Car Dealership Fraud

Consumer Fraud and Selling Damaged Cars: Dealer Liability

February 8, 2008 | Jonathan Rudnick

Millions of new and used cars are sold every year in this country. It is well-known within the industry that many of the used cars are damaged, ranging form minor body damage to serious frame damage.

Many dealers sell these cars and make a handsome profit. The first issue is: what is the dealer’s liability if they sell these cars?

There are many areas of law that address this liability: Consumer Fraud, Fraud, Breach of Warranty, Lemon Law (New and Used)

FRAUD
The basic premise of fraud is that if the dealer knows about the damage and they think that disclosing the information would make a difference in the consumer’s purchasing decision they must make the disclosure, whether or not they are asked by the purchaser. There is also liability for reckless disregard, meaning if they intentionally disregard the risk and stick their heads in the sand to avoid learning that the car was damaged, there is liability.

CONSUMER FRAUD
The analysis is more complex but, for the sake of brevity, if the dealer knew or should have known and failed to disclose this information there is liability under the Consumer Fraud Act. Intent must be proven under this situation.
The dealer can also be sued if the they misrepresented that the car was not in an accident when it actually was, even if they did not know. This is called an affirmative misrepresentation of fact. The dealer as a seller of merchandise is obligated to assure that their representations pertaining to their goods must be accurate.
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The New Jersey Consumer Fraud Act Must be Liberally Construed to Effectuate its Remedial Purpose

February 3, 2008 | Jonathan Rudnick

The New Jersey Consumer Fraud Act should be liberally construed to effectuate its remedial purpose. The New Jersey Consumer Fraud Act was passed in 1960 to permit the Attorney General to combat the increasingly widespread practice of defrauding the consumer. Cox v. Sears Roebuck & Co., 138 N.J. 2, 14 (1994) (quoting Senate Committee, Statement to the Senate Bill No. 199 [1960].) The New Jersey Consumer Fraud Act, N.J.S.A. 56:8-2, states:
“Any act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false promise, misrepresentation, or the knowing concealment, suppression or omission, of material fact with intent that others rely upon such concealment, suppression, or omission in conjunction with the sale . . . or with the subsequent performance of such person as aforesaid, whether or not any person has, in fact, been misled, deceived or damaged thereby, is declared to be an unlawful practice.”

The Consumer Fraud Act was initially designed to combat sharp practices and dealings that victimize consumers by luring them into purchases through fraudulent or deceptive means. Id. at 16. See also Lemelledo v. Beneficial Management, 289 N.J. Super. 489, 495 (App. Div. 1995). In 1971, it was specifically amended to include a private cause of action with treble damages, giving New Jersey one of the strongest consumer protection laws in the nation. Cox at 15, Lemelledo at 495. Quoting Governor’s Press Release for Assembly Bill No. 2402, at 1 (April 19, 1971): “The Consumer Fraud Act is no longer aimed solely at shifty, fast-talking and deceptive merchants, but reaches non-soliciting artisans as well.” Thus, the Act is designed to protect the public, even when a merchant acts in good faith. Cox at 16.

Both the New Jersey Supreme Court and the Legislature have declared that the New Jersey Consumer Fraud Act is a remedial statute and, as such, should be construed liberally in favor of consumers. Cox at 16. The Legislative history supports this conclusion, evidenced by two significant Amendments to the Act. In 1962, the Act was amended to include a cause of action for “deceptive practices”. Also, in 1975, the Legislature amended the Act to include unlawful practices in the sale and advertisement of real estate. An analysis of relevant New Jersey law supports the proposition that the Consumer Fraud Act should be liberally in an expansive fashion to protect the consumer for potentially deceptive conduct.
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New Jersey Consumer Fraud Act

February 3, 2008 | Jonathan Rudnick

The New Jersey Consumer Fraud Act is one of the strongest Consumer statutes in the country. It provides for mandatory triple damages and attorney fees if you are successful. The posts in this category are primarily for lawyers or those writing briefs on the Act. I will include both basic and more advanced points of law. Good luck.

The Law Office of Jonathan Rudnick is a law firm located in Red Bank/Middletown New Jersey and has extensive experience in litigating against car dealerships and other defendants using the Consumer Fraud Act.

Acura of Ocean Commits Consumer Fraud

January 22, 2008 | Jonathan Rudnick

The Honorable Mark Sullivan J.S.C. found that Acura of Ocean committed consumer fraud when they failed to accurately disclose damage on the lease of a new car.

The client leased a new car from Acura of Ocean and was told that there was a paint chip that had been repaired. The truth was that the vehicle had been vandalized and there was much more damage to the car, none of which was disclosed.

