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Automobile Fraud: 10.4.3.1 Introduction

Defendants who were not involved in the original fraud may be liable if they ratified others’ fraud, knowingly accepted the benefits of the fraud, conspired with others, or aided and abetted the fraud.176 These means of establishing liability apply to tort claims and most courts borrow them for UDAP claims as well.

Automobile Fraud: 10.4.3.2 Ratification

The Restatement (Second) of Agency defines ratification as “the affirmance by a person of a prior act which did not bind him but which was done or professedly done on his account, whereby the act as to some or all persons is given effect as if originally authorized by him.”177 To establish liability by ratification, one court held that the plaintiff must show that the defendant: (1) had actual knowledge of the allegedly fraudulent conduct; (2) knew or should have known that this conduct constituted a tort; and (3) armed with this k

Automobile Fraud: 10.4.3.3 Knowing Acceptance of Benefits of Fraud

Another theory provides that one who knowingly receives the benefits of fraud can be held liable for it.184 This theory of liability is sometimes referred to as “fruit of the fraud” liability,185 and holds liable those peripheral parties to a transaction who, while not directly making a fraudulent representation, knowingly profit from it.

Automobile Fraud: 10.4.3.4 Civil Conspiracy

Civil conspiracy is another potential theory of liability.191 Civil conspiracy is not an independent tort of its own as much as a device by which to spread joint and several liability for another tort among those who facilitated it.

Automobile Fraud: 10.4.3.5 Aiding and Abetting

To aid and abet a fraud, the culpable party must act knowingly or recklessly in substantially assisting a fraud.198 This assistance can be to further the fraud or to assist in the concealment of the fraud.199 Courts often identify the following as the elements of a claim that one party aided and abetted another’s fraud: (1) the party whom the defendant aids must perform a wrongful act causing injury; (2) at the time the defendant provides assistance, they must be generally aware of their rol

Automobile Fraud: 10.4.4 Recovering from the Creditor for the Dealer’s Misconduct

Recovering from the creditor for the dealer’s misconduct is an important strategy when the dealer is judgment proof. Creditors are, of course, liable for their own misdeeds and their participation in or ratification of the dealer’s fraud.204 But they also have derivative liability for claims against the dealer by virtue of the Federal Trade Commission’s Holder Rule.205

Automobile Fraud: 10.4.5.2 Liability Under Federal Odometer Act

An auction may be able to escape liability under the federal odometer statute’s disclosure requirements because, when the auction never holds title to the vehicle, it has no disclosure responsibilities.224 Nevertheless, this immunity for auction companies does not apply to the auction’s derivative liability for claims based upon the misconduct of its undisclosed principal or fraud claims for its own misconduct.225

Automobile Fraud: 10.4.5.3 Online Auctions

Sometimes consumers purchase vehicles through online auctions. If the seller posted a false description of the vehicle on the auction’s website, the consumer certainly has a claim against the seller. However, a number of courts have held that a federal statute, 47 U.S.C. § 230, protects the auction itself from liability. That statute provides that no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another content provider.

Automobile Fraud: 10.4.6 Liability of Notaries

Many states require that signatures on vehicle titles or other vehicle documents be notarized. If any of the documents involved in the transfer of the vehicle were notarized, the consumer’s attorney should investigate whether the notary might be liable to the consumer. Notary liability is particularly important because states typically require notaries to be bonded.230

Automobile Fraud: 10.4.7.1 Overview

If the wrongful acts or omissions of more than one entity combine to produce a single injury, it is necessary to determine whether—and how—to allocate liability among the wrongdoers. If two tortfeasors are jointly and severally liable the plaintiff may sue either of them or both of them, and may recover partly from one and partly from the other or in full from either.237

Automobile Fraud: 10.4.7.2 Concerted Action

The strongest case for joint and several liability is concerted action.241 If persons combine to do wrong, “the act of one is the act of all,” and each wrongdoer is liable for the entire damages.242 A formal agreement need not be shown, unless a state statute so requires; “tacit agreement” may be implied from a course of conduct.243

