Legal News/Legislation

Uber agrees to additional conditions in revised FTC settlement

WASHINGTON, D.C. - 

Uber’s compliance challenges with federal regulators involving data security intensified last week.

According to a news release, Uber has agreed to expand the proposed settlement it reached with the Federal Trade Commission last year over charges that the ride-sharing company deceived consumers about its privacy and data security practices.

After the announcement of last year’s proposed settlement, the FTC said it learned that Uber had failed to disclose a significant breach of consumer data that occurred in 2016 — in the midst of the FTC’s investigation that led to the settlement announcement last August. Due to Uber’s misconduct related to the 2016 breach, the FTC indicatd Uber will be subject to additional requirements.

Among other things, the revised settlement could subject Uber to civil penalties if it fails to notify the FTC of certain future incidents involving unauthorized access of consumer information.

“After misleading consumers about its privacy and security practices, Uber compounded its misconduct by failing to inform the Commission that it suffered another data breach in 2016 while the Commission was investigating the company’s strikingly similar 2014 breach,” acting FTC chairman Maureen Ohlhausen said.

“The strengthened provisions of the expanded settlement are designed to ensure that Uber does not engage in similar misconduct in the future,” Ohlhausen continued.

In announcing the original proposed settlement with Uber last August, the FTC charged that the company had failed to live up to its claims that it closely monitored employee access to rider and driver data and that it deployed reasonable measures to secure personal information stored on a third-party cloud provider’s servers.

In the revised complaint issued last week, the FTC alleges that Uber learned in November 2016 that intruders had again accessed consumer data the company stored on its third-party cloud provider’s servers by using an access key an Uber engineer had posted on a code-sharing website.

This time, the intruders used the access key to download from Uber’s cloud storage unencrypted files that contained more than 25 million names and email addresses, 22 million names and mobile phone numbers, and 600,000 names and driver’s license numbers of U.S. Uber drivers and riders.

The revised proposed complaint further noted that Uber paid the intruders $100,000 through its third-party “bug bounty” program and failed to disclose the breach to consumers or the Commission until November 2017. The bug bounty program was created to provide financial rewards to parties who responsibly disclose security vulnerabilities rather than those who maliciously exploit vulnerabilities to access consumers’ personal information.

In addition to compelling Uber to disclose certain future incidents involving consumer data, the new provisions in the revised proposed order include requirements for Uber to submit to the Commission all the reports from the required third-party audits of Uber’s privacy program rather than only the initial such report.

The FTC added that Uber also must retain certain records related to bug bounty reports regarding vulnerabilities that relate to potential or actual unauthorized access to consumer data.

The commission vote to withdraw the original administrative complaint and proposed consent agreement and to issue the revised administrative complaint and to accept the revised proposed consent agreement was 2-0.

The FTC reiterated that regulator issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the FTC that a proceeding is in the public interest.

When the FTC issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $41,484.


Dealer associations cheer Supreme Court ruling that service advisers are exempt from overtime

TYSONS, Va., and ARLINGTON, Texas - 

National Automobile Dealers Association (NADA) and the National Independent Automobile Dealers Association (NIADA) both celebrated this week when the U.S. Supreme Court made a ruling in their favor.

The associations recapped that on Monday the Supreme Court ruled automotive service advisers are not covered by the Fair Labor Standards Act’s overtime pay requirement, the final word in a long court battle that actually made it to the high court twice.

In a 5-4 decision, the court held that service advisers fall under the FLSA provision that exempts a “salesman, partsman or mechanic primarily engaged in selling or servicing automobiles” from federal overtime pay.

NADA and NIADA explained that decision overturned a 2011 ruling by the Obama administration’s Department of Labor that dealerships were required to pay overtime to service advisers. The DOL policy was challenged in 2012 but was upheld by the Ninth Circuit Court of Appeals in 2015 and again in 2017 after the Supreme Court vacated the first decision and sent it back to the lower court.

