Tag Archive | "lawsuit"

Dealer Group Files Class Action Lawsuit Against Volkswagen

CHICAGO — On Wednesday, Ed Napleton, president of the Napleton Auto Group, filed a class action lawsuit against Volkswagen in the U.S. District Court for the Northern District of Illinois on behalf of three of his Volkswagen dealerships. The lawsuit stated that the manufacturer intentionally defrauded dealers by installing “defeat devices” in its diesel cars.

In addition, the lawsuit further claims that Volkswagen separately carried out a systematic, illegal pricing and allocation scheme that favored some dealers over others and illegally channeled financing business to one of its affiliates, Volkswagen Credit Inc., according to Hagens Berman, a consumer-rights law firm.

“What is really discouraging and led me to file this lawsuit is that Volkswagen has wholly failed to respond to dealer concerns in a substantive manner. It has talked for months about multiple plans, but done nothing and left us dealers in the red, and in limbo,” Napleton said.

The suit also accuses Volkswagen of engaging in a criminal racketeering enterprise, violating federal law designed to protect car dealers from unfair practices by vehicle manufacturers, breaching state franchisee protection laws, and breaching its franchise dealer agreements.

The manufacturer’s deception, the suit charged, has resulted in a drop in the value of the Volkswagen brand. The damage the scandal has caused to the brand, as well as the cease of diesel-vehicle sales, has both negatively hurt dealer profits and the value of their franchises, the suit alleges.

“Plaintiffs and the Franchise Dealer Class have invested millions, collectively hundreds of millions of dollars in the Volkswagen brand,” the suit states. “But now the brand value has plummeted, sales of VW diesels have completely halted, and sales of all VW cars have plummeted.”

Additionally, the complaint states that Volkswagen “purposely and fraudulently induced its dealers to continue to invest in their dealership facilities and to otherwise benefit VW.” It also told dealers that it would replace stair-step programs it had abandoned with new programs with equal or greater financial benefit to dealers.

This move, the suit claims, “was calculated to quell poor publicity as well as dealer outrage at VGoA’s (Volkswagen Group of America) conduct and was otherwise calculated to fraudulently induce its dealers and prospective dealers to continue to invest in the Volkswagen brand.”

As a result, according to the complaint, franchised dealers built new showrooms and purchased new facilities and also heavily stocked their lots with CleanDiesel vehicles, based on the manufacturer’s false marketing.

“Franchise owners are now left with lots full of CleanDiesel vehicles they are unable to sell, and these cars have suffered tremendous loss of value and take up inventory space and carrying costs,” Steve Berman, managing partner of Hagens Berman added. “VW dealerships large and small have been at the mercy of an unethical corporation, much like the hundreds of thousands of owners across the country, and we believe it’s time to take a stand for their rights.

“In a sickening display of VW’s disregard for its dealer franchisees, Napleton Automotive of Urbana was purchased after VW admitted its fraud to regulators, just three days before the Dieselgate scandal made headlines. Yet Volkswagen withheld the truth and pushed the sale through, knowing well that Ed Napleton was purchasing a dealership that would almost immediately plummet in value,” Berman said.

According to the suit, Volkswagen’s U.S. affiliate in charge of its dealer network was aware of the emissions-cheating software since as early as 2014 but withheld information from current and prospective dealers. Volkswagen has admitted that during that time, it installed emissions cheating software in more than 550,000 U.S. diesel vehicles.

“For VW dealers  — many of which are small, family-owned franchises  — Dieselgate amounts to a classic ‘pump and dump’ operation, in which VW exploited the CleanDiesel eco-friendly market that it helped create, boosting the price of entry and continuation in the market for VW franchises,” Berman said. “All the while, VW withheld information about the impending Dieselgate fiasco, and left dealers to fend for themselves as the scandal unfolded.”

Napleton and his family have been in the automotive dealership business in the Chicago area for three generations. Today, the Napleton family operates more than 50 dealerships in five states.

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VW Faces Billions in Fines as U.S. Sues for Environmental Violations

The U.S. Justice Department has sued Volkswagen for up to $48 billion for allegedly violating environmental laws – a reminder of the carmaker’s problems nearly four months after its emissions scandal broke.

Although such U.S. lawsuits are typically settled at a fraction of the theoretical maximum penalty, analysts said the size of the claim meant Volkswagen (VW) could face a larger bill than previously anticipated.

“The announcement serves as a reminder/reality check of VW’s still unresolved emissions issues,” Goldman Sachs analysts wrote in a note, maintaining their “sell” recommendation on the stock.

VW shares fell as much as 6 percent to a six-week low on Tuesday, the biggest drop on Germany’s blue-chip DAX index.

