AutoNation 2003 Annual Report Download - page 15

Table of Contents
We are subject to numerous legal and administrative proceedings, which, if the outcomes are adverse to us, could materially
adversely affect our business, results of operations, financial condition, cash flows and prospects.
We are involved, and will continue to be involved, in numerous legal proceedings arising out of the conduct of our business, including
litigation with customers, employment-related lawsuits, class actions, purported class actions and actions brought by governmental
authorities.
Many of our Texas dealership subsidiaries have been named in three class action lawsuits brought against the Texas Automobile Dealers
Association (“TADA”) and approximately 700 new vehicle stores in Texas that are members of the TADA. The three actions allege that since
January 1994 Texas dealers have deceived customers with respect to a vehicle inventory tax and violated federal antitrust and other laws as
well. In April 2002, in two actions (which have been consolidated) the state court certified two classes of consumers on whose behalf the
action would proceed. In October 2002, the Texas Court of Appeals affirmed the trial court’s order of class certification in the state action and
the Company and the other dealership defendants are appealing that ruling to the Texas Supreme Court. In March 2003, the federal court
conditionally certified a class of consumers in the federal antitrust case. We and the other dealership defendants are appealing the ruling. In
August 2003, the plaintiffs and certain key defendants, including our Texas stores, reached an understanding on proposed settlement terms
for all three cases. However, certain conditions to the adoption of the proposed settlement were not satisfied, and a settlement was not
reached. We intend to vigorously assert available defenses in connection with the TADA lawsuits. Further, we may have certain rights of
indemnification with respect to certain aspects of these lawsuits. However, an adverse resolution of the TADA lawsuits could result in the
payment of significant costs and damages and negatively impact our ability to itemize and pass through to the customer the cost of the tax in
the future, which could have a material adverse effect on our business, results of operations, financial condition, cash flows and prospects.
In addition to the foregoing cases, we also are a party to numerous other legal proceedings that arose in the conduct of our business. We
do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, results of operations, financial
condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or
more of these matters could have a material adverse effect on our business, results of operations, financial condition, cash flows and
prospects.
Our operations, including, without limitation, our sales of finance, insurance and vehicle protection products, are subject to
extensive governmental laws, regulation and scrutiny. If we are found to be in violation of any of these laws or regulations, or if
new laws or regulations are enacted that adversely affect our operations, our business, operating results and prospects could
suffer.
The automotive retailing industry, including our facilities and operations, is subject to a wide range of federal, state and local laws and
regulations, such as those relating to sales of finance, insurance and vehicle protection products, licensing, consumer protection,
environmental, health and safety, wage-hour, anti-discrimination and other employment practices. Specifically with respect to the sale of
finance, insurance and vehicle protection products at our stores, we are subject to various laws and regulations, the violation of which could
subject us to consumer class action or other lawsuits or governmental investigations and adverse publicity, in addition to administrative, civil
or criminal sanctions. The violation of other laws and regulations to which we are subject also can result in administrative, civil or criminal
sanctions against us, which may include a cease and desist order against the subject operations or even revocation or suspension of our
license to operate the subject business, as well as significant fines and penalties. We currently devote significant resources to comply with
applicable federal, state and local regulation of health, safety, environment, zoning and land use regulations, and we may need to spend
additional time, effort and money to keep our existing or acquired facilities in compliance therewith.
Legislative or similar measures have recently been introduced in certain states to limit the fees that dealerships may earn in connection
with arranging financing for vehicle purchasers or to require disclosure to consumers of the fees that stores earn to arrange financing. Recent
litigation against certain vehicle
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