Law360: Fiat Chrysler Accused Of Adding 'Phantom Freight' Costs

May 05, 2022

By Bill Wichert

Law360 (May 5, 2022, 8:10 PM EDT) -- Two customers have hit Fiat Chrysler with a proposed class action in New Jersey federal court, alleging that the automaker has resumed the practice of charging so-called phantom freight by artificially jacking up charges passed on to customers for delivering new vehicles to dealerships.

Decades after the allegedly deceptive practice ceased due to "congressional intervention," FCA US LLC has been issuing "destination charges" in recent years that are far more than the actual costs of transporting vehicles to dealers, according to the complaint filed Wednesday by plaintiffs Christopher Lindsey and BCR Carpentry LLC.

"Seizing on its ability to manipulate the market in these ways, since at least the 2018 model year, FCA has reengaged in the systematic practice of charging inflated destination charges for class vehicles," the complaint says. "These newly inflated destination charges reflect a return to the price packing and phantom freight charging that were endemic in the early 20th century."

Stellantis NV, FCA's successor company, also is named as a defendant in the suit. Stellantis representatives did not immediately respond to request for comment Thursday.

Using data from a February 2021 article in Consumer Reports, Lindsey and BCR Carpentry said FCA is "winning the race to the bottom" among top car manufacturers with respect to destination charges. The business "consistently charges hundreds of dollars more per vehicle than all of the other manufacturers identified by Consumer Reports," the complaint says.

With its charges, FCA "consistently outpaces inflation" and exceeds transportation costs in general, according to the complaint.

For example, between 2016 and 2022, destination charges for the Ram 1500 pickup truck increased by more than 50%, while the Internal Revenue Service's mileage reimbursement rate went up by 7.4% during that period, the complaint says.

The complaint also noted how, from 2016 to 2020, data published by the U.S. Bureau of Transportation Statistics for average freight revenue per ton-mile showed an increase of 10.3%.

"Trains and trucks primarily transport passenger motor vehicles to market for sale," the complaint says. "As the foregoing statistics demonstrate, the increases in transportation costs do not remotely reflect the rate of increase in FCA's destination charges for vehicles since 2016."

The purportedly excessive destination charges from FCA represent a throwback to the phantom freight practice that led federal lawmakers to pass the Automobile Information Disclosure Act of 1958, according to the complaint.

That bill required automakers to place a label on each new vehicle sold in the U.S. — known as the "Monroney sticker" based on an Oklahoman senator who sponsored the act — which is supposed to include the destination charge for the vehicle, the complaint says.

When Lindsey and BCR Carpentry bought their respective FCA vehicles last year from Garden State dealerships, the destination charge listed on the Monroney sticker for each vehicle was $1,695 — "which, in reality, was materially higher than the delivery cost for plaintiff's vehicle," the complaint says.

"At all times, FCA was and is under a continuous duty to disclose on the Monroney sticker the actual cost of transporting class vehicles to the dealerships where they were sold," the complaint says. "Instead, FCA actively concealed the true costs of delivery using the claimed destination charge as a profit center."

Lindsey and BCR Carpentry are represented by Joseph J. DePalma and Bruce D. Greenberg of Lite DePalma Greenberg & Afanador LLC, William H. Anderson and Rebecca P. Chang of Handley Farah & Anderson PLLC, Rosemary M. Rivas, David Stein and Kyla J. Gibboney of Gibbs Law Group LLP and Jon M. Herskowitz of Baron & Herskowitz.

Counsel information for the defendants was not immediately available Thursday.

The case is Christopher Lindsey et al. v. FCA US LLC et al., case number 2:22-cv-02637, in the U.S. District Court for the District of New Jersey.

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