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Judge Dismisses Case Against Online Car Purchasing Company

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Eastern District of Pennsylvania Judge Wendy Beetlestone dismissed the vast majority of a complaint against online car dealer Carvana, LLC for a host of consumer fraud violations on Monday. The plaintiff, Andrew Okulski, a Pennsylvania resident, contended that the vehicle Carvana sold him had defects inconsistent with the company’s advertising and sale agreements.

Carvana is an online platform that facilitates the purchase and sale of used cars. It is registered under the laws of Arizona, where it is headquartered.

The plaintiff’s second amended complaint brought fraud, negligent representation, and breach of contract claims, in addition to Unfair Trade Practices and Consumer Protection Law (UTPCPL) and Pennsylvania Board of Vehicles (BVA) rules violations. The complaint named the company, its general counsel, and an employee as defendants. The defendants moved to dismiss each of the claims except Carvana did not move to dismiss the claim for breach of contract. 

Okulski bought a used Nissan from Carvana in 2019. He signed several agreements at the time of purchase, though, in the litigation, the parties disputed the purchase location. The plaintiff claimed it was in Philadelphia, Penn., the defendants claimed that it was made online, and one sale agreement stated that it was made through a car dealership located in Georgia. Several months after Okulski’s purchase, his car suffered major mechanical issues.

According to the court, “the core of Okulski’s Complaint is that he was induced to purchase the Vehicle by Defendants’ representation to him that it had been ‘carefully inspected’ and was ‘CARVANA CERTIFIED.’ But, he contends that these representations were untrue: rather it was ‘in a damaged, defective, unfit, unmerchantable and unsafe condition.’”

The court first analyzed the general counsel defendant’s argument that it lacked personal jurisdiction over him. The court found that the company’s head lawyer, an Arizona resident, did not have sufficient contacts with Pennsylvania to warrant a grant of general or specific personal jurisdiction. In turn, all claims against him were dismissed.

All three defendants moved to dismiss the fraud, negligent misrepresentation, BVA, and UTPCPL allegations for failure to state a claim. As to the first two, the court considered the defendants’ argument that they were barred by the “gist of the action,” doctrine prohibiting “claims which merely recast breach of contract claims as torts.” The court found that the alleged fraud and negligent misrepresentation claims were, ‘“inextricably intertwined’ with the parties’ contractual terms,” and granted the motion in the defendants’ favor.

The defendants also argued in support of dismissal of the UTPCPL and BVA claims under the economic loss doctrine. According to the opinion, the doctrine “was established to maintain a boundary between contract and tort law; it ‘prohibits plaintiffs from recovering in tort economic losses to which their entitlement flows only from a contract.’”

As to the UTPCPL claim, the court dismissed it with prejudice, concluding it was also merely a modified contract claim that “no amount of artful pleading,” could properly amend it. Finally, the court held that the BVA did not extend to an “online transaction that stipulated the Vehicle was being sold by a Georgia dealer,” and dismissed it with prejudice.

The plaintiff is represented by Bensley Law Offices, and the defendant by Blank Rome LLP.

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