The civil lawsuit, announced on Monday, reflects the growing number of allegations against VW since the German company admitted in September to installing devices to cheat emissions tests in several 2.0 liter diesel vehicle models.

According to a Reuters review of the U.S. complaint, VW could in theory face fines of as much as $37,500 per vehicle for each of two violations of the law; up to $3,750 per “defeat device”; and another $37,500 for each day of violation.

The complaint says illegal devices to impair emission control systems were installed in nearly 600,000 vehicles in the United States.

In September, U.S. regulators initially said Europe’s biggest carmaker could face fines in excess of $18 billion.

The lawsuit had been expected, and analysts believe any fine will be far below the theoretical maximum. Although U.S. authorities sued Toyota for up to $58 billion for environmental violations around the turn of the century, they agreed a settlement that cost the Japanese carmaker about $34 million.

“We have not enumerated a maximum possible penalty, and will decline to speculate on what the court may ultimately choose to do,” said U.S. Justice Department spokesman Wyn Hornbuckle.

Equinet analyst Holger Schmidt cut his rating on VW shares to “reduce” from “neutral”.

“We continue to believe that no one is able to make anything else than a wild guess on potential fines,” he said.

During December, VW’s shares had been recovering as the carmaker announced incrementally positive news such as simple fixes for about 8.5 million affected cars in Europe.

The stock fell on Tuesday 22 percent below pre-scandal levels, with analysts particularly concerned about the impact on VW in the United States, where the firm has long struggled to make inroads and tougher regulations mean it faces bigger potential fines.

The lawsuit, filed on behalf of the U.S. Environmental Protection Agency (EPA), accuses VW of four counts of violating the U.S. Clean Air Act, including tampering with the emissions control system and failing to report violations.

“The United States will pursue all appropriate remedies against Volkswagen to redress the violations of our nation’s clean air laws,” said Assistant Attorney General John Cruden, head of the Justice Department’s environment and natural resources division.

The lawsuit is being filed in the Eastern District of Michigan and then transferred to northern California, where class-action lawsuits against VW are pending.

“We’re alleging that they knew what they were doing, they intentionally violated the law and that the consequences were significant to health,” said a senior Justice Department official.

VW’s cheating of diesel emissions tests allowed it to avoid a costly revamp of engines to meet new U.S. standards.

The Justice Department has also been investigating criminal fraud allegations against VW for misleading U.S. consumers and regulators. Criminal charges would require a higher burden of proof than the civil lawsuit.

The U.S. lawsuit also alleges VW gamed emissions controls in many of its 3.0 liter diesel models, including the Audi Q7, and the Porsche Cayenne.

VW’s earlier admissions eliminate almost any possibility that the automaker could defend itself in court, Daniel Riesel of Sive, Paget & Riesel P.C, who defends companies accused of environmental crimes, said.

To win the civil case, the government does not need to prove the degree of intentional deception at VW – just that the cheating occurred, Riesel said. “I don’t think there is any defense in a civil suit,” he said.

Instead, the automaker will seek to negotiate a lower penalty by arguing that the maximum would be “crippling to the company and lead to massive layoffs”, Riesel said.

Even after VW first admitted to using cheat devices in certain models, the automaker “failed to come forward and reveal” that other vehicles contained such devices, the government said.

To cheat the emissions controls, VW installed software that allowed the vehicles to detect when they were being tested on a flatbed. When the vehicles detected they were actually on the road, the software caused the emissions control systems to underperform or shutdown, the government said, allowing the cars to emit dangerous levels of air pollution.

The civil lawsuit does not preclude the Justice Department from pursuing criminal charges against VW, said the Justice Department official.

VW said in a statement: “Volkswagen will continue to work cooperatively with the EPA on developing remedies.”

“We will continue to cooperate with all government agencies investigating these matters.”

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Firm Suing TrueCar Files Second Mass Action Lawsuit

MINEOLA, N.Y. — Bellavia Blatt & Crossett filed a second mass action lawsuit against TrueCar on July 30, this time representing 100 dealerships that are currently affiliated with the car-shopping site.

In March, the law firm filed a mass action lawsuit on behalf of 117 — now over 200 — non-affiliated dealerships, alleging that TrueCar’s business practices have injured its former dealer partners and dealers that do not subscribe to the service by “poaching” customers in their market area.

According to the lawsuit filed last week, TrueCar is violating California deceptive practices statutes by claiming to be “transparent” with “no hidden fees” and “no surprises” — when in fact it charges dealers a $299 new-car and $399 used-car transaction fee that gets passed along to the consumer in the price of the vehicle.

