When ancient mapmakers created new maps, they were limited by the fact that not all of the world had been visited by explorers. These undiscovered areas might be small or huge. No one knew. No one also knew what sort of dangers awaited those intrepid sailors who literally elected to sail off the map. In order to make it clear that they couldn't vouch for the safety of those who were foolish enough to try such a stunt, the cartographers placed a warning at the edge of their maps: "BEYOND HERE BE DRAGONS." I was reminded of the concept of terra incognita (a Latin term for "unknown land") a few days ago when a friend sent an article describing a Kansas City, Missouri dealership that had filed for bankruptcy under Chapter 7. Now, dealers haven't had the easiest time of it in the last few years, but, even so, you don't often see dealers in bankruptcy court. What really brought me up short, however, was the reason this dealer filed for bankruptcy. According to the report in the Kansas City Business Journal, what brought this dealership to its knees was a $7.8 million verdict in a class-action lawsuit. The lawsuit, filed in 2002 by Keith and Deborah Shackelford, dealt with a "100-percent money-back guarantee" that the dealership offered on vehicle service contracts. Supposedly, if a buyer of a service contract did not make any claims under the service contract, the buyer would receive a refund of the entire purchase price of the contract. The Shackelfords alleged in their suit that they made no claims. When they returned to the dealership for a refund, they said they were told they could only obtain a credit good toward another car purchase. After discussing the matter with the Shackelfords and their lawyers, the dealership offered to return the cost of the service contract, but refused to pay legal fees and other costs, violating Tom's Rule 1, which is, "the first check that you have a chance to write will have the fewest zeroes." The report of the bankruptcy filing wasn't long on detail about the documents that set forth the deal between the Shackelfords and the dealership. It's possible that the documents stated that the refund would be provided only in the form of a credit toward their next car purchase, and that the gist of their suit was that the dealership personnel misled them with oral statements. It's also possible that the documents did not place any qualifications on the refund, and that the dealership was simply trying to get out of the deal it had made. We've seen a couple of these service contract "money-back" programs though, and they were not particularly consumer friendly. Various technical and paperwork requirements seemed to be set up for the sole purpose of reducing the number of successful refund claimants. It's possible, I suppose, that the Shackelford's contract was one of these. In any event, there are questions raised by this mess: 1. Where, oh where, was the dealer's arbitration agreement with a class-action waiver? That's the first and best defense against class-action suits. 2. Did this money-back program get a review from the dealership's lawyers? 3. Why didn't the dealer write that first check, which would have been but a small wart on $7.8 million? Out on the edge of every dealership's world there are dangers lurking. Plaintiffs' lawyers are getting more aggressive every day. State attorney generals know that dealers make good punching bags from a political standpoint. Legislators see big awards like this one, and decide that "there oughtta be a law." Beyond here be dragons aplenty. Thomas B. Hudson, Esq. is the author of monthly legal newsletters Spot Delivery and CARLAW and is a partner of Hudson Cook, LLP. Visit www.counselorlibrary.com for more information. E-mail him at thudson@special-finance.com.