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Automobile Fraud: 10.6.2 Prior Fraud Suit or Criminal Prosecution

Sometimes a consumer sues a dealer for misrepresenting a car’s condition, but discovers odometer tampering or some fraud in the title history at some later date after the lawsuit is concluded. Can the consumer can then bring a new action alleging the newly discovered fraud? This problem can usually be avoided by, as a matter of course in any car case, getting a title history and having an expert review the car’s condition, including the accuracy of the odometer reading.

Automobile Fraud: 10.7.1 In General

It is relatively rare for cases involving rollbacks, concealed wreck damage, lemon resales, or yo-yo sales to be brought as class actions. Many of these cases involve individual fact patterns. On the other hand, some parties do systematically violate the law for all or many of the cars that pass through their hands, and the nature of this violation follows a pattern. In such a situation, a class action may be appropriate.

Situations that may involve the same violation for a large enough number of vehicles to support a class action include:

Automobile Fraud: 10.7.2 Shaping the Class Action

As automobile fraud cases generally involve significant actual damages, it will usually be necessary to bifurcate the case, with a determination of liability on a classwide basis, followed by individual proceedings to assess damages. For example, the class portion of an odometer act case will focus on whether there was a pattern of violations under the act and whether the transferor had the requisite intent to defraud.

Automobile Fraud: 10.7.3 Claims to Assert in Automobile Fraud Class Actions

Too many claims may make a class action less appealing and raise concerns about manageability. Claims under a number of different statutes, whose elements overlap only partially, can also make it necessary to have subclasses. On the other hand, it is important to include at least one claim that allows an award of attorney fees.

Automobile Fraud: 10.7.5 Class Pleadings

The pleadings in an automobile fraud class action will vary greatly, depending on the particular practice that is challenged. Full sets of pleadings, motions, memoranda, discovery, and settlement papers in three sample odometer fraud class actions are available online as companion material to this treatise. The online material also includes sample individual complaints for a variety of other types of automobile fraud that can be adapted to form the basis for class action complaints.327

Automobile Fraud: 10.7.6 Preventing Defendants from Settling Against Individual, Unrepresented Class Members

There is a particular risk in an automobile fraud class action that the defendant will contact potential class members to settle their claims. This is because these class actions are likely to involve fairly clear-cut violations, largely provable by documentary evidence, that will result in significant damages for each class member, and the class size will likely be in the low hundreds rather than in the thousands.

Automobile Fraud: 10.8.1.1 Overview of Admissibility of Other Acts Evidence

In an automobile fraud case, it is unlikely that the individual consumer’s car is the first whose history the defendants concealed, or the first whose odometer the defendants rolled back. If other similar acts by the defendants can be discovered, proving them gives the trier of fact a sense of the “stench” of the defendants’ practices. Evidence of other acts is likely to be highly persuasive to the jury.

Automobile Fraud: 10.8.1.2 To Show Intent or Motive

The rule that evidence of other bad acts is admissible to show intent or motive should suffice to admit the evidence in most if not all automobile fraud cases.343 Intent is a material issue in such cases, because it is a required element of fraud claims and claims under the federal odometer statute,344 and is likely to be relevant to a RICO claim.

Automobile Fraud: 10.8.1.4 To Show Knowledge

Evidence of other acts is admissible to show the defendants’ knowledge, which may be relevant in a number of situations.351 Knowledge of the fraudulent activities of a dealership’s salespersons is relevant, for example, to establish the liability of an entity that receives the benefits of the fraud.352

Automobile Fraud: 10.8.1.5 To Show Absence of Mistake or Accident

Defendants in automobile fraud cases frequently raise the “dumb dealer” defense—the claim that the inaccurate odometer disclosure or undisclosed wreck damage was merely a mistake. Evidence of other bad acts is admissible to prove absence of mistake or accident.357 Similarly, it should be admissible to rebut any bona fide error defense under a consumer protection statute.

Automobile Fraud: 10.8.1.6 To Show Habit or Routine Practice

Evidence of prior acts can also be part of proof of an individual’s habit or an organization’s routine practice.358 Such evidence can be substantive proof that the individual or organization acted in conformity with the habit or routine practice on a particular occasion. For example, evidence that the defendant customarily signed blank transfer and mileage papers supports a finding that the defendant did the same thing in the particular plaintiff’s transaction.359

Automobile Fraud: 10.8.1.7 To Support Punitive Damages Claims

If the consumer seeks punitive damages, evidence of other bad acts is clearly admissible to show intent or malice. In BMW of North America, Inc. v. Gore,360 the Supreme Court noted: “Certainly evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful would provide relevant support for an argument that strong medicine is required to cure the defendant’s disrespect for the law. . . .

