A recent odometer law case is atypical in that the car buyer alleged that the dealership that sold him the car overstated the car's mileage, meaning that he ended up with a car with fewer miles than he had been told. In most circumstances, a car buyer would be thrilled to learn that the car he bought had been driven fewer miles than he thought. After all, you usually pay more money for a car with fewer miles. In the end, the dealership won, but not because an overstatement of a car's mileage is not a law violation.

Here's what happened in this unusual case.

Elite Auto Credit, Inc., bought a used Jaguar from another dealership through the auction company Manheim Chicago of Matteson. Manheim stated in documents that the Jaguar had an odometer reading of around 156,000 miles. However, the car's odometer actually read 156,029 kilometers, which is only about 96,952 miles, and the certificate of title that Manheim provided to Elite stated that the car had 96,940 miles.

Elite Auto Credit
Elite Auto Credit won the FOA claim lawsuit 

John Tamburo bought the Jaguar from Elite for $5,266, including taxes and fees. The bill of sale and the odometer statement indicated that the car had 156,028 miles, based on information from Manheim and from AutoCheck.com, not from the Jaguar's odometer. The buyer's guide that Tamburo signed stated that the car had no warranty.

After spending over $4,000 on repairs within a few months after the purchase, Tamburo contacted Elite to demand that, pursuant to Illinois law's implied warranty for vehicles with less than 150,000 miles, Elite pay for some of the repairs. Elite responded that because the odometer exceeded 150,000 miles, it was not required to cover any repairs.

Tamburo sued Elite for violating the Federal Odometer Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. Elite moved for summary judgment.

The U.S. District Court for the Northern District of Illinois noted that in order to establish a violation of the FOA, the buyer must show that the seller provided an inaccurate odometer reading with the intent to defraud. In this case, Tamburo alleged that Elite overstated the mileage in order to avoid the Illinois statutory warranty for cars with mileage under 150,000. The court found that Elite received an overstated mileage number from Manheim and that Elite's employees relied on that number rather than verifying it against the car's odometer. The court noted that the failure to check the odometer may have been negligent, but there was no evidence that Elite acted with intent to defraud Tamburo. Therefore, the court granted summary judgment to Elite on the FOA claim.

Lesson learned : Double check the odometer

Next, the court addressed Tamburo's ICFA claim for failing to provide an implied warranty of merchantability, telling him that the car had no warranties, using an outdated buyer's guide on the car's window, and failing to repair the mechanical defects he discovered. Because the court granted summary judgment on the federal law claim, the statute of limitations had not run on the ICFA claim, the court had not invested substantial resources into the ICFA claim, and the resolution of the ICFA claim was not absolutely clear, the court concluded that it was appropriate to decline to exercise jurisdiction over the state law claim and to dismiss the claim without prejudice to Tamburo's right to refile the claim in state court.

What is there to learn from this case? Overstating a car's mileage can be just as wrong as understating a car's mileage, especially, as in this case, where state law provides fewer protections to buyers of cars with mileage above a certain threshold. Make sure your employees understand that relying on any document to determine a car's mileage is less than perfect. An actual look at the odometer, including whether the odometer reflects miles versus kilometers, should be mandatory.


Shelley B. Fowler is a Managing Editor at CounselorLibrary.com, LLC.

CounselorLibrary.com, LLC, provides articles on its website written by attorneys with Hudson Cook, LLP, and by other authors, for information purposes only. CounselorLibrary.com, LLC, and Hudson Cook, LLP, do not warrant the accuracy or completeness of the articles, and have no duty to correct or update information contained on the CounselorLibrary.com website. The views and opinions contained in the articles do not constitute the views and opinions of CounselorLibrary.com, LLC, or Hudson Cook, LLP. Such articles do not constitute legal advice from such authors or from Hudson Cook, LLP, or CounselorLibrary.com, LLC. For legal advice on a matter, one should seek the advice of legal counsel.



Penske Repays Notes

August 24, 2020

Penske Automotive Group Inc., a diversified international transportation services company, announced the company has repaid in full, at scheduled maturity, its $300 million Senior Subordinated Notes due Aug. 15. The 2020 Notes were repaid using availability under the company's U.S. revolving credit facility, leaving the company with over $800 million in available liquidity under its revolving credit facilities. The Company also completed the issuance of $550 million aggregate principal amount of 3.5 percent Senior Subordinated Notes due 2025, which the Company intends to use to redeem its $550 million 5.75 percent Senior Subordinated Notes due 2022 (on Oct. 1.

