Missouri Court Ruling Leads to Class Actions Against Car Dealers

Posted by Sergei Lemberg, Esq. on October 31st, 2008

In the summer of 2007, the Missouri Supreme Court affirmed a lower court decision that a bank’s document preparation fees violated the Missouri Merchandising Practices Act. Basically, the court found that by charging fees, the bank was illegally practicing law. What does this have to do with cars? Plenty.

In a previous post, we talked about car dealer Earl Stewart’s crusade against the dealer preparation and document fees that dealers charge. They’re essentially a means of padding profit and ripping off consumers. It turns out that the Missouri ruling paved the way for consumers there to launch class action suits against that state’s car dealers for charging these fees.

According to Charles Emerick over at BNET, the latest twist is that one dealership is trying their hardest to force the plaintiffs to accept arbitration instead of proceeding with their class action suit. Lee’s Summit Honda is seeking to overturn a lower court’s decision that rejected their premise, and instead allowed the class action to proceed.

Stay tuned!

Allstate’s Commercial: Where’s the Sequel?

Posted by Sergei Lemberg, Esq. on October 30th, 2008

Brian Wilson over at The Nicodemo & Wilson Bull’s-Eye Blog shared this recent post with us. He shares some important information about what insurance companies don’t tell you. Thanks, Brian!

Recently, Allstate has been running a commercial where a young man who causes a collision is sued in a personal injury case and the jury returns a verdict in excess of this poor fellow’s liability insurance. The attorney for Allstate then informs the young man’s parents that the injured person can now go after and take the young man’s college fund and savings, etc.

The purpose of the commercial is obviously twofold. One, Allstate wants to sell higher levels of liability insurance. No problem there. But the other purpose is to plant the fear that “out of control” jury verdicts will mean that you lose everything and become a pauper on the streets if you get hit with a verdict in excess of your liability limits.

This is misleading and inaccurate for two reasons. First, our friends at Allstate don’t mention that if a jury returns a money verdict greater than your liability limits, you can file for bankruptcy and discharge any personal debt in almost any circumstances (unless you were driving drunk, for example).

More importantly, in the unlikely event that you get tagged for a verdict that exceeds your liability limits, it is often because the Allstates of the world put the screw job to you by handling your claim in “BAD FAITH.” Example: you cause a crash and injure somebody. You have a $50,000 liability policy. The injured person offers to settle for $25,000 – a figure much less than your liability limits. So far, so good. But Allstate makes a “take it or leave it” offer of $8,000 to the injured person.

Allstate’s unreasonable offer forces the parties to go to trial, and a jury returns a verdict of $65,000. Allstate gambled and lost. But here’s the problem: it gambled with YOUR personal assets, as you now owe the injured party $65,000, and your liability limits are only $50,000. Bottom line: if Allstate’s puny offer was considered unreasonable (because it could have settled the claim for $25,000 and not exposed you to losing your personal assets), Allstate can now be liable to YOU as an Allstate policyholder for handling your claim in bad faith. It is Allstate’s job under the law to FAIRLY evaluate the claim and take no action that favors Allstate’s interests over yours as a policyholder. If Allstate has committed “bad faith” by mismanaging a claim against you, you as a policyholder can sue Allstate for “bad faith” damages, including the $15,000 in personal liability it exposed you to, and punitive damages that punish Allstate for unreasonably exposing your personal assets.

So the next time you view this commercial, remember that in many circumstances, it is the Allstates of the world that put their own insureds in this box by making unreasonable settlement offers, and essentially gambling with their financial future and assets while trying to save a few bucks. To borrow a page from Allstate’s own playbook, their “good hands” shouldn’t be used to push their insureds off a financial cliff. That is the essence of “bad faith” claims handling practices, and the law gives you the right to fight back when you’re pushed around.

The second commercial–where the poor kid hires one of those “trial lawyers” to sue Allstate for handling his claim in bad faith–is the one you won’t see.

Wisconsin Lemon Fridge Owner Gets the Cold Shoulder

Posted by Sergei Lemberg, Esq. on October 26th, 2008

WKOW-TV in Madison, Wisconsin, recently reported that a family in Monroe found that they had a lemon refrigerator on their hands. Like the lemon cars we see all the time, the family’s $1,600 fridge had four different defects. Maytag wouldn’t replace the refrigerator or repair it – and wouldn’t reimburse the family $500 for the two times the fridge conked out and spoiled their groceries.

Although Annie Figi, the refrigerator’s owner, told Maytag that she had a lemon, the company (correctly) said that the state’s lemon law didn’t apply. Thankfully, she turned to the TV station’s consumer troubleshooting team, who convinced Maytag to replace the refrigerator.

While it’s true that state lemon laws typically only apply to vehicles (although assistive devices and wheelchairs are sometimes covered), it’s important to remember that other federal and state laws cover consumer goods. The federal Magnuson-Moss Warranty Act, for example, would most likely have applied, as would Section 2 of the Uniform Commercial Code.

The moral of the story? If you buy a product that’s defective, assert your rights. Ultimately, the law is on your side.

A Tale of Wrecks, Salvages, and Registries

Posted by Sergei Lemberg, Esq. on October 26th, 2008

Rebuilt Wrecks Are A Danger

Back in 1992, Congress passed a law mandating the creation of a national database (the National Motor Vehicle Title Information System) that lists all of the vehicles written off by insurance companies due to accidents, fires, floods, and the like. Why haven’t we seen such a database? According to consumer advocates, it’s because the insurance industry has been putting pressure on the federal government to delay implementation of the law.