“We will be seeking a court order requiring TrueCar to openly disclose in its advertising and on the guaranteed savings certificate that there is a $299/$399 fee participating dealers pay that may affect the selling price of the vehicle,” said Leonard Bellavia, senior partner at Bellavia Blatt & Crossett. “We will also seek a declaration that TrueCar’s business model is illegal in most states, as it is not properly licensed.”

Bellavia added that dealers subscribing to TrueCar are damaged because they do not wish to be complicit in violating consumer fraud statutes. The lawsuit alleges that TrueCar is acting as a car dealer and broker without the proper licenses. And if consumers knew about the fees prior to their dealership visit, the dealer would then be protected from joint liability, Bellavia added.

TrueCar has called the allegations “meritless.”

“In the first case, TrueCar recently filed a motion to dismiss — essentially arguing that all of its promises are simply ‘puffery,’” Bellavia said. “It went so far as to quote a case that held it could lie through its teeth with impunity, as consumers would not take any of the promises seriously.”

The lawsuit is similar to one filed in May by the California New Car Dealer Association, which alleges that TrueCar is not in compliance with certain sections of the California Vehicle Code pertaining to dealer licensing, brokering, advertising and disclosure.

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Mass Action Suit Filed Against TrueCar

MINEOLA, N.Y. — The law firm of Bellavia Blatt & Crossett filed a mass action lawsuit against TrueCar today, claiming that dealers have been injured by the lead provider’s business practices. So far, 117 dealerships are part of the suit — a number Senior Partner Leonard Bellavia expects to rise drastically.

“I have another 50 [dealers] I could have included, but I never would have been able to file the case in a reasonable amount of time,” Bellavia tells F&I and Showroom. “Now that I’ve filed the case, I’m adding more dealers.”

The lawsuit filed today in Federal Court for the Southern District of New York represents non-TrueCar affiliated dealerships, meaning dealers that either have not subscribed to TrueCar’s services, or dealers that are former TrueCar subscribers. A second suit representing current TrueCar dealer customers will be filed in the coming weeks. The firm is also currently representing more than 1,000 dealers in an antitrust lawsuit against Carfax.

“Simply because a dealer is using TrueCar does not mean that they are happy with the business practices of TrueCar,” Bellavia notes.

The business practices in question include offering customers a “no haggle” price, a promise Bellavia says the lead provider breaks right at the start of a transaction, violating the Lanham Act and unfair competition and deceptive trade practices under New York statutes.

“When a customer logs on to the website and puts in their data, the information gets shot out to three separate dealers right off the bat,” he explains. “So as soon as the consumer clicks send, they will get inundated with texts, phone calls, emails and letters from three different dealers, each promising to do better than the other. So that’s ipso facto haggling.”

In addition, Bellavia says that TrueCar’s business model forces its dealer clients into “bait-and-switch” situations by promising car shoppers that its dealers have certain colors and equipment in stock, even if that is untrue. The firm also alleges that TrueCar claims that its pricing is “below invoice,” which conveys to the consumer that they are getting a vehicle below dealer cost.

“It’s just blatantly misleading to the consumer,” Bellavia adds.

As for the non-TrueCar affiliated dealerships represented in the lawsuit filed today, Bellavia says they are adversely affected by the presence of TrueCar dealers in their market.

“[TrueCar] deceives customers in their market area, essentially poaching them,” the firm’s senior partner notes. “If you live within a mile of a dealership, you will see TrueCar commercials and when you go online you will get a certificate for three dealers that are further away than the non-TrueCar dealerships. So dealers are losing business.”

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Ala. AG Shuts Down Dealer for Fraud

MONTGOMERY, Ala. — A county circuit judge has granted Alabama Attorney General Luther Strange a temporary restraining order against of Quality Used Cars and its associate Preowned Automotive, as well as permission to seize the dealer’s property.

The dealerships have been owned and operated by Clayton and Connie Reeves since 2009. The Attorney General’s lawsuit against the couple also extends to their daughter Monecia Brown and her husband Christopher Robinson. A preliminary injunction hearing is set for March 5.

According to the lawsuit, Quality Used Cars “has a consistent practice of entering into deals and failing to fulfill its end of the bargain. Quality has accepted vehicle trade-ins under the condition of paying off existing liens but then failed to do so. And it has then sold these very vehicles to other customers without disclosing the liens attached to them, while charging but not remitting State sales taxes. Quality has acquired other vehicles via false pretenses and bad checks, which has led to credit unions, banks, and other car dealers losing tens of thousands.