“The court’s decision ratifies what has been an industry practice in dealerships for decades — a practice that had been satisfactory to both federal regulators and courts,” NIADA senior vice president of legal and government affairs Shaun Petersen said. “NIADA is pleased the court’s ruling allows dealers much needed flexibility in structuring service advisers’ pay plans.”

In his majority opinion, Justice Clarence Thomas said a service adviser is a salesman because service advisers sell services to customers, and service advisers are also engaged in servicing automobiles because they are integral to the servicing process.

The court noted service advisers’ active and essential participation in the auto service process — meeting customers, listening to their concerns, suggesting and discussing repairs, selling parts and accessories, recording repair orders and following up with customers — qualifies them as “primarily engaged in servicing automobiles,” even though they do not actually perform the mechanical service work on vehicles.

NADA chairman Wes Lutz applauded the action by the Supreme Court in its decision in the case — Encino Motorcars LLC v. Navarro.

“NADA is extremely pleased with the Court’s decision that dealership service advisers clearly fall within the salesmen, partsmen and mechanics overtime pay exemption under the federal Fair Labor Standards Act,” Lutz said.

“This decision upholds more than 40 years of consistent interpretation by the courts and the executive branch, and will allow the auto retail industry to continue structuring employment relationships that are efficient and beneficial to dealerships, their employees and their customers,” he went on to say.

NADA provided extensive support to the dealers litigating the case and worked with the state dealer associations in the Ninth Circuit to file several “friend of the court” briefs on behalf of all dealers.

NIADA emphasized that this ruling only affects federal law regarding overtime. State laws still apply.

Several states, such as California, have laws governing overtime pay requirements for dealership employees, including service advisers, according to NIADA.

“Consult your legal counsel about your state’s overtime rules,” NIADA said.

NHTSA unveils new compliance assistance program

WASHINGTON, D.C. - 

On Monday, the National Highway Traffic Safety Administration (NHTSA) announced the creation of a compliance assistance program to help regulated entities, including vehicle and trailer manufacturers,  as well as equipment manufacturers comply with safety regulations as a means to promote safety on our highways. 

NHTSA reiterated that regulated entities may not sell vehicles or equipment that do not comply with all applicable Federal Motor Vehicle Safety Standards (FMVSS). 

“NHTSA seeks to promote safety through proactive and responsive engagement.  In addition to vigilant enforcement, NHTSA also serves as a federal resource that small and large manufacturers can for guidance on federal regulations,” NHTSA Deputy Administrator Heidi King said. 

“A transparent partnership with manufacturers assures the development of safe, reliable vehicles and equipment,” King continued.

King pointed out that NHTSA tests and monitors important vehicle components like brakes, tires, air bags, child seats, seat belts and headlights to ensure they are compliant with FMVSS. NHTSA’s Office of the Chief Counsel issues interpretations on various legal issues.

She added the new compliance assistance program will help NHTSA achieve the highest standards of excellence in motor vehicles by providing informal compliance guidance, to current and prospective manufacturers. 

Regulated entities can NHTSA for guidance on compliance issues at [email protected] or .

Podcast: Anne Holtzman of Allied Solutions

CARY, N.C. - 

For this episode — our 50th — Nick takes a trip to the “back office” with Anne Holtzman, who is the senior vice president of claim and recovery at Allied Solutions.

While Hurricanes Harvey and Irma happened several months ago, some auto finance companies — especially with collateral impacted by the storms — could not begin some recovery processes until after Jan. 1 because of certain state and federal restrictions. Holtzman shares her insights into how those chores are complicated and could take up to a year to be resolved.

Check out their conversation below.

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All episodes can be found on our  or by visiting ausm.info/ar-podcast.

Please complete ; we appreciate your back on the show!

New Jersey creates emergency registry connected to VINs

TRENTON, N.J. - 

Perhaps dealers in New Jersey can add one more item to their checklist when they’re finalizing the delivery process.

