Appeals court: Ford committed fraud by selling defective Super Duty trucks (2023)

The owner of a 2006 Ford F-350 argued for years that Ford Motor Co. soldSuper Duty trucks with defective6.0L diesel engines to thousands of unsuspecting buyers and then concealed the known problems, saddlingcustomerswithrepair bills and exposing them to engine failure.

Now an appeals court has agreed with Charles Brian Margeson, 41, of Torrance, California.

Heis the first Super Dutytruck owner with a 6.0L diesel engine to have a fraud claim against Ford affirmed onappeal.The California Court of Appeal late last month upheld a lower court's ruling in Margeson's favor. Five other jury awards against Ford in similar cases are pending appeals.

"I bought my truck new. It must've broken down a couple dozen times and the turbo even blew up,"Margesontold the Free Press. "I started carrying spare hoses with me andleather gloves because everything was super hot and I had to repair it myself on the side of the freeways. We would lose power.I mentioned it to Ford a couple times, saying, 'Hey, this is a lemon.' They just laughed it off. I just wanted a truck that worked."

He decided to opt out of aclass action case involving unhappy Super Duty owners whoeventuallysettled in 2013.

On his own,Margeson filed a lawsuit in June 2014.He was awarded a total of $940,177.74 in June2017, but the appeals court determined expert testimony about punitive damages was improper and tossed out that piece of hisaward —about $726,000.But anew jury, in a trialnot yet scheduled,will determine how much Ford must pay himin punitive damages, which by definition isdesigned to punish the defendant.

A top legal expert in the U.S. told the Free Press thatMargeson's victoryis a powerful example of how a class action case can be used to prevent potentially billions in costs when things go wrong with consumers, in this case for Ford.

"The company dodged a bullet," said Brian Fitzpatrick, a law professor at Vanderbilt University who clerked forthe lateU.S. Supreme Court Justice Antonin Scalia.

Appeals court: Ford committed fraud by selling defective Super Duty trucks (1)

In Margeson's case, the Court of Appeal in Californiaon Sept. 22upheld the Los Angeles County Superior Court jury verdict that found Ford acted with malice, oppression or fraudby deliberately concealing known defects in itsPower Stroke diesel engine.The enginewasmade by Navistar and used primarily in Super Dutytrucks for model years 2003-07.

Margeson, atechnician who maintains the electrical grid for Southern California Edison, used internal Ford documentstoprove in court the Dearborn automaker knew its diesel engineswere bad and put them in the heavy-duty pickups anyway for years.

Owners reported problems including loss of engine power, blown head gasket, warped or disfigured head bolts and oil cooler failure. Frequent breakdowns and decreased resale value dominated pickup discussion groups.

The jury award toMargesonincludedthe maximum amount allowed for Ford’s violation of California’s lemon law, totaling$214,537.34, plus legal fees. That amount is not in dispute and will go to Margeson.

It could've been avoided if Ford had takenhis pleas seriously, Margesonsaid. "Every time I would tow, the thing would break down."

Appeals court: Ford committed fraud by selling defective Super Duty trucks (2)

Bryan Altman of Los Angeles, Margeson's lawyer, said the new jury will determine how much Ford should be punished monetarily.

"There's no built-in ceiling on this," Altman said. "The jury will be tasked with considering how heinous and repetitive their fraudulent conduct was.They put this 6.0 engine in over 1 million Ford vehicles, with estimates in sales ranging as high as$60 billion."

AFord spokesman declined to comment on details of the case. Ian Thibodeau told the Free Pressin a statement, "We are happy that the appellate court struck down the punitive damage award. Ford looks forward to the opportunity for a retrial.”

Black smoke

Of the nearly $215,000 the jury awarded Margeson under the lemon law, $72,564.04 was in compensatory damages that essentially repayMargeson for his truck,which wasamong the priciest on the market at the time. The rest was a civil penalty.

For years, he and other owners ofthe heavy-duty pickups reported the engineswould break downand emit black smoke.

Margeson decided to sue, he said, after the truck stranded himon the side of ahighwaywith his wife and babyassemis roaredpast. He broke down in tears on the stand while testifying under examination.

"It was really scary," said Margeson, who declined an offer from Ford for a few hundred dollars after he hadspentthousands in repairs. "I understand they're a business and they care about their shareholders. But, at some point, they need to be worried about their customers."

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Ford initially denied a problem existed, then claimed there was insufficient evidence to prove the claim and finally maintained the company wasn't aware of the extent of the diesel engine problem.Internal emails written by upper level management shattered the Ford defense.

One email presented during trial was dated five months before Margeson purchased his truck. John Koszewnik, Ford's North American diesel division director, wrote on Feb. 5, 2006, thatwarranty repairs on the 6.0L engine were running "as high as $5 million a month" andadded Ford would not invest in an engine upgrade.Two hours later, according to court records,Koszewnik warned people not to forward his email.

Mike Frommann, theFord warranty manager, emailedhis colleagues warning that the diesel engine could lead to a class action lawsuit if its cylinder pressure specifications went public.

He wrote in an email to colleagues dated July 13, 2006, "I recommend we delete all these emails."

By February 2007, warranty repair costs on the engine exceeded $400 million,includingmore than $227 millionto fixfuel injectors and more than $182 million on turbochargers, which was the largest repair rate ever seen forany Ford engine. This information was taken from an affidavitby one of Ford's own officialsin alawsuit itfiledagainst Navistar.Despite this testimony,Ford later denied engine problems when it was being suedover the Navistar engine.

