Skip to main content

Search

Automobile Fraud: 5.8.8 Inferring Intent from Dealer’s Failure to Investigate

An intent to defraud can be inferred even when the odometer disclosure provided to the dealer indicates that the mileage is accurate. Dealers have a duty to inspect and make an independent determination when they have reason to suspect a previous disclosure is inaccurate.386

Congress explicitly rejected including language in the Act which would have permitted reliance on the disclosure of the previous owner.387 The Senate Report states:

Automobile Fraud: 5.8.9 Inferring Intent from a Carfax Report

Carfax or other vehicle history reports are often reviewed by car dealers, and representations about the report are often made to consumers. These situations may present an opportunity to prove dealer intent. For example, a federal court found that there was a fact question as to intent when the Carfax report revealed an odometer discrepancy and the dealer showed the report to the consumer, but rushed the consumer to prevent the consumer from reading the report.401

Automobile Fraud: 5.8.10 Does a Repossessing Creditor’s Lack of Investigation Show Intent?

Many used cars are introduced into commerce by creditors or lessors who repossess the vehicles and then resell them, often at dealer-only automobile auctions. These creditors may disclose the odometer reading as accurate even though they have no direct knowledge of whether that is in fact the case. The creditor has an obvious financial incentive to disclose the odometer reading as accurate, but does this failure to investigate show an intent to defraud when the mileage is in fact inaccurate?

Automobile Fraud: 5.8.11 When There Is a Pattern of “Clerical Errors”

Dealers may claim that an inaccurate odometer disclosure is a mere clerical error. For example, the dealer may provide the consumer with a separate odometer statement, and check “mileage unknown” on its copy after the consumer signs that they received the statement. Then the dealer will claim that the failure to check “mileage unknown” on the actual title was a mere clerical error.

Automobile Fraud: 5.8.14 Examples of Dealers Overcoming Presumption of Intent

Not every dealer violation of the Act is made with intent to defraud; dealers can overcome this presumption with the correct facts. Misstating the mileage by only three miles has been found immaterial and not to show an intent to defraud.415 In another case, no intent was found when the dealer explained the odometer discrepancy to its buyer.

Automobile Fraud: 5.9 Consumer’s Waiver of Rights Under the Act

Dealers may attempt to insert in the sales agreement language stating that the car is sold “as is” or more specifically that, notwithstanding odometer disclosures to the contrary, the dealer makes no representations as to the vehicle’s mileage. Such disclaimers have no effect on the dealer’s liability under the Act for mistaken disclosures or other violations.430

Automobile Fraud: 10.1 Introduction

This chapter provides general advice on litigating an automobile fraud claim. For a federal or state odometer act case, use this chapter in conjunction with Chapters 5 and 6, supra, which examine litigation issues unique to those statutes.

Automobile Fraud: 10.2.1 Need for Expert Inspection

Any consumer with a fraud case involving the condition of the vehicle should be advised to have the car thoroughly inspected by a qualified mechanic at the earliest opportunity.2 If the consumer rescinds the sale and returns the car to the dealer, the consumer will need to have documentation of the car’s problems before turning over possession. If the consumer decides to keep the car and sue the dealer for damages, it is essential to have documentation of the car’s condition at the earliest possible moment, before it is driven any farther.

Automobile Fraud: 10.2.2 Consumer Must Decide Whether to Withhold Payments and Whether to Return the Car

Among the first decisions an automobile fraud client must make are whether to keep the car or try to return it and whether to continue paying for it. Returning the car and stopping payment will likely lead to an adverse credit report and probably a suit for a deficiency balance, although the consumer’s attorney should warn the dealer and the creditor against taking these steps.7 Keeping the car and not paying for it is likely to result in an adverse credit report and the vehicle’s repossession.

Automobile Fraud: 10.2.3 How to Return the Vehicle

Sometimes a dealer will reluctantly go along with rescission of the sale if it is forced to accept possession of the car. Then the dealer may find it easier to resell the car and forget the first transaction. This may make the consumer nearly whole if the consumer has not yet paid a substantial portion of the purchase price.

Automobile Fraud: 10.2.4 Withholding Payments

If the client decides to keep the car and withhold payments, a strong letter from the attorney to the creditor is appropriate. The letter should explain exactly why the consumer is withholding payments and warn the creditor against repossession or an adverse credit report.

Automobile Fraud: 10.2.5 Asking the Consumer to Perform Preliminary Steps

Depending on the client’s sophistication, the value of the case, and the nature of the attorney’s practice, it may be practical for the consumer to perform much of the preliminary investigation. This is also an easy way for the attorney to screen out less meritorious cases. On the other hand, leaving the preliminary investigation to less sophisticated consumers may be a mistake.

Automobile Fraud: 10.2.6 Placing the Attorney-Client Relationship on a Sound Footing

Attorney fees should be thoroughly explained to the consumer at the outset of the relationship. If the monetary value of the case is small and it involves a claim under a fee-shifting statute, the consumer should be told that, unless the defendants resolve the matter promptly, the attorney fees may end up being larger than the consumer’s recovery. The attorney should take care to document all time spent on the case from the outset in detail.

Automobile Fraud: 10.2.7 Documenting Damages

Damages should be documented from the earliest stage of the case. The consumer should be instructed to document any costs to store, inspect, or repair the car, any days of work missed because of lack of transportation, any increased insurance costs, any denials of credit that may conceivably be related to the car transaction, and all costs of substitute transportation. The consumer should keep track of non-monetary damages such as inconvenience, lost time, embarrassment, and anxiety.

Automobile Fraud: 10.3.1 Selecting Claims to Plead

An automobile fraud case will provide a consumer with a number of potential legal claims. Because transferring a vehicle from state to state is often part of the process that conceals its history, the consumer may even have potential claims under the substantive law of more than one state. Each potential claim will have advantages and disadvantages.

Automobile Fraud: 10.3.4.1 Advantages and Disadvantages of Federal Court

A federal forum is potentially available whenever the plaintiff has a claim under the federal odometer statute (MVICSA), the Truth in Lending Act, or the federal RICO Act, or a claim under the federal Magnuson-Moss Warranty Act with at least $50,000 in controversy.40 State courts also have jurisdiction over claims under these federal statutes.41 Federal jurisdiction is also available if there is diversity of citizenship among the parties and the plaintiff’s claim exceeds the federal jurisdic

Automobile Fraud: 10.3.4.3 Framing Misrepresentation Claims As Federal Odometer Claims

If the consumer prefers a federal forum, in some cases it is possible to plead fraud-type claims as violations of the MVICSA. Any false statement made to the buyer in connection with making the federally required odometer disclosures is a violation of the MVICSA.49 Thus, any oral statements, advertisements, or written representations about a vehicle’s mileage may give rise to federal claims.

Automobile Fraud: 10.3.5.1 General Rules

It is very common for out-of-state entities to be involved in automobile fraud, because interstate transfers of vehicles are a key step in many automobile fraud schemes. If the plaintiff wants to sue out-of-state entities, the court must have personal jurisdiction over those defendants. The existence of potential defendants in several states can also give the plaintiff a choice of forums.

Automobile Fraud: 10.3.5.2 Long-Arm Jurisdiction over Out-of-State Vehicle Sellers

The consensus is that an out-of-state seller will be subject to long-arm jurisdiction if the seller does business in the forum state or follows a regular course of business of selling vehicles that it knows will end up in the forum state. For example, a Kentucky man rolled back a car’s odometer and sold it to a West Virginia dealer, which then sold it to a West Virginia consumer. The consumer showed that the Kentucky man had sold 127 cars to West Virginia dealers during the previous five years.