Asbury Automotive Group filed a lawsuit on Oct. 4 to challenging as unconstitutional an administrative proceeding filed against Asbury by the Federal Trade Commission (FTC).
The lawsuit Asbury filed in U.S. District Court for the Northern District of Texas seeks to enjoin the FTC’s administrative proceeding in that case on constitutional grounds. Among other things, Asbury’s lawsuit asserts that the FTC’s administrative proceeding violates the company’s rights by denying it the right to a jury trial and by allowing the FTC to serve as both prosecutor and judge in the same proceeding.
The lawsuit filed in in response to an FTC complaint that three Asbury dealerships in the Dallas-Ft. Worth area sold protection products to customers that the customers did not agree to buy.
FTC Allegations
The FTC alleges that three Texas dealerships—David McDavid Ford Ft. Worth, David McDavid Honda Frisco, and David McDavid Honda Irving as well as general manager of those dealerships, Ali Benli—engaged in a variety of practices to sneak hidden fees for unwanted add-ons past consumers.
According to the complaint, numerous consumers complained about Asbury’s practices as they reported being charged thousands of dollars without their knowledge or charged items they had declined including protective chemical coatings and service contracts to life and disability insurance policies.
The federal complaint details that Asbury’s sales and financing process made it difficult, if not impossible, for consumers to know they were being charged for these add-ons, with consumers being asked to sign documents on electronic devices that showed only the places where they should sign and not the full documents. In other cases, consumers who noticed the add-on charges were falsely told they were mandatory.
Asbury Refutes FTC Claims
A survey of customers across the dealerships showed that as many as 75 percent of consumers reported that they were charged for add-on products and services they did not authorize or were falsely told were required, according to federal officials.
According to Asbury officials, customers who purchased protection products received full disclosure about the products’ costs, impact on payments, and other important terms consistent with company policy. Customers signed for the protection products, which were itemized separately on paperwork provided to the customers.
Asbury CEO David Hult stated when the FTC filed the complaint that “we will not allow the FTC to coerce fines from us or subject us to onerous requirements that negatively impact the car-buying experience for our customers, would not apply to others, and would place us at a competitive disadvantage in the industry. We are confident that we will prevail in the litigation.”
Recent Supreme Court Rulings
Asbury’s lawsuit contends that FTC commissioners and in-house administrative law judges are effectively insulated from removal by the President in contravention of the Constitution’s requirements.
Ed Burbach, counsel for Asbury and a partner of Foley & Lardner LLP in Austin, TX, noted the U.S. Supreme Court this year placed limits on the authority of executive branch agencies.
“One result is that agencies like the Federal Trade Commission can no longer operate as both judge and jury,” said Burbach. “Asbury is seeking nothing more than the fair administration of justice and looks forward to making its case in federal court.”
Similar cases have been filed in federal courts to stop administrative proceedings conducted by federal agencies following the Supreme Court’s decision earlier this year in Securities and Exchange Commission (SEC) v. Jarkesy. In that case, the Supreme Court reaffirmed a defendant’s right to a jury trial, holding that the SEC could not use an internal administrative proceeding overseen by its own in-house administrative law judge to sidestep the requirements of the Constitution’s Seventh Amendment.
