Predatory Litigators Proliferate

At the recent Chris Leedom conference in Las Vegas, colleague Emily Beck and I had a chance to talk with a number of dealers about the legal risks they face in their everyday operations. During an Ask the Experts panel presentation, Chuck Bonanno tossed out an opening question: What's the biggest development that you've seen in the last year or so for dealers? I didn't have to think very long about

THOMAS B. HUDSON

January 1, 2008

3 Min Read
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At the recent Chris Leedom conference in Las Vegas, colleague Emily Beck and I had a chance to talk with a number of dealers about the legal risks they face in their everyday operations.

During an “Ask the Experts” panel presentation, Chuck Bonanno tossed out an opening question: “What's the biggest development that you've seen in the last year or so for dealers?”

I didn't have to think very long about my answer. The emergence of “predatory litigators” (a term coined, as far as I know, by Leedom) is easily the most significant legal trend in the dealership legal arena.

Leedom defines “predatory litigators” as lawyers who are beginning to make it their business to sue car dealers over their sales and F&I practices. Now, lawyers suing car dealers isn't exactly news. And class-action lawsuits against dealers aren't news either.

For years, lawyers have been filing lawsuits on behalf of consumers, and, for years, they have been tossing in class-action claims, mostly to bolster the settlement value of the case for their clients and to increase the attorneys' fees that are usually part of the settlement agreements in consumer cases.

Usually, however, these cases were not filed by experienced class-action lawyers with pockets deep enough to withstand a protracted legal battle against a dealer or finance company that decided to really make a fight of it.

That's changing.

A decade or more ago, we began to see class-action lawsuits alleging violations of consumer protection laws, such as the federal Truth in Lending Act, filed against sales finance companies and banks by really experienced and well-heeled class action lawyers.

At least some of these cases dealt with retail installment sales contracts bought by the sales finance companies and banks from car dealers.

Litigating these cases against the buyers of retail installment contracts taught these lawyers a great deal about the laws that regulate the sales and financing practices of dealers.

This knowledge turned out to be just as useful against dealers as it had been against the bigger targets.

As court opinions dealing with these cases were reported, other lawyers began to take note. In a very short time, a new law-firm specialty arose: consumer actions against car dealers.

And these lawyers weren't the typical lawyers that dealers had seen for years, often willing to accept a quick settlement in order to earn enough to pay the next month's rent.

Many of these lawyers had been engaged in heavyweight class-action lawsuits against big companies for years.

They had the experience to recognize and effectively pursue good class claims; they had learned enough car sales and finance law to be truly dangerous; and they had accumulated enough of a war chest from their prior lawsuits to go chin-to-chin with the largest defendants for as long as it took to negotiate a favorable settlement, with a big attorneys' fee attached.

In short, these guys are about as closely related to yesterday's plaintiffs' lawyers as Great White sharks are to sand sharks.

Y'all be careful swimming in the consumer-protection ocean, you hear?

Tom Hudson is an attorney specializing in dealer affairs. This article appeared in Spot Delivery®. Reprinted with express permission from CounselorLibrary.com LLC.

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