Automotive News - February 11, 2008 - (Page 36) 36 • FEBRUARY 11, 2008 Jeep store faces trial over undisclosed repairs Eric Freedman freedma5@msu.edu Back to court Issue: Did a dealership that failed to disclose repaired damage on a Jeep Grand Cherokee demo defraud the buyers? Where it stands: Mississippi’s top court rules that a jury should decide and reinstates buyers’ lawsuit for fraud and consumer violations. Can a demonstrator model be sold as new, and does a generic contract disclaimer that a vehicle “may have suffered damages and may have had repairs performed on it” meet a dealership’s obligation to disclose prior damage to a consumer? Those are questions a Mississippi jury should answer, that state’s Supreme Court has ruled in reinstating a lawsuit by the dissatisfied purchasers of a 2002 Jeep Grand Cherokee. The decision is the furthest a Mississippi court has gone to extend the duty of dealerships to disclose repaired damage to consumers, said plaintiffs’ lawyer Mark Prewitt of Vicksburg. “I don’t think this case treats auto dealers different than the general business community,” Prewitt said in an interview. Buyers of a 2002 Jeep Grand Cherokee demo who learned the vehicle had been damaged in a crash have been granted a trial against the selling dealership by the Connecticut Supreme Court. A 2002 Grand Cherokee is shown. paired or replaced in-house — including the condenser, front bumper and deflector — at a retail cost of $2,190. The SUV had 8,745 miles on the odometer at the time of the accident. More than a year later, the Holmans’ insurance agent notified them of the accident, the court said. The Holmans then sued Howard Wilson for compensatory and punitive damages. The dealership denied liability, and a Rankin County judge dismissed the case without trial. The state Court of Appeals also sided with the dealership. The case The controversy arose after Coye and Ted Holman bought the vehicle in July 2002 from Howard Wilson Chrysler-Jeep Inc. in suburban Jackson for $33,685. It was a demonstrator with 8,821 miles. The offer to purchase contained boilerplate language stating that the vehicle may have been damaged “during prior ownership or usage, during transit or while in the control or possession” of the dealership. But the dealership allegedly failed to disclose that the Grand Cherokee had, in fact, been damaged in a frontend crash more than three months earlier and that parts had been re- Supreme’s court ruling But in unanimously reviving the lawsuit, the Supreme Court said a trial is necessary to decide whether the dealership was obligated to disclose the repaired damage, whether the wording of the offer to purchase adequately notified the plaintiffs and whether the dealership violated the consumer protection law by describing the vehicle as “new.” The court said there is a factual dispute as to whether the Grand Cherokee had been sold as new, as the plaintiffs claimed the salesperson told them and as the title and sales documents indicated. State law makes it illegal to sell a demonstrator as new, it said. But dealership lawyer Jeffrey Hubbard of Jackson told Automotive News that the commonly understood meaning of “new” is not previously titled. “We plan on going to trial and prevailing at trial,” he said. “Our argument is that you knew you were buying a car with 8,000 miles, and there were no damages.” Additional arguments In an opinion by Justice William Waller Jr., the state Supreme Court also rejected the argument that the dealership is shielded by a Mississippi Motor Vehicle Commission regulation requiring written disclosure when retail repair costs exceed 6 percent of the sticker price. That regulation exempts bumpers as well as other options or components that are replaced by identical manufacturer’s original equipment. In a friend-of-the-court brief supporting Howard Wilson, the commission said the regulation “was enacted because operation of a newcar dealership would be impractical without it.” The comission added, “Managing, reporting and discussing every scratch and ding with every person visiting the car lot creates an impractical burden on the dealership who has fully repaired damage that was minor, not evident to the salesperson and does not impact the automobile’s functionality.” But the court found that the repairs to the Grand Cherokee fell outside the purpose of the regulation — which, it said, is aimed at minor damage suffered in transit, not at accident-related damage. Defense lawyer Hubbard said that the court mistakenly had limited the actual scope of the regulation, but that he is pleased the court upheld the regulation itself. c Court rejects Chrysler’s bid for sales tax refunds on repurchased lemons Eric Freedman freedma5@msu.edu Automakers aren’t entitled to a refund of Connecticut’s sales tax on lemon vehicles they repurchase from dissatisfied customers, the state Supreme Court ruled unanimously. Manufacturers don’t qualify as “aggrieved taxpayers” under state law, the court said in an opinion written by Justice Joette Katz. The lemon law requires manufacturers that repurchase and reacquire such vehicles to refund the full contract price, including dealer prep, transportation, options, license and registration fees, finance charges and the 6 percent sales tax. Chrysler LLC sued after the Department of Revenue Services reject- ed its claim in 2004 for a refund of more than $950,000 on 626 vehicles, according to the attorney general’s brief. The department concluded that “the vehicle sales in question were completed transactions properly subjected to sales tax” and that state law includes no provision allowing the refunds. A lower court judge sided with the department. In its unsuccessful appeal, Chrysler argued that although it wasn’t the retailer and wasn’t legally required to collect the tax, it was still a taxpayer entitled to reimbursement after it reimbursed customers, and that the lemon law refund requirement “becomes an unlawful penalty and a judicially legislated fine on vehicle Sour argument Issue: Should Chrysler be reimbursed for the Connecticut sales tax it refunds to customers when it repurchases a lemon? Outcome: State Supreme Court says no. manufacturers.” The result, the company asserted in court papers, is the state “retaining sales tax on a sale that never took place.” But the Supreme Court disagreed, finding the state immune from liability. It said Chrysler is ineligible for a refund since it isn’t an aggrieved taxpayer as either the purchaser or the original retailer. The court added, “The lemon law was intended to protect consumers of new automobiles,” so interpreting it to allow manufacturers to collect a tax refund “would do nothing to advance the legislature’s remedial concerns of consumer protection and would undermine the incentive to provide nondefective products to consumers.” Sarah Kaufman, a spokeswoman for the Department of Revenue Services, said Connecticut has no pending refund litigation involving other manufacturers. Last May, the Maine Supreme Judicial Court reached a similar conclusion under its own lemon law. The case stemmed from Chrysler’s re- quest for a $50,872 refund for sales tax it reimbursed to the former owners of 58 vehicles. The Maine court, like Connecticut’s, rejected Chrysler’s argument that its constitutional rights to equal protection and due process of law had been violated. Chrysler spokesman Michael Palese told Automotive News that the company also has been in litigation over the issue in Indiana, Georgia and Pennsylvania but hasn’t lobbied any state legislature to change its laws. Said Palese: “Some of these states rationalize this as a punitive measure, although the law stipulates the nonpunitive nature of its lemon law.” c Get a Free Diagnosis of Your Dealership at www.mightycure.com ! tter l be 00 ee -39 ’ll f You 0-829 … -80 1 l us Cal …or… Visit us at NADA Booth 3239W The Automotive Dealership Specialists http://www.mightycure.com http://www.mightycure.com
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