By Sheila Loftus

A collision repair shop owner who closed his 18 facilities and blamed insurance companies for his business failure is being sued by a bank that lent him money and by 50 of his former employees for failure to make good on their last paychecks.

Todd Fox, the owner of Fox Collision Center Inc., based in Tulsa, Okla., wrote a letter of farewell to the collision industry when he announced the closing of his shops, which occurred October 27. In it, he claimed his facilities were grossing $28 million a year, but were operating on a low profit margin.

He said hundreds of people would lose their jobs as a result of his action. “I am so sorry, sad, and discouraged,” he wrote in his letter.

For the fired employees, “sorry” wasn’t enough. They said they were left without insurance—and their last paychecks, worth a collective $10,000, weren’t honored. As a result, the former employees filed a class action lawsuit in U.S. District Court in Oklahoma charging that Fox laid them off without giving 60 days’ notice. Furthermore, Fox issued paychecks that couldn’t be cashed.

Roughly 50 former Fox employees have joined the suit.

Fox employees from Kansas are also preparing to file a class action suit against Fox.

After closing his shop, Fox issued a letter to his former employees in which he said he deeply regretted having to close the facilities and asked his former employees for “your patience and your understanding.”

The Aspen Times quoted Fox’s cousin Ron Fesler dismissing as “not true” reports of some former Fox employees being owed as much as $4000. “I feel something for the people [who lost their jobs],” said Fesler, who owns a leather goods store named Toddy’s in Aspen, Colo., where Fox is employed as a consultant. Fesler told the Aspen Times that Fox is not a stockholder or partner in Toddy’s. Megan Gilligan, an employee of Fox Collision until recently, is working at Toddy’s.

The Internet buzzed with opinions about Fox’s actions. “I ask that as a community we make sure that this man not be able to operate any businesses in Tulsa ever again,” one writer posted to the Channel 8 (Tulsa) Web site.

Another said: “Let’s all sit back and remember one thing: Karma. Todd Fox will get his one day.”

In addition to a lawsuit from his employees, Fox faces a suit in state District Court in Tulsa filed by Marshall & Illsley Bank, a Milwaukee-based financial institution that claims Fox Collision Center and Fox Real Estate owe more than $7.2 million on loans issued since 2004.

Marshall & Illsley representatives say the bank issued a dozen loans to Fox over a three-year period in amounts totaling $8.2 million.

In addition to collecting the remaining principal, interest, attorney fees, and the cost of collection, Marshall & Illsley is hoping to foreclose on two of Fox’s collision repair centers.

In announcing he was closing his collision repair facilities, Fox issued a letter to the collision repair industry denouncing the insurance industry for its pursuit of cheaper, quicker repairs at the expense of quality and safety. He was particularly critical of DRP relationships.

“Insurance carrier concession-based DRP contracts now list pages and pages of requirements that are imposed on us,” he wrote. “And when I refer to concessions, I don’t mean only labor discounts, parts discounts, paint caps, and mark-ups on sublet items, but also and more importantly, I refer to the quality, integrity, and safety of repairs.”

Because the insurance companies are gaining increasing control over the repair process, Fox wrote, the collision repair shop is becoming faceless. “We used to joke that someday a customer would drop a car off in a big parking lot and never know who repaired it or how well,” he wrote. “Well, we all know that now happens routinely.”

He elaborated on his concerns about safety: “How many concession-based DRP repair programs make sure that frame rails and structural components are sectioned and replaced properly and ensure that air bag sensors are all replaced per the vehicle manufacturer? How many DRP repair programs encourage and check that seatbelts are replaced according to the vehicle manufacturer?”

About the financial situation of his business, Fox had this to say in his letter: “Fox Collision Centers historically have made money. Sometimes not much, but enough for me to still wake up excited at 4:30 a.m. and go to work. But the bottom line is that the business model that supports the new DRP models does NOT work financially.”

Fox concluded by saying that collision repair shops are “killing the profitability of the industry by participating in concession-based DRPs.” Additionally, they are “putting people’s lives at risk as we fight futilely for survival by submitting to the concession-based DRPs’ demands for faster and cheaper repairs in exchange for more work volume.”

Fox grew up in the collision repair business. His parents opened Service Body Shop in Wichita, Kan., in 1974. Fox took over and grew the business to three shops before selling them in 1999 to Boyd, a collision repair industry consolidator based in Canada.

For a time, Fox worked for Boyd, but he left to open a facility in Tulsa. When the no-compete clause he had signed with Boyd expired in 2004, he bought back his Wichita facilities.

In three years, he grew his business to 18 shops in four states.

All of this, however, is over.

© 2007 Sheila’s Information Network Inc.

Sheila Loftus (sheilaloftus@yahoo.com), publisher of the CRASH Network, has written about the auto collision repair industry for 32 years. She lives in Washington, D.C.