in a settlement agreement, even without a detailed agreement.” In particular, the court noted the clear similarities between Lee’s case and the controlling case of Hetherington v. Ford Motor Co., 257 Mont. 395, 399, 849 P.2d 1039, 1042 (1993), which held that the failure to execute a formal settlement agreement did not bar the formation of a valid agreement when shorter written correspondence between two parties where one party agreed to release all legal claims in exchange for payment from the other party constituted an “unconditional” offer and acceptance.
While it would have been better to get the settlement agreement signed before the repairs were undertaken, Lithia won the case because Lee’s counsel stated in writing that Lee accepted the offer, Lithia’s counsel accepted as well, and Lithia then performed all its obligations, so the settlement was complete – the correct result.
