How can dealers avoid problems with recalls?
Attorney Michael Charapp of Charapp & Weiss, LLP, says dealers should be proactive on recalls. His recommendations:
« Dealers should ground new cars with an open recall.
« On used vehicles, dealers should repair any open recalls they can. If the car is not of the dealerês brand, or if a repair or part is not available, that should be disclosed to the customer.
Dealers should not assume that the disclosure of an open recall to a used vehicle customer protects the dealership from legal action by the franchisor if it imposes a stop sale on used cars of the dealershipês brand with open recalls. Some manufacturers have advised dealers to stop the sale of some used vehicles with certain open recalls. The manufacturers threaten to shift the liability for damages for any accident allegedly caused by the unremedied defect to the dealership which sold the vehicle, despite the stop sale pronouncement.
While significant questions remain about whether a manufacturer can shift that liability, a dealer who disregards the stop sale direction of a manufacturer runs the risk of legal action in the event of a lawsuit allegedly arising from a consumer injury claim because of the unremedied recall. A disclosure to the customer will have no effect whatsoever on the litigation over rights between the manufacturer and dealer in that circumstance.
The dealershipês policy and practice in response to a stop sale directive on used vehicles by the franchisor is a business and legal decision each dealership must make on its own with input from appropriate advisors. Dealers should not assume that disclosure of open recall status to a buyer insulates the dealership from possible legal action by the franchisor if the dealer sells a used vehicle with an open recall contrary to the franchisorês stop sale directive.
This information should not be considered legal advice. Dealers should consult with their own lawyer about their circumstances.Download Bulletin PDF