Dependable Sales & Service, Inc. v. Truecar, Inc., No. 15-cv-1742, 2016 WL 79992 (S.D.N.Y. Jan. 6, 2016)
Plaintiffs, 162 auto dealerships, sued TrueCar for false advertising under state and federal law. TrueCar’s website tells prospective car buyers search that it has more than 9,000 affiliated auto dealerships nationwide and that more than 500,000 customers have purchased vehicles from “TrueCar Certified Dealers.” Dealers’ identities are revealed only after consumers enter their names and contact information, at which point dealers contact consumers to solicit them. “As a result, instead of taking the ‘haggling’ out of car sales – as TrueCar advertises – TrueCar’s business model facilitates and encourages haggling.” Consumers allegedly may ultimately pay prices higher than those offered through the TrueCar website. Likewise, consumers may download a “Guaranteed Savings Certificate,” which allegedly doesn’t accurately reflect the eventual price TrueCar customers pay.
The court granted in part and denied in part TrueCar’s motion to dismiss based on lack of falsity. First, TrueCar argued that its ads promising a haggle-free, negotiation-free buying experience weren’t false. Example claims: “There’s zero negotiation ....,” “You get a negotiation free guaranteed savings and hassle free buying experience,” and “Because I used TrueCar there was no haggling about the price.” However, plaintiffs alleged that TrueCar instead facilitates dealership solicitations to consumers, the purpose of which is to “haggle” and negotiate over the vehicle purchase.
TrueCar argued that “TrueCar’s user experience does not involve negotiation,” and that “the customer is immediately entitled to the Guaranteed Savings with the click of a mouse,” as “a lump-sum discount.” This was a factual issue that couldn’t be resolved on a motion to dismiss. Nor could any effects of TrueCar’s website disclaimer be assessed. The disclaimer stated:
Guaranteed Savings represents the amount that a TrueCar Certified Dealer selected by you guarantees that you will save off the Manufacturers’ Suggested Retail Price (’MSRP’) on any in-stock vehicle that is the same make, model, and trim as your Ideal Vehicle. The Guaranteed Savings is based on a vehicle without factory or dealer installed options and includes generally available manufacturer incentives. ... Each dealer sets its own pricing. Your actual purchase price is negotiated between you and the dealer.”
“While a disclaimer may be so plain, clear and conspicuous as to bar a claim as a matter of law, this is not such a case.” There was a factual question whether “[t]he few words of disclaimer are lost when the ads are considered as a whole” or were effective.
Nor could the court determine at this time that the claims were puffery. TrueCar argued that “haggling” was an opinion-based concept. But there were conflicting definitions, which the court couldn’t resolve on the pleadings. TrueCar cited one definition of haggle as to “bargain in a petty, quibbling, and naggingly quarrelsome manner,” while plaintiffs’ definition was “to talk or argue with someone especially in order to agree on a price.” The complaint plausibly alleged that lay consumers understood “no haggle” to mean that the given price is the actual price, and that no negotiation is required. (What does the presence of CarMax in the market mean for consumer expectations?)
Other supporting allegations also made the puffery defense inapposite at this stage: TrueCar made other claims such as “No Negotiation,” “No Surprises,” “No hidden costs or surprise fees. Ever.,” “the negotiation-free car buying and selling mobile marketplace,” “we provide true up front pricing information and a network of trusted dealers that guarantee savings without negotiation,” “it’s negotiation free guaranteed savings and a hassle free buying experience,” and “the negotiation-free car-buying platform.” TrueCar didn’t explain how these statements concerning negotiation were mere puffery.
However, the court dismissed claims going to alleged “bait and switch” tactics. Plaintiffs alleged that the ads led consumers to think they could get a specific car at a guaranteed price. But not all TrueCar-affiliated dealers who contact consumers have the desired make and model in their inventory, and instead offered different vehicles, amounting to bait and switch. But the complaint didn’t specifically identify the false statements that supported a bait and switch claim.
