Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—E.D. Va.: Virginia CPA claims continue in vehicle odometer controversy, (Oct 22, 2013)

By Jody Coultas, J.D.

The federal district court in Norfolk, Virginia denied dismissal of a vehicle purchaser’s Virginia Consumer Protection Act claims against vehicle trader Southeastern Wholesale Corp. based on Southeastern’s alleged misrepresentation of a vehicle’s odometer reading (Alexander v. Southeastern Wholesale Corp., October 17, 2013, Smith, R.). The Consumer Protection Act (CPA) claim was not preempted by the federal Motor Vehicle Information and Cost Savings Act.

Southeastern Wholesale Corp. bought a truck in which the odometer reading was off by almost 75,000 miles, but certified the odometer reading as correct to the best of its knowledge. After the vehicle purchaser bought the truck from Southeastern, he tried to trade the truck to a third party. The third party discovered the inaccurate odometer reading and required the vehicle purchaser to take back the truck. The vehicle purchaser filed CPA claims against the first two owners of the truck.

Statute of limitations. Because the vehicle purchaser filed his CPA claims within two years of when he allegedly discovered the inaccuracy, the court held that the claims were not barred by the statute of limitations. The CPA statute of limitations requires a cause of action to be brought within two years of when it accrues. A cause of action accrues when it is discovered or by the exercise of due diligence reasonably should have been discovered. Southeastern argued that limitations period began to run when the purchaser bought the truck. While it may be true that Southeastern should have reasonably discovered the odometer issue at the time it bought the truck, that same standard did not apply to the vehicle purchaser. As an individual consumer, rather than automobile retailer, the vehicle purchaser was not expected to discover the issue at the time of purchase.

Preemption. The Motor Vehicle Information and Cost Savings Act did not preempt the CPA claims, according to the court. The stated objectives of Congress in enacting the Odometer Act were to prohibit tampering with motor vehicle odometers and to provide safeguards to protect purchasers in the sale of motor vehicles with altered or reset odometers. Allowing a state consumer protection statute claim did not stand as an obstacle to these objectives.

It was unnecessary for the court to decide whether the treble damages provision of the Motor Vehicle Information and Cost Savings Act limited the amount of punitive damages that are allowed pursuant to any state claim for odometer-related fraud because the amount of damages available to a successful claimant does not affect the validity of the claim, according to the court.

Consumer transactions. The plain language of the CPA and relevant precedent supported the conclusion that the CPA covered transactions like the one at issue, according to the court. Southeastern argued that it could not be held liable under the CPA because it sold the truck to a third party, rather than directly to the vehicle purchaser. The CPA applies only to consumer transactions. A consumer transaction is an advertisement, sale, lease, license, or offering for sale, lease or license, of goods or services to be used primarily for personal, family, or household purposes. Suppliers are manufacturers or distributors who sell goods to be resold by other persons in consumer transactions, implying that transactions between suppliers were anticipated and included.

Virginia courts appear to be split on the issue of whether a transaction between suppliers is covered by the CPA, while federal courts have consistently held that a direct sale to a consumer is not required for the transaction to be covered by the CPA. Thus, the CPA applied to the transaction at issue.

The case is No. 2:13cv213.

Attorneys: John Cole Gayle, Jr. (The Consumer Law Group) for Andre Alexander. William Hunter Old (Kaufman & Canoles PC) for Jason D. Adams, Incorporated.

Companies: Southeastern Wholesale Corp.

Cases: StateUnfairTradePractices VirginiaNews