Chicago Business Litigation Lawyer Blog

Mileage is a big issue these days. While some want higher mileage in their cars to try to protect the environment, others simply want to save some cash at the gas station. Whichever reason you use, it is enough for consumers to get testy when they discover the new car they bought does not get the mileage they were promised.

In November of 2012, the Environmental Protection Agency announced that Hyundai and Kia carmakers had exaggerated the mileage on the window stickers on nearly 1.1 million 2011-2013 model-year vehicles. Most vehicles were receiving an average of 1 mpg less than advertised but others, such as the Kia Soul, were getting as much as 6 mpg less than advertised.
Both automakers made public apologies, calling the discrepancies “procedural errors” but the class action lawsuits allege that Hyundai and Kia knowingly overstated the estimated mileage of their vehicles in order to get customers to buy them.

Recently, 12 class actions against the two car companies which are currently pending in Alabama, California, Illinois, New Jersey, and Ohio have been consolidated into one multidistrict litigation (MDL) in the Central District of California. An additional 22 class action lawsuits pending in 12 different districts may join the MDL.

The Espinosa case was the first filed and is the most advanced in litigation. For these reasons, they wished to abstain from the MDL but the panel on MDL did not deem their case advanced enough to warrant granting that request.

According to the U.S. Judicial Panel on Multidistrict Litigation, consolidating the class actions into one “will eliminate duplicative discovery; prevent inconsistent pretrial rulings, including with respect to class certification; and conserve the resources of the parties, their counsel, and the judiciary.”

Certain plaintiffs against Kia wanted a separate MDL for Kia-only classes. This motion was denied for three reasons: 1) Hyundai and Kia share a parent company, 2) the testing for both companies was done at the same facility in Korea, and 3) the announcement made on November 2, 2012 regarding the procedural errors in the mileage estimates and launch of the related mileage reimbursement programs were made on behalf of both Kia and Hyundai.
The case is being transferred to the Central District of California because that is where the defendants are based as well as where the majority of the lawsuits have been filed. Judge George H. Wu has been presiding over the Espinosa action for over a year and is therefore the most qualified to act as the transferee judge for the MDL.

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Many of us are familiar with the stereotype of the dishonest used car salesman. They take advantage of those who know little about cars and the fact that we have no way of really knowing the history of the car we are purchasing. Websites such as CarFax makes us feel that these practices can be stopped but leave off a lot of information and can often be incomplete allowing used car salesmen to still find victims for their questionable merchandise.

The most recent scam is the reselling of vehicles that were damaged by Hurricane Sandy in New York. Saltwater is corrosive and can leave cars rusting and dangerous to drive. However, even though many of these cars have been deemed a total loss by insurance companies, they are being dried out and resold in other states.

In most states, cars that have been ruined by flooding are required to indicate that on their titles. However, in some states a car can be re-registered for another title without requiring the flood-brand carry-over. This is known as “title washing” and there’s no shortage of used car dealers who are eager to load up the damaged vehicles and pack them off to states without the required carry-over, such as Colorado and Vermont.

At one recent auction at Manheim, damaged cars had been dried out and scrubbed clean, but many of them showed tell tale signs of damage. For example, on some, the leather seating was puckered, while others had condensation beading their headlights. While this kept away some buyers, others were unhindered and some of the damaged cars went for more than $5,000.
Certain groups that keep a look-out for these issues say that insurance companies sometimes exacerbate the problem by underplaying the damage to a car at auction. In 2005, the State Farm insurance company reached an agreement with the attorneys general of 49 states and the District of Columbia for failing to properly title their cars. In the agreement, State Farm said the company is complying with all of the laws in each state affected by Hurricane Sandy.
However, once a car has been deemed a total loss, insurance companies hire special firms to collect the damaged vehicle, tow it away, spruce it up, and resell it. One such company, Insurance Auto Auctions, employs people to study weather forecasts and predict where the next disaster will be. Before Hurricane Sandy even hit the shore, Insurance Auto Auctions already had 400 tow trucks dispatched to the area and had leased huge holding facilities nearby. One of these holding facilities was an airport on Long Island where the runways were leased for $2.7 million for the year. After the hurricane, about 18,000 cars have packed the tarmac from end to end.

Now, consumers all over the country are being warned about the vehicles they are buying. Officials have warned used car shoppers in Georgia, North Carolina, and Illinois where the secretary of state’s office is scrutinizing new title applications for cars coming in from states affected by the hurricane. In addition to the state issue is the foreign market for these cars, entirely unhindered by U.S. regulations.

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