The database is supposed to help prevent consumers from being defrauded by unwittingly purchasing vehicles that have been previously deemed total losses.

According to an article in the New York Times, consumer groups sued the Justice Department, and the U.S. District Court for the Northern District of California rejected the Justice Department’s request to dismiss the suit. As a result, the insurance industry has to start providing information on salvage vehicles by March 31, 2009, and consumers must have access to that database.

That’s an important ruling, but the database isn’t fail-safe. For one thing, just as with lemon laws, state laws regarding re-titling vehicles as “total losses,” vary considerably. In other words, a vehicle that might be considered a total loss in one state might not be in another. This can lead to the practice of “title washing,” whereby vehicles are transported from a strict state to a more lenient state in order to obtain a clean title.

Some who are in the collision repair industry note that, because they are on the front lines, they know when a vehicle is a total loss. Yet, even when they write off a vehicle, an insurance company may send out an adjuster who assesses the vehicle damage at a lower amount, thus making the vehicle eligible for a “salvage” title (meaning it can be resold as re-buildable) instead of a “junking” title (meaning that the vehicle needs to be dismantled).

A total loss database is long overdue, but measures should be taken to ensure its integrity. Similarly, a national lemon buyback database should be initiated, so that consumers who buy used cars can get reliable information about whether or not the car they are considering has been repurchased by the manufacturer as a “lemon.” About half of the states in the country require that manufacturers rebrand lemon buybacks, but some find ways to get around those requirements. And, when lemons are sold at auction, some unscrupulous people take those lemons to more lenient states in order to “wash” the titles. They then resell those lemons to unsuspecting consumers.

The Department of Justice is accepting public comment on the National Motor Vehicle Title Information System through November 21, 2008. You can read more about it, as well as download Federal Register information here.

Cost Effective Ways to Resolve Legal Matters

Posted by Sergei Lemberg, Esq. on October 26th, 2008

Attorney Roger Glovsky, a business lawyer in Massachusetts, is in the guest blogger’s chair today. Thanks, Roger!

Legal services can be expensive! The average hourly billing rate for lawyers set new records this year at $352 for senior partners and $227 for senior associates.

Sometimes, it is hard to justify high billing rates unless the lawyer agrees to cap his fees at some fixed amount. So, what should you do when you hire a painter and he leaves the job half-done, or you buy an air conditioner that is damaged during installation, or a small business takes your deposit but fails to deliver the services you ordered?

If the dollar amounts are significant or if there are potential liability claims, you should consult a lawyer. Look for a specialist who is already familiar with a particular matter (e.g. Sergei Lemberg, who practices Lemon Law). A specialist, even with a high billing rate, is often less expensive and provides better results. Ask for an initial free consultation to evaluate the nature of your claim and an estimate of the time and costs involved. If the lawyer doesn’t offer an initial free consultation or provide an estimate, then look for another lawyer.

If the matter is too small, or just not cost effective for a lawyer to handle, then what can you do? You could go to law school yourself, but that would take a lot of time and money. Alternatively, there are other ways to take action. One way is what I use to call waging the “fax campaign.” Today, it is really the “fax/email campaign.”

First, you should just write a letter and send it to the person with whom you have a complaint. But, you say you have already complained? Was it in writing? If you don’t put it in writing, many businesses won’t take you seriously (or may not even be aware there is a problem). When you put it in writing be sure to stick to the facts (i.e., who, what, when, where, and how). Be reasonable in your letter and avoid insulting or demeaning statements. If what you write it reasonable, you are more likely to get a reasonable response.

Second, if the recipient of the letter is not reasonable, be persistent. Let the person know that you are serious about your concerns and that you expect action. If there is no response to your letter, follow up with a simple note enclosing a copy of the original letter and asking why you have not received a response.

Third, if it is a business-related matter, fax your letter to the business. Most businesses have only one fax, which is received by an office administrator who then hand-delivers the message to the person responsible. Don’t include a cover letter; that way, the person receiving it has to read the letter in order to deliver it. If your letter explains your complaint, now everyone in the business knows about your complaint (assuming the person who receives the fax is likely to gab about it).

Fourth, don’t be afraid to move up the chain of command. If the contact person or representative is not responding to your complaints, send a copy of your letter to their supervisor. If they don’t have a supervisor, look for the head of the department or the president of the company. Ask for their phone number or email address.

Fifth, don’t let up after you get an initial response. Make sure the company delivers on its promises. As you move up the chain of command, send emails to the supervisor, the department head, and the president, keeping them informed of the situation. Let them know whether or not the problem has been fully corrected, what the status is, and what you are waiting for them to do. Be sure to number the emails in the subject line so that they know how many emails you have sent.

One note of caution: stick to the facts; do not misrepresent anything; do not mislead anyone; and do not make any false accusations. Any misstatements could create counter claims against you. If you do get a satisfactory result, be sure to send another letter thanking the company for doing the right thing. Maybe, that will make it easier for the next customer.

Roger Glovsky is the founder of Indigo Venture Law Offices, a business law firm based in Massachusetts, which provides legal counsel to entrepreneurs and high-tech businesses. Mr. Glovsky is also the founder of LEXpertise.com, a collaboration and networking site for lawyers, and writes a blog called The Virtual Lawyer.

The above content is provided for informational purposes only. It is not legal advice and should not be construed as such. Do not act upon this information without seeking professional advice or rely on this website or use the content as a substitute for consultation with professional advisors.