“Finally, Quality has failed to obtain, let lapse, or had revoked such quality standards as a surety bond, a State business license, and from the Department of Revenue, its Dealer License and Designated Agent status. Thus, any deal Quality makes is corroded from the start.”

In a civil complaint also filed with the Court, Attorney General Strange accused the car dealer of 18 counts of violating the Alabama Deceptive Trade Practices Act as well as a 19th count of a Department of Revenue violation. He gives examples of three particular fraudulent transactions:

  • A woman traded in her Ford Ranger vehicle to purchase a car from Quality with the agreement that Quality would pay off her $3,900 lien on the Ford Ranger. This is a standard practice for car dealers who accept a trade-in that has a lien. She began to get notices that her loan had not been paid, and over the next 22 months the car dealer only sporadically made payments in which the checks bounced, were late, or did not cover the payment amount. Not only did this damage the woman’s credit history, but the credit union filed a lawsuit against her. It was only after she reported the matter to the Elmore County Sheriff’s Office, and the Reeves were threatened with arrest, that Quality finally paid off the loan nearly two years later. In addition to the harm caused to the consumer, Quality caused the credit union substantial administrative and legal costs to collect what was owed.
  • Another woman paid $4,700 for the same Ford Ranger. Knowing there was the unpaid lien on the vehicle, Quality falsely represented that it had the title and that there was no lien.
  • During her purchase of a vehicle from an Alabaster car dealer, Connie Reeves was asked for her regulatory license and her Alabama Sales Tax License. She claimed that she had left them in Elmore County, wrote a check for $16,200, and left with the car and its title. This check, and a subsequent second check, bounced. At this time, they have not yet paid for the vehicle.

In addition to the alleged violations of the Deceptive Trade Practices Act, Quality has paid no sales tax since 2012. The Attorney General’s complaint states that for “over 70 months Quality has sold multiple vehicles at retail and collected and underpaid at least $53,072.88 in sales tax, which it itemized on issued bills of sale. This sales tax, which consumers paid in addition to the price of their chosen vehicle, never made it to the (Revenue) Department.” Additional interest and penalties in the amount of $30,923 also is owed. It is noted that these figures are estimates based upon only those transactions which are known. The Revenue Department sent numerous notifications to Quality.

“Quality has continued to sell vehicles and do business despite lacking nearly every required license or prerequisite for doing so,” the complaint alleges. Its Alabama Dealer License was revoked around August of 2014 and its status as “designated agent” was revoked in February of 2014. It has paid other authorized agents to use their credentials to reach the restricted access program used to process title applications.

“In sum, Quality’s entire operation is unlawful,” the complaint concluded.

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GM Ignition Compensation Death Claims Rise to 49

General Motors’ ignition compensation fund said Monday it has approved 49 death claims, four more than the previous week, along with five new injury claims, reported The Detroit News.

In total, GM compensation adviser Kenneth Feinberg has approved claims for 49 fatalities and 72 injury claims linked to defective ignition switches through Jan. 16, his office said Monday. Of those, seven are for very serious injuries and 65 are for minor injuries.

The number of death claims rose to 311, up eight, and serious injury claims rose to 207, up five. Feinberg has declared 320 ineligible, including 49 death claims, while 857 claims are still under review and 763 have been submitted without documentation.

Last month, Camille Biros, the deputy administrator of the compensation fund, said it has made 65 compensation offers and 41 have been accepted. None have been rejected.

GM set up the fund to compensate those hurt or the families of those killed in 2.59 million now-recalled Chevrolet Cobalts, Saturn Ions and other cars with defective ignition switches that can inadvertently turn the engine off and disable power steering and air bags.

The automaker has said it expects to spend $400 million on claims, but said it could rise as high as $600 million. Asked if GM expected that figure to rise, GM CEO Mary Barra said earlier this month that the company hadn’t changed its guidance.

In May, GM paid a record $35 million fine to the National Highway Traffic Safety Administration for the ignition switch recall that was delayed by nearly a decade, and agreed to up to three years of intense oversight by the safety agency.

The delayed recall has prompted investigations from the Justice Department, Congress, 48 state attorneys general, the Securities and Exchange Commission and U.S. and Canadian regulators. Barra fired at least 15 people in the aftermath of a scathing internal report written by an outside law firm and is searching for a new general counsel. GM made significant changes to its safety recall review process in the wake of the recalls.

In November, Feinberg recommended and GM agreed to extend the deadline 30 days until Jan. 31 — a month later than planned — as GM sent 850,000 letters to newly registered owners and others notifying them of the program.

Feinberg has said it could take six months to complete the review of all applications once the final claims are submitted, meaning it may not be until summer before the final tallies are known.

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