Automobile Fraud: 10.4.7.4 Punitive Damages When There Are Multiple Defendants

Even if several defendants are jointly liable for a wrong, their liability for punitive damages is individual, not joint. Punitive damages are based on individual culpability and are intended to punish a particular offender.261 Thus punitive damages may be awarded separately against each responsible individual,262 and a settlement with one defendant does not affect the punitive damages liability of the remaining defendants.263

Automobile Fraud: 10.5.2 Items to Seek in Formal Discovery

Once the case is filed, it is important to begin discovery early. One experienced automobile fraud attorney recommends starting discovery with a document request that includes a demand for the entire dealer file, and then following up with a deposition of the salesperson, with instructions that the salesperson is to bring the original dealer file to the deposition. The consumer’s attorney’s staff then copies the original file as one of the first items of business during the deposition.

Automobile Fraud: 10.5.3 Pattern Evidence

A critically important area to explore through formal discovery is other transactions involving similar allegations.271 There are several theories supporting the admissibility of such evidence,272 and many courts have ordered it produced in discovery.273

Automobile Fraud: 10.5.4 Making the Most of Available Discovery Techniques

Some discovery techniques are better than others for obtaining certain types of information. Interrogatories and requests for production of documents are effective ways to identify documents and witnesses. With car dealers, it is important to ferret out all the documents, including service department records, financing documents, facsimiles and other communication records, records and notes from the finance and insurance manager, and the used car manager’s notes and records.

Automobile Fraud: 10.5.5 Preparing for Discovery Battles

The consumer’s attorney must be prepared for discovery battles in automobile fraud cases, especially when seeking evidence that will pinpoint the fraud or establish a pattern of misconduct. Experienced consumer attorneys often view these expected discovery battles as critical stages of automobile fraud cases, because success in these battles (particularly seeking “pattern” evidence) may change a case from a winnable one to an overwhelmingly powerful one.

Automobile Fraud: 10.5.6 Deposing the Dealer

A sample outline for deposing the dealer is available online as companion material to this treatise. One useful question to ask the dealer during deposition, and at trial, is whether the dealer has changed any of the dealership’s practices since the plaintiff’s experience came to the dealer’s attention. If the dealer answers no, it shows intransigence, while an affirmative answer is further evidence that the dealer acted wrongfully toward the plaintiff.

Automobile Fraud: 10.5.7 The Defendant’s Deposition of the Consumer Plaintiff

In preparation for the deposition, start with the basics with the client. These may seem like common sense steps but it is unlikely that the client has ever attended a deposition before and providing as much detail as possible can help the client feel more relaxed and less anxious about the experience. Explain what a deposition is and the purpose of this informal proceeding. Describe the location of the deposition and make sure the client has transportation to the location to arrive ahead of the designated time.

Automobile Fraud: 10.5.8.1 Right to Record the Deposition

Consumer attorneys should carefully consider an audiovisual recording of any deposition of the consumer plaintiff, particularly if the consumer is elderly or unsophisticated. Federal Rule of Civil Procedure 30(b)(3)(A) states that the deposition may be recorded by audio, audiovisual, or stenographic means, and the party taking the deposition shall bear the cost of the recording. Rule 30(b)(3)(B) states that, with prior notice, any party may designate another method to record the deponent’s testimony in addition to that specified by the person taking the deposition.

Automobile Fraud: 10.5.8.2 Advantages and Disadvantages of Video Recording the Deposition

The video recorded deposition may become necessary to show at the trial if the consumer becomes incapacitated or dies before the trial. Moreover, particularly if the consumer is elderly or vulnerable, video recording the deposition can have a profound effect on the other side’s attorney. The attorney may become less aggressive and badgering, and may even become flustered, because the attorney knows that any aggressiveness and its impact on the consumer will be visible to the viewer.

Automobile Fraud: 10.5.9 Dealing with Missing Documents

Sometimes discovery reveals that documents are missing. For example, a dealer or manufacturer may claim to have purged records about the vehicle. Following up with specific interrogatories about where, why, and by whom each document was destroyed sometimes results in the defendant finding the documents. If not, it can produce information that will be useful upon cross-examination.286

Automobile Fraud: 10.6.1 Prior Collection Action

The creditor sometimes files and wins a collection action against the consumer before the consumer seeks legal advice about automobile fraud. Whether res judicata bars an affirmative suit by the consumer in this situation depends on the rules of the forum state.