Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—SDFla: Classic Car Appraiser Did Breach Contract by Failing to Perform Adequate Appraisals, but Did Not Violate Florida Deceptive and Unfair Trade Practices Act, (Mar 21, 2013)

By Tobias J. Gillett, J.D., LLM.

A classic car collector did not establish that an appraiser of classic cars violated the Florida Deceptive and Unfair Trade Practices Act in recommending the purchase of two cars that were later found to have flaws that diminished their value, even though the appraiser did breach his contract to perform appraisal services, the federal district court in Miami has ruled (Henderson v. Demars, March 20, 2013, Scola, R.).

According to his complaint, in February 2007 Robert Joseph Henderson responded to an advertisement from Robert Demars in an automobile collectors magazine in which Demars claimed to be the “the world’s best known auto appraiser,” and asserted that he had extensive skill and experience with classic automobile appraisal. Demars sent Henderson additional materials touting his expertise, and Henderson hired Demars to locate and evaluate automobiles for him in exchange for a percentage of the purchase price of the cars he found.

In May 2007, at Demars’s recommendation, Henderson purchased a 1974 Ferrari Dino GTS. Demars claimed the car was in “time capsule” and “all original” condition with original “fly yellow paint.” However, when Henderson went to sell the car two years later, a classic car dealer determined it had been repainted twice, and that it originally had been painted blue.

In June 2007, again relying on Demars’s recommendation, Henderson purchased a 1963 Ferrari 250 GT Lusso. Demars claimed the car contained its original engine, but when Henderson went to resell the car a prospective buyer noticed unusual stampings on the engine block. Further research led the buyer to conclude the engine was counterfeit.

Henderson sued Demars, claiming that Demars breached their contract by failing to adequately appraise the automobiles, and that Demars violated the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) by misrepresenting his expertise. Henderson also claimed Demars violated the FDUTPA by falsely informing Henderson that the owner of the Dino had told Demars that the car was in its original condition and that Henderson had to purchase the car immediately or lose his opportunity to buy it.

The court concluded that Demars had breached the contract, finding that Demars’s claim that he was only obligated to locate vehicles under the contract “border[ed] on the absurd.” Pursuant to the contract and related documents, Demars’s service included “inspecting, diagnosing, and determining the history of the car,” as well as locating it. Testimony from Henderson’s expert witness and the dealer of the Dino “demonstrated that determining the original color of the Dino was a surprisingly easy task.” Simply searching an online registry of Dinos, or subscribing to the Ferrari Market Letter, would have permitted Demars to determine the original color of the car.

With respect to the Lusso, “a knowledgeable auto appraiser should have easily detected the engine restamping.” A look at the internal number of the engine would have revealed that the engine belonged to a different Ferrari model. Therefore, the court concluded that Demars had breached the contract by failing to provide the appraisal services.

However, the court concluded that Demars had not violated the FDUTPA. The court explained that a deceptive practice under the FDUTPA is a practice “that is likely to mislead consumers,” while an unfair practice is “one that is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” The court noted that the FDUTPA was not intended to convert ordinary breach of contract claims into claims for unfair or deceptive practices. The court also noted that courts should consider the opinions of the FTC and other federal courts as to whether a practice was unfair or deceptive.

Henderson had claimed that Demars committed deceptive and unfair practices by overstating his qualifications, by failing to perform promised services, and by falsely claiming that Henderson had to buy the Dino immediately because other buyers were interested. The court concluded that, although some of Demars’s claims might be “hyperbole,” his claims regarding his expertise were not false—“[h]e did have decades of experience and may have been considered by some as the best known appraiser.”

Moreover, the conclusion that Demars breached the contract did not also mean that Demars committed an unfair or deceptive practice, according to the court. Henderson had not shown that Demars entered the contract intending not to perform or that he intended to deceive Henderson. All Henderson had proved was “that Demar just wasn’t very good or very thorough—not that he was unscrupulous.”

Furthermore, the court “credit[ed] Demars’s explanation” of his statements regarding the status of other potential buyers for the Dino, and “considered the evidence that other cars bought by Henderson with Demars’s recommendation were sold for a profit.” Therefore, the court entered judgment against Henderson on the FDUTPA claim.

The case is No. 11-80589-Civ-SCOLA.

Attorneys: James Thomas Ferrara (Shraiberg, Ferrara & Landau, P.A.) for Robert Joseph Henderson. Dominic John Scalera, III (Grieco & Scalera) for Robert Demars.

Companies: Robert Demars, Ltd.

Cases: StateUnfairTradePractices FloridaNews