Joining Fraud Claims to Lemon Law Claims in the Certified Pre-Owned Context
A few days ago, I wrote about Certified Pre-Owned Vehicles and the California Lemon Law. Problems with Certified Pre-Owned Vehicles can give rise to fraud claims as well as lemon law claims. Fraud claims are generally brought against the selling dealership, but not against the manufacturer. (By contrast, lemon law cases are generally brought against the manufacturer.)
The usual scenario that gives rise to a fraud claim against a selling dealership goes something like this. Joe Consumer reads in the local circular about certified pre-owned vehicles for sale. He is interested in some of the offerings and decides to stop by the dealership that placed the ad. He meets with a salesperson, who tells him that the CPO program is one of the best there is. Each CPO vehicle has been subjected to a 112-point inspection and is almost “like new.” In fact, it’s better than new, because the vehicle has to meet exacting standards and comes with an extended “bumper-to-bumper” warranty.
Joe Consumer agrees to pay a premium for the "better-than-new" certified pre-owned vehicle and drives off the lot feeling that he’s gotten a great deal.
Within a short amount of time, however, Joe Consumer begins to notice a lot of problems with his CPO vehicle. There are some mechanical problems that the dealership cannot seem to fix and a perplexing inability to stay aligned.
Because Joe Consumer does not have time to drive all the way back to the selling dealership during the work week, he drives to the dealership close to his work. To his shock, he is informed by this dealership that the vehicle has over-spray, evidence of bondo on the quarter panel, and other signs of collision damage.
Adding to his woes, this new dealership says that they “won’t touch it” and warns that the factory warranty is probably void because of the prior collision damage.
How could this have happened? The dealership advertised the vehicle as being a “certified” vehicle - as having special qualities and characteristics. The sales personnel promised that the vehicle was “as good as new” – maybe even better. And, Mr. Consumer believed that he was getting an extended warranty that would give him peace of mind for many miles to come.
In all likelihood, the used car department failed to perform an adequate inspection when the dealership first acquired the vehicle. Then, the fact of the insufficient inspection was never communicated to the sales force, who aggressively puffed the quality of the CPO program to the consumer.
What claims does the consumer have? There would be a lemon law claim under the Song-Beverly Consumer Warranty Act for the void warranty. There would also be a common law fraud claim if the consumer can prove that the dealership knew of the problems with the CPO inspection, but hid that information from the public. Most interestingly, is a claim under something called the Consumers Legal Remedies Act (CLRA). This powerful, pro-consumer statue can be a good compliment to a lemon law claim. It does not require “intent” or “knowledge” like common law fraud, but it covers situations like the one I have described above. The CLRA prohibits, among other things, “[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have; [and] [r]epresenting that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.”
Similar to the lemon law, the CLRA allows a consumer to obtain a refund and consequential damages. Unlike the lemon law, the CLRA can give rise to an award for punitive damages. Consumers can also help obtain permanent injunctions against businesses to prevent further unfair and deceptive practices towards other members of the public.
Bottom line: consumer claims involving CPO vehicles should always include an analysis of whether there is a CLRA and/or fraud claim in addition to a lemon law claim.
