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Automobile Fraud: 8.5.1 General

Intent to induce is usually not difficult to demonstrate in automobile fraud cases. “The intent which constitutes an essential element of fraud is an intent that the representation be acted upon by the other party.”201 In a car transaction, the sale of a car is the whole purpose for the two parties’ relationship, and so the motive for the misrepresentation is usually obvious. Evidence of prior similar acts of deception can be a useful tool to prove intent.202

Automobile Fraud: 8.5.2 Remote Sellers and Others Not in Privity with Buyer

The more complicated intent issue arises when the misrepresentation is not made to the plaintiff, but to someone farther up the chain of title. For example, in odometer rollback cases it is commonly a prior owner, not the immediate seller, who turned back the odometer. Did the tamperer intend to induce the plaintiff, someone the tamperer has never spoken with, to rely on the misrepresentation inherent in the rollback? Courts generally say yes:

Automobile Fraud: 8.6.1 General

The element of justifiable reliance requires plaintiffs to show that they relied on the misrepresentation in purchasing the car for the consideration paid.218 Thus, the false impression conveyed by the seller’s actions (or inactions) must have influenced the buyer’s decision to enter into the transaction. Furthermore, the reliance must have been reasonable under the circumstances.219

Automobile Fraud: 8.6.2 Proving Reliance

Reliance “may be inferred from all the facts and circumstances in the case.”225 Classically the reliance portion of the element is fulfilled by credible testimony that the buyer would not have bought the car if they had known of its true condition.226 For example, a plaintiff duped into buying a car represented as new demonstrated reliance by testifying he would not have bought a used car.227

Automobile Fraud: 8.9.1 General

To recover actual damages for fraud, the plaintiff must prove the amount of damage suffered and that the defendant’s misrepresentation caused those damages.314 Whether the plaintiff sustained damages will usually be an issue for the jury or other trier of fact,315 although a court can reduce the amount of damages awarded as excessive.316 If no damages are proven, there can be no actual damages awarded.3

Automobile Fraud: 8.9.3 Causation

As part of the proof of damages, the plaintiff must demonstrate a link between the misrepresentation made and the damages sustained.

Automobile Fraud: 8.10.1 Availability of Punitive Damages

As the United States Supreme Court has noted, “[p]unitive damages have long been an available remedy at common law for wanton, willful, or outrageous conduct.”397 With only a handful of exceptions,398 all states allow punitive damages to be awarded on fraud claims.

Automobile Fraud: 8.10.2 Actual Damages As Precondition to Punitive Damages

Some courts do not find economic damages to be a precondition for punitive damages.400 But in many jurisdictions the plaintiff must first establish at least some actual damages in order to recover punitive damages in a fraud action.401 Some of these jurisdictions allow punitive damages if actual damages are shown even if for some reason they are not awarded402 or they are awarded only on a non-fraud count.

Automobile Fraud: 8.10.6 State Statute May Limit Size of Punitive Damages Award

A number of state statutes restrict the circumstances in which punitive damages can be awarded or cap the amount of the award. Even if such a statute has been enacted, however, carefully analyze it to see if it applies to a common law fraud claim. For example, some caps apply only to product liability cases, while others apply to all civil actions.

Automobile Fraud: 8.10.7 Effect of Treble Damages Provision of State Odometer Statute

In a much criticized decision, Perez v. Z Frank Oldsmobile, Inc.,513 the Seventh Circuit has predicted that Illinois courts would interpret the Illinois odometer statute as establishing the maximum punitive damages award available on a common law fraud claim for an odometer rollback. The Seventh Circuit concluded that the treble damages recovery under the state odometer statute is not only a minimum but also a maximum recovery for odometer fraud.

Automobile Fraud: 8.11.2.1 Factors to Determine Reprehensibility

The first guidepost by which to evaluate a jury’s punitive damages verdict is the degree of reprehensibility of the defendant’s conduct.538 The Supreme Court stated in both in State Farm and Gore that reprehensibility is “the most important indicium of the reasonableness of a punitive damages award.”539 Five factors must be considered in evaluating an act’s reprehensibility:

Automobile Fraud: 8.11.2.2 Physical Versus Economic Harm

The first factor identified by the Supreme Court in determining reprehensibility is whether the harm is physical as opposed to economic. In Gore, the Court emphasized that the harm caused by the failure to disclose that the vehicle the consumer bought had been repainted was purely economic, with no effect on safety, performance, or even appearance for at least the nine months it took the plaintiff to discover it.542

Automobile Fraud: 8.11.2.3 Risks to Health or Safety of Others

The second factor identified by the Supreme Court to determine reprehensibility is whether the defendant acted with indifference to, or in reckless disregard of, the health or safety of others. Courts have used this factor in determining reprehensibility in cases involving the sale of unsafe used cars550 and other products.551

Automobile Fraud: 8.11.2.6 Intent, Malice, Trickery, or Deceit

The fifth factor in evaluating reprehensibility is whether the harm resulted from intentional malice, trickery or deceit, or from mere accident. Reckless indifference may be sufficient.590 In nearly all automobile fraud cases the proof of the merits of the claim will show that the defendant’s acts involved intentional malice, trickery, deceit, or reckless indifference, thus satisfying this element.591