No Privity? No Problem!

An Oregon dealer learned that enforcement of the federal Truth in Mileage Act can include tracing the chain of ownership back to the original seller.

September 2016, Auto Dealer Today - Feature

by Thomas B. Hudson, Esq. - Also by this author

It seems like there are endless ways a dealer can get in trouble. One of those traps is the federal odometer law. These cases are not as prevalent as they once were, so when one pops up, it gets our attention.

It is even more attention-getting when the dealer who gets tagged with the violation isn’t the dealer selling the car to the consumer, but someone several steps back in the chain of title. Here’s what happened in a recent case.

Grand Prix Motors Inc. bought a car from a Manheim auction. Manheim “announced” the car as “TMU” (true mileage unknown) but represented the mileage as 28,190. Grand Prix sold the car to a customer. Grand Prix represented the car as having 28,210 miles and signed a Secure Odometer Disclosure certifying that the odometer reading was the actual mileage of the vehicle. Grand Prix did not check either of the boxes on the Secure Odometer Disclosure form that indicated “[t]he mileage stated is in EXCESS of its mechanical limits” or “[t]he odometer reading is NOT the actual mileage. WARNING — ODOMETER DISCREPANCY.”

The car was sold three more times to dealers before being bought by Channing Tate. All the intervening dealers also certified that the odometer readings were the actual mileage of the vehicle.

Tate sued the dealers, including Grand Prix, in the U.S. District Court for the District of Oregon for violating the Truth in Mileage Act, claiming that the dealers knew that the odometer reading differed from the actual mileage. Grand Prix did not respond to the complaint. Tate moved for a default judgment against Grand Prix.

The court noted that a successful Truth in Mileage Act claim requires a showing of intent to defraud. The court found that, if a person violates an odometer disclosure requirement with actual knowledge that he is committing a violation, it can be inferred that the violation was committed with an intent to defraud a purchaser.

“But wait a dad-burned minute,” said Grand Prix. “We didn’t sell anything to Tate. In fact, we didn’t deal with him at all.” (Pointy-headed lawyers would claim that there was no “privity” between Tate and Grand Prix. Ordinary humans would say “contact” or “connection,” but they didn’t pay a lot of tuition to go to law school to get their brains professionally scrambled.)

The court also found that a TIMA claim does not require privity or a showing of reliance on the dealer’s statement. Therefore, the fact that Tate did not buy the car from Grand Prix did not prohibit him from recovering from Grand Prix under the TIMA. Accordingly, the court awarded a default judgment to Tate.

So, if you buy a car with a hinky mileage reading, and think you can get rid of the problem by selling it to a dealer who sells it to another dealer — and so on — until you’ve put some distance between you and the car, time to think again!

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