Certified Pre-Owned Used Vehicle or CPO Fraud

Our Chicago consumer fraud attorneys often represent consumers against automobile and truck manufacturers in certified pre-owned used vehicle (“CPO”) lawsuits. The Manufacturers deny responsibility for their own certification, claim that they are not parties to the certification and seek dismissal of the suits. Remarkably they claim that as a matter of law the certifications don’t come from them and that they don’t need to stand behind them, even though their advertising say that they do.

However, manufacturers are clearly liable for false certifications or false CPO’s as breach of express warranties (which for vehicles designed for consumer use also states a Magnuson-Moss claim) and under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”).

The CPO programs are not a dealer program. They are manufacturer programs with the manufacturer supervising them and profiting from them. The manufacturer sets all the standards; does the marketing; prepares the program materials and monitors and inspects their dealer’s for compliance with the program. The certification provided by manufacturers are not labeled “a Used Car Dealer Certification”; they are labeled for instance a “GMC Certified Used Car” or “BMW Certified Used Car” on the manufacturers’ CPO website and in the certification program documents provided to consumers

Under a number of court decisions, s manufacturer is liable under the ICFA and for breach of warranty for falsely certifying vehicles that are rebuilt wrecks or flood vehicles and holding them out to buyers as meeting certification requirements. See Garcia v. Overland Bond & Inv. Co., 282 Ill. App. 3d 486, 495-496 (1^st Dist. 1996). Under Section 10(a) of the ICFA those persons damaged by violations of the ICFA may sue “any person” who violates the Act. Section 1(c) of the Act includes a “business entity” as a “person.” 815 ILCS 505/1(c); Garcia, 282 Ill. App. 3d at 496; see also Torp v. Gen. Motors Acceptance Corp., No. 05-1042-CV-W-HFS, 2007 WL 2811437, at *9 (W.D. Mo. Sept. 24, 2007) (GMAC could be liable for its participation in the false certification of GM certified used car that was a rebuilt wreck); Ferrari v. Mercedes Benz USA, LLC, 17-CV-00018-YGR, 2017 WL 3115198, at *5 (N.D. Cal. July 21, 2017) (manufacturer liable as principle for false CPO certification); Washington v. William H. Porter, Inc., CV N17C-01-170 EMD, 2017 WL 3098210, at *6 (Del. Super. Ct. July 20, 2017) (consumer stated consumer fraud and breach of warranty claims against GM for false CPO certification). The ICFA simply tracks the common law. Common law fraud allows suing anyone who participates in a fraud as a joint tortfeasor. Garcia, 282 Ill. App. 3d at 496. Manufacturers as the provider of the certification can also be sued for breach of express warranty. Washington v. William H. Porter, Inc., supra.

The certification documents, certification advertising, and certification website where manufacturers list CPO vehicles for sale bear the manufacturers’ name, and trademarks. The manufacturers maintain the right to supervise and direct its dealer agents with respect to the CPO program and provides direction and training to its agents as to every aspect of the CPO program. Manufacturers, not the dealers, create and supply all materials provided to CPO purchasing consumers, as well as instructions, checklists, and training materials used by dealers participating in the CPO program. The dealer merely acts as the manufacturers’ agent in conducting the certification inspection. Consumers aren’t paying a premium for a used car dealer certification.

By failing to stand behind their CPO programs and misstating that they do and omitting to disclose their policy of refusing to make consumers whole, if the CPO vehicle is a rebuilt wreck or flood vehicle, manufacturers can be sued under the ICFA for an unfair practice in addition to claims for breach of warranty and misrepresentations and omissions of material fact. To adequately plead a claim for an unfair practice under the ICFA, the plaintiff must allege (1) an unfair act or practice by defendant, (2) defendant’s intent that plaintiff rely on or be treated unfairly by the act or practice, (3) that the unfair act or practice occurred in the course of conduct involving trade and commerce, and (4) the plaintiff suffered injury as a proximate result. Thompson v. Fajerstein, 2008 WL 4279983, at *4 (N.D. Ill. Sept. 17, 2008). “A plaintiff may allege that conduct is unfair under ICFA without alleging that the conduct is deceptive.” Siegel v. Shell Oil Co., 612 F.3d 932, 934 (7th Cir. 2010); Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 960 (Ill. 2002). A practice is unfair if it (1) offends public policy; (2) is immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to consumers. Robinson, 775 N.E.2d at 961. A practice does not need to meet all three criteria to be unfair. Id. It “may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three.” Id.

Claims for unfair practices are also not required to meet Rule 9(b)’s heightened pleading for fraud. “Because neither fraud nor mistake is an element of unfair conduct under Illinois’ Consumer Fraud Act, a cause of action for unfair practices under the Consumer Fraud Act need only meet the notice pleading standard of Rule 8(a), not the particularity requirement in Rule 9(b).” Windy City Metal Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 670 (7th Cir. 2008).

The Illinois Supreme Court in Avery v. State Farm Mutual Auto Insurance Co., 835 N.E.2d 801 (Ill. 2005) held that a plaintiff must allege “something more” than a mere breach of a contract to state an unfair practice claim under the ICFA. An auto-manufacturer’s consistent practice of denying responsibility for its own certifications is that “something more.” Al Maha Trading v. W.S. Darley & Co., 936 F. Supp. 2d 933 (N.D. Ill. 2013).

If you are the victim of certified pre-owned vehicle or CPO fraud or of any type of used car fraud or car dealer fraud, contact one of our experienced Chicago auto-fraud lawyers with offices in Chicago, Elmhurst and Wilmette at 630-333-0333. You can also contact us online. With offices near Oak Brook, Evanston and Chicago we file suits in state and federal courts all over the Chicago area for auto-fraud and CPO fraud claims against used car dealers or manufacturers who provide CPO certifications. We also bring claims for auto-fraud against used car dealers who sell rebuilt wrecks or flood vehicles that are not CPO vehicles when the dealers have misrepresented condition of the used cars or knowingly omitted to disclose that the vehicles are rebuilt wrecks or flood vehicles.