California consumer scores major legal victory over CarMax

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When buying a used car from a dealership, it makes sense that a consumer would assume they’re purchasing a safe vehicle. After all, many used auto retailers boast of employing thorough safety inspections on their inventory, ensuring that the car leaving their lot isn’t a “lemon.” Unfortunately, however, not all dealers are honest, and that can mean potentially dangerous problems for car shoppers.

CarMax, the nation’s largest used auto dealer, recently came under fire for such dishonesty. Tammy Gutierrez of Bakersfield, Calif. had previously brought suit against the retailer for selling her a 2008 Hyundai Elantra with an unrepaired safety recall. After CarMax pushed back, the suit was dismissed, though she continued her fight. Now a California state appellate court has ruled that her complaint is valid, and this landmark decision could have a significant impact on the used car industry going forward.

A misleading quality certification

When Ms. Gutierrez purchased her vehicle, she had no reason to believe it wasn’t in good condition. The CarMax location that sold the car had advertised it as passing its “rigorous 125-point inspection.” Per the dealer’s claims, this would’ve included the Hyundai Elantra’s brake lights, though the automaker had issued a recall due to said parts being defective.

In their recall, Hyundai warned that a faulty brake light switch could intermittently malfunction, putting drivers at an increased risk for a crash. Ms. Gutierrez learned of this after buying the vehicle and decided to take action against CarMax for selling her a false bill of goods. Though her initial lawsuit stalled, with the aid of attorney Robert Starr she was able to bring a strong appeal, which was ultimately ruled 2-1 in her favor by a three-judge panel.

What this could mean down the road

In her complaint, Ms. Gutierrez claimed that CarMax was in violation of California’s Unfair Competition Law, as well as its Consumer Legal Remedies Act. A lower court had ruled this claim to be invalid, but as the recent appeal overturned that ruling, she may now proceed with her lawsuit. The Court of Appeals also found that CarMax had a duty to disclose the recall, but opted instead for partial truths about the car’s condition.

The court’s decision could potentially have major consequences for consumers in the future. This ruling may allow car buyers to take action when a dealer sells them a recalled or defective vehicle, as it would fail to comply with the warranty of merchantability. We could also see a greater transparency going forward, as CarMax opening itself up to liability may affect industry practices.

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