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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.

Automobile Fraud: 10.13.1.2 Collecting from Debts Owed to the Dealer

Another way to collect a judgment against the dealer is to search local court records for suits the dealer has filed. If the dealer has won judgments against other people or companies, the payments on those judgments can be attached. This method of collecting a judgment has particular potential because the people the dealer has sued may be delighted to pay someone other than the dealer, so may be more cooperative than other garnishees.

Automobile Fraud: 10.13.1.3.1 Information from and payments owed by manufacturer

Manufacturers require franchised dealers to make periodic reports on their financial status. These reports can help locate assets. They are also a helpful way of verifying a claim by a dealer that it is on the brink of going out of business.

A manufacturer may also owe money to a franchised dealer, for example for advertising. The consumer can collect against this obligation by garnishing the manufacturer. Similarly, a bank or other financing entity that purchases installment contracts from the dealer may owe money to the dealer.

Automobile Fraud: 10.13.1.3.2 Dealer assets on the premises

Even low-end used car dealerships that do not have a prosperous appearance often have substantial assets. In particular, they often have substantial amounts of cash going through the dealership every month. On any given day, the dealership will have some cash on hand from customers who have paid for repairs or made car payments in person. The dealer may also have real estate, or personal property such as computers and office furniture, that is subject to execution. Even a leasehold interest in real estate may have value.

Automobile Fraud: 10.13.1.3.4 Information held by auction houses

When a dealer registers to attend an auction, it must fill out an online or paper form giving detailed information about its licensure and financial resources. Typically the form includes the identity of the dealer’s bank account, wire transfer information, Social Security or federal tax identification number, and licensure information, plus photographs of the dealer’s agents. Many auctions use the Auction Access registration form produced by Auto Tec, L.L.C.

Automobile Fraud: 10.13.1.3.5 Information from public agencies and lending institutions

Information filed with public agencies may also help uncover dealer assets. Agencies to check include the corporations division of the secretary of state’s office, the dealer licensing board, and any salesperson’s licensing agency. These agencies will not only have records relating to the dealership, but may also have records of the bank accounts on which checks for annual fees were drawn.

Automobile Fraud: 10.13.1.4 Collecting Against Manufacturers

If a manufacturer fails to pay a lemon laundering or other judgment, enforcing the judgment is easier if the consumer can find assets of the manufacturer in the jurisdiction. One possibility is to execute upon the debts that local dealers owe that manufacturer for vehicles shipped to them. If the dealer has floor plan financing through the manufacturer, the payment for the vehicles will be merely an accounting adjustment on the manufacturer’s books, without any money changing hands, so it is necessary to find a dealer that has floor plan financing through a local bank.

Automobile Fraud: 10.13.2 Effect of Defendant’s Appeal on Collection

When the defendant loses and then appeals the judgment, execution is generally stayed if the defendant posts a bond. If the defendant is in financially poor shape, the consumer’s attorney should be wary of the possibility that the defendant will file bankruptcy before the judgment can be affirmed and enforced.

Automobile Fraud: 10.13.4.1.2 Procedure for invoking bond

The procedure for invoking a bond differs significantly from state to state. In some states, the bond can be invoked only through an administrative proceeding with the motor vehicle department or similar state agency.758 The surety may have the right to intervene in an administrative bond forfeiture hearing.759

Automobile Fraud: 10.11.1.6 Dealing with Multiple Defendants and the Dealer’s Insurer

When multiple defendants are sued, amounts received in settlement with some defendants may be deducted from any court or jury award against a non-settling defendant.679 The consumer’s attorney should check the jurisdiction’s law carefully concerning the manner and form in which the settlement should be documented in order to minimize the effect on the non-settling defendants.