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Auto Dealers Beware
by Andrew T. McDonald
Dealers Beware! In the distance- beyond plain view, a predator lurks in your midst that has eyes fixed on bleeding profits from your business enterprise. The predator is likely a lawyer who seeks out consumers to file lawsuits alleging that you violated the New Jersey Consumer Fraud Statute.
Consumer Fraud
Many dealers bear witness to the fact that the New Jersey Consumer Fraud Statute serves to foster litigation that places adversaries at impossible ends, making settlement negotiations an effort in futility and litigation very costly. The Consumer Fraud Statute provides that plaintiffs need not prove that an automotive dealer intentionally deceived them in the purchase of a vehicle, only that a misrepresentation was made. If it is found that an automotive dealer made a material misrepresentation regarding the advertisement or sale of a vehicle, then the defendant-auto dealer faces liability exposure under the Consumer Fraud Statute. This liability exposure is greater than one would expect.
More times than not, the liability exposure in a consumer fraud action is exponentially greater than the conduct that gives rise to the complaint. The inflated exposure for a defendant facing consumer fraud allegations stems from the fact that a successful plaintiff in a consumer fraud action is entitled to have treble damages where the award is multiplied by three. Further, a lawyer that brings a successful consumer fraud complaint is entitled to have the automotive dealer pay his legal fees. Such fees are usually based on an hourly billing rate upwards of $300 dollars an hour. Therefore, any recovery in a consumer fraud action has the potential to be astronomical when compared to the actions that typically give rise to complaint.
For example, an action alleging false advertising where a plaintiff may struggle to demonstrate that he has sustained any articulable damage, or that the advertising was indeed misleading, could result in a nominal award to the plaintiff of $2,000. This figure must in turn be trebled to $6,000 while plaintiff ’s counsel may demand tens of thousands of dollars (or more) in legal fees. For example, an automotive dealer could be hit with a $36,000 judgment on a very questionable claim regarding only his advertising!
Lemon Law
Akin to expensive liability exposure associated with allegations of consumer fraud is potential liability exposure concerning an allegation of a violation of New Jersey’s "lemon law" statute. Pursuant to the statute, a plaintiff has a choice of forums to bring such an action and must have placed the manufacturer on notice of a problem within the first 18,000 miles or two years from obtaining the vehicle. A successful plaintiff is entitled to an amount equal to the close analysis of the contract price of the vehicle, plus all collateral charges and attorney’s fees. Again, such a remedy may drive the litigation and deter reasonable settlement negotiations. A close analysis of the "lemon law" statute reveals that it should be of paramount concern for a dealer or manufacturer to take advantage of the statutory right to be afforded one last opportunity to "cure" the alleged problem. Such action may serve to nip excessive expense in the bud and avoid the "lemon" label being affixed to the vehicle at issue.
Our firm is aware that automotive dealers are vulnerable to litigation. Hill Wallack is able to provide counsel in an effort to avoid this potential for liability exposure. In addition, the firm aggressively defends allegations of consumer fraud working to avoid potential pitfalls and inflated judgments that "fee driven" litigation tends to foster. Lastly, a clear liability analysis for allegations of consumer fraud and violation of the "lemon law" is paramount to enable an automotive dealer to make an informed decision in how to defend such action.
Andrew T. McDonald is an associate in the General Litigation and Community Association Law Practice Groups.
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