"Our diversified transportation services model continues to generate significant cash flow, providing us with the opportunity to repay the 2020 Notes while funding our future growth and acquisition plans,” stated Chair and Chief Executive Roger Penske. “I am also pleased to be able to refinance our existing 2022 Notes at today's attractive rates.”

Illinois Attorney General Kwame Raoul filed a lawsuit against Skokie Motor Sales Inc. operating as Sherman Dodge, for allegedly engaging in unfair and deceptive advertising and business practices. Sherman Dodge’s advertisements allegedly violated motor vehicle advertising regulations relating to sales events, trade-in values, discount substantiation, and advertised prices.

“Sherman Dodge knowingly and repeatedly took advantage of people through deceptive advertising – even after entering into an agreement with the Attorney General’s office to stop using unlawful practices,” Raoul said. “I am committed to seeking enforcement against business and others who violate the law to take advantage of Illinois consumers.”

In October 2014, the Attorney General’s office opened an investigation into Sherman Dodge after receiving complaints from consumers who were unable to purchase vehicles advertised by the dealer. Following the investigation, Sherman Dodge entered into an Assurance of Voluntary Compliance (AVC) with the Attorney General’s office in February 2016. Under the AVC, Sherman Dodge agreed to not sell a vehicle for more than the advertised price, advertise a vehicle that it has already sold or leased, guarantee a specific value for a trade-in vehicle, advertise a sale without reducing the selling price of vehicles listed in an advertisement by at least 5 percent, or include limited rebates in an advertised price.

Raoul’s lawsuit alleges that Sherman Dodge has violated the AVC by continuing to engage in the illegal and deceptive activities prohibited by the AVC.

In the lawsuit, Raoul is seeking to prohibit Sherman Dodge from engaging in acts or practices that violate the law, rescind all contracts entered into between Sherman Dodge and consumers by use of unlawful methods and require Sherman Dodge to pay full restitution to consumers. Raoul is also seeking a civil penalty of $50,000 per deceptive act or practice, with an additional $50,000 for each act or practice committed with the intent to defraud and an additional $10,000 for each act committed against a person 65 years of age or older.

The Federal Trade Commission has issued an administrative complaint against a marketer, Traffic Jam Events, LLC, and its owner, David J. Jeansonne II, charging multiple counts of deceptive conduct.

The scam involved drawing consumers to a car dealership for fake prizes or stimulus benefits. The administrative complaint alleges that the respondents have deceived consumers with mailers supposedly directing them to obtain federal COVID-19 stimulus benefits. The complaint also alleges that, in addition to the misleading COVID-19 mailers, respondents sent flyers to consumers containing matching numbers indicating that consumers had won a valuable prize. Consumers were then told they had to go to a car dealership to “claim” the prize, but the small print on the back of the mailer revealed that there was only a 1-in-52,000 chance the consumer had actually won the prize specified.

In addition to FTC Act violations alleged related to the COVID-19 and prize mailers, the FTC’s complaint claims the respondents violated the Truth In Lending Act and Regulation Z for failing to clearly disclose required credit information in their advertising.

Wolters Kluwer’s Lien Solutions business is hosting an informational webinar, Auto Repossessions Avalanche is Coming: Are You Ready? to share insights with lenders on managing their motor vehicle liens in preparation for higher loan defaults and car repossessions. This event will focus on how lenders can effectively mitigate these risks in the current economic environment and takes place from 1-1:45 p.m. CDT on Aug. 19.

As lenders assess the impact of COVID-19 to their lending portfolios, they expect a higher-than-expected volume of loan defaults and car repossessions. This trend is expected to continue for many months, presenting substantial risks to lenders who have not prepared across all jurisdictions in which they have loan interests.

Webinar participants include McGlinchey Stafford Attorney Mark S. Edelman, who provides guidance to banks, finance companies, and online lenders on regulatory compliance matters in the arena of consumer financial services; Rick Vanko, senior product manager for iLien Motor Vehicle in Wolters Kluwer’s Lien Solutions business who supports a portfolio of automated lien and risk management products; and Marina Hardy, marketing associate director for Wolters Kluwer Lien Solutions’ iLien Motor Vehicle business, who will also serve as a moderator for this event.

The 45-minute event will look at economic drivers of repossessions, jurisdictional guidelines on repossession restrictions, challenges of processing titles with departments of motor vehicles, and general considerations for lenders faced with properly interpreting federal, state, and local laws and regulations for auto repossessions and repossession titling in an evolving environment.