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Automobile Fraud: 7.2.3.5 Actual Knowledge Precondition

A state’s new car damage disclosure law may require disclosure only when the dealer has actual knowledge of the damage. Even when the damage occurred prior to the dealer’s receipt of the vehicle, however, it may be possible to show actual knowledge through documents that the manufacturer or transporter provided to the dealer. The manufacturer may also require that the dealer inspect the vehicle for transit damage promptly upon delivery.

Automobile Fraud: 7.2.3.7 Statutes Shield Dealers from Consumer Remedies When Threshold Damage Amount Is Not Reached

Although new car damage disclosure laws are generally useful for consumers when the damage amount to their cars exceeds the threshold disclosure amount, the laws can have the effect of insulating dealers and manufacturers from liability when the threshold is not met. The question is whether cars that are damaged in an amount less than the statutory threshold can still be sold as “new” without disclosure of the damage.

Automobile Fraud: 7.2.5 Dealer Responsibility to Inspect Vehicles

Even if a state does not have a damage disclosure law, if it requires dealers to inspect vehicles there is likely a duty under common law or the state UDAP statute to disclose damage that an inspection revealed or should have revealed. Connecticut,217 Michigan,218 Rhode Island,219 and Wisconsin220 require dealers to inspect used cars before selling them.

Automobile Fraud: 7.4 State Laws Requiring Disclosure of Gray Market Origin

Gray market vehicles are vehicles that are sold in the United States even though they were manufactured for sale elsewhere. They may not meet federal emissions and safety standards.255 As a result, it may be difficult or impossible to title the vehicle in the United States.256 Odometer issues also arise because the odometer must be converted from kilometers to miles when the vehicle is brought into the United States.257

Automobile Fraud: 7.5 State Airbag Laws

Sale of cars without functioning airbags is a growing problem in light of the expense of replacement airbags and their attractiveness to thieves.265 A number of states have enacted laws addressing this problem.

Truth in Lending: 4.2.4.5.1 Overview

Contradictions on the TILA disclosure itself or between the TILA disclosure and other loan documents may also render the disclosures not clear and conspicuous. Lenders or their agents may also provide other information that contradicts or overshadows the TILA disclosures, rendering the TILA disclosures not “clear and conspicuous.”

Truth in Lending: 13.1.1 Summary of Consumer Leasing Act Requirements

The Consumer Leasing Act (CLA) and Regulation M specify approximately thirty terms that must be disclosed to lessees, and require that charges on default or early termination be reasonable. Failure to comply with any disclosure requirement or the reasonableness requirement can lead to a statutory damages award plus actual damages and attorney fees. There are also a number of CLA lease advertising requirements, with private remedies if the consumer is damaged.

Truth in Lending: 13.5.4.4 Manufacturer “Supported” Residual Values

A special issue arises when a manufacturer “supports” an inflated residual by agreeing to subsidize the lessor because the vehicle at lease end will be worth less than the inflated residual. A lessor can use the inflated residual to lower the amount the lessor loses to depreciation over the lease term, allowing the lessor to reduce monthly lease payments (if it keeps rent charges the same). This can result in more of the manufacturer’s vehicles being sold.

Automobile Fraud: 7.7.6 Recordkeeping Requirements

Dealer licensing statutes also commonly include recordkeeping requirements designed to thwart fraud.325 These requirements vary from state to state, but may include information about the previous owner, the date of purchase, and the vehicle identification number for each vehicle the dealer buys; a description of each vehicle; a description of the body or chassis of used vehicles sold and any vehicle disassembled or altered; the sale price; the name and address of the purchaser; and copies of the title, the warranty, and other documents.

Automobile Fraud: 7.8.2 Disclosure and Title-Branding Requirements

A number of statutes require automobile auctioneers to disclose substantial background information regarding vehicles.333 Maine requires the most disclosure, including the vehicle make, model, and identification or serial numbers; odometer reading; name and address of the previous owner, including the principal use of the vehicle; the means by which the prior owner acquired the vehicle; all known mechanical defects; the extent of any damage, such as by fire, water, or collision; whether implied warranties are excluded or modified; whether t

Automobile Fraud: 7.8.3 Other Requirements

Other statutes specific to automobile auctions are more limited and involve disclosure regarding the nature of a warranty or guaranty,336 compliance with safety and pollution requirements,337 vehicle identification numbers,338 whether a vehicle is rebuilt,339 and whether a manufacturer was required to replace or repurchase a vehicle due to defect.340

Automobile Fraud: 7.8.4 Private Remedies

The Maryland, New York, Pennsylvania, South Carolina, and Washington statutes regarding automobile auctions contain a private right of action for violations.345 In other states, the auction’s violation of state standards may be a state UDAP violation or lead to a fraud claim.346 Motor vehicle auctions may be required by state law to post a bond that will be available to pay specified types of judgments obtained by consumers.347

Automobile Fraud: 10.12.1 Availability of Attorney Fees

Many of the statutes under which automobile fraud claims are brought, including the Motor Vehicle Information and Cost Savings Act, many state odometer statutes, federal RICO and most state RICO statutes, many state lemon laws and damage disclosure laws,708 the Magnuson-Moss Warranty Act, and nearly all state deceptive practices (UDAP) statutes, allow an award of attorney fees if the consumer is successful.

Automobile Fraud: 10.12.2 Pleading Attorney Fees and Other Initial Steps to Obtain Fees

In drafting an automobile fraud pleading, the consumer’s attorney should be careful to include at least one claim under a fee-shifting statute. If there is any possibility of asserting such a claim, the attorney should keep careful, detailed, contemporaneous records of time and any expenses, including pre-suit activity such as investigation and negotiation.

Automobile Fraud: 10.12.3 Standards for Determining Fees

There is a large body of case law interpreting the fee-shifting provisions of federal statutes.716 Many states have built up their own body of law interpreting state fee-shifting statutes,717 but most state courts give considerable weight to federal interpretations of comparable federal statutes.718

Automobile Fraud: 10.12.4 Procedure for Requesting Fees

Ordinarily, a fee request is submitted to the court, not the jury, after the plaintiff is awarded damages.730 This procedure is preferable to submitting attorney fee issues to the jury, which would unnecessarily complicate the case, and introduce side issues that distract attention from the consumer’s case. Only if the award of attorney fees is sought as consequential or incidental damages should the claim be submitted to the jury.731

Automobile Fraud: 10.12.5 Attorney Fees When Case Is Settled

Fee arrangements can be tricky when a case is settled. For example, the defendant may offer an amount that is sufficient to make the consumer whole, but insufficient to pay the consumer’s attorney a reasonable fee as well. Or the defendant may accept return of a vehicle, without any money changing hands. To avoid the dilemmas created by this type of settlement tactic, it is important for the consumer and the consumer’s attorney to have worked out in advance a clear understanding of how fees will be handled if there is a settlement.735

Automobile Fraud: 10.13.1.1 Locating Dealer Bank Accounts

If a defendant does not voluntarily pay a judgment, state law collection procedures will need to be used to enforce the judgment. This effort can be complicated by the difficulty in locating a dealer’s assets. The most obvious assets of the dealership—the vehicles displayed for sale—are likely to be covered by a superior lien pursuant to the dealer’s floor plan financing arrangement.