Damage causation in false advertising can't assume that all harm was caused by falsity

Dependable Sales & Service, Inc. v. TrueCar, Inc., --- F.Supp.3d ----, 2018 WL 2356658, No. 15-cv-1742 (S.D.N.Y. May 9, 2018)

Plaintiffs, 108 individual automobile dealerships, alleged false advertising by TrueCar’s ads promising a “no-haggle,” no-negotiation car-buying experience, thus diverting business from the plaintiff dealers to TrueCar-affiliated dealers. Here, the court granted TrueCar’s motion in limine to exclude the expert report of plaintiffs’ damages and causation expert, mostly because he reasoned that 100% of TrueCar’s sales from buyers located in a plaintiff dealer’s geographic market were caused by the company’s “no-haggle” claim, and that this claim was always false (even if the buyer bought the exact car he or she wanted at the exact price quoted by TrueCar), without accounting for other factors that could have caused the sales. 

TrueCar’s ads touted multiple other features, including research tools showing what other consumers paid for a vehicle’s make and model, “transparency” about dealer fees and “[g]uaranteed savings.” Nor did the expert’s analysis account for the possibility that a consumer might have been influenced by other considerations in deciding to purchase from a TrueCar-affiliated dealer, such as their past interactions with that dealership or the plaintiff dealership, personal recommendations, or non-TrueCar promotions.  He testified that the industry knew that negotiations were a “pain point” and “that telling people that they could save money without negotiating was a magic bullet, that that really penetrated to consumers,” referring to a study done for TrueCar in which respondents reacted favorably to messages touting “[a] negotiation-free way to save thousands off MSRP on a new car” (70% of respondents), free price reports showing what “others paid for the car you want” (65%), upfront pricing information (56%), the ability to “[s]ave time, save money, and never overpay for your next car” (52%), and average savings of $3,078 off the manufacturer’s suggested retail price (48%). But to the extent that he relied on that study, it contradicted his assumption that 100% of buyers bought because of the no-hassle claim. 

Further, TrueCar only used the no-haggle claim in part of its selling history, and TrueCar’s own expert found “no discernable, systematic, and/or persistent changes in these TrueCar-related sales” on either end of the promotion. This evidence was “open to some legitimate challenge as to its duration and significance,” but it still didn’t support plaintiffs’ expert report.  Likewise, his causation analysis also failed to weigh that a significant percentage (2/3 in 2014) of new vehicles sold through TrueCar were transacted through “affinity partners” such as American Express and the United Services Automobile Association, who made TrueCar’s services available through their own customer websites and smartphone apps, using their own branding and giving the no-haggle claim less emphasis. The expert treated those sales as 100% caused by the no-haggle claim, which the court found to undercut the reliability and relevance of his causation analysis and weigh against its admissibility.

Separately, the analysis also concluded that any sale made to a TrueCar-affiliated dealer would necessarily have gone to a plaintiff dealer, as opposed to some other dealer in the same geographic market. But some plaintiffs were in densely populated areas with heavy competition, and dealers also often sell vehicles to consumers outside of that dealer’s defined market, and likewise lose sales to consumers who buy from dealers in an adjacent market. Plaintiffs’ analysis didn’t adequately weigh the likelihood that sales made to a TrueCar-affiliated dealer might have otherwise gone to some other competing dealer, other than a plaintiff.

One final embarrassment was that 23 plaintiff dealers were, at some point, TrueCar-affiliated, and 19 of those sought damages based on sales that they themselves made through TrueCar’s allegedly false ads, which “weighs heavily against the reliability and relevance” of the report.

The expert also attributed $1,602 in lost-profits damages per car, the average profit per car calculated by the National Automobile Dealers Association. But the evidence showed it varied a lot between various plaintiff dealers, both above and below that average; he didn’t persuasively show that this “cookie-cutter approach” was reliable.  Relatedly, the court denied a motion to redact individual dealers’ net profits, holding that the public interest in judicial access outweighed dealers’ privacy interests:

Evidence on this issue was highly relevant to the performance of the judicial function and the judicial process, and the parties seek to redact information that the Court has discussed and relied upon in this Memorandum and Order. The presumption of public access to this information is high because it played a direct role in the adjudication of TrueCar’s motion. The plaintiff dealers may have an interest in the privacy of certain commercial data, but they are the ones who elected to bring this action and to pursue a damages theory that turned on net profits per sale.