What Do You Do About A Cybersquatter?Last month we discussed how a dealer can determine if its prospects are being diverted by a cybersquatter. This month, we will discuss what to do about it.

 

INFORMAL NEGOTIATIONS

Prior to seeking formal remedies, a dealer may choose to give a cybersquatter a chance to cooperate and comply with the dealer’s demands. The Hustler Cybersquatter Should a dealer wish to own a domain name that is already registered by a cybersquatter who only purchased the domain name to sell it at a higher price, a dealer may consider negotiating with the cybersquatter to buy the domain name.

IN THIS ISSUE...

Uncommon Sense:A Quiz(sometimes the law can throw you a curve)

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What Do You Do About a Cybersquatter?(continuation of feature article on Cybersquatting from September 2012 Newsletter)

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Cybersquatter continued on page 4

Quiz continued on page 2

Uncommon Sense:  A QuizDo you think that common sense is enough in answering questions about the laws that apply to car dealers? Here is a quiz that will show that sometimes the law can throw you a curve.

1. Question: You have a general office employee who is in charge of your personnel matters. You get into a dispute with the office employee over whether certain dealership sales and service employees are entitled to overtime. It is your position that they are not, and it is the position of the office employee that they clearly are. As a result of the dispute, you fire the office employee. The office employee sues for retaliation in violation of the Fair Labor Standards Act. You defend on the basis that the fired employee was not a victim of a Fair Labor Standards Act violation since that person’s pay was never an issue. Who wins? 

Answer:  The employee is probably going to get the opportunity to present the case to the jury. The Fair Labor Standards Act prohibitions against retaliation are very strong. An employee who does not have a pay claim under the Fair Labor Standards Act can still sue if fired allegedly in retaliation for complaining about the company’s FLSA practices. 

2. Question: Your neighbor buys a vehicle from a used car lot down the street from you. You are a little aggravated that your neighbor didn’t buy from you. You chuckle a bit when the used car lot goes out of business, and the floorplan lender for the used car dealer demands

www.cwattorneys.com October 2012

return of the vehicle because of its floorplan lien. Your neighbor nevertheless claims the right to ownership of the vehicle with a superior right over the defunct dealer’s floorplan lender. Who wins, your neighbor or the floorplan company?

Answer: Your neighbor probably will keep the car. Under the Uniform Commercial Code that has been enacted in all states, a dealer that sells to a consumer in the ordinary course of business, even though there is a blanket floorplan lien on all inventory vehicles, can pass title to the buyer free of the floorplan lien.

3. Question: A man came into the dealership to sell you his car. He claimed that he is moving to Europe, and he had to sell the vehicle. He produced the title in his name. You purchased the car. The FBI comes to your dealership a week later and wants to take the vehicle. They say it was a stolen vehicle with a counterfeit title. Your position is that you bought it in the ordinary course of business, and therefore you have superior title to it. Who wins?

Answer:  A thief can never pass good title to property. If the vehicle is stolen and the title was a counterfeit, a buyer of the vehicle, even a dealer buying in the ordinary course of business, cannot get good title to it. The owner from whom the car was stolen, or more likely that person’s insurance company, will probably have a superior right to the vehicle.

4. Question: You sold a car to a credit challenged customer. You had difficulty finding a finance source to take assignment of the paper, and it was forty days before you were able to assign the retail installment sale contract and to process title work for the vehicle including recording the lien of the finance source. The buyer declares bankruptcy and contends that the finance company has no right to claim an interest in the vehicle. The finance company claims that it has the right keep its lien on the vehicle and to get paid. Who wins?

Answer:  In this case, the customer will win. A dealer has thirty days from delivery within which to record a lien on a vehicle sold under a retail installment sale contract. If the seller misses this window, then the lien can be disregarded if the customer declares bankruptcy. Since the lien in this case was not placed until forty days after

delivery to the customer, the bankruptcy court will order free and clear title to be issued to the buyer. The finance company will be out the money, and the finance company will look to you to reimburse it.

5. Question: Your service manager, who was not an officer of your company, signed a lease for an expensive piece of equipment for your service department and arranged for training of a tech to operate it. The service manager left three months later with the tech. You are stuck paying for a piece of equipment that is no longer useful for you. You tell the equipment supplier to come in to pick up its equipment because the service manager had no authority to bind the dealership, and the lease is invalid. The supplier contends that it has a solid lease. Who wins?

Answer: Likely the supplier. A service manager has “apparent authority” to enter contracts for matters involving the service department. In this case, the supplier can argue that the manager had apparent authority to lease the equipment, and the lease is binding. Unless there is some compelling evidence, like a prior letter to the supplier from you letting them know that the service manager has no such authority, the supplier will probably win that fight.

6. Question:  Your F&I representative hands the FTC mandated privacy notice to a customer and asks the customer to sign it.  He won’t.  He says that there are things in there that he does not like, and he wants to change them. Like any other document it should be subject to negotiation, so the F&I representative and the customer make some hand written changes.  Should the document be revised with the changes or should the parties just initial the handwritten changes?

Answer:  Neither.  Never negotiate the terms of the privacy notice.  It is not an agreement. The notice describes the dealership’s policy, just like the policy mailed to an account holder by a credit card company periodically.  Changing the terms of that policy for particular customers will lead to the impossible situation of multiple policies in place in the dealership. Hopefully, you are using the federally suggested form giving you a “safe harbor” against enforcement action.  Changes to that form can destroy the safe harbor benefit.

Quiz from page 1

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Quiz from page 2

7.      Question:  Your F&I Director wants to do a dea l in which the cus tomer pays the downpayment sixty days after delivery, well after you have sent the RISC to the financing source. Is that legal?

