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1.2.10 Misrepresentation of Number or Nature of Prior Users

Car dealers may misrepresent the number of prior owners. The prototypical representation is that the car was traded in to the dealer by someone who took excellent care of the vehicle ever since purchasing it new. In fact, the car may have had a number of consumer owners, and was also passed between a number of dealers, wholesalers, and auctions.

Related misrepresentations concern the nature of the prior use. For example, many consumers would want to know if a car had previously been a rental car, police car, taxi cab, or lease car, and whether it had been repossessed. For purposes of this checklist, misrepresentations and failure to disclose the number of prior owners and the nature of that use will be described as “prior use deception.”

  • • The nature of prior use deception and how it works is described in § 2.1.7, infra.
  • • How to investigate prior use deception is examined in §§ 2.2–2.5, infra.
  • • Automobile auctions are examined in § 2.6.4, infra.
  • • MVICSA may be violated when the dealer does not provide title documentation for the buyer to sign, in an attempt to hide the number or nature of prior owners listed on the existing title. See §§ 3.9.2.2–3.9.2.5, infra.
  • • Prior use deception may involve common law fraud, which may lead to punitive damages. See Ch. 8, infra.
  • • Prior use deception 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 prior history. See § 9.2, infra.
  • • A breach of an implied or written warranty in a prior use deception case may also lead to a Magnuson-Moss Warranty Act claim, which would provide for attorney fees. See § 9.2, infra.
  • • Probably the best way to challenge prior use deception is under 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.
  • • Prior use deception 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 §§ 7.3, 7.7, infra.
  • • Prior use deception 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 number or nature of the vehicle’s prior users, rescission on the grounds of mistake may be available. See § 9.3, infra.
  • • How to litigate a prior use deception 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 prior use deception cases, damage issues, settlements, attorney fees, and collecting judgments against the defendant, the defendant’s surety, related lenders, and auction companies. Sample complaints regarding sale of a former daily rental vehicle are found in the online version of this treatise, and summarized in Appendix G, infra.