Suit Alleging Dealer Boosted Vehicle Price to Conceal Negative Equity on Trade-in Certified as Class Action Plaintiffs' lawyers will try as hard as they can to turn every disgruntled car buyer's hissy fit into not only a lawsuit but a class action lawsuit over claims not remotely related to the original hissy fit. In a recent case, a car buyer's mechanical difficulties turned into a class action suit over disclosure of the cash price of the new vehicle, the trade-in value of the old vehicle, and the amount owed on the trade-in vehicle.
Robert Cornell bought a new truck from Robinson Ford Sales, Inc. He traded in a 2002 Honda on which he still owed $24,305 but which was worth only $16,000. Robinson Ford credited the buyer with $26,305 for the trade-in value of the Honda and increased the cash price of the new truck Cornell was purchasing in the purchase contract. Therefore, the cash price charged to Cornell for the new truck was greater than the cash price that would have been put on his contract if he were a cash buyer. Cornell had mechanical difficulties with the new truck and pursued Lemon Law remedies, and eventually returned it to Robinson Ford.
Cornell sued Robinson Ford for violating the disclosure requirements of California's Automobile Sales Finance Act and brought related claims under California's Consumer Legal Remedies Act and its Unfair Competition Law. After Cornell died, the personal representative of his estate continued the action and amended the complaint to add class allegations. The amended complaint alleged that Robinson Ford rolled some or all of the over-allowance from a trade-in into the cash price of the vehicle being bought for disclosure purposes on the retail installment contract. The amended complaint further alleged that Robinson Ford usually failed to disclose prior credit or lease balances on the trade-in vehicles. The complaint concluded that where the buyer's negative equity was concealed in the cash price by the inclusion of an over-allowance for a trade-in, the proper disclosure of the actual cash price was not made, in violation of ASFA's disclosure requirements, the buyer may potentially pay higher amounts of sales tax and higher registration fees because of the rolled in negative equity, and the contract may be unenforceable by statute.
The proposed class was defined as "[a]ll persons who, since December 28, 2000, bought a vehicle from & Robinson Ford Sales by entering into a [RISC] and had the cash price of the vehicle being purchased increased on line 1.A.1 of the RISC to cover some or all of the over-allowance & and Robinson Ford failed to properly disclose the prior credit or lease balance owing on [the trade-in on] line 1.G of the RISC."
The trial court denied Cornell's motion for class certification, concluding that the proposed class was not sufficiently ascertainable. Because various customers had engaged in individual negotiations regarding the purchase price and trade-in value, the trial court found that individual fraud and punitive damages issues would require individual trials.
The California Court of Appeal reversed the trial court's decision. The appellate court noted that the punitive damages issues only related to the CLRA claim, with no application to the ASFA and UCL claims. In any event, the appellate court stated that the punitive damages issues were not appropriate to consider in determining ascertainability of the class regarding the issues raised on statutory disclosure standards.
The appellate court found that the proposed class had common issues of fact and law; the core factual issue was whether the cash price of the vehicle being bought included an over-allowance for a trade-in without adequate written disclosures, and the core legal issue was whether this failure to disclose negative equity on the RISC violated the ASFA. The appellate court noted that the existence of any statutory violations could be determined by examining the "face of the records" provided by Robinson Ford.
In addition, the appellate court found that "any related UCL allegations [were] not dependent on a finding of separate instances of fraud, because the business transactions here could still qualify as unlawful or likely to deceive the public through any proven violations of the ASFA." The appellate court went on to state that individual issues do not defeat class certification so long as such issues can be effectively managed. Moreover, individualized proof of damages is not per se an obstacle to class treatment. Accordingly, the appellate court concluded that the trial court incorrectly denied class certification of Cornell's proposed class.
So, the bottom line is that your goal should be to make a disgruntled car buyer happy before he or she has a hissy fit and goes to see a lawyer. Once that happens, you're sure to find yourself in class action land over whatever claim the lawyer can drum up by picking through your documents.
Cornell v. Robinson Ford Sales, Inc., 2007 WL 2812991 (Cal. App. September 28, 2007).
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