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Automobile Fraud: 6.1 Introduction

This chapter examines issues that are unique to the enforcement of the federal Motor Vehicle Information and Cost Savings Act (MVICSA), also sometimes referred to as the Truth in Mileage Act or the Federal Odometer Act, referred to herein as the “Federal Act” or “Act.” Also covered are issues relating to the enforcement of state odometer acts; a state-by-state analysis of these statutes is found in Appendix C, infra.

Automobile Fraud: 6.2.1 Federal Act Does Not Restrict Standing

The Federal Act does not limit who can bring an action under the Act, which is consistent with the Act’s broad remedial purposes. The Act provides that violators are liable without specifying to whom. As the Act’s provisions dealing with private remedies clearly call for a private right of action, and as the Act does not limit who can bring such an action, the Act should be construed as allowing anyone to bring an action, as long as they meet constitutional standing requirements.

Automobile Fraud: 6.2.3 Plaintiff Need Not Be Current Title Owner

The plaintiff need not currently own the car at issue.15 A spouse of the titled owner has standing to sue for Act violations if the spouse negotiated the purchase and remained responsible for the debt.16 The plaintiff need not even have completed the vehicle’s purchase. A person can still bring an action if the person intended to purchase the vehicle, but the Federal Act violations resulted in the deal falling through.17

Automobile Fraud: 6.2.4 Parties Indirectly Affected by Odometer Violation

A federal court has found that an individual who contributed some of the funds for a vehicle’s purchase has standing to sue under the Act, even though not listed on the vehicle’s purchase agreement or title.19 Courts have found parties who were not involved in the purchase of an automobile to still have standing to sue under the Act for their injuries relating to Act violations.

Automobile Fraud: 6.2.5 Lessor and Lessee Suits Against Each Other

A lessor has standing to bring an action against a lessee who, with the intent to defraud, fails to provide the lessor with the required disclosures about the leased car’s mileage while being used by the lessee.22 (National Highway Traffic Safety Administration regulations require, in certain situations, that lessees disclose odometer readings to the lessor.23) Similarly, lessees should have standing to sue their lessors or the dealer for any odometer tampering or other odometer violation which occu

Automobile Fraud: 6.3 Do All Disclosure Violations Lead to a Private Right of Action?

The Act provides for a private civil action whenever a “person . . . violates this chapter or a regulation prescribed or order issued under this chapter.”28 This provision thus grants explicit authority for private actions for any type of violation, including violations of the National Highway Traffic Safety Administration (NHTSA) disclosure regulations.

Automobile Fraud: 6.5.1 Federal Court Jurisdiction

The Federal Act gives federal district courts jurisdiction over actions under the Federal Act regardless of diversity or the amount in controversy.51 Cases may also be brought in state court,52 but that action may be removed to federal court within the thirty-day time limit.53

Automobile Fraud: 6.5.2 Venue

As the Federal Act contains no special venue provision, the proper venue for a federal court action is determined by the general venue statute, 28 U.S.C. § 1391. The action may be brought where the defendant resides or where a substantial part of the claim arose.54 A corporation resides anywhere it is incorporated, licensed to do business, or is doing business. In state court actions, the state venue statute must be followed.

Automobile Fraud: 6.5.3 Right to Jury Trial

The Federal Act does not specifically provide for a jury trial. However, the Seventh Amendment to the United States Constitution guarantees the right to a jury trial in “suits at common law, where the value in controversy shall exceed $20.” Rule 38(a) of the Federal Rules of Civil Procedure provides that the right of trial by jury as declared by the Seventh Amendment or as given by a statute of the United States is preserved to the parties inviolate.

Automobile Fraud: 6.6.1 Claim Selection Largely Determines Court Selection

A state odometer act claim cannot be brought in federal court unless there is federal diversity jurisdiction or federal jurisdiction under the Class Act Fairness Act. A federal court has discretion to hear the state claim as supplemental to a Federal Act claim, and will generally do so because the state claim is so closely related.

