Class action accuses GM of underpaying refunds from service contracts

With alleged claims likely to top more than $5 million, a recent class action accuses General Motors of underpaying the prorated refunds of cancelled extended warranty plans.

As class representative, Jimmy Hendon filed a lawsuit against General Motors Co. and General Motors LLC on April 21 in the Beaumont Division of the Eastern District of Texas.

The plaintiff states that he purchased a new 2006 Chevy Avalanche on Aug. 21, 2006, which came with the GM standard 36 month/ 36,000 mile factory warranty.

At the time of purchase, he also bought a GM Major Guard Vehicle Service Contract, which extended the standard factory warranty an additional 12 months and an 44,000 miles.

Hendon canceled the contract in June 2009 with 18,483 miles remaining on the warranty.

According to the complaint, GM calculated his refund by taking the remaining miles divided by the 80,000 total miles, resulting in a $295 refund. Hendon claims GM should have calculated his refund by dividing his remaining miles by the 44,000 mile extension, resulting in a $580 refund.

The lawsuit argues that GM is improperly calculating the prorated cancellation refunds by dividing the remaining miles or days by the total number of miles or days in the factory warranty, plus the extension.

The suit claims GM should be prorating the canceled refund by dividing the remaining miles or days by the number of miles or days that the service contract extended the factory warranty.

Class members are owners, lessees and/or operators of GM vehicles, who have purchased, then canceled extended warranty plans from GM.

The plaintiff claims the defendant breached its contractual obligation by improper calculation of the prorated refund and by underpaying the class members.

The class action is asking for damages for the underpayment, pre-judgment and post-judgment interest, attorney's fees, interest and costs.

Houston attorneys Michael A. Caddell, Cynthia B. Chapman and Cory S. Fein of Caddell & Chapman PC and Beaumont attorney Mitchell A. Toups of Weller, Green, Toups & Terrell LLP are representing the plaintiff.

U.S. District Judge Thad Heartfield is assigned to the case.

Case No 1:10cv00227