Chicago Business Litigation Lawyer BlogArticles Posted in Auto Fraud
Car Dealer’s Fail to Pay Off Car Loan on Trade-In
Car Dealers exposed for failing to pay off loan on trade-ins. Continue reading ›
Car Dealer Agrees to Pay Large Class Settlement to Avoid Trial On Allegedly Mislabeled Fees and Resulting Alleged Hidden Profits
Many people are intimidated by the idea of making large purchases, such as a new home or car. This is because these kinds of purchases often come with all sorts of extra fees, which can be confusing for consumers. Not everyone is aware of what constitutes a fair deal and auto dealerships sometimes take advantage of this by adding fees to a customer’s purchase without a clear explanation of what those fees are for.
Such was allegedly the case with Panhandle Automotive Inc., which does business as Bay Lincoln Hyundai Mitsubishi. Jesse Page, who represented the class of plaintiffs, filed the lawsuit against the car sales company after having bought two cars from the dealership. For each purchase, Page was allegedly charged $49 for an electronic filing fee and $489 for a delivery fee.
Of the electronic filing fee, Panhandle allegedly gave $12 to a third party that performed the electronic filing and kept the rest. Panhandle’s electronic filing fee was later raised to $147. Panhandle allegedly got to keep all of the delivery fees.
Bill Bielecky, the attorney who represented the class of plaintiffs, said that fees like this are common among car dealerships in Florida, but that they add little or no value to the consumer.
Under Florida’s Deceptive and Unfair Practices Act, the fees would have been legal if the documents used by Panhandle had expressly stated that the fees would be profit for the dealership. According to Bay County Commissioner George Gainer, who owns Panhandle, the failure to include the language in the documents was due to an error.
Such seemingly small omissions can have large consequences, as in this lawsuit, which resulted in thousands of dollars in settlement costs. “It’s just a no-brainer,” said Bielecky. “They didn’t have the language: they were going to lose.”
Gainer feels differently about his case, though. He said in a statement that if they had continued to fight the lawsuit in the courts, “we’d have won the thing.” This attitude is reflected in the fact that, as part of the settlement agreement, Panhandle refused to admit to having done anything illegal. Instead of an admission of guilt, Gainer maintains that the settlement was merely a way to avoid the expenses of a litigation, which could drag on in the courts for months.
Circuit Court Judge Timothy McFarland, on the other hand, felt that both sides had an equally strong case. When he approved the settlement, McFarland noted that “this factor weighs in favor of settlement because it is unclear which party will prevail at trial.” By agreeing to a settlement, the class of plaintiffs receives some relief, while Panhandle gets to save face. Continue reading ›
Melton Family’s Expert Discovered the Flaw in GM’s Ignition Switch
Once a mistake in the engineering of a car is made known, the maker of the vehicle has a responsibility to fix the mistake. However, to try to remedy the mistake in new cars, without recalling old cars with the defect, is illegal, and in some cases, potentially fatal. This was allegedly the case with General Motors (G.M.) when it realized that the ignition switch in more than 2 million of its cars was faulty. The car company worked with Delphi, the supplier that made the part, to redesign the part so that the flaw was fixed, but neither party allegedly bothered to alert the public to the flaw, which existed in millions of cars which had already been sold.
When Brooke Melton’s Cobalt suddenly shut off, causing her fatal accident in 2010, her family sued G.M. and Mark Hood was hired to investigate the accident. Hood photographed, X-rayed, and disassembled the ignition switch in his attempt to figure out how the engine suddenly shut off. Then he bought a replacement part at a local GM dealership.
Although the replacement switch that Hood bought had the same identification number as the old switch, it contained significant differences. A tiny metal plunger was not included in the replacement part and the switch’s spring was more compressed. According to Hood, there was also a difference in the amount of force needed to turn the engine on and off.
As Hood’s investigation progressed, he realized that both GM and Delphi had realized the mistake and changed the part some time in 2006 or early 2007. The new part made it less likely that the driver could bump the ignition key, causing the car to cut off power to the engine and deactivate the airbags.
Lance Cooper, the attorney representing the Melton family in the lawsuit, confronted Raymond DeGiorgio, the head switch engineer on the Cobalt, with the differences between the two switches. DeGiorgio acknowledged the differences between the two parts, but said that he could not explain why the new part had not been given a different identification number.
“I was not aware of the detent plunger switch change,” he testified in his deposition. “We certainly did not approve a detent plunger switch change.”
However, the paper trail tells a different story. In the federal filings for the recent recall of certain G.M. vehicles containing the defect, G.M. confessed than an engineer (whom they did not name) had in fact signed a document in April of 2006 which approved design changes in the switch. Government investigators have since requested that G.M. provide all documents related to the switch change and who within the company approved it.
Since Hood’s discovery of the allegedly clandestine part change, G.M. has issued a worldwide recall of 2.6 million vehicles, including Cobalts, Pontiacs, and Saturns. G.M. has said that it will replace the old part with the new one at no cost to vehicle owners. In the mean time, the company’s website contains a video which assures consumers that the old switches are still supposedly safe, so long as nothing is attached to the ignition key. A reported 13 deaths have occurred as a result of the faulty switches.
G.M. settled the lawsuit with the Melton family, but it is now facing a class-action lawsuit which consists of all owners of vehicles included in the recall. The research into the faulty part conducted by Hood will likely also play a role in that lawsuit.