Automobile Fraud: 6.6.2 Factors in Choosing Between State and Federal Claims and Courts

Consumers preferring state over federal court must weigh the relative merits of such a state court action based only on state odometer and other state claims compared with a federal court action based on claims under both the federal and state statutes. In general, there will not be an issue of the Federal Act preempting state law.62 State statutes do not typically conflict with the purposes of the Federal Act.63

Automobile Fraud: 6.6.3 Benefits of Adding a State Odometer Claim to a Federal Act Claim

When the consumer brings an action in federal court or if it is not imperative that the consumer stay in state court, the best course of action usually is to bring an action under both the state and federal odometer statutes. There will be little question that the federal court will exercise supplemental jurisdiction over the state odometer act claim, because it is so closely related to the Federal Act claim.

Automobile Fraud: 6.7 Drafting the Complaint

Sample complaints that contain Federal Act claims are summarized in Appendix G, infra, and available digitally in Microsoft Word format as companion material to the digital version of this treatise. Because intent to defraud is an element for a private action under the Federal Act,77 it is safest to explicitly plead this intent.

Automobile Fraud: 6.8 No Comparative Fault Defense

It is no defense to liability under the Act that the consumer was at fault in not recognizing the odometer problem. An Act complaint for a violation that requires intent is akin to a complaint in fraud, and there is no comparative fault defense for fraud actions.85

Automobile Fraud: 6.9.1.1 General

The Federal Act states that: “A person that violates this chapter or a regulation prescribed or order issued under this chapter, with intent to defraud, is liable for 3 times the actual damages or $10,000,86 whichever is greater.”87 If treble damages are less than $10,000, then the court awards $10,000. But if treble damages exceed $10,000, then the award of treble damages is mandatory, not permissive.88

Automobile Fraud: 6.9.1.2 Diminished Value of the Vehicle

One measure of actual damages is the difference between the value of the vehicle the consumer thought they were buying and the fair market value of the vehicle after the odometer irregularity has been discovered.96 The mileage irregularity will affect the fair market value in two ways. One is the fact that a higher mileage vehicle is worth less (the next subsection examines how to measure this diminution in value when the actual mileage is unknown).

Automobile Fraud: 6.9.1.3 Computing Diminished Value When True Mileage Cannot Be Determined

In odometer tampering cases in which a vehicle’s true mileage cannot be determined, the difference in the value of the car as it was represented to be and its value as it was in fact delivered is difficult to measure. The most sensible position is to base the car’s actual value on the testimony of an expert as to its value assuming the mileage is unknown and also that the odometer disclosure must state that the mileage is not accurate, and that a seller’s truthful representations about mileage must admit that the mileage is unknown.

Automobile Fraud: 6.9.1.4 Availability of Treble Damages When Consumer Seeks to Rescind the Transaction

Many consumers who discover odometer fraud will want to return their vehicle to the dealer and get all their money back. While the Federal Act does not explicitly provide for such equitable relief, courts have held this remedy is available under the Act,107 and a court can certainly award such a remedy under Uniform Commercial Code Article 2 or a common law claim. But consumers seeking to unwind the transaction may be depriving themselves of the benefit of a treble damages remedy.

Automobile Fraud: 6.9.1.5 Cost of Service Contracts, Other Voided Coverages

When a consumer purchases a vehicle, the dealer may also sell a service contract or extended warranty, GAP insurance, or other products whose terms may state that if there is a mileage discrepancy, the contract is voided.112 Then, even though the consumer may not have attempted to use the service contract or other product, the contract is worthless and the damages are the total cost of the product and any related charges for the contract. These should be actual damages under the Act, which should then be trebled.

Automobile Fraud: 6.9.1.6 Costs to Determine Odometer Discrepancy

Expenses incurred to determine if the odometer is accurate are incidental damages that should be trebled under the Act.113 These expenses can include charges assessed by a mechanic in investigating the odometer or other aspects of the vehicle to determine its true mileage. Such expenses can also include the cost of a Carfax or other summary title search, or the cost of a detailed title search obtained from one or more state departments of motor vehicles.