Auto dealer library
This page provides links to various matters relating to developments of interest to automobile dealers. The discussion and links are not to be taken as legal, accounting, tax, or other advice. You should consult your own professionals for such advice. Some of the material may not be up to date because of legislative, regulatory, or court case changes. Much of the material, however, remains timely. You should check with your own legal counsel or other professional for any updating of the information provided here.
Advertising
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California Supreme Court rules on sales below cost
This court decision says that to violate the California sales below cost laws, the seller must have with a purpose of injuring competitors. -
Calling lease program "special" and "puffery"
Unpublished California Court of Appeal decision holds dealership advertisement of lease as "special" is "puffery" and does not require additional disclosures -
California law trumps EPA advertising rules in some circumstances
This court decision concludes that federal law does not prempt claims regarding fuel economy that are deceptive and/or misleading. -
California Supreme Court rules on mistake in advertised price of a vehicle
Dealer is not bound by good faith mistake in advertised price of vehicle. -
FTC guidelines on internet advertsing
Detailed guidelines from the FTC dealing with disclosures and disclaimers for internet advertising, focusing on the clear and conspicuous rule and placement of disclaimers -
Ninth Circuit Court of Appeal says that plaintiff may file a lawsuit over false claims that items were on sale.
The court ruled that when a customer purchases merchandise on the basis of false information, and when the consumer alleges that he or she would not have made the purchase but for the representation, the consumer may sue under California's Unfair Competition Law and Fair Advertising Law.
Finance and Insurance
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Nelson vs. Pearson Ford regarding backdating contracts
California Court of Appeal rules that backdating a re-written vehicle purchase contract is illegal. -
Estimation of license fees
California Court of Appeal allows estimation of license fees and finds no violation of Automotive Sales Finance Act. -
Court decision allows negative equity case to be certified as class action (Lewis vs. Robinson Ford Sales)
Class action allowed against dealers who extend overallowances for trade-in's negative equity or who "roll" overallowances into the cash price of purchased vehicles. -
Court decision prohibits dealers from using overallowances to handle negative equity (Thompson vs. 10,000 RV Sales)
Court decision says dealers must not overallow on trade-ins to handle negative equity -
Single document rule
California Attorney General gives opinion on single document rule allowing multiple pages and pages attached to the contract. -
Silence violates leasing act's single document rule
All agreements in a lease contract must be stated in the lease document. -
Disclosure of Lojack devices
California Attorney General opinion regarding Lojack as a theft deterent device requiring contract disclosure as such -
Pineda vs. Williams Sonoma Stores regarding ZIP codes
California Supreme Court rules that obtaining ZIP code information in credit card transactions is illegal. -
Alarcon vs. Fireside Bank regarding license and registration fee lumping
This unpublished Court of Appeal case holds the lumping license and registration fees together on a contract is an unlawful practice. -
FTC letter to Texas automobile dealers regarding credit reports
FTC opinion on (1) the propriety of an auto dealership obtaining a consumer report from a consumer reporting agency on an individual who visits the showroom, (2) the disclosure required to a job applicant or a current employee for consumer reports, (3) the items required to be provided to the consumer before adverse action may be taken by the employer based on the report.
Litigation issues
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California Supreme Court rules that an employee arbitration agreement can override the employee's right to a hearing before the Labor Commissioner.
In the case of Sonic Calabasas v. Moreno the court rule that an employee arbitration agreement can override the employee's right to a hearing before the Labor Commissioner in a wage dispute. The court ruling also implied that class action waivers in arbitration agreements are valid. -
Court of Appeal denies insurance coverage for wage and hour claim
In a non-published opinion, the Court of Appeal ruled that an insurance policy provided to eight dealerships did not provide insurance coverage for wage and hour violations of state and federal law. The insurance company was not required to provide a defense to the dealerships. -
Court of Appeal upholds validity of arbitration agreement in conditional sale contract.
