If an auto repair shop says it charges $70 an hour for labor, and the job takes one hour, how much is the labor bill?
David Verdiner thought the answer should be $70 when he had his car fixed at a Pep Boys -- Manny, Moe & Jack Inc. garage in Los Angeles two years ago. The store had signs stating that its hourly labor rate was $70. But instead, Verdiner claims, he was billed $112 for the labor, even though the job took only 40 minutes.
Verdiner paid his bill. But in October 2002 he sued Pep Boys, alleging fraud and false advertising. A Los Angeles County Superior Court judge initially dismissed the suit, but on Monday an appeals court said the judge acted too hastily, and it sent the case back to the lower court.
The lawsuit has opened a window on an arcane method that many auto repair shops use to help determine what they charge motorists.
Pep Boys and many other repair shops bill the labor portion of much of their work based on independent guidelines of how long a particular job should take. In Verdiner's case, the guidelines estimated that replacing the axle on his 1991 Toyota Corolla should consume more than an hour, so Pep Boys billed him accordingly.
Tens of thousands of auto repair shops nationwide that aren't affiliated with dealerships purchase labor estimates from two obscure firms based in California -- Mitchell Repair Information Co. in Poway and Alldata in Elk Grove. The repair shops take those data and combine them with their hourly labor rates to help calculate bills. (In contrast, auto dealerships' service departments rely mostly on repair data from their vehicles' manufacturers.)
Pep Boys, which uses Mitchell's data, said it had acted properly. Pep Boys' general counsel, Brian Zuckerman, said the data provided an industry standard and that its use of Mitchell's information was "clearly disclosed at all of our locations" along with the hourly labor rate.
"Whatever the Mitchell guide gives as the prescribed amount of time is what you are charged," Zuckerman said.
But Verdiner's suit alleges that Pep Boys sticks so closely to the estimates that some customers are overbilled. The practice enables Pep Boys "to systematically seize for themselves an illicit and unjust profit" from its repair services, the suit alleged.
"We're not disputing that this [Mitchell information] is a helpful guide," said Daniel Lapidus, who with his brother Ryan, is representing the 34-year-old Angeleno. "It shouldn't be used as a flat-rate billing system."
The suit asks for unspecified damages and an injunction prohibiting Pep Boys from calculating repair bills on the basis of preset guidelines regardless of how much actual labor is involved.
If Verdiner wins his case, it could force auto repair shops in California to revisit how they bill motorists for repairs, Ryan Lapidus said. "We believe this is a rampant problem in the industry," he said, "and we believe Pep Boys is the most egregious company taking advantage of consumers in this area."
One industry representative said it was too early to say whether the suit would have a wider effect.
"Until this is fully litigated, it's hard to draw any legal conclusions," said Marty Keller, executive director of the Automotive Repair Coalition, a Sacramento trade group.
Pep Boys' Zuckerman said using independently calculated time estimates protects consumers. Without them, he said, an unscrupulous repair shop could bill someone for several hours' work when the Mitchell guidelines say the job should take only one hour.
But many service-station garages and other mom-and-pop repair shops use the outside estimates merely as guidelines and "charge for the time they actually work," said Will Woods, executive director of the Automotive Trade Organizations of California, a Tustin trade group for independent station owners.
"That's the whole point of putting an hourly [labor] rate on the wall," he said.
Mitchell's repair estimates are based on decades of experience with fixing different kinds of problems, said David Niemiec, the privately held firm's vice president of marketing. But he acknowledged that even though Mitchell's estimates are widely used to determine motorists' bills, "when it comes to Joe Consumer, probably 90% of them have never heard of Mitchell."
That could change if Verdiner prevails, Niemiec said. A repair shop's use of outside repair-time estimates "might just have to be that much more clearly stated to the consumer," he said.
William Berry, one of the lawyers representing Pep Boys, said his client already tells people about the Mitchell data.
"People don't know about the Mitchell guide because most repair dealers don't take that extra step" with customers, he said.
Pep Boys, based in Philadelphia, is a major auto parts retailer and repair chain with nearly 600 stores in 36 states -- including 122 in California. Repairs accounted for $406 million, or 19%, of the firm's $2.1 billion in revenue for its fiscal year ended Jan. 31. Its shares rose 38 cents to $24.70 on the New York Stock Exchange on Tuesday.