Just before leaving office, Gov. Chris Christie signed legislation establishing an emergency registry for vehicles that requires the New Jersey Motor Vehicle Commission (MVC) to allow vehicle owners to submit their vehicle identification number (VIN) to the statewide emergency information registry program known as the “Next of Kin Registry.”

“In the aftermath of a serious car crash, emergency personnel need to be able to communicate with the victim’s family in a timely fashion, whether it’s to secure information regarding the person’s medical history or, in the most tragic cases, allowing them to say their final goodbye,” said Tyler Izen, executive director at Car Dealers Saving Lives, a California-based automotive nonprofit social welfare organization.

“When seconds count, having immediate access to an emergency is essential,” Izen continued.

The new law requires the MVC to allow the holder of any New Jersey validated permit, probationary or basic driver’s license to voluntarily submit the name and telephone number of two emergency s and the VIN of any vehicle owned or leased, or authorized to be used by the permit holder or licensee, to the Next of Kin Registry either through the commission’s website or by mail.

Officials explained the law effectively is an extension of Sara’s Law, which in 2011 established a next of kin registry linked to a motorist’s driver’s license or permit. Similarly, this new law will tie emergency information to a vehicle’s VIN.

“Having a designated emergency can help eliminate some of the guesswork that health care professionals otherwise may go through as they assist a victim who is unable to communicate his or her wishes,” Izen continued. “More importantly, it can limit the chances that family members will experience the kind of anguish Sara Dubinin’s parents did in 2007, when they received notification over two hours later that their daughter had been in a crash that ultimately was fatal."

“Taking a few minutes to register a vehicle identification number in the Next of Kin Registry can pre-emptively reduce chaos and heartache in the unfortunate event of a serious roadside emergency,” he went on to say.

Under the law, the New Jersey DMV is required to allow the submission of a VIN to the Next of Kin Registry by February of next year.

The registry is for the exclusive use of law enforcement and is not considered a government record, according to officials.

TrueCar, Calif. dealers settle litigation

SANTA MONICA and SACRAMENTO, Calif. - 

More than two-and-a-half years after the suit was filed, TrueCar and the California New Car Dealers Association have settled the litigation between the two parties.

In a statement released Thursday afternoon, TrueCar said as part of the resolution, its billing model in California will transition to a flat-fee subscription model — as opposed to the from the pay-per-sale model with a cap — by Jan. 1, 2019.

The new model will in the state also not have the “sales guarantee” as a retroactive adjustment mechanism, the company said.

Additionally, TrueCar has agreed to double the indemnity provided to its dealer partners in the state.

The suit was initially filed in May 2015

TrueCar has since gone through a well-documented overhaul of how it conducts business with dealers, including a Dealer Pledge launched in early 2016 by newly minted president and chief executive officer Chip Perry, who arrived in December 2016.  

Commenting on the CNCDA settlement in a news release, Perry said: “TrueCar is pleased that the litigation has been resolved to the parties’ mutual satisfaction, and we look forward to continuing to serve our dealer customers in the State of California.”

CNCDA president Brian Maas added: “This litigation afforded us the opportunity to thoroughly examine TrueCar’s user experience and business practices.  The agreement reached with TrueCar, together with the other adjustments to its business model made by TrueCar after CNCDA initiated this litigation, satisfactorily resolve our previously expressed concerns regarding the existing TrueCar business model, which is currently a pay-per-sale model with a cap.

“We also believe that through the doubling of the indemnity TrueCar offers to participating California dealers, we have procured another valuable benefit for our members through this litigation,” Maas added. “We are pleased that we are now able to put this matter behind us.” 

OEMs have chance for piece of $850 million Takata airbag restitution fund

BOSTON - 

Franchised dealerships have seen scores of customers arrive at their service departments to have defective Takata airbags replaced. Now, it’s the automakers’ turn to be compensated for the matter.

The special master in the criminal case involving Takata announced that he launched the $850 million restitution fund for OEMs that purchased airbags with PSAN inflators from Takata and its subsidiaries. 

