A federal appeals court in California ruled that CarMax’s component inspection checklist violates a state statue that requires dealers to provide consumers a “completed inspection report” prior to the sale of any certified used vehicle.
A list of vehicle components inspected under CarMax Inc.’s certified used-vehicle program violates a California statue that requires dealers to provide consumers a “completed inspection report” prior to the sale of any certified used vehicle, the appeals court concluded.
The U.S. Court of Appeals for the 9th Circuit on Thursday ruled that the certification documents supplied by CarMax to consumers do not convey the condition of individual inspected car components to buyers, as required by state law.
“We respect the court’s findings and are reviewing the ruling to determine if any changes need to be made to our process,” said CarMax in a statement. “In their ruling, the court acknowledged that CarMax inspects all vehicles prior to sale. All of CarMax’s vehicles pass its 125-plus point inspection prior to sale.”
Bill of Rights
The opinion stems from a lawsuit filed by Travis Z. Gonzales against CarMax in the U.S. District Court for the Central District of California. The suit also names Santander Consumer USA Inc. and Safeco Insurance Co. as defendants.
Gonzales’ attorney, Hallen Rosner, of the law firm Rosner, Barry & Babbitt in San Diego, said California’s Car Buyer’s Bill of Rights passed in 2006 requires sellers of certified used vehicles to conduct and provide consumers with a checklist of every component that has been inspected and if those components satisfactorily passed the inspection.
Rosner said manufacturer certified programs largely adhere to that law, but CarMax does not.
He said CarMax’s certified program “is a complete lie and a farce. They’re cheating everyone: the competition and consumers.”
Gonzales sued CarMax alleging that the 2007 Infiniti G35 he bought from the retailer’s store in Costa Mesa was a lemon, according to court documents. He alleged he went to CarMax after hearing and seeing its advertising that touted the benefits of its rigorous 125-point certification inspection program.
Shortly after purchasing the car, Gonzales found several mechanical problems such as brake pads that needed replacing, malfunctioning windows, transmission problems and instrument panel warning lights that illuminated routinely or in clusters, according to court filings.
He had received two versions of generic pre-printed CarMax Quality Inspected Certificates listing the vehicle components that were inspected, court documents said. A one-sided certificate was given to Gonzales prior to the sale and a two-sided certificate was placed in the glove box before he took possession of the vehicle.
Court documents allege that a third document containing a checklist of 236 points of inspection and the condition of each component inspected is filled out by a CarMax technician during the inspection process.
But rather than provide the checklist to consumers, “CarMax destroys the document after the inspection results are entered into its electronic system and no copy of the checklist is retained,” court documents state.
The court’s opinion, written by Circuit Judge Stephen Reinhardt, stated: “Sellers cannot merely list components that have been inspected (as CarMax’s CQI certificate does), thereby leaving the consumer ignorant as to whether the various components satisfactorily passed the inspection.”
It goes on to say: “CarMax’s CQI certificates merely guarantee that the vehicle’s overall condition satisfied its certification program and list the components inspected under that program. After receiving this certificate, the consumer knows neither the condition of the individual components nor which, or how many, components must pass the test before a vehicle is ‘certified.’ In fact, the consumer knows nothing specific about the status of the vehicle as a whole or of the individual components because he does not know what the standards are for satisfying the CarMax certification program. The vehicle may have passed inspection, but do the brake lines function properly? The consumer does not know what it means to ‘pass’ CarMax’s inspection: are all of the inspected components fully functional, or just a mere majority (or fewer) of the components inspected? Which components must be satisfactory, if any, before the car is deemed certified? Under CarMax’s certification program, the consumer remains uninformed, and the consumer-protection and transparency-promoting purposes of the statute remain unfulfilled.”
The initial lawsuit also alleged that CarMax had committed fraud and had violated a consumer warranty act, but those claims were dismissed by the district court.