Articles Posted in Consumer Lawyer

US Supreme Court Decision on Arbitration

Recently, the US Supreme Court decided a significant arbitration case. The issue is whether or not the Federal Arbitration Act permitted the waiver of class action claims in a consumer contract. At the state level under the state laws, the states were divided as to whether or not a consumer could waive the right to a class action. Specifically, under New Jersey Law, the Supreme Court had held that the waiver of class action claims under certain circumstances were unconscionable. Thus, even if a selling dealer or manufacturer had a class action provision in the contract prohibiting the plaintiff to participate in a class action, this “clause” was not enforceable as part of the contract. There are specifically two cases, which were entitled “Delta Funding” and “Mohammad.”

The US Supreme Court held, however, that the policy underlying the Federal Arbitration Act and the expeditious resolution of disputes took precedence over the public policy behind class actions. In addition, the Court held that class actions could not be appropriately handled in the arbitration contacts. As an example, if there was an arbitration clause but no waiver of class action, various attorneys could potentially or were within the right to file a class action in the arbitration forum. JAMS and AAA had their specific provisions for arbitrating class actions. The Supreme Court held that the risks of mistakes were too great and thus determined that class actions could not be arbitrated.

Can you commit fraud by maintaining silence?

The simple answer to this is yes. Under New Jersey law, you can commit fraud or consumer fraud when there is a fact which a seller of a good knows will be relevant to the purchaser’s decision, and as a material fact to the transaction, failure to disclose same will be considered fraud if the claimant can prove intent.

In simple words, if you know something is important and do not tell the other person and their decision on the particular transaction would change based on that information, it is fraud, assuming it was done intentionally.

The fees associated with the National Arbitration Forum are excessive and would effectively prohibit the plaintiff from pursuing her statutory and common law claims. The United States Supreme Court in Green Tree Financial v. Larketta Randolph 531 U.S. (2000) held that excessive arbitration costs form a basis to challenge the enforceability of an arbitration clause. The Court did, however, hold that it is the plaintiff’s burden to demonstrate this fact. The Supreme Court did not undertake such an analysis in Green Tree because no such facts were presented to the Court.

The costs associated with arbitrating a case consistent with National Arbitration Forum guidelines would require the plaintiff to pay excessive fees which are unconscionable in light of the plaintiff’s financial condition. The plaintiff brings home approximately $372.00 per week working as an operator for Verizon. The plaintiff’s expenses are approximately $1,500.00 per month. The plaintiff is a single mother and resides with her mother and daughter in South River, New Jersey. The plaintiff has $1,600.00 in the bank between checking and savings accounts. The National Arbitration Forum fees and costs demonstrate the cost structure associated with filing a claim. There are four types of hearings: Document Hearings, Telephone Participatory Hearings, On-Line Participatory Hearings, and In-Person Participatory Hearings. There are also filing fees ranging from $150.00 to $14,252.00. The minimum hearing fee for an In-Person Participatory Hearing is $500.00 for the initial session plus $450.00 for each additional session. This is for hearings where the amount in dispute ranges from $15,000 to $25,000. Claims which range from $250,000 to $500,000 cost $3,000.00 for the initial session and $2,000 for each additional session.

The plaintiff has made numerous claims pursuant to Federal and State statutory law as well as New Jersey Common Law. The plaintiff has also made a demand for punitive damages for the statutory and common law violations alleged. New Jersey Law permits the plaintiff to recover up to $350,000 in punitive damages or five times compensatory damages, whichever is greater. Moreover, the plaintiff is entitled to punitive damages under the Fair Credit Reporting Act or the Equal Credit Opportunity Act. Under any of these statutory schemes, including the New Jersey Consumer Fraud Act, the plaintiff is entitled to attorneys’ fees and costs of the action. The New Jersey Consumer Fraud Act’s rights and remedies are cumulative and in addition to any other claims that the plaintiff might have under either Federal or State Law. Therefore, if the plaintiff is successful under the New Jersey Consumer Fraud Act she would not be prohibited from collecting damages either Truth In Lending, Equal Credit Opportunity Act or the Fair Credit Reporting Act.