The special master — defined as an official appointed by a judge who ensures court orders are followed — stated that he is sending notice to more than 50 manufacturers around the world that purchased the Takata airbags that are subject to widespread recall programs, and that may be eligible for compensation from the OEM Restitution Fund set up as part of Takata’s plea agreement in February.

Appointed by the United States District Court for the Eastern District of Michigan as special master is Eric Green, a Boston law professor and mediator.

According to the special master's notice sent to the manufacturers, Takata pled guilty on Feb. 27 to one count of wire fraud and the court entered the restitution order requiring Takata to, among other things, pay restitution in the amount of $481,848,850 to the OEMs who were defrauded in connection with their purchase of airbags with PSAN Inflators and additional restitution in the amount of $368,151,150 to all OEMs who purchased airbags with PSAN Inflators from Takata for a total amount of $850 million in restitution to OEMs.

On July 31, the court appointed Green as special master to oversee the OEM Restitution Fund. His responsibilities include developing a formula or formulas, subject to court approval, for distributing funds to eligible claimants, making determinations regarding allowed claims, and making a recommendation to the court regarding allocation of funds from the OEM Restitution Fund.

Officials explained that a significant majority of Takata’s OEM customers — which collectively purchased approximately 90 percent of the PSAN inflators sold by Takata as of Dec. 31, 2016 — agreed upon a proposed allocation and presented it to the special master for consideration.

Following a formal presentation on the proposal for allocation of the OEM Restitution Fund, several discussions with the consenting OEMs about the proposal, and an independent review by the special master of the proposal, the special master provisionally determined that the proposed allocation provides for an equitable distribution of the OEM Restitution Fund.

However, to ensure that all eligible OEMs have a chance to be heard, an opportunity is being provided for them to object to the proposed allocation or comment in writing to the special master prior to final determination by the special master and submission to the court for final approval.

Green is also in charge of a separate $125 million Individual Restitution fund designed for persons who suffer personal injury or wrongful death as the result of a Takata airbag inflator defect. Green stated that the proposed allocation of the Individual Restitution fund will be announced at a later date.

Under the proposed allocation, the restitution monies directed to the OEMs will be combined into a single global fund. All OEMs that purchased PSAN inflators, regardless of jurisdiction of sale, will be eligible to participate in the combined fund without the need for determining whether a particular OEM was defrauded by Takata.

Each OEM’s allocation will be determined by the percentage of all PSAN inflators sold by Takata globally that was purchased by that OEM as of Dec. 31, 2016. The court noted the special master has independently analyzed the verified third-party Takata PSAN inflator sales data utilized to determine the percentage for each OEM and determined it reliable.

The proposed allocation governing the distribution of the OEM Restitution Fund is set forth in the direct notice that was mailed electronically or otherwise to all identified OEMs that are eligible to participate in the OEM Restitution Fund. A copy of the direct notice and the proposed allocation schedule can be found and accessed on the special master's website, .

Officials indicated any remaining funds attributable to checks which are not cashed or to wire transfers that cannot be completed will be redistributed by the special master pro rata to all participating OEMs.

To receive an allocation from the OEM Restitution Fund, each eligible OEM will be required to provide a release in favor of the special master and his professionals, advisors and agents.

If an eligible OEM disagrees with the proposed allocation, it can comment on the plan or object. Officials said any comments and objections must be in writing and received by the special master on or before Dec. 20.

Objections can be emailed to [email protected] If a manufacturer does not submit a timely objection, officials insisted it will be deemed by the special master to have accepted and consented to the proposed allocation.

Following his review of any objections, Green anticipates that he will provide the final proposed allocation for the OEM Restitution Fund to the court for approval in January.

For any questions about the proposed allocation, visit , email [email protected], or call (800) 574-7035.

