Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—S.D. N.Y.: Renters’ deceptive business practices claims against Zipcar dismissed, (Feb 26, 2014)

By Linda O’Brien, J.D., LL.M.

Vehicle renters failed to state deceptive business practices claims against a car sharing service in relation to the service’s alleged practice of charging renters for vehicle damage without complying with the procedures of the New York General Business Law (GBL), the federal district court in New York City has ruled (Sigall v. Zipcar, Inc., February 24, 2014, Oetken, J.).

Zipcar, Inc. and Zipcar New York, Inc. operate the world’s largest car sharing service. Instead of hosting vehicles at centralized locations, the companies provide self-service vehicles located in reserved parking spaces throughout major metropolitan areas and college campuses. To become a member of Zipcar, a consumer completes an application on the company website. Once approved, members may reserve Zipcar vehicles at particular locations by the hour or by the day. Rental prices include gas and insurance. Under the membership agreement, members must maintain a valid credit or debit card on file with Zipcar and are billed for amounts due on those cards. Members are responsible for damage that occurs to a Zipcar vehicle while in the member’s possession. Liability is generally limited to a predetermined damage fee, which is based on the member’s driving plan. For an additional charge, members can purchase a damage fee waiver that reduces or eliminates the damage fee.

In October 2012, Zipcar member Jessica Sigall rented a Zipcar vehicle using a credit card issued to her father, Michael Sigall. The vehicle’s mirror was damaged by an unknown person and Zipcar charged his credit card for a damage fee. The plaintiffs did not agree to the charge after the damage occurred, and no court determined that they were liable. The plaintiffs filed a putative class action against Zipcar, alleging that Zipcar’s practice of charging members for vehicle damage without complying with certain procedures constituted deceptive business practices under the GBL. Zipcar moved to dismiss.

The court found that, although a vehicle renter may assert non-compliance with the GBL as an affirmative defense, the statute does not provide a private right of action for non-compliance. Under the GBL, a rental vehicle company cannot hold an authorized driver liable for damages without following certain procedures, such as performing a physical survey of the vehicle, issuing an incident report, and allowing the renter to inspect the vehicle. The plaintiffs’ claims that Zipcar’s vehicle rental agreement should be automatically voided by non-compliance with the GBL fails since the statute does not provide a private right of action. The statute provides broad enforcement powers to the state and it would be unfair to infer a private right of action where the legislature provided an official enforcement mechanism, according to the court.

Additionally, the plaintiffs failed to state a claim for deceptive acts or practices under the GBL. The plaintiffs asserted four allegedly deceptive acts by Zipcar: (1) representing to members that they are liable for damages when they are not; (2) collecting amounts for damages without complying with the GBL; (3) representing to credit and debit card issuers that the charges are authorized when they are not; and (4) selling damage fee waivers to waive liability that could not imposed with compliance with the GBL. Because each of the allegations relied on Zipcar’s alleged violation of the GBL, rather than a deceptive act or practice independent of such violation, they were insufficient to support a claim under the GBL, the court noted. Moreover, the plaintiffs did not dispute the facial validity of the agreement and their argument that they were deceived as to their legal rights solely by the inclusion of challenged provisions in the agreement was implausible. Finally, the plaintiffs’ claim for fraud that was predicated solely on Zipcar’s alleged violation of the GBL was barred.

The case is No. 13 Civ. 4552 (JPO).

Attorneys: Lawrence Katz (Law Offices of Lawrence Katz) for Michael Sigall. Dennis R. Lafiura (Day Pitney, LLP) for Zipcar, Inc.

Companies: Zipcar, Inc.

Cases: StateUnfairTradePractices NewYorkNews