McClellan & Gomez Announces Class Action Suit Filed Against Ford Motor Co. for Alleged Fraud in Certified Pre-Owned Used Car Program

Business Wire, June 23, 2005

LOS ANGELES -- Millions of consumers have been defrauded into paying some $1,000 extra for a so-called certified pre-owned used car (CPO) over the past four years when the car may have gone through the same inspection as any other used car, according to a class action law suit filed here today by McClellan & Gomez in Superior Court against Ford Motor Company and Claremont Ford, of Los Angeles.

John Gomez, of the San Diego firm of McClellan & Gomez, one of three law firms involved as counsel in the suit, said Ford promoted the CPO by saying that "if it's not certified, it's just used."

"In fact, they are all used," said Gomez. "Unbeknownst to consumers who decide to purchase CPO vehicles, the inspection conducted on the vehicles is the same inspection that the technicians perform on all used vehicles whether they are part of the CPO program or not."

The other law firms involved in the suit are Lerach Coughlin Stoia Geller Rudman & Robbins, LLP, and Robbins Umeda & Fink, all of San Diego.

Gomez became involved in the CPO issue when his firm represented the family of a 17-year-old girl who died in Southern California in a so-called CPO car. The car, it was later learned, was sold with frame damage and had a history of brake and steering problems. They discovered a fraudulent CPO program, deceptive practices by at least one dealer and a lack of involvement by the car manufacturer. McClellan & Gomez brought suit against the driver of the other vehicle, Ford Motor Company and El Cajon Ford. The parties settled this year for an undisclosed amount.

"Manufacturers such as Ford market these CPO cars as the best of the best," said Gomez. "But can this marketing be trusted? Should consumers be spending billions of dollars a year for a perceived benefit that does not exist?"

The suit notes that the purpose of marketing these vehicles as CPO is to give consumers peace of mind that the vehicle has undergone a special inspection and is being certified by the manufacturer. At Ford dealers, a consumer receives a certificate signed by Steve Lyons, president of Ford Division, which congratulates the new owner on his or her purchase, and assures them that their vehicle has passed a series of rigorous inspections to verify that it meets or exceeds all program standards and quality commitments. The certificate also highlights various aspects of the 115-point inspection Ford states the vehicle has undergone, and lists other purported benefits of purchasing a CPO vehicle.

According to the suit, the inspection conducted on CPO vehicles is the same inspection that the technicians perform on all used vehicles. This fact is not disclosed to consumers who pay $1,080 more for the CPO vehicle than a regular used vehicle.

"If all 1.4 million CPO cars sold in 2005 were bogus, that would mean consumers were paying some $1.5 billion extra for no real benefit," said Gomez.

The suit alleges that the defendants' failure to disclose that the inspection process is the same for all used vehicles, whether in the program or not, makes its business practices unfair and deceptive.

"Losing money is one thing," Gomez said. "But a bogus inspection program can have fatal consequences as we experienced in San Diego, when a young girl died in a wreck in a so-called CPO car. It had been purchased at auction, had a history of frame damage and steering problems and was sold without any special inspection. Its history was never revealed to the buyers. Consumers shouldn't have to ask detailed questions about vehicle history, acquisition, inspection, previous damage, guarantees and warrantees before purchasing a CPO vehicle. CPO should stand for something meaningful, not just a marketing ploy by the manufacturer and dealer."

The suit notes that the number of CPO vehicles sold in the U.S. in 2003 amounted to approximately 38% of all used-car sales. Recent data shows that approximately 1.375 million CPO vehicles were sold in the United States in 2004, and estimates for 2005 sales reach over 1.4 million. The suit seek damages of the CPO premium plus interest, punitive damages to prevent Ford or other auto dealers from engaging in similar practices, an order requiring Ford to stop advertising CPO vehicles as having gone through a special inspection process and requiring Ford to change their CPO program so that it offers an inspection that is different than that performed on regular used cars.

McClellan & Gomez has been working on CPO cases for three years. The San Diego firm has earned a national reputation for successful litigation of cases involving product and governmental liability, worker safety and business disputes. The firm has obtained more than 70 verdicts and settlements of $1 million or more on behalf of clients throughout the country. Its cases have been featured on "60 Minutes," "The MacNeil-Lehrer Report" and other national media. More information is available at www.mcclellanandgomez.com.