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Dealer's Mail Campaign Results In $250,000 Settlement

Some legal principles are so simple. Like the one that says if you hire someone to do a job for you and they screw something up, you end up paying the price. Or the one that says “don’t get your legal advice from your vendors.”

A recent issue of Automotive News carried an article about a Minnesota dealership that agreed to pay a $250,000 fine to settle a case brought against it by the Minnesota Attorney General. That’s right – 250 “large.” The AG (“AG” stands for “aspiring governor”) was upset, it seems, about a mail campaign that the dealership had employed.

The AG’s press release was not exactly crammed with detail, so it’s not precisely clear what it was in the mail campaign that got the AG’s shorts in a knot. There seemed to be a couple of major, identifiable problems, however.
It seems the mail campaign targeted consumers who had filed for bankruptcy without first getting the consumers’ permission. The AG also claimed that the mailing materials were designed to look as if they had been mailed by the U.S. Bankruptcy Court and were “guaranteed” by the state of Minnesota.

The article quotes the dealer’s lawyer as stating that the dealer “relied on a third-party vendor that represented to us that the mailer did meet with all the applicable statutes and regulations.” You wonder if the vendor’s representations were in writing. You also wonder if the dealer’s contract with the vendor provided that if the vendor’s representations concerning the legality of the mailing program were false, the vendor would indemnify the dealer if the dealer suffered as a result of the falsity. Finally, you wonder if the dealer, or the dealer’s lawyer, did any due diligence on the vendor to determine whether the vendor was sufficiently solvent to make its representations and contractual undertakings worth anything.

You would like to feel sorry for this dealer, but personally can’t muster a lot of sympathy. Remember that this mail program went out in the dealership’s name, so, at the end of the day, it is the dealer’s responsibility to determine whether the mail program is legal or not. This dealer says he abdicated this responsibility to the mail house. Rather than do its homework and take responsibility for the legal content of the mailing program conducted in its name, the dealer took the business gamble that the mail house knew what it was doing.

Another reason I can’t rouse up any sympathy for the dealer is that the mailing materials shouldn’t have passed the dealer’s “smell test.” Whether the materials were legal or not, using materials that looked like checks and that were designed to give a false impression about their origin just isn’t straightforward marketing.

You can call me a stickler if you want, but I’ve still got my $250,000. Oh well, maybe the dealer’s insurance policy covers liability arising out of advertising campaigns.

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