March 2010, Auto Dealer Today - WebXclusive
There’s “new,” and there’s “used,” but sometimes even a seemingly black-or-white determination like this can turn more than a little bit gray. Here’s one court’s attempt to resolve the question of, “How new must a car be to be ‘new?’”
Rostis Timoshchuk bought a Mercedes SL500 from Long of Chattanooga Mercedes-Benz. A dealership in Georgia, RBM, LLC, transferred the car to Long.
Both Long and RBM were authorized retailers for Mercedes-Benz USA, LLC. Timoshchuk knew the car had several hundred miles on it, but he did not know that the miles were accumulated through discretionary use of the car by RBM’s general manager.
Timoshchuk was listed as the first retail purchaser on the title. Several months later, Timoshchuk discovered the car’s trunk had been repainted. Long questioned RBM, and RBM denied that the car had been damaged.
After Long presented evidence of the repainting, RBM admitted the car had been damaged in transit. Timoshchuk tried to return the car to Long, which refused to accept it.
Timoshchuk then sued Long, Mercedes and RBM. Timoshchuk claimed that Long and Mercedes violated the Tennessee Consumer Protection Act (CPA) by misrepresenting the car as new and misrepresenting the warranty as a new car warranty.
Timoshchuk claimed that Long negligently misrepresented the damage to the car and that RBM violated the CPA by failing to disclose the damage to the trunk. Finally, Timoshchuk claimed that Mercedes was liable for breach of contract and breach of warranty committed by Long and RBM.
Long, Mercedes and RBM moved for summary judgment, which the trial court granted. Timoshchuk appealed.
The Court of Appeals of Tennessee upheld the summary judgment for Long, Mercedes, and RBM. Timoshchuk argued that the car was not “new” when he accepted delivery because RBM’s manager had been using it as a personal vehicle for some time. The appellate court determined that the car was considered “new” under the definition of that term in the TCPA because the car had not been previously sold to the public. The appellate court applied the same analysis to find that Long and Mercedes did not misrepresent the warranty when they described it as a “new” car warranty.
The appellate court also found that Long did not negligently misrepresent the damage to the car. The appellate court agreed with Timoshchuk that representing a car as new generally implies that the car is undamaged.
However, Long did not know the trunk was damaged when it told Timoshchuk the car was new. Also, Long reasonably relied on various standard industry documents when Long told Timoshchuk the car was new and undamaged.
The appellate court further found that RBM did not violate the CPA by failing to disclose the damage. The appellate court determined that Georgia law controlled Timoshchuk’s claim against RBM. RBM pointed to a Georgia statute that requires a dealer to disclose prior damage only if it exceeds 5 percent of the manufacturer’s suggested retail price. The eventual cost to repair Timoshchuk’s car amounted to less than 1 percent of MSRP.
Finally, the appellate court found that Mercedes was not liable for breach of warranty or breach of contract. Mercedes distributed cars to Long and RBM. The Mercedes franchise agreement expressly stated that the dealers were not Mercedes’s agents or representatives. Mercedes never spoke with Timoshchuk prior to the sale, so at no time did Mercedes indicate to Timoshchuk that the dealers were its agents.
So, this Benz was new enough to be “new.” Will this same analysis work in other states and with other sorts of claims? The answer to that question will likely turn, as it did in this case, on the court’s parsing of the definitions it encounters in the various laws that the parties argue are applicable to the case.
If you aren’t familiar with the definitions of “new” and “used” in your state’s laws, you might want to spend a little time boning up on them and determining whether your practices and procedures for new and used cars accurately reflect those definitions. You might just avoid a lawsuit like this one!
Vol. 7, Issue 2