TrueCar’s ads also allegedly misled consumers into believing that they could learn a vehicle’s “factory invoice” price through TrueCar, and that they would be able to buy a vehicle for less than the amount originally paid by the dealer. However, the advertised “factory invoice” price allegedly didn’t reflect rebates, incentives and other discounts that the manufacturer provided to the dealer. One ad, for example, had a graph identifying a “TrueCar Price” of $24,450, an “Average Paid” figure of $25,386, a “Factory Invoice” price of $25,970 and a Manufacturers’ Suggested Retail Price of $26,445. The accompanying text, “Information is Power,” said, “As a data company, we study millions of purchase transactions every year. ... Within minutes, you can get upfront pricing information from TrueCar Certified Dealers and know how those prices compare to the current market.”
TrueCar argued that any reasonable consumer would believe that dealerships profit from their auto sales. But plaintiffs didn’t claim that TrueCar failed to disclose that fact; they alleged that the “factory invoice” price cited in advertisements was misleadingly high and misled consumers about the extent of their purported savings. TrueCar also cited a webpage describing factory invoices for the Toyota Corolla, which said that the factory invoice “does not include discounts, dealer incentives, or holdbacks ....” On a motion to dismiss, the court couldn’t resolve whether this definition cured any misleading ad. Finally, TrueCar argued that the graph wasn’t misleading “because TrueCar users on occasion will pay less than the factory invoice price.” Not on a motion to dismiss they don’t.
The court dismissed a few more claims, one about financing—the ads allegedly led consumers to believe that TrueCar would calculate the financing terms of a vehicle purchase, including monthly payments. TrueCar’s website contains a feature that calculates an “Estimated Loan Payment” for the particular car selected by the consumer, but it displays financing terms that “are not available to all consumers.” But the express “Estimated” showed that TrueCar wasn’t offering actual financing terms. (But if they aren’t “estimates” of what someone with bad credit would pay, why is “estimated” nonfalse?)
The court also dismissed claims based on statements about transparency, such as “you can trust that everything is upfront and out in the open. No hidden costs or surprise fees.” Plaintiffs alleged that TrueCar conceals costs and fees, because dealerships affiliated with TrueCar paid TrueCar for every car sold, and those fees are inevitably passed to consumers. That didn’t plausibly allege that claims of no hidden costs/surprise fees were false. A fee that’s included in a price quoted to a consumer isn’t hidden or surprising.
Finally, plaintiffs alleged that TrueCar’s ads were false because they indicated that consumers would receive the full discount advertised by TrueCar. But some rebates were only available to certain customers, such as loyalty rebates or rebates offered to recent college graduates or members of the military. The complaint alleged that some TrueCar customers expressed confusion after receiving the impression that they would be eligible for all rebates advertised by TrueCar. Again, the complaint didn’t sufficiently identify the relevant ads to put TrueCar on notice of the claims against it.
Finally, the court refused to dismiss the claims for failure to allege injury. TrueCar argued that, even if consumers were misled, they knew the truth before they bought their cars. If a consumer tried a non-matching car and decided to buy it, the deception would have dissipated. The court rejected this argument as going to the merits. It is also legally irrelevant, I think. I’ll let the Supreme Court explain:
We find an especially strong similarity between the present case and those cases in which a seller induces the public to purchase an arguably good product by misrepresenting his line of business, by concealing the fact that the product is reprocessed, or by misappropriating another's trademark. In each the seller has used a misrepresentation to break down what he regards to be an annoying or irrational habit of the buying public—the preference for particular manufacturers or known brands regardless of a product's actual qualities, the prejudice against reprocessed goods, and the desire for verification of a product claim. In each case the seller reasons that when the habit is broken the buyer will be satisfied with the performance of the product he receives. Yet, a misrepresentation has been used to break the habit and, as was stated in Algoma Lumber, a misrepresentation for such an end is not permitted.