1.2.3 Salvage Fraud
Salvage fraud involves cars which are declared a total loss and thus salvage because of a car collision, flooding, fire, or other serious physical accident. Millions of cars declared as salvage are patched up and sold to unsuspecting consumers. This treatise extensively treats salvage fraud.
- • The nature of salvage fraud and how it works is described in §§ 2.1.3–2.1.6, infra.
- • How to investigate salvage fraud is examined in §§ 2.2–2.5, infra.
- • State salvage statutes requiring title branding and other disclosures are reviewed in § 7.2.1, infra. See also Appx. C, infra.
- • The potential liability of insurance companies for salvage fraud is reviewed in § 2.6.5, infra.
- • Salvage auctions are examined in § 126.96.36.199, infra.
- • If the dealer misrepresents the car’s vehicle identification number (VIN), make, mileage, or year, this may violate MVICSA, providing a federal cause of action for $3000 minimum damages, treble damages, and attorney fees. See § 5.5, infra.
- • MVICSA may also be violated when the dealer does not provide title documentation for the buyer to sign, in an attempt to hide information on the existing title relating to the salvage history. See §§ 188.8.131.52–184.108.40.206, infra.
- • Many states have special motor vehicle statutes that provide private causes of action for salvage fraud. See § 7.9, infra.
- • Salvage fraud may involve common law fraud, which may lead to punitive damages. See Ch. 8, infra.
- • Salvage fraud may involve a breach of implied or express warranties, which may lead to revocation of acceptance, withholding of installment payments, and a claim for damages, even if the seller had no knowledge of the car’s salvage history. See § 9.2, infra.
- • A breach of an implied or written warranty in a salvage fraud case may also lead to a Magnuson-Moss Warranty Act claim, which would provide for attorney fees. See § 9.2, infra.
- • Salvage fraud also will violate a state UDAP statute, which will often provide attorney fees, minimum, multiple, or punitive damages, and which may not require proof of the defendant’s intent or knowledge. See § 9.4, infra.
- • Salvage fraud may violate a state’s automobile dealer licensing statute or regulations, which will either provide a cause of action, leverage with the dealer, or an indirect cause of action under a UDAP, warranty, or fraud claim. See § 7.7, infra.
- • A number of state statutes require disclosure of wreck damage for certain used cars. Such a statute will either provide a private cause of action, or indirectly provide a cause of action under a UDAP, warranty, or fraud claim. See §§ 220.127.116.11, 7.2.2, 7.9, infra.
- • Salvage fraud may also violate the federal or state RICO statute. The federal statute provides federal jurisdiction, attorney fees, and treble damages. See § 9.5, infra. The state RICO statute may provide similar remedies in state court. See § 9.6, infra.
- • If the seller claims ignorance of the prior damage, rescission on the grounds of mistake may be available. See § 9.3, infra.
- • How to litigate a salvage fraud case is examined in Chapter 10, infra, including: advising the client, who to sue, what claims to plead, jurisdictional issues, res judicata, class actions, evidentiary issues (such as how to introduce evidence of the defendant’s misconduct against other consumers), trial of salvage fraud cases, damage issues, settlements, attorney fees, and collecting judgments against the defendant, the defendant’s surety, related lenders, and auction companies. See also various sample pleadings found in the online version of this treatise, and summarized in Appendix G, infra, including, among others: a complaint involving sale of a car without disclosure that it had a branded title, sample discovery in a wreck case, a sample outline for questioning an expert witness about the condition of a vehicle, a sample voir dire outline, jury instructions, and a special verdict form in a wrecked car case.