Public Justice Takes on Auto Industry Abuses

By Claire Prestel, Public Justice Staff Attorney

Justice for car industry consumers is at stake in three important cases briefed or argued by Public Justice and its co-counsel in recent months: Aguayo v. U.S. Bank in the Ninth Circuit Court of Appeals; Piccardi v. FT Automotive III, LLC in the Nevada Supreme Court; and Wallace v. The Ganley Auto Group in the Ohio Court of Appeals.         

Jose Aguayo of California, the plaintiff in the Ninth Circuit case, purchased a car from a Los Angeles-area dealership, which promised that if Aguayo’s car was ever repossessed, he would be provided with “all” post-repossession notice required by law. 

But after the dealership sold Aguayo’s contract to U.S. Bank, the Bank claimed it could ignore some of California’s debt-collection notice requirements because they are preempted by the National Bank Act. 

The trial court accepted the bank’s preemption theory, but Public Justice argues that the district court’s decision is contrary to 100 years of case law holding that national banks’ debt-collection practices are subject to state control.  Public Justice’s brief also argued that U.S. Bank stepped into the dealership’s shoes and voluntarily assumed its express promise to provide “all” required notice.  The National Bank Act is not a bait-and-switch scheme that allows financial institutions to re-write consumer contracts, says the brief.

A putative class action, the Nevada case involves William and Beth Ann Piccardi’s claim that their dealership collected an illegal fee and failed to disclose another charge.

In the third case, April Wallace and two other Ohioans allege that their dealerships sold them undisclosed rental cars in violation of state law, and they, too, seek to represent a class of similarly situated consumers.  Although the plaintiffs’ claims in both Piccardi and Wallace have so far been stymied by mandatory arbitration clauses, Public Justice is arguing on appeal that the dealerships’ arbitration clauses are unfair and unenforceable as a matter of state law.

Public Justice’s efforts on behalf of car purchasers are particularly timely.  Just last month, Congress exempted car dealers (in most cases) from regulation by the new Bureau of Consumer Financial Protection created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  The Bureau will still have jurisdiction over non-dealer lenders, and Dodd-Frank enhanced the Federal Trade Commission’s authority to regulate car dealers.  But the dealers’ ability to win a special exemption from CPFB oversight demonstrates that consumers need powerful advocates when they take on this industry—an industry that claims $850 billion in consumer debt, as much as Americans owe to credit-card companies.

The Aguayo case is fully briefed and ready to be set for argument.  Public Justice Senior Attorneys Paul Bland and Leslie Brueckner, Staff Attorney Claire Prestel, and Brayton-Baron Fellow Melanie Hirsch are working on the case with Andrew Ogilvie and Carol Brewer of San Francisco, California, and Michael E. Lindsey of San Diego, California. 

Public Justice Senior Attorney Paul Bland argued the Piccardi case in July.  In addition to Bland, the Piccardis are represented by George O. West III of Las Vegas, Nevada.  The Wallace case is being briefed on appeal.  Public Justice Senior Attorney Paul Bland and Staff Attorney Claire Prestel are working with Ronald Frederick of Cleveland, Ohio on the case.