An Ohio appeals court has thrown out a nationwide class-action settlement involving Carfax, ruling that a trial judge should not have approved the settlement without requiring notice to all of the affected consumers and without considering information about whether the coupons offered under the settlement had any value.
The settlement would have resolved a class-action lawsuit alleging that Carfax, which sells history reports for used cars, deceives consumers by representing that its reports are based on complete national accident data. Public Citizen represented 17 individual class members and the nonprofit Center for Auto Safety in objecting to the proposed deal.
The ConsumerAffairs.com database has no shortage of complaints about Carfax. Among them:
• Steven of Chaptico, MD tells us, "I purchased a used vehicle in 4/2009 and requested a Carfax. Carfax failed to report the car was in an accident. 11/2009 during my attempt to sell my car, Carfax reported a car accident that occurred 3/2008. I lost $4,000 in resale value."
• Anastasia from Orange, CA writes that a potential buyer ran a Carfax report based on the VIN number on a car she is trying to sell. "The report stated that my vehicle was involved in an accident. My car has never been involved in any accident. I spoke to my insurance company and I got a report from the DMV based on the VIN number and it showed a clean history." She says upon calling Carfax she learned that "the company does not get the VIN report from the DMV, but rather from 'anonymous third parties.'" Anastasia concludes, "They are making me jump through hoops to clear my vehicle history. I believe that this is misrepresentation of innocent victims for money."
• From James in James Palm Beach, FL comes this complaint: "I inquired about trading in my 2001 Honda Accord for a 2010 new Honda Accord and I was dumbfounded when Braman Honda produced a Carfax report indicating that my vehicle had been in a serious accident and it had been 'disabled' at one time while I owned it." James tells ConsumerAffairs.com he has never been in an accident with this vehicle, adding that since he works for a police department, it was "very embarrassing when the salesman indicated that I was lying to him." He says he's filed a complaint with Carfax and will "use all the resources of my police department to prove that their report is a boldfaced lie." James says he was advised that since his Carfax report inaccurately indicated a major accident, his vehicle was worth very little as a trade in.
Not much notice
The settlement had defined the class of consumers bound by its terms to include anyone who purchased a Carfax vehicle history report prior to Oct. 2006, which would include consumers who bought the reports during more than a decade preceding that date.
However, individual notice of the proposed settlement was sent only by e-mail and only to customers who bought Carfax reports during the one year preceding the settlement. As a result, the majority of class members got no notice of the settlement, according to Public Citizen's objections. The decision of the 11th District Court of Appeals in Ohio held that individual notice should have been sent to all class members.
Moreover, as part of the settlement, consumers were offered a coupon for additional Carfax history reports. The time for claiming a coupon had expired before the trial court approved the settlement, yet the court had denied Public Citizen's motion seeking disclosure of how many class members filed claims.
The court of appeals found that the trial court erred in not requiring Carfax to disclose how many consumers had taken advantage of the coupon offer. Those numbers would show whether the coupons had actual value to the class members and, therefore, whether the settlement had value to the class, said Deepak Gupta, one of the Public Citizen lawyers who handled the case.
"Class actions are a tool for securing consumer justice, but settlements like this one give class actions a bad name," Gupta said. "The appeals court's decision sends a strong message that class-action settlements should be approved only after a legitimate attempt to inform the class members and only if the settlement offers real value to the class."