Automobile Fraud: 10.8.1.8 Acts That Are Intertwined with Main Transaction; Multiple Claims; Conspiracies

Another basis for admitting evidence of other acts is that they are necessary to complete the story of the main transaction or are inextricably intertwined with it.364 These are not “other” acts.365 For example, evidence of prior sales of the same vehicle is admissible.366 Evidence of other acts may also be admissible if claims regarding several transactions are joined in the same suit, although the court may decide to sever the various claim

Automobile Fraud: 10.8.1.9 Admissibility Under RICO and UDAP Statutes

Evidence of prior bad acts is also relevant to claims under state and federal racketeer influenced corrupt organizations (RICO) statutes. The federal RICO statute and almost all state RICO statutes require a showing of a pattern of racketeering activity.370 This being a necessary element of the claim, the consumer not only can, but must introduce pattern evidence.

Automobile Fraud: 10.8.1.10 Impeachment

Evidence of some criminal convictions can be used to impeach the credibility of a witness.375 The type of conviction that can be used for impeachment varies, but typically a crime involving dishonesty is admissible, and in some cases any felony conviction is admissible.376

Automobile Fraud: 10.8.1.11 Practice Tips for Admission of Other Acts Evidence

In presenting evidence of other acts, the advocate should keep in mind that, as a practical matter, no judge wants to try twenty-five cases when it is possible to try just one.380 If a pattern is to be proven, sound judgment should be applied to draw the line on the number of instances of similar conduct that will be shown, so that the point will be made thoroughly, but also as quickly as possible.

Automobile Fraud: 10.8.2 Evidence of Other Consumer Complaints

Sometimes evidence exists that consumers have filed complaints with government agencies or the Better Business Bureaus concerning the defendant, but it may be difficult to prove the facts underlying those consumer complaints. For example, there may be lists of complaints made to the state attorney general or a Better Business Bureau, but little underlying documentation. Ways to avoid hearsay problems with this evidence are:

Automobile Fraud: 10.8.3 Evidence of Wholesaler’s or Auction Company’s Bad Reputation

Evidence of the bad reputation of an auction company or wholesaler is relevant to show that the dealer who sold the car to the consumer was or should have been on notice of likely problems, and should have investigated the vehicle’s history.389 This evidence is not hearsay, because it is not introduced to prove the truth of the matter asserted (for example, that in fact the auctions or wholesalers sold large numbers of rollbacks).390 Rather, it shows that the purchasing dealer was on notice

Automobile Fraud: 10.8.4 Evidence of Defendant’s Settlement or Settlement Offers in This or Other Cases

Many states follow a rule similar to Federal Rule of Evidence 408 that evidence of compromise or an offer to compromise is not admissible on liability issues. Evidence that a defendant has settled, or offered to settle, this or other disputes is not admissible to prove that the defendant engaged in the challenged practices.394 Nor may a defendant introduce a settlement offer to negate fraudulent intent, show a lack of damages, or defend against punitive damages.395

Automobile Fraud: 10.8.5 Admissibility of Evidence of Other Defendants’ Settlements; “Empty Chair” Effect

A consumer who reaches a settlement with some but not all defendants may be concerned about the effect on the jury if the judge allows admission of evidence of the settlement. If the plaintiff has already recovered a substantial sum from another defendant, the jury may feel that the plaintiff’s case no longer has to be taken seriously. If the plaintiff settled with other defendants for a nominal amount, it may devalue the case in the jury’s eyes.

Automobile Fraud: 10.8.6 Parol Evidence Rule and Merger Clauses

Defendants may object to testimony about oral misrepresentations, or written representations that are not in the parties’ contract, on the ground of the parol evidence rule. In addition, the defendant may point to a “merger clause” in the sales agreement to the effect that the seller is not responsible for the oral representations of its sales personnel and that the contract supersedes any such representations.

Automobile Fraud: 10.8.7.1 Previous and Subsequent Owners

A vehicle’s previous owners can offer important testimony about the vehicle’s history. In rollback cases, previous owners can testify to the mileage at the time of transfer and that the odometer was functioning accurately at that time. In salvage cases, they can describe whether the insurance company declared the vehicle a total insurance loss, or the size of the insurance settlement. In a lemon laundering case, the prior owner can detail the nature of the car’s mechanical problems.

Automobile Fraud: 10.8.7.2 Testimony and Statements of Adverse Parties and Persons Associated with Adverse Parties

Under Federal Rule of Evidence 611 and comparable state rules, a party may call adverse parties, or witnesses identified with an adverse party, and question them by leading questions. This approach can be effective in establishing basic facts about the transaction, and in presenting admissions that the witness has made in deposition. An adverse party is sometimes a good choice as the first witness to present in the plaintiff’s case. The consumer’s attorney should call adverse parties as witnesses only if they have been deposed, however.