Judge Denies TrueCar’s Motion to Dismiss Dealer Lawsuit
January 13, 2016
MINEOLA, N.Y. — The mass action lawsuit filed by 162 new- and used-vehicle dealers against TrueCar will proceed after a U.S. District Court judge denied the vehicle-buying site’s request to have the case dismissed. It wasn’t a complete win for dealers, however, as four of the complaint’s six claims that the vehicle-buying site violated federal and New York laws through false and misleading advertising were dismissed.
On Jan. 6, Judge Kevin Castle for the Southern District of New York denied TrueCar’s motion to dismiss the suit’s charges that it violated the Lenham Act and New York business law by advertising a no-haggle car-buying experience and promising car buyers they can learn of a vehicle’s “factory invoice” price and receive an “exceptional offer” by using the site.
Dismissed, however, were the suit’s “bait-and-switch” allegations, as well as charges that TrueCar made false and misleading statements in advertisements about financing, transparency, pricing and rebates.
Leonard Bellavia, the attorney representing dealers in the case, called the ruling a victory for the plaintiffs, noting that the principal claims in the complaint remain. The case now enters discovery, a phase in which Bellavia said he will seek marketing and business plan documents to further validate the suit’s claims of false advertising.
Filed last March, the lawsuit claims that dealers have been injured by TrueCar’s business model, alleging that they have lost business to TrueCar-affiliated dealers and have been “forced” to offer discounted prices in order to match TrueCar’s “allegedly misleading price guarantees.”
The main practice in question is the site’s no-haggling promise, which the site promotes in TV, social media and radio advertising. Bellavia said the promise violates the Lanham Act and unfair competition and deceptive trade practices under New York statutes once a car buyer enters his or her personal information and prints out TrueCar’s Guaranteed Savings Certificate. By doing that, Bellavia charged, customers are taking the first step in a process that would lead to dealerships contacting them, soliciting their business, and negotiating a transaction.
While the dealers’ complaint acknowledges that TrueCar has disclaimers on its website that say “actual price must be negotiated with the dealer,” it argues that the disclaimers are inconspicuous and appear in fine print. In denying TrueCar’s motion to dismiss that claim, Judge Castle said, “At this state, the court cannot conclude whether the disclaimer ‘effectively turns an otherwise false advertising claim into a true one, in such a manner that the consumers are misled.”
In denying TrueCar’s motion to dismiss the suit’s claims that it misled consumers into believing they can learn a vehicle’s “factory invoice” price through the site, Judge Castle said the court could not determine whether TrueCar’s “factory invoice” definition, which states that the factory invoice “does not include discounts, dealer incentives or holdbacks,” eliminates any “allegedly misleading advertisement citing a factory invoice price.” He also noted that the court could not determine whether “users on occasion” pay less than the “factory invoice” price.
As for the suit’s four other ancillary claims, Judge Castle said the plaintiffs failed to produce statements made by TrueCar to support the bait-and-switch claim as well as their allegation that the firm misled consumers into believing there were no “hidden costs or hidden fees.” The suit had alleged that fees charged to dealers for every vehicle sold — $299 for new vehicles and $399 for used vehicles — are inevitably passed along to the consumer “and amount to an undisclosed portion of the purchase price.”
Judge Castle also dismissed the suit’s allegation that TrueCar ads falsely claim that the site could calculate finance terms, saying TrueCar’s website clearly states that it provides “estimated loan payments” and “does not purport to offer actual financing terms to consumers.”
"We are gratified that the court has agreed with our position regarding the majority of plaintiffs' claims, which have now been dismissed,” Johnny Stephenson, TrueCar’s chief risk officer, said in a statement emailed to F&I and Showroom. “As to the narrow remaining claims, the court has merely concluded that further information is necessary before they can be resolved. We are confident that once the Court has additional information, those claims will also be resolved in our favor."