GM destination charges not deceptive, 9th Circuit Court rules

A three-judge panel representing the Ninth Circuit Court of Appeals upheld a lower court decision that found destination charges paid by a dealership to an automaker and passed on to the end customer don't deceive the buyer.

Plaintiffs Robert Romoff and Joe Siciliano sued General Motors in May 2021, alleging unjust enrichment and violations of California and New Jersey law over the fees. The plaintiffs are seeking class-action status for the case. Their lawsuit argued GM's failure to disclose that its destination charges contained a profit constituted deceptive behavior.

Romoff received a $1,195 destination charge on a 2021 Chevrolet Equinox he purchased in San Diego, Calif., and Siciliano incurred a $995 destination charge on a 2019 Cadillac Escalade he bought from a Hackettstown, N.J. retailer. Both men said they were unaware the charges contained a profit for GM.

"Line items are intended to inform consumers of the reason they are being charged," their lawsuit states. "For that reason, consumers do not generally expect line-item costs to include hidden profit."

U.S. District Judge William Hayes dismissed the case without prejudice in December 2021.

"Reasonable or average consumers would not be surprised to learn that the price of goods often includes profit for the seller," Hayes wrote. The federal Automobile Information Disclosure Act requires automakers to state how much they charged dealerships for delivery, a mandate that as worded "no more suggests the absence of profit than the term 'Destination Charge' itself," Hayes wrote.

Romoff and Siciliano decided to appeal rather than revise their lawsuit. Their brief to the appellate court argued it was inappropriate for Hayes to draw a conclusion about a consumer's thought process so early in the litigation. The plaintiffs also said Hayes had taken too narrow a view of what common sense would dictate in the matter.

Their appeal also said Hayes ignored a California Court of Appeals case decision holding that charging more than cost for services "with no indication to the customers that they were doing so, may constitute a deceptive business practice."

But GM had charged the dealerships, not the consumers, ruled Judges Milan Smith Jr. and Daniel Collins of the Ninth Circuit Court of Appeals and Judge Paul Kelly Jr. of the 10th Circuit Court of Appeals, sitting by designation.

"There is no allegation that GM charged the dealers a lesser amount than is represented to consumers, enabling the dealer to earn a secret profit from consumers," the judges wrote in their Jan. 30 decision.