CarMax Knowingly Sold Cars that Failed Inspection to Unlicensed Dealers, Class Action Claims

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A proposed class action claims CarMax Auto Superstores, Inc. and CarMax Auto Superstores West Coast, Inc. have unlawfully sold to unlicensed dealers vehicles that failed to meet California emissions standards.

According to the 19-page case out of California federal court, CarMax represented the sales as dealer-to-dealer wholesale transactions despite being aware that the buyers were not licensed to purchase wholesale cars. Moreover, CarMax allegedly “muddled the facts of the transaction[s]” by making them appear as retail transactions and failed to fill out required paperwork.  

The plaintiff claims to have become a victim of the defendants’ “fraudulent scam” when she purchased from a private seller a vehicle that had been sold by CarMax to an unlicensed dealer and hadn’t passed a smog inspection for several years. Per the suit, the plaintiff hadn’t driven 20 miles before the car’s check engine light came on and prompted her to get the vehicle looked at, after which she discovered she had been “the victim of fraud.”

The lawsuit stresses that “multiple atypical business practices had to occur” for CarMax to be able to sell to an unlicensed dealer at a dealer-only auction a wholesale car that was not lawful to drive.

“CarMax acted atypically, unlawfully, and often fraudulently at every juncture pertaining to the sale of the Car,” the complaint scathes, claiming the defendants breached their duty to the public by knowingly putting cars “that are not fit to drive” onto the streets and into the hands of unlicensed dealers.

According to the lawsuit, the plaintiff’s car was sold by CarMax during its dealer-only auction in Murrieta, California to Sandra Wellington of “Genuine Automotive Enterprises,” who the case says never produced a valid dealer license. The suit claims CarMax “fraudulently filled out the dealer-only section on the back of the certificate of title to fraudulently complete the transaction as if it were wholesale” and failed to record a dealer license number or record the “sold by” section with the name and date of the auction as legally required. While Sandra Wellington is listed as the purchaser, the signature on the back of the title is “RW,” the initials of Sandra’s husband “and partner in the scam,” Rod Wellington, the lawsuit alleges.

Per the case, CarMax then illegally represented the sale of the car as a retail transaction and filled out the wrong kind of paperwork for what should have been a wholesale transaction.

“This kept the unlicensed dealers off of the DMV’s radar and able to successfully victimize Plaintiff,” the complaint charges. “Additionally, failing to report to the DMV painted an untrue history of the Car which Plaintiff relied upon in her decision to purchase it.”

The suit says the plaintiff purchased the vehicle at issue from a private seller in May 2020 and was presented with a fraudulent smog certificate dated May 23, 2020 as part of the sale. After taking the car to a dealership and discovering that the smog certificate was fake, the plaintiff, according to the case, uncovered on publicly available Facebook posts the relationship between the seller and the Wellingtons, along with photos of the cars they had sold, and reported to CarMax that it had illegally dealt multiple vehicles.

CarMax, the lawsuit alleges, responded to the plaintiff’s complaints by stating it had dealt with the matter “internally” and took no action to report suspected unlicensed dealing.

The lawsuit argues that because CarMax requires dealers to upload their credentials into its system before they can participate in a dealer-only auction, it is “physically impossible” for the defendants to unknowingly auction a car to an unlicensed dealer. Indeed, the plaintiff herself was able to discover through a simple Google search and by emailing the Missouri DMV that Sandra Wellington had listed an invalid dealer license number and a business address “belonging to a mailbox in an empty field in Missouri,” the suit relays.

“CarMax has far more resources at its disposal and bears the burden of dealing its cars lawfully which means verifying that a dealer is in fact licensed before selling them a wholesale car,” the complaint argues.

The case claims CarMax, by selling the plaintiff’s and others’ cars as retail without valid smog checks, has “unfairly shifted the burden of repairs” and should have known that consumers would be negatively affected by their alleged fraud.

The suit looks to represent anyone in the U.S., as well as a subclass of California residents, who purchased cars sold by CarMax through allegedly fraudulent means to unlicensed dealers within the past four years.

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