Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. Cal.: CarMax not liable for allegedly deceptive inspection reports, (Jan 22, 2014)

By Jody Coultas, J.D.

A vehicle purchaser failed to state California Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA) claims against vehicle dealership CarMax Auto Superstores, LLC for advertising its vehicles as “Quality Certified” and representing that the vehicles had passed a rigorous inspection, the federal district court in has held (Zambrano v. CarMax Auto Superstores, LLC, January 21, 2014, Hayes, W.).

CarMax advertised its vehicles “CarMax Quality Certified,” and described the inspection it performed on vehicles as “CarMax Quality Inspection,” or “CQI.” The CQI Certificate provided a general list of components inspected and certified that the vehicle has passed a rigorous inspection. After buying a vehicle from CarMax, the purchaser experienced problems with the vehicle. CarMax told the purchaser that the defects were not CarMax’s problem because they were not pre-existing issues.

The CLRA prohibits representing that goods have characteristics that they do not have, and representing that goods are of a particular standard, quality, or grade, if they are of another. Conduct that is “likely to mislead a reasonable consumer” violates the CLRA. The UCL prohibits “any unlawful, unfair or fraudulent business actor practice and unfair, deceptive, untrue or misleading advertising.”

There was insufficient evidence to support the purchaser’s claim that the CarMax CQI Certificate did not meet the requirements of the California Vehicle Code, according to the court. The purchaser alleged that CarMax violated the Vehicle Code by labeling the vehicle as “Certified” and that this practice violated the CLRA and the UCL. The purchaser failed to demonstrate that the CarMax CQI Certificate was not a “completed inspection report indicating all the components inspected.” The Vehicle Code did not preclude the use of a generic form used for many different vehicles.

The purchaser failed to meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), according to the court. There were allegedly eleven false representations made by CarMax regarding the vehicle and its inspection, mostly concerning CarMax’s use of the term “Certified” and its failure to provide an inspection report. As noted above, the purchaser failed to present facts to establish that the CQI Certificate was not a valid report. The complaint failed to provide information regarding the time, place, and specific content of the representation, or the identities of the parties to the representation. There were also no facts presented to show why CarMax had a duty to disclose the results of the inspection, and how, when, and where CarMax failed to do so.

The court also held that the purchaser failed to plead actual damages. The purchaser alleged that she was damaged by paying for a Certified 2007 Volkswagen Passat, but actually received an uncertified 2007 Volkswagen Passat, and suffered opportunity costs because CarMax’s representations diverted her from finding an authentic “Certified” pre-owned vehicle. There was no evidence that CarMax’s CQI Certification was invalid, or that the vehicle was uncertified.

The case is No. 13cv2107-WQH-WMC.

Attorneys: Christopher T. Smith (Rosner Barry & Babbitt, LLP) for Tania Zambrano. Kurt Andrew Schlichter (Schlichter & Shonack LLP) for Carmax Auto Superstores, LLC.

Companies: CarMax Auto Superstores, LLC

Cases: Advertising StateUnfairTradePractices CaliforniaNews