Newsletter - Winter 2003
The Importance of Dealership Legal Audits
by Edward J. Castellani
A Michigan dealer was recently held liable for a $12 million jury verdict resulting from a 1999 fatal car accident. Apparently, the dealership failed to have a customer sign a title transfer before he drove away in a used car that was involved in an accident and killed a passenger. In light of decisions like this it is imperative that dealers are in compliance with all State and Federal laws and regulations.
The legal audit is a service aimed at helping auto dealerships identify existing and potential legal liabilities. It is a preventive tool that assists a dealership in reducing expenses from its legal liability exposure, and was developed in response to the increasing complex legal demands placed on auto dealers and a tendency of certain individuals to resort to legal action to resolve disputes.
Conducted much like traditional accounting financial audits, the legal auditor observes dealership operations and reviews contracts in areas selected by the dealership. After completion of the review, a report is submitted summarizing the observations and findings with respect to liability exposures. The report includes recommendations that either eliminate, minimize or control these exposures. Recommendations may range from simple measures such as language changes in contracts or invoices, increase compliance with legal regulatory issues, or amendments to corporate documents or factory agreements.
The types of items that are ordinarily reviewed in a legal audit include Federal and State required consumer disclosures, dealership forms, employee wage and hour compliance, sales and use tax compliance, Secretary of State compliance, IRS compliance, factory agreements, and organizational documents.
Ed Castellani, has specialized in the representation of auto dealers for over 20 years and is available to conduct a legal audit of your dealership.
Mr. Castellani is a member of our Business Department. He practices in the Lansing office and may be contacted at 517.377.0845 or toll free at 800.748.0436. You can also contact him via e-mail at ecastellani@fraserlawfirm.com.