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Virginia Lawyers Weekly

Fraud alleged in sale of Shelby Cobra prototype
- Defense Verdict

by Virginia Lawyers Weekly

Published: September 27th, 2010

Shelby American Inc. is a high-performance sports car manufacturer located in Las Vegas and the maker of Shelby Cobras and Shelby Mustangs. In 2006, its president, Amy Boylan, contracted with Richard J. Martin of Fauquier County to sell him one of the company’s prototypes of the 2007 Shelby GT. The 2007 Shelby GT program was a joint venture between Shelby and Ford.

The prototype was one of four such prototypes in existence, and this particular vehicle was the primary one used in magazines and other promotional material for the upcoming production line.

Plaintiff paid $450,000 for the car. There was no written contract that documented all terms of the agreement. A year later, the plaintiff sued Shelby and Boylan for breach of contract, fraud, constructive fraud and violation of the Virginia Consumer Protection Act.

At trial, the plaintiff claimed that Shelby had failed to deliver the car and the title over the course of the year. Shelby executives, including Boylan, testified that plaintiff had actually requested that Shelby temporarily keep the car and use it in promotions and media features to build the history and provenance of the vehicle.
Plaintiff presented no evidence demonstrating that time was of the essence in delivery of the vehicle.

Defendants also presented evidence that plaintiff made no demand for the car or had any issues with the transaction until his relationship with the company soured approximately eight months later, in regards to other transactions that he was conducting with the company at that time.

Plaintiff claimed that he was defrauded by Shelby and Boylan and that Shelby had violated the VCPA on several grounds. He claimed that Shelby did not have authority from Ford Motor Company (which manufactured the base vehicle that Shelby “upfitted” to a Shelby Mustang) to sell the car when the parties entered into the agreement, as evidenced by the fact that a title for the vehicle was not generated until six months later.

Defendants put on testimony to demonstrate that Ford and Shelby had orally agreed that Shelby had the right to sell the car months before the Martin transaction and that Ford had shipped the car to Shelby immediately upon notification of the sale.

Plaintiff claimed that Boylan had originally told him that the prototype was one of only three such cars in existence, when in fact it turned out to be one of four. Defendants put on evidence, including plaintiff’s admission, that he conveyed the final payment for the car, $100,000, after being put on notice that there might be more than three cars in existence. Boylan further testified that she never said that the prototype was one of three.

Plaintiff called an appraisal expert to testify that the prototype did not satisfy the automotive definition of a prototype, which was another basis for plaintiff’s fraud and VCPA claims. The expert had never appraised a prototype before, and had never worked for Shelby or Ford. Representatives of both Ford and Shelby testified regarding how this car satisfied the definition of a prototype. Plaintiff’s expert also testified that the car was only worth approximately $60,000, as opposed to $450,000. The plaintiff did not testify that he was under any duress when he conveyed the purchase price.

In a pretrial motion in limine, plaintiff’s counsel sought to exclude evidence that Shelby had made several offers to refund plaintiff’s money, with interest, and with an additional sum of $5,000. These offers were rejected by the plaintiff. At the hearing, defense counsel argued that the offers were admissible on the grounds that they were being offered into evidence by the offeror, as opposed to the offeree, and therefore did not run afoul of the usual public policy concerns that a settlement offer is inadmissible as evidence of liability.

The defense also argued that the offers were relevant to plaintiff’s failure to mitigate damages, in that he was asserting claims for pre-judgment interest. Finally, the defense argued that one of the offers was admissible as a “cure offer” under the VCPA. Under this statute, if the defendant makes such an offer prior to the filing of the initial responsive pleading, the plaintiff cannot recover attorney’s fees incurred after that time. Plaintiff’s motion was denied, and two of the three settlement offers were admitted into evidence.

As damages, plaintiff sought return of the purchase price, prejudgment interest, attorneys’ fees, and treble damages under the VCPA. Potential liability exceeded $1.5 million.

After three hours of deliberation, the jury returned a verdict in favor of the defendants on all counts.

[10-T-138]

Type of action: Breach of contract, fraud, and Virginia Consumer Protection Act
Injuries alleged: Monetary only - potential liability for defendants exceeded $1,500,000 million
Name of case: Richard Martin v. Shelby American, Inc. and Amy Boylan
Court: Fauquier County Circuit Court
Case no.: 2008-0026
Name of judge: Jeffrey Parker
Verdict or Settlement: Defense Verdict
Date: July 19, 2010
Defense attorneys: Stacey Rose Harris and John M. Tran, Alexandria