An Iowa Supreme Court May 2, 2014 decision may affect Iowa Automotive dealers and their customers. Many dealerships promote their business through the use of plate frames. The Iowa Supreme Court has put a small hiccup in the use of plate frames for dealerships and all Iowans.
Under Iowa Code 321.37(3), “It is unlawful for the owner of a vehicle to place any frame around or over the registration plate which does not permit full view of all numerals and letters printed on the registration plate.” The Court determined that “all numerals and letters” includes the county information on the bottom of Iowa plates. Based on that decision, police can stop a vehicle and issue citations for any license plate in which numerals or letters are covered or partially covered. This decision may give police “probable cause” to stop a vehicle without evidence of other violations.
Arenson Law Group, PC, urges dealerships to look at your advertising plate frames. Don’t be the reason that your customer gets stopped. The dissenting Iowa Supreme Court Justice, Justice Appel, warned: “For the thousands of Iowans who have a frame that promotes a sports team, or an auto dealer, or have a nice (or not so nice) slogan, beware!”
We recently blogged about “Operation Steer Clear,” where the FTC targeted automobile dealerships for false or misleading advertising. The FTC charged a number of dealers with violations leading to litigation and consent agreements. For more on the federal crackdown, see our blog by clicking here.
Iowa Law Update: More Headaches
Iowa dealers must comply with the Iowa Consumer Fraud Act and the Iowa Consumer Credit Code (ICCC), which incorporates the Truth in Lending Act at the state level. Because these laws are meant to protect consumers, the court, and law enforcement generally, will construe the code liberally so that consumers receive the maximum protections possible under the law.
Iowa consumer protection laws are enforced by the Attorney General and some protection laws fall under the Iowa Criminal Code. Like the FTC, the Attorney General can seek injunctions and a fine of up to $40,000 for each occurrence. Iowa also has special protections for elderly citizens and veterans; there is an additional $5,000 fine provision if the violation is against an older person (defined in the code as over age 65). As of 2009, Iowa also provides a private cause of action for consumers. This means that, in addition to the state action, the consumers with claims may also sue the dealership individually for damages.
Here’s the BrakeDown: What to do, What to do?
Know that Iowa Code Chapter 322 makes compliance with the ICCC a condition of maintaining your dealer license. Although the consumer protection laws in Iowa and at the federal level focus on fraud and financing, they apply throughout the car-buying experience. The consumer’s first interaction with a dealership is usually through its advertising. Therefore, the consumer protection laws extend to advertising as well as the negotiations and sales after the customer walks in the door.
From a defense perspective, note that a “misrepresentation” is only a violation if it relates to a “material fact.” A material fact is a fact that, if the buyer had known or understood it, would have caused the buyer to act differently during the sale. For example, a material fact might be one that would change the price the customer is willing to pay or whether the customer would even purchase the vehicle. If you question whether the information is a “material fact,” then it probably is. Further, liability for a violation of the consumer protection laws does not depend on whether the dealership had an intent to deceive their customers. Occasionally, an ad that you think is crystal-clear may be confusing or misleading to a potential customer. Be careful and review your ads!
Of course, in the government’s overzealousness to protect consumers, it may drag automobile dealerships into litigation where the dealership did not even know it was to deceiving its customers. These advertising concerns can be avoided if experienced auto dealer counsel reviews advertising that you deem to be questionable. The NADA specifically recommended that dealerships ensure “their legal counsel review all advertising.”
Puffery: advertising copy that indulges in subjective exaggeration in its descriptions of a product or service, such as “an outstanding piece of luggage.” Puffery is always a matter of opinion on the part of the advertiser and often will use words such as “the best” or “the greatest” in describing the good qualities of a product or services. Sometimes puffery is extended into an exaggeration that is obviously untrue and becomes and outright parody, such as, “This perfume will bring out the beast in every man!”
– Jane Imbler & Betsy-Ann Toffler, Dictionary of Marketing Terms 458 (2000).
As Judge Learned Hand aptly explained, puffery is the “kind of talk which no sensible [person] takes seriously.” Puffery is not a foreign concept to the average automotive dealer. However, there is occasionally a fine line between puffery and fraud or misrepresentation. Of course, a customer likely cannot effectively bring a successful action against a dealership for puffery, but they can bring an action against a dealership for fraud, deception, or misrepresentation.
Iowa, like many other states, has enacted legislation to deter businesses from misleading consumers in contract terms, financing agreements, or advertisements. Under the Iowa Consumer Fraud Act, the Attorney General can bring a case on behalf of a citizen who feels they have been subjected to deceptive or misleading business practices. Further, in 2009, Iowa enacted the Consumer Fraud – Private Right of Action, which grants consumers the ability to bring a suit on their own behalf should they feel that a company has misrepresented information or deceived them in any way. Of course, this legislation only covers misrepresentation or fraud and does not extend to actions for puffery. As such, dealerships should beware of the line between puffery and misrepresentation.
Like Iowa, Indiana has similar legislation designed to protect consumers from deception in relationships with businesses—the Indiana Deceptive Consumer Sales Act. A recent case involving this act may help you find the line between puffery and deception. The Indiana Supreme Court addressed an issue where a dealership advertised a vehicle as a “Sporty Car at a Great Value Price.”
In evaluating the advertisement, the court determined that it was a statement of opinion, rather than a statement of fact. The court gave a counter-example: using the phrase that a truck is “road ready” is an affirmation of fact that the truck will actually drive on the road. Further, the court noted the significant difference between flatly stating that the car has cruise control when in fact, the cruise control does not work. While the cruise control statement is not technically false, it still misleads the customer into implying that the cruise control is functioning.
It is possible that a statement be part puffery and part statement of fact. As such, the court in this case took pains to evaluate each word in the advertisement before determining that the phrase was simply puffery. The court determined that in order for a term to be deceptive, and fall under Indiana’s Deceptive Consumer Sales Act, it must first be a representation of a fact, and not a mere opinion.
The court also noted the devastating effects that may plague the automobile industry if the court did not determine that this statement was puffery. If dealerships were so concerned that they may be sued for puffery, then they may be more inclined to list only the actual features of the car. That is, there may be no advertisement involved at all, just a list of the vehicle’s features. This would greatly reduce the dealerships ability to advertise generally.
Since the court took an in-depth look at each word in the advertisement, it is important that dealerships take a lesson and do the same. Does the describing word give a customer a promise or an opinion? If you are unsure, experienced dealer counsel should step in to help evaluate your advertising.