Pub. 3 2014-2015 Issue 1

Summer 2014 15 San Diego Dealership Lawsuit Report By Jonathan Morrison and Shane McCallan E arlier this year AutoAdvisory Services began tracking lawsuits filed in California against car dealers, manufacturers and auto finance companies as a part of our continuing efforts to ensure our guidance and auditing practices target the most high profile and hot button compliance issues facing the industry. We have now accumu- lated information from over 800 filings in 2014 alone. And this is an incomplete tally: several county courthouses do not provide remote access to their filings. As San Diego dealers are acutely aware, this County has become known as ground zero for consumer litigation affecting car dealers, because of the numerous “lemon law” and “auto fraud” law firms locat- ed in the region. Many legal theories originating in San Diego County allege technical violations involving no real harm to the consumer, but are difficult to settle because of the complicated legal arguments involved, and the plaintiffs’ attorneys’ desire to run up legal fees. Ac- cordingly, AAS believes it is valuable to keep track of litigation trends so that dealerships can stay ahead of the curve in creating compliance programs. The Lawsuit Tracker, a report found in our on-line newsletter, pro- vides customers with statewide trends. In addition, the report now details relevant lawsuit information filed in San Diego. In 2014 we noted 156 lawsuits filed against dealerships, manufac- turers, and/or finance companies in San Diego County. Those cases documented in our report include: 1. 72 naming a new or used car dealer; 2. 110 lawsuits naming a manufacturer; 3. 32 lawsuits naming an auto finance companies. Given the manner in which the County of San Diego Superior Court reports its case filings, we do not have as much detailed information about the allegations as we do for other courts. The actual number of filings is likely to be higher. The most common lawsuit in San Diego (and statewide) alleges some form of breach of warranty (generally invoking California’s “ lem- on law.”) These are most-frequently filed solely against the manufac- turer (if the trial lawyer is merely seeking a quick settlement), but often name the dealer, and frequently include secondary claims relating to dealer fraud. The second most common claim involves allegations that the dealer failed to disclose vehicle accident, damage or prior use history. Other frequent claims include: 1. Lawsuits accusing the dealership of publishing incorrect or deceptive advertisements (false advertising); 2. Lawsuits claiming the dealership wrongfully added charges to the cash price of the vehicle (payment packing); 3. Lawsuits claiming wrongful repossession or debt collection; 4. Lawsuits claiming the dealership failed to disclose deferred down payments correctly (hold checks); 5. Lawsuits claiming that the dealership attempted rescission outside of ten days and failed to send adverse action notices. Please note that these are just the most common types of industry lawsuits appearing in San Diego County courts. With these in mind, we recommend that dealers redouble their compliance efforts in these areas to ensure you are not the next victim of one of San Diego’s hometown shakedown artists. Auto Advisory Services subscribers can call our legal compliance hotline at (800) 785-2880 for guidance on these or any other legal issues.