Therefore, it is not unreasonable to assume that the plaintiff will be seeking an amount from $250,000 to $500,000, which requires a $3,000.00 fee for the initial session and $2,000.00 for each additional session. This would be in addition to any fees and costs which are charged by National Arbitration Forum for amendments, subpoenas, discovery orders, continuances and time waivers. Simply put, the fee structure associated with the National Arbitration Forum is excessive in light of the plaintiff’s salary. Assuming the plaintiff had no expenses, with her take home pay at $372.00 per week it would be unreasonable to assume that the plaintiff could proceed with the In-Person Participatory Hearing. Clearly, the fact that there are less expensive methods, document hearings, telephone participatory hearings and on-line participatory hearings, is of no consequence. Nonetheless, the fees for these hearings in the $250,000 to $500,000 range are excessive. A document hearing in this range is $5,000.00. A telephone participatory hearing in this range is $1,750.00 for the initial session and $1,250.00 for each additional session. The fee for the on-line participatory hearing is $2,500.00 for the initial session and $1,500.00 for each additional session. This is in addition to the $1,000.00 filing fee. This cannot be the effective vindication of the plaintiff’s rights as envisioned by the United States Supreme Court in Green Tree v. Randolph.

The next level up would be the sales manager, the finance managers who are responsible for the back end or the financing and the extras on the transaction. Once the transaction is finalized, meaning the consumers agreed to purchase the particular type of car, they are turned over, handed off or otherwise processed through middle- or upper-level management, who is responsible for the financing, selling addition products. Many times the selling of these finance products or aftermarket items saps money from the front-end of the transaction. This means that if there was a $1,000 profit on the sale of the vehicle from the salesman’s perspective, this profit might be funneled or focused into aftermarket items, warranties or financing. Under some circumstances, finance managers would “pack” products into this $1,000 profit margin for the salesman, then making it difficult for a salesman to realize their fair share of the profit on the automobile.

With regard to the back end, the middle- and upper-level management also have issues because they are unsure as to the nature and extent of the “packs” that the upper level management and ownership are putting on the car. This means that if they sell an aftermarket product, what happens if this company is owned, operated or controlled by the ownership? Moreover, what if there are unknown packs or costs put into the price of the vehicle which reduce the upper level management’s commissionable gross proceeds? In short, each employee in this chain, from the salesman to the ownership, has particular answers and methods by which they can reduce the profit of those beneath them.

This is a follow-up on my previous posts and the basic underlying concepts of suing car dealerships. Previously, I addressed the concerns with regard to insurance and whether or not to file a case. Once you decide to file a case, you need to understand how a car dealership works to fully understand the concept of the fraud or the deceptive practice. In order to examine this, the best thing to do is to start from the bottom and work your way to the top. This means that you need to examine the workings of the salesmen, how their compensation and pay plan works, how their job works, how they interact with their superiors – which would be the finance and insurance managers and sales managers – and then how this upper-level management, finance and insurance managers and sales managers, deal with the ownership and the general manager.

You need to understand that the salesmen are paid solely on the profit on the vehicle. This means that if the auto dealership acquires a vehicle for $5,000 and it sells for $6,000, the salesman receives profit on the $1,000 difference. Usually, this is a 20% to 25% commission rate. This sounds simple, but it is not. These salesmen are usually nickel-and-dimed by the upper management, forcing them to implement these deceptive practices. Hypothetically, if a dealer were to acquire a vehicle for $3,000 at auction but felt it was worth $5,000 and had to put money into this vehicle to recondition it even though the dealership acquired it for $3,000, it might go on the books at $6,000 or $7,000. This makes the salesman’s job that much more difficult to make an honest living and an honest profit. Many times sales representatives only make a “flat” (set fee) for selling a vehicle. This means that there is no or little profit and they get a set amount for a car which ranges from $100 to $200. This is one of the reasons for the turnover in the industry and the reason that salesmen are not particularly concerned with the method by which they use to sell these cars. Since they have a good idea they are not going to be around at the same dealership long enough, they are just mostly concerned with maximizing the number of cars they sell, regardless of the method they use.

In this case the defendant is alleged to have sold a damaged certified car to the plaintiff who sued them in New Jersey. The dealership was not incorporated in New Jersey and was not physically located in New Jersey.

PROCEDURAL HISTORY/SUMMARY OF THE CASE

This claim arises out of the plaintiff’s purchase of a $40,000 ‘certified used Porsche Cayenne‘ from the defendant, XXXX that was significantly damaged, despite representations to the contrary. Soon after the plaintiff’s complaint was filed in or about April 2009, the defendant, XXX., filed a motion to dismiss alleging that there were insufficient contacts in the State of New Jersey to require XXX to defend the case in the State of New Jersey. In the initial motion for dismissal, the defendant, XXX, asserted the following:

Legal argument submitted in a wrongful repossession lawsuit:

LEGAL ARGUMENT

POINT I THE DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT ON THE CLAIMS FOR FRAUD SHOULD BE DENIED SINCE THE DEFENDANTS’ AGENTS IMPERSONATED LAW ENFORCEMENT WITH BADGES TO GAIN COMPLIANCE