NADA alerts dealers about floor-plan pitfall in current Senate tax reform bill

TYSONS, Va. - 

The National Automobile Dealers Association wanted to alert principals and store owners who might be impacted by any turkey-consumption slumber about a crucial part of the U.S. Senate’s tax reform measure that currently includes a significant change regarding deductibility of floor plan interest.

As currently written, NADA explained the Senate’s tax bill would limit the deductibility of business interest — including floor plan interest — to 30 percent of adjusted taxable income. As interest rates increase, the association stressed that this change would result in dealers paying higher taxes even when a dealership does not show a profit.

“This is a tax increase for your business and could be especially devastating to cash flow, particularly to many of our smaller members, during an economic downturn,” NADA said.

“It’s imperative that we as a community of auto dealers and dealership employees take collective action to educate lawmakers regarding a major threat to dealerships that is included in the current version of the Senate tax bill,” NADA continued.

While NADA acknowledged the Senate tax reform bill is still being drafted, the legislation could be voted on as early as the last week of November.

“Senate floor action is critical to preserving the full deductibility of floor plan loans since there may not be opportunities to change the bill after the Senate vote,” NADA said.

“NADA urges dealers to their Republican Senator to ask them to add the House bill language that preserves full floor plan deductibility,” the association went on to say.

. Dealers also can view a list of target lawmakers here and a .

For more information or to provide Senate back, Patrick Calpin with NADA Legislative Affairs at (202) 547-5500.

Former NADA Pres. Brady joins Kerrigan Advisors

IRVINE, Calif. - 

Kerrigan Advisors announced Tuesday it has appointed former National Automobile Dealers Association president Phil Brady as senior adviser to provide the firm counsel on generational transitions and corporate planning.

Brady brings Kerrigan Advisors and its clients over 30 years of experience and extensive relationships based on his automotive and legislative background, the firm said.

Brady served as president of NADA from 2001 to 2012, and in 2015, retired from his most recent role as senior vice president for government affairs at Phillips 66.

“Phil brings with him the experience of industry leadership during some of the toughest times our industry has ever seen,” Kerrigan Advisors founder and managing director Erin Kerrigan said in a news release.

“In leading NADA through 2012, he navigated auto retail through collapsing sales, a brutal financial market and OEM bankruptcies. It’s this sort of depth of industry understanding and perspective that Kerrigan clients will really benefit from as they consider their business’ future in today’s consolidating auto retail market, whether that means passing to the next generation, gearing up for growth or considering a sale,” she continued.

Brady's legislative experience includes working in the White House as deputy counsel to the President during the Reagan Administration and serving as assistant to the President, staff secretary and general counsel to the Department of Transportation from 1991 to 1993 under President George H.W. Bush.

“It’s a privilege and a pleasure to be associated with Kerrigan Advisors, the well-recognized consummate professionals in representing dealers as they evaluate strategic options for their businesses,” Brady said. “I very much look forward to re-engaging with my many friends and colleagues in the auto retail industry.”

Prior to taking on his roles in government in D.C., Brady practiced law in California.

He is a graduate of the University of Notre Dame and Loyola University New Orleans College of Law.

In addition to his new advisory role, Brady currently serves as an adjunct professor at Catholic University of America’s Columbus School of Law.

Contact At Once! aquires new patent for mobile messaging

ATLANTA - 

Contact At Once! announced Monday that the United States Patent and Trademark Office recently issued it a patent for a system designed to analyze messages and initiate communication sessions for clients.

The new patent was developed to enhance the service that Contact At Once! customers are able to provide consumers who wish to communicate with businesses via chat and mobile messaging sessions, according to the company.

"Contact At Once! has continually invested in technological innovations to allow in-market shoppers and businesses to message at scale through a variety of media,” Contact At Once! vice president of product and strategy Marc Hayes said in a news release.

“This latest patent is another example of our commitment to helping our brands seamlessly connect with consumers in innovative ways that are most convenient for shoppers," he said.

Additionally, the company said the newly acquired patent expands on another recent patent by Contact At Once! that features a system and method for publishing online advertisements and search results.

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