Zipcar Dodges Class Action Lawsuit over Vehicle Damage Charges

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A New York federal judge has dismissed a class action lawsuit that accused Zipcar Inc. of violating state business law by failing to follow certain procedures when charging customers for vehicle damage, finding that the plaintiffs did not have a private right of action under the relevant statute.

Zipcar operates a car sharing service that provides vehicles at a variety of locations throughout major cities and college campuses worldwide. According to the Zipcar policies, Zipcar members are “responsible for any and all damage that occurs to a Zipcar vehicle while in the Member’s possession or control.” Liability is typically limited to a predetermined damage fee that is calculated based on the member’s driving plan and type of vehicle used. Eligible members can purchase a damage fee waiver that can eliminate or reduce the damage fee.

According to the class action lawsuit, which was filed in July 2013 by Jessica Sigall and her father Michael Sigall, Jessica rented a Zipcar using a credit card issued to her father. After the Zipcar’s mirror was allegedly damaged by an unknown person, Zipcar charged the credit card for a damage fee of $486.34. The plaintiffs say they did not agree to the charge.

The plaintiffs made a claim with their insurer, which asked for documentation from Zipcar. However, because Zipcar allegedly failed to provide the documentation, the insurer has not paid the claim. The plaintiffs also disputed the charge with their credit card issuer, which credited their account but has since re-billed them for the vehicle damage charge. The plaintiffs voluntarily dropped their Truth in Lending Act claims against the credit card issuer in January.

On Monday, U.S. District Judge J. Paul Oetken granted Zipcar’s motion to dismiss the class action lawsuit and denied the plaintiffs’ motion for class certification. He found that the plaintiffs could not allege violations of a New York law governing rental vehicle companies because the statute does not allow for a private cause of action.

The statute at issue is New York General Business Law Section 396-z, which prohibits rental car companies from holding an authorized driver liable for damages without following specific procedures, such as physically surveying the vehicle, issuing an incident report, and allowing the renter to inspect the vehicle. The plaintiffs alleged in their class action lawsuit that Zipcar is a rental vehicle company that is subject to section 396-z and that it failed to follow the required procedures before charging them for vehicular damage.

Judge Oetken disagreed with the plaintiffs’ assertions after determining that New York’s appellate courts have established that while renters may assert non-compliance with section 396-z as an affirmative defense, the statute cannot serve as the basis for a lawsuit. Because the fraud and deceptive business practices claims depend on the applicability of section 396-z, the judge found that those claims couldn’t stand and dismissed the class action lawsuit, rendering the plaintiffs’ request for class certification moot.

The plaintiffs are represented by Tiffany N. Hardy of Edelman Combs Lautner & Goodwin LLC and Lawrence Katz.

The Zipcar Vehicle Damage Charge Class Action Lawsuit is Michael Sigall, et al. v. Zipcar Inc., et al., Case No. 1:13-cv-04552, in the U.S. District Court for the Southern District of New York.