The appeals courtaffirmed there was"adequate evidence of intentional concealment of these problems by Ford to the detriment of consumers."

Not alone

Super Duty trucks, which are purchasedfor both personal and commercial work, are bigger and more powerful than theirbestselling F-150 little brother. The F-250 and F-350 are marketed as being capable of pullingmore weight and carrying heavier loads.

Ford Super Duty owners have claimed since it came out thatthe Navistar engine was troubled. At the same time, the faulty engine was touted as best in class by Ford with the most horsepower, most torque and other high-performance claims.The Free Press was unable to confirmhow many of thevehicles remain on the road today.

Class action settlement

While the young father sued Ford himself, othertruck owners chose a different route.

Dozens of class-action lawsuits involving the 6.0L diesel engine were consolidated and settledin 2013 by Ford. It entitled F-250 and F-350 owners to claim between $50 and $825 in reimbursement for post-warranty repairs.

Ford agreed to pay the 16 truck owners who brought the class action lawsuit on behalf of Super Duty owners nationally a total of $150,000, which is separate fromthe reliefmoneyprovided to all people included in the class group, Automotive News reported.

Compare $150,000totalfor 16 plaintiffs with nearly $215,000for one plaintiff, not including punitive damages.

Super Duty owners were included inthe class action and qualified for limited repair reimbursementunless theyopted out.

Win for Ford

The Super Duty class action settlementwas a huge win for Ford, especially in light of the recent court ruling, said Fitzpatrick, author of "The Conservative Case for Class Actions."

"That opens up the question, could every single class member have gotten the price of their car back?" he said. "If they had to pay every class member the price of their car back, it would be like the Volkswagen situation and Volkswagen paid billions of dollars. They ended up paying every class member the price of their car — 500,000 people."

The case against Ford appears to have been a lot more valuable than the Super Duty class members knew at the time, FItzpatrick said.

Appeals court: Ford committed fraud by selling defective Super Duty trucks (3)

"One of the virtues of class action, from the defendant's perspective, is 'global peace,' ” Fitzpatrick said. “You can wipe something off your balance sheet in one fell swoop. That's why a lot of companies like class action. But every once in a while, someone will opt out. So the loose ends weren't quite tied up this time. But pretty close. One got away, but that's OK. The company still got a lot of global peace for the settlement."

Meanwhile, the F-350case involving Margeson is the first of six Super Duty cases led by Altman and the Knight Law Group, laying the groundwork for potential issues for Ford in the future.

In addition to Margeson, five other consumers who owned Super Duty trucks with 6.0L diesel engines collectively have been awardedmore than $10 millionby juries. Ford is appealing all of these cases.

Fitzpatrick said Ford would be wise to settle withremaining Super Duty owners suing over the Navistar engine. He saidthe company could cut its losses and reduce timeand moneyby closing the books.

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Auto critics knew

"The dark times began in 2003," wrote Chris Riley in an historical overview of engines posted on in early 2018.

"Faced with more stringent emissions standards, Ford introduced its least reputable diesel engine to date —the 6.0L Power Stroke. This engine was so bad that Ford and Navistar eventually went to court over it," Riley wrote. "It featured a glut of emissions equipment never before used, such as an exhaust gas recirculation (EGR) valve."

$1B on repairs

By January 2009, Mike Levinewrote as then-editor,"Ford said it had spent $1 billion on repairs and recalls to fix problems with legacy 6.0-liter Power Stroke diesel engines."

Appeals court: Ford committed fraud by selling defective Super Duty trucks (4)

Loss of power steering and power brakes because of engine problems resonated with jurors in multiplecases, not just Margeson's, Altman said. "Ford would deny the problem" but their internal emailsindicated the company concealed what it knew.

"They were even keeping repair people at Ford facilities in the dark so information never got out to the public, according to testimony," hesaid.

Bob Fascetti, who oversaw diesel engine products as director of V-engine and diesel engineering for FordNorth America, said in a Feb. 28, 2007, affidavit:"Ford has experienced unprecedented repair rates with the 6.0L engines. The 6.0L has had the largest R/1000 (repairs per thousand) rate ever experienced by Ford for an engine in widespread production. In fact, the 6.0L, which represents only 10% of Ford's total engine volume, accounts for approximately 80% of all of Ford's warranty spending on engines. Additionally, warranty spending on the 6.0L accounts for approximately 25% of Ford's overall warranty spending."

Future business

Jon Gabrielsen, a market analyst who has interviewed hundreds of commercial truck buyers in North America on how they rank factors that influence their purchase, said these Navistar cases may bemore sensitive than casual observersrealize.

This is not just about individual Super Duty owners who have suffered financially but the situation has the potential to affectfuture business targeted bynewCEO Jim Farley.

“It is a new day at Ford with new leadership and a more focused strategy, specifically including significant focus on the commercial end of the truck business," Gabrielsen said. "These F-250 and F-350 trucks are the volume leaders within the business-to-business commercial vehicle offering for Ford. And commercial business buyers are intensively focused on quality, reliability, durability and total cost of ownership of their fleets.

"So it would seem to be in Ford’s best interest to clean up and close out this unfortunate chapter in history on any last open lawsuits in this area so that they can focus purely on growing this mission critical segment without the lingering taint on the Super Dutybrand.”

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Contact Phoebe Wall Howard: 313-222-6512 her on Twitter@phoebesaid. Read more on Ford and sign up for our autos newsletter.

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