In a non-published opinion, the Court of Appeal held that the arbitration clause on the back of the plaintiffs’ vehicle purchase contract was fully enforceable, both procedurally and substantively, and that contrary to the trial court’s ruling, defendants did not waive their right to arbitration. -
Class action waiver in arbitration agreement upheld
Class action waiver in arbitration agreement upheld by the California Court of Appeal in spite of argument that the California Legal Remedies Act should not allow such a waiver. -
U.S.Supreme Court rules on arbitration agreements
In the case of AT&T Mobility vs.Concepcion, the U.S. Supreme Court upholds a class action waiver in an arbitration agreement under federal preemption. -
Dealer waits too long to ask for arbitration
This is a court decision where an automobile dealership involved in court proceedings waited too long to assert its right to have the matter go to arbitration. Because the court found the delay to be unreasonable, the dealership lost its right to arbitration. -
Dealer not liable for accident over modified truck
Unpublished California Court of Appeal case holding dealership not liable over sale of modified truck involved in an accident -
Dealer wins attorney fees against plaintiff
Dealer who successfully defended lawsuit alleging violations of the California Vehicle Leasing Act allowed to collect dealer's attorneys fees from the plaintiff. -
Dealer license revoked
Dealer license revoked for allowing another to use dealer's books and license -
Discovery of dealer's customer list
Unpublished Court of Appeal decision allows the discovery of identity of customers to whom rental vehicles were sold. -
Rejected buyer of dealership may not sue factory
California Court of Appeals rules that rejected buyer of dealership has no standing to sue the factory under California Vehicle Code. -
Dealership not liable for failure to inspect and repair brakes
Unpublished California Court of Appeal decision finds dealer did not owe duty to inspect or repair brakes by virtue of its status as a vehicle dealership with service department. -
Person Ford gets a large award in lawsuit against Ford Motor Company
California Court of Appeal confirms trial court decision that Ford Motor Company breached its implied duty of good faith and fair dealing in connection with a dealership relocation agreement. -
Oral statements inconsistent with lease terms
California Court of Appeal rules that oral statements can be used to show a violation of Consumer Legal Remedies Act. -
Consumer Legal Remedies Act does not override Vehicle Code
California Court of Appeal rules that compliance with the Vehicle Code's damage disclosure statutes creates a safe harbor for dealers from claims under a provision of the Consumer Legal Remedies Act
Antitrust laws
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Summary of antitrust laws
An FTC guide to the antitrust laws
Repossession of vehicles
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California Supreme Court rules on vehicle repossession sale process
This California Supreme Court decision says that if a creditor gives a notice of a private sale of a repossessed vehicle and then sells it at public sale, the notice is defective and the deficiency is lost. -
Post repossession notices (Juarez vs. Arcadia Financial)
Court decision rules that post repossession notices must state the exact amount necessary to reinstate contract
Miscellaneous issues
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New Consent Requirements for Telephone Calls and Text Messages Effective Oct. 16, 2013
New consent requirements from the Federal Communication Commission for phone calls and text messages go into effect on Oct. 16, 2013. Dealers should review the rules and work with their counsel and any third party vendors to ensure that all phone calls and text messages they make or send (or that are made or sent on their behalf) meet these new requirements. -
Personal liability for environmental violations (People vs. Roscoe)
The Court of Appeal held that the trial court did not err in holding personally liable individual officers, directors, and shareholders of a family company that was held liable for an underground storage tank that leaked over 3,000 gallons of gasoline into the ground. -
Dealer which provided customer documents to law enforcement agents without a subpoena prevails in lawsuit by customer against dealer
Unpublished court of appeal decision upholds dealer right to provide customer information to law enforcement without subpoena under the circumstances described in this case -
Signing corporate contracts
Corporation law regarding signatures required for valid corporate contract -
Dealer liability for vehicle stolen from repair facility
Dealership held liable when thief steals tow truck and slams into bus stop killing and injuring 11 people
Employment issues
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Court of Appeal rules that a dealer’s flat-rate technicians are entitled to additional compensation for time spent waiting for repair work.
The Court of Appeal ruled that flat-rate compensation only meets minimum wage requirements for the hours spent performing the work from which the compensation is generated, The employer must pay flat-rate employees for time spent waiting for the next job, waiting for parts, and performing any other number of functions other than actual repair of a vehicle. -
Written payroll plans (Nein vs. Hostpro)
Court confirms importance of having properly drafted commission pay plan, -
Brinker Restaurant vs. Superior Court regarding rest and meal periods
California Supreme Court rules on issue of providing meal periods and rest breaks to employees. Employers do not have to ensure that employees take the breaks and rest periods, but there are cautions about this in the court opinion. -
Liability of managers for unpaid wages (Boucher vs. Shaw)
Federal court rules that individual managers can be held liable under the Fair Labor Standards Act for unpaid wages. -
Areso vs. Car Max regarding commission sales overtime exemption
Court rules that per vehicle compensation can be commission income for commission sales overtime exemption
Taxation
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IRS automobile dealership audit manual
The guide the IRS uses for auditing a new motor vehicle dealership -
IRS ruling on employees' use of demonstrator vehicles
IRS rules that use of demonstration vehicles by employees of new motor vehicle dealerships is not excludable from income as a working condition fringe because of a lack of necessary substantiation -
IRS ruling on nondeductibility of underground storage tank expenses
This is a 1998 IRS revenue ruling regarding the deductibility of costs incurred to replace underground storage tanks and acquiring new tanks -
No LIFO recapture on inventory transferred to qualified subchapter S subsidiary
This is an IRS letter ruling that a parent S corporation's transfer of its LIFO inventory to its wholly owned qualified subchapter S subsidiary will not be subject to LIFO recapture under section 1363(d) -
Taxation of extended warranty agreements
Ninth Circuit Court Appeals rules on taxation of extended warranty agreements