Ask yourself whether the following fact scenario is true or false: Mrs. G and her husband come to a dealer seeking to trade two vehicles for two new cars. The dealership signed a document agreeing to add leather seats to one of the new cars.

When Mr. G called to ask about the leather seats, he was told that the dealership would not be installing them because it did not get a good deal on one of the trade-in vehicles. Mrs. G posted a negative comment on social media about this experience at the dealer. A dealer employee called Mrs. G and said that (1) the leather seats would not be installed until she removed the negative social media post and (2) that the dealership has nude photos of her. This employee said he would share the nude photos of Mrs. G with her husband if she did not remove the negative comment and also that he knew she was a teacher.

Pretty crazy, right? This is what was alleged in a lawsuit in Georgia.

Here is the second scenario: Mr. and Mrs. G go to purchase a new car. Mr. has a screenshot of credit pre-approval on his phone, saved in his photos. The salesperson asks to borrow the phone to show his manager, so Mr. G gives his phone to the employee. Mr. G’s phone was given to the dealership’s sales director, who found nude photos of Mrs. G on the phone and sent the photo to an email address for a swingers’ website. The sales director had an active profile on the swingers’ site. When Mr. G got his phone back, he noticed that a photo of his wife had been accessed. He then accessed his sent emails and saw that the photo had been emailed to the swingers’ website.

Again, these facts are what was alleged in a lawsuit in Dallas.

The mantra of customer retention seems even more urgent when conventional wisdom tells us it is much more expensive to acquire a new customer than to retain an old customer. While there is, admittedly, pressure on the dealership floor to make sales, how do you balance meeting sales goals while retaining customers?

Beyond Breach of Contract

Certainly, in the first scenario, the dealership entered into a written contract with its customer which it unilaterally breached by refusing to perform the leather installation. If this is where the story stopped, the fallout could include a breach of contract claim, perhaps an unfair trade practices claim and maybe a complaint with the local attorney general’s office. Obviously, attempting to use nude photos of the customer to coerce her to do something escalated this fact pattern from a breach of contract to something altogether different.

In the second scenario, had the sales manager not gone “fishing” into the stored photos on the customer’s phone, then presumably the sales transaction could have been completed without further incident. This conduct is so outrageous that it almost defies belief.

Each dealership should, of course, as part of its written policies and procedures, specifically set forth expectations of behavior, even for situations which seem self-evident. Privacy and nonpublic personal information (NPI) must be safeguarded, and certainly all customers should be treated with respect — if customer retention is the priority it should be.

So what is the takeaway here? Obviously, if a contract is entered into, both sides should honor its terms and if there is a question, counsel should be retained for review and analysis before any action is taken. While the first scenario only resulted in a suit against the local Georgia dealer, the second scenario resulted in a suit against both the Dallas dealer and Toyota Motors North America. Both dealers have shattered their reputations, and the second dealer may have jeopardized its relationship with its distributor.

The story does not mention any pre-employment screening which may or may not have been performed in the second scenario, but obviously this manager-level employee had significant judgment and decisionmaking deficits, beyond the moral issues. While compliance issues gather their fair share of headlines, ordinary contract and privacy issues can be just as damaging to the dealer’s wallet and, more importantly, reputation.

Just protecting NPI is no longer a good benchmark for dealerships. Recent headlines regarding the hacking of Sony Entertainment and even the hacking of the Democratic National Committee established that protecting all customer information is the new standard, NPI included. While protecting NPI is the regulatory standard, to preserve your reputation with your customers, dealers must take affirmative action to safeguard and keep all customer information secure — photographs, email addresses, telephone numbers, everything that is unique to the customer.

“Keeping it secure” is the new norm to maintain customers for life. Hands-on management requires scrutiny in screening employees, notifying employees of written expectations of conduct and behavior as well as periodic review. Boundary setting is considered the hallmark of good management, and these two scenarios prove this true.

Content in this article is intended for informational purposes only and should not be construed as legal advice, and should not be relied upon or acted upon without specific legal advice based upon your unique jurisdiction and circumstances. No attorney-client relationship is being created by your review or use of this material.