Indiana Car Dealer Gets Off the Hook for Most Claims in Consumer Fraud Case
Most states have local statutes which have been put in place to protect consumers from deceptive and unfair business practices. However, courts must be careful to balance the needs of protecting consumers with the needs of sellers to market their wares. Just such a balance was considered in a recent case in Indiana in which Heather Kesling bought a used car from Hubler Nissan, Inc. The car was allegedly advertised as being a “Sporty Car at a Great Value Price,” but after buying it, Kesler discovered that the car had extensive mechanical problems which rendered the vehicle unusable. As a result, Kesler sued Hubler Nissan for fraud and violation of the Indiana Deceptive Consumer Sales Act.
Hubler Nissan moved for summary judgment which the trial court granted. Kesling appealed the decision and the appellate court reversed the trial court’s ruling. According to the appellate court, the statement that the car was a “Sporty Car at a Great Value Price” could implicitly represent that “it is a good car for the price and that, at a minimum, it is safe to operate.” The appellate court therefore ruled in Kesling’s favor, after which the case then moved to the Indiana Supreme court which reversed part of the ruling and remanded part of the ruling.
Hubler Nissan responded by petitioning to have the case moved to the Indiana Supreme Court. The Indiana Legal Foundation and Barnes & Thornburg LLP filed an amicus brief with the court in support of the petition for transfer. In the amicus brief, they argued that the assertion that the car was a “Sporty Car at a Great Value Price” was nothing more than puffery, meaning that it was an expression of the seller’s opinion and was not meant to be construed as fact. To punish Hubler Nissan for making such a statement, the amicus brief argued, would be to impose undue hardship on Indiana businesses in the future, as it would inhibit all forms of advertising.
The Supreme Court agreed that to rule in Kesling’s favor would be to force sellers to list only a product’s “name, rank, and serial number” in order to avoid a similar lawsuit. The Court concluded that sales puffery is not actionable as fraud, stating that, “[w]hile advertisements may not be deceptive, they need not refrain from any expression of the seller’s opinion.”
In its ruling, the Indiana Supreme Court further noted that Hubler Nissan’s advertisement “was puffing and not any representation of fact, and thus the advertisement was not ‘deceptive’ under the Indiana Deceptive Consumer Sales Act (IDCSA); whether a car is ‘sporty’ was a subjective assertion of opinion and could not reasonably be ascribed any significance as a representative of a car’s state of repair or drivability, and ‘great value price’ could not reasonably be understood to have any greater significance than the comparable terms ‘great price’ or ‘priced to sell’.”
The Indiana Supreme Court also pointed out that, under the Indiana Consumer Sales Act, the failure to disclose information does not constitute a representation of fact. As a result, the Court could not find Hubler Nissan guilty of fraud under that Act. This is not the case in most states such as Illinois where if a car dealer knowlingly fails to disclose or conceals material facts it can be liable under the Illinois consumer fraud act.
You can view the Court’s opinion here.
Court Rejects Volvo’s Motion to Decertify Class Action Involving Sun Roofs That Leaked Due to a Defective Design
With the Supreme Court make the criteria for class certification more stringent, cases are still getting certified in the consumer protection and fraud area for products with common design defects. In a recent case against Volvo, a class action of consumers has been certified for a lawsuit against the car company alleging that defective sunroofs leaked, leading to flooding and damage inside the car. The lawsuit was filed in New Jersey U.S. District Court by Joanne Neale and seven other Volvo owners. Each plaintiff experienced an issue with the sunroof drainage system which resulted in damage to the inside of the vehicle. Each of these consumers were told that the sunroof drain was not covered under their warranty and so the cost of fixing or repairing the drain fell on the consumers. For some, this included the cost of whatever damage was cause by the faulty drain, such as replacing the carpeting in the vehicle. The cost of implementing these repairs ranged from $250 to over $1,000. The plaintiffs filed the lawsuit and asked for certification of either a nationwide class or statewide class.
The defective sunroofs allegedly affect Volvo models S40, S60, S80, V50 (model years 2004 to present), and XC90 (model years 2003 to present). The class action includes Volvo owners and lessees in Massachusetts, Florida, Hawaii, New Jersey, California, and Maryland. According to the lawsuit, the defective sunroofs allegedly resulted in damage to the vehicles’ interior components, including carpeting and safety-regulated electrical sensors and wiring. The lawsuit further alleges that Volvo knew about the design defect, based on the existence of numerous consumer complaints as well as internal Volvo communications and Technical Service Bulletins which were issued by Volvo in an attempt to deal with the problem.
Volvo filed a motion for summary judgment and to decertify against the plaintiffs saying that the definition of the nationwide class and the definition of the statewide classes were too broad. In their motion to reconsider, Volvo noted a recent Supreme Court decision in which the Court ruled in favor of the defendant, Comcast. In that case, the plaintiffs, a class of current and former Comcast cable consumers, provided an expert witness who testified with hypothetical examples of what cable prices would have been without Comcast’s allegedly illegal business practices. The Supreme Court ruled that the methodology used by the expert was unsound and, on that basis, the Court denied the plaintiffs class action status.
The Volvo case, according to the New Jersey U.S. District Court judge, had verty little in common with the Comcast case. In his opinion, Judge Dennis Cavanaugh wrote that “Defendants argue that this court should reconsider its opinion that granted plaintiffs’ motion for certification for statewide classes due to the U.S. Supreme Court’s decision in Comcast. … However, this case is entirely distinguishable from Comcast. … Here, the damages issue is much more straightforward – all class members who purchased defendants’ product were allegedly damaged by a design defect.” The U.S. District Court therefore saw no reason to decertify the statewide class action in the Volvo case and denied the defendant’s motion for to reconsider as well as the motion for summary judgment against the plaintiffs.