Mercedes Parts-Fraud Suit Again on the Ropes

     SAN FRANCISCO (CN) — A federal judge this week again dismissed with leave to amend a lawsuit claiming Mercedes Benz defrauded customers by having designated service shops install third-party parts at Mercedes prices.
     Lead plaintiff Steve Ferrari lobbed claims of fraud and conspiracy at Mercedes and its dealerships in a federal lawsuit filed this past September.
     Ferrari and 18 named co-plaintiffs said Mercedes “directly participated” in the fraud scheme by stating on its website that its dealers only use genuine Mercedes parts, despite knowing that information was false.
     The complaint also accuses dealerships Autobahn Motors and Sonic Automotive of reselling original parts to third parties, using non-original parts to repair customer vehicles, and then charging customers Mercedes prices for non-genuine parts.
     In February, U.S. District Judge Yvonne Gonzalez Rogers dismissed the complaint with leave to amend, finding in part that the Racketeer Influenced and Corrupt Organizations Act does not authorize holding companies like Mercedes liable for allegedly “aiding and abetting” a fraud scheme.
     On May 10, Gonzalez Rogers again granted Mercedes and its dealerships’ motion to dismiss the lawsuit with leave to amend.
     Mercedes had argued in court filings that Ferrari’s first amended complaint suffered from the same defects as its original lawsuit — namely that it was “rife with contradictions” on Mercedes’ role in the alleged conspiracy.
     For instance, the complaint claims Mercedes knew of and actively concealed the scheme, but it also states Mercedes “should have known” about the use of non-original parts and that it “could have found out all about the non-OEM fraud.”
     Autobahn said in its motion to dismiss that the plaintiffs failed to adequately allege the existence of RICO enterprise because there was no “distinct enterprise conduct” between Autobahn and its employees.
     The dealerships also argued the plaintiffs failed to specify what representations the dealerships made to plaintiffs that led them to believe the replacement parts would be original equipment manufacturer, or OEM, parts.
     Mercedes attorney Robert Hawk of Hogan Lovells in Menlo Park and Autobahn attorney Bruce Nye of Adams Nye in San Francisco did not immediately return phone calls seeking comment Friday morning.
     Ferrari’s attorney, Herman Franck of Sacramento, did not return an emailed request for comment on Friday.
     The plaintiffs have until May 31 to file a second amended complaint.

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