Answer:  Surprisingly, yes. Under the Truth in Lending Act, a lender can defer receipt of the downpayment. TILA provides that one can accept “pick up payments” as long as they are paid in full by the due date of the second scheduled payment and are not subject to a finance charge.  HOWEVER, this practice will cause a problem with the financial institution to which you assigned the RISC because it violates the representations and warranties that you received the entire downpayment that you make to the financial institution with each assigned contract.  If you assign the contract with the downpayment owing, you will be in breach of that, and the contract will be subject to repurchase. So, this is a trick question.  While it is legal to defer collection of the downpayment, it will likely violate the indirect finance agreement, and you should not do this.

8. Question:  When the deal went to the general office, someone discovered that the price for the extended service agreement was misstated in the retail installment sale contract .  Your F & I director has run a new one correcting the error and changing the vehicle price to keep the same payment, but the customer is apparently away for a few days.    Since there is no change to the payment, the F&I director wants to sign it for the customer. Can he?

Answer:  No. Signing a document for a customer on which the terms are altered, unless there is authorization by a power of attorney that specifically allows this, can be forgery which is a crime.  It can cost the forger jail time.  And it will render any retail installment sale contract or lease void, meaning that the finance source can demand that the dealership repurchase it.

9. Question:  When reviewing the deal paperwork against the deal completion checklist, the reviewer found that the customer had not signed the menu with his choices for F&I products.  When the F&I representative got the

deal back, he tried to get the customer to come back in, but he was unsuccessful.  Since this is only an internal document, the F&I person can sign it for the customer, right?

Answer:  No.  The law provides no exception for internal documents in a car dealership.

10. Question:  The F&I representative understands that he may not to sign the customer’s name without authorization.  So when he has a deal with a RISC that must be changed where there is no difference in rate or payment, he calls the customer who authorizes him to sign the customer’s name.  That’s alright, correct?

Answer:  No.  So that there is not mistake:  signing a document for a customer is improper  unless the person signing is authorized under a written power of attorney permitting this. If a problem arises, it is quite easy for a customer to “forget” that he verbally authorized that his name be signed. A proper power of attorney provides the only exception to the rule that one cannot sign a customer’s name to documents. A power of attorney from the customer should only be used for titling purposes. Dealers should not attempt to obtain a blanket power of attorney giving them authority to sign all documents on behalf of the customer.

If a dealer is interested in using a brokerage service, like the one offered by GoDaddy.com or other similar registrars, it can contract with the brokerage service. The broker makes a “certified appraisal” of the value of the domain name, and transmits this back to the dealer within 48 hours. The dealer then gives the broker a price range to negotiate a sale of the domain name. The broker then usually has 30 days under the brokerage contract to contact the owner of the domain name and negotiate a sale price, working up to the dealer’s maximum desired price point.  If a sale is completed using registrar brokerage services, the broker takes a 10% commission or $10, whichever is greater. The domain name is then registered in the name of the dealer. The benefits of using such a service are that the dealer does not have to engage in any of the negotiations or work out the transfer of domain registration. The Competitor Cybersquatter If the dealer is dealing with a cybersquatter that is a direct competitor or someone that has registered more than one domain name to cause confusion and divert customer traffic away from the dealer’s webpage, then the dealer may choose to send a cease and desist letter to the registrant’s address identified by a search conducted on the registrar’s WhoIS Database. The cease and desist letter puts the cybersquatter on notice that if the dealer’s demands are not met, then further legal action will be taken. What are those further actions?  THE OPTIONS Uniform Domain Name Dispute Resolution Policy (UDRP) All domain name registrars have available a dispute resolution policy that is binding on parties that register domain names with it. The Uniform Domain Name Dispute Resolution Policy (UDRP) provides a streamlined, non-judicial method for trademark owners to determine rights to a domain name. The owner of a mark may initiate this non-judicial method by submitting a complaint against the URL owner to the approved dispute resolution services. The approved American dispute

resolution service is the National Arbitration Forum. An Anticybersquatting Consumer Protection Act (ACPA) Lawsuit The Anticybersquatting Consumer Protection Act provides grounds for a cause of action for a trademark owner against a person who “has a bad faith intent to profit from the owner’s mark” and who “registers, traffics in, or uses a domain name” that is identical or confusingly similar to the owner’s distinctive mark or that is identical, confusingly similar to, or dilutive of the owner’s mark.  In order to determine whether someone has violated the ACPA, the first inquiry is whether the cybersquatter acted with a bad faith intent to profit from a protected mark. The second inquiry under ACPA is whether the cybersquatter (1) registered, trafficked in, or used a domain name; (2) that is identical or confusingly similar to a distinctive mark; or (3) is identical, confusingly similar to, or dilutive of the owner’s mark. A Trademark Infringement Lawsuit In addition to a lawsuit filed for violations of ACPA there may also be grounds to bring a trademark infringement action against a cybersquatter. Typically, trademark infringement actions allege dilution or confusion. However, to bring an action for trademark infringement under federal law, there must be an enforceable trademark.  Dealers may not have registered trademarks like companies such as Coca-Cola, Nike, or McDonalds, so rather than a trademark infringement action for dilution or confusion, a dealer may bring an action against a cybersquatter that alleges unfair competition in violation of the federal Lanham Act as well as an action under state laws that protect against unfair competition.

October 2012 DRIVING YOUR SUCCESS page 4 of 4

Cybersquatter from page 1

Purchase Auto Dealer Law: the Definitive Legal Guide to the Purchase, Sale, and Operation of Vehicle Dealerships at www.autodealerlaw.com.