New Jersey Lemon Law Lawyer Blog

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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Deceptive Conduct is Actionable

February 5, 2008 | Jonathan Rudnick

The capacity to mislead is the prime ingredient in all types of consumer fraud. See Cox v. Sears Roebuck & Co., 138 N.J. 2,17 (1995).

An excellent example of deceptive, but truthful conduct, is contained in Miller v. American Family Publishing, 284 N.J. Super 67, 76 (App. Div. 1995), where the Court held that the plaintiffs establish a prima facie case and the defendant’s Motion for Summary Judgment should be denied. In Miller, the plaintiffs contended that the defendant’s advertising materials were deceptive and violated the New Jersey Consumer Fraud Act in three respects. First, plaintiff said that the defendants deliberately planted the impression that the chances of winning in its sweepstakes were enhanced by ordering a magazine subscription. Second, plaintiffs claimed that those who responded to defendant’s earlier mailings were, thereafter, urged to submit further responses from misrepresentations that they had survived a “winnowing down” process which had placed them in a select group of finalists and had increased their chances of winning. Thirdly, plaintiffs pointed to defendant’s “alert” to sweepstakes participants who had not ordered the magazines, implying that a continued failure to subscribe would lead to their being dropped from the contest. The Court held as follows:
” . . . here the entire tenor of the defendant’s promotional literature has the capacity to mislead. It misleads by strongly implying that purchase of a magazine subscription will enhance one’s chances of winning the sweepstakes. It misleads by saying (not just implying) that the contestant to whom the mailing is addressed has survived some earlier thinning-out process and now has an enhanced likelihood of success in the sweepstakes. And, it misleads by indicating that if the reader does not buy a subscription, he or she will be dropped from any opportunity to win the sweepstakes.” Id. at 83.

The Court held specifically that neither the defendant’s disclaimers, nor the literal truth of the solicitations, constituted a defense to any of the plaintiffs’ claims. Id. at 84.
Miller was pre-dated by the case of Barry v. Arrow Pontiac, 193 N.J. Super 613 (1984), (App. Div. 1984), wherein the Appellate Division held that the automobile dealership advertising “dealer invoice” prices was inherently deceptive. The Court held as follows:
“When a dealer advertises that he is selling a car for what it costs, the reader can easily be misled into believing that if he purchased the car, he would be getting a bargain, not realizing that the advertiser’s idea of the cost may include a portion of overhead and payment to manufacturers, which would be later refunded.”

As can be seen by the applicable case law, the New Jersey Courts have a long history and strong tradition of prohibiting deceptive conduct.
In respect of what constitutes an “unconscionable commercial practice, this Court explained in Kugler v. Romain that unconscionability is “an amorphous concept obviously designed to establish a broad business ethic.” The standard of conduct that the term “unconscionable” implies is lack of “good faith, honesty in fact and observance of fair dealing.” Id. at 544, 279 A.2d 640.106. See Herner v. House of America,349 N.J.Super 89 (App.Div 2002)

The model civil jury charge defines the following:

“Deception” is conduct misleading to an average consumer. It does not matter that at a later time it could have been explained to a more knowledgeable and inquisitive consumer, nor need the conduct or advertisement actually have misled the plaintiffs. The fact that the defendants may have acted in good faith is unimportant. It is the capacity to mislead that is important.

“Unconscionable commercial practice” is an activity in the public marketplace which is basically unfair or unjust and/or which materially departs from standards of good faith, honesty in fact and fair dealing. To find a commercial practice to be unconscionable, there should be factual dishonesty and a lack of fair dealing.

“Fraud” is a perversion of the truth, a misstatement or a falsehood communicated to another person creating the possibility that the other person will be cheated
See the model jury instruction for consumer fraud section 4.23 Continue reading ›

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.

EZ Lube Investigation Undercover Video (Auto Repair Fraud)

February 1, 2008 | Jonathan Rudnick

I was surfing the net for interesting stories pertaining to auto fraud and I am never shocked. I guess there is this well-known chain of oil change stores in California that was allegedly taking some shortcuts. It appears that they were recommending services that were not needed according to this news story.

I guess the issue is: how do you protect yourself form this type of conduct?
Get a second opinion or even educate yourself on the work that is being performed? This is a very though thing to recommend. Who has the time to make sure they are not taken advantage of when they get an oil change? The only way to really make sure is to do it yourself.
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Where do dealerships make their money?

January 31, 2008 | Jonathan Rudnick

To understand how dealerships treat consumers you need to understand where they make their money. This is a great site that gives detailed reports on how and where dealers make their money. Certainly worth a look.

http://www.nada.org/Publications/NADADATA/

North Plainfield Nissan and Maintenance Agreements

January 28, 2008 | Jonathan Rudnick

During litigation in the American Arbitration Association I discovered that North Plainfield Nissan sold Maintenance Agreements and offered these agreements with the sale of used cars. The price was not disclosed in any of the purchase agreements and there was no documentation that was given to the claimant.

If you have purchased a car from North Plainfield Nissan and you have questions about the transaction I would review the documents for no fee.

The Law Office of Jonathan Rudnick is a law firm in Middletown/Red Bank that litigates claims against car dealerships.

North Plainfield Nissan and American Arbitration Association

January 24, 2008 | Jonathan Rudnick

I recently litigated a case against North Plainfield Nissan using the American Arbitration Association. The litigant alleged that she was overcharged for the car and also that there were certain misrepresentation made pertaining to the financing.

During the arbitration it was disclosed that my client had “purchased” a “maintenance plan” for about $1,200. She testified that this was never disclosed to her and that she was unaware of the benefits of the plan, which included free oil changes.

The arbitrator found in the claimant’s favor and awarded a return of the $1,200 plus interests and costs BUT the basis is unknown because he did not award fees or triple the damages as required under NJ law for Consumer Fraud.
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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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