The Judge tripled the damages under the Consumer Fraud Act and provided for an award of counsel fees as required under the law.
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Frame damage on new and used cars

January 15, 2008 | Jonathan Rudnick

Many times vehicles are sold with known frame or other types of body damage. Dealers are required to disclose material facts to purchasers. Damaged vehicles are probably valued at 25-80% of the price you have paid and possibly nothing if the prior damages was severe. Safety concerns are aways an important issue, on top of the monetary losses.

These cases are more common than you think. There are actually special auctions that only sell damaged vehicles to dealers. Some are even owned by insurance companies. I have litigated many cases where Certified Used Cars have been sold in a damaged condition despite an extensive 100-point inspection.
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CARFAX: is It worth the money?

October 18, 2007 | Jonathan Rudnick

I would have to say that it is worth the money BUT you really need to understand the limitations of CARFAX so you don’t get burned. CARFAX operates like any other database: garbage in, garbage out. It is only as good as its source of information. If you look at a CARFAX and it does not show an accident that does not mean that the car was not in an accident. It only means that the CARFAX database does not show an accident.

CARFAX does not have access to CLUE (Comprehensive Loss Underwriting Exchange), which is a huge database maintained by the insurance companies of all claims paid on autos – both property damage and bodily injury.
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Auto Dealership Ethics

October 12, 2007 | Jonathan Rudnick

Most reputable car dealers are a members of NADA, National Association of Auto Dealers. You might find this hard to believe, but there is actually a code of ethics for dealerships. Here it is:

1. ADVERTISING

This dealership is committed to advertising its products and services in a clear, conspicuous and accurate manner that fully complies with applicable legal requirements. This includes disclosing credit terms in accordance with the federal Truth in Lending Act and consistent with state and local law.
2. FINANCIAL SERVICES

Implicit in these standards is the requirement that NADA members comply fully with all federal, state, and local laws governing their businesses.

At this dealership, the finance and insurance professionals will at all times…

* Disclose fully to customers the costs, terms, and contractual obligations of credit and lease transactions. Documents will be written in a simple, plain, and unambiguous manner to the extent permitted by federal and state law.
* Offer optional insurance or other optional products in a clear and informative manner. Any purchase of such a product must reflect a voluntary choice by the consumer.
* Advertise financial services products in a clear and non-deceptive manner.
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Car Salesmen’s Secrets

October 10, 2007 | Jonathan Rudnick

Car salesmen have one goal: sell you a car and take as much of your money as possible. There are all types of unflattering terms that are insulting, and they describe customers. Before you buy or lease your next car you need to know this.

1. Bumping — Raising what the customer says he wants to pay for a car (“If Mr. Customer says he only wants to pay $250 a month, just say, ‘up to …?’ He’ll probably bump himself up to $300.”)

2. Closer — An experienced salesperson who is brought in to make the customer agree to the dealership’s terms.

3. The feel of the wheel will seal the deal – the idea that if customers test drive a car, they will fall in love and buy it.
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Cherry Hill Triplex: $48,000 arbitration award

October 8, 2007 | Jonathan Rudnick

Cherry Hill Triplex was sued in New Jersey Superior Court for Consumer Fraud. The case went to arbitration and the plaintiff received a favorable award. This is not a final award since Cherry Hill Triplex has the right to present the case to a jury and let a New Jersey jury decide if they did something improper.

Plaintiff claims that she was informed the dealership no longer had the trade-in car she had left the day before, according to testimony. The sales staff then forced her to buy the van despite her objections and attempts to return the car.
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Ciasulli Auto Dealerships Lawsuits (2002)

October 4, 2007 | Jonathan Rudnick

Several Bob Ciasulli automobile dealerships settled a lawsuit filed by the State of New Jersey.
They agreed to pay the State $425,000 for costs, fees and in furtherance of the interests of the State of New Jersey (2002).

These dealerships were included in the settlement:

B.C.T. Imports, Inc.; Bob Ciasulli Toyota, Inc.; Bob Ciasulli Jeep/Eagle, Inc.; Bob Ciasulli Hyundai, Inc.; Arrow Hyundai, Inc.; Arrow Auto Imports, Inc.; Mack Auto Imports, Inc.; Mack Dodge, Inc.; Mack Pontiac/Cadillac, Inc.; Monmouth American, Inc.; Monmouth Chrysler/Plymouth, Inc.; M.T. Imports, Inc.; Route 88 Vehicle Corp.; United Galaxy, Inc.; and Universal Global, Inc.