By David Undercoffler, Crain News Service
LOS ANGELES (June 2, 2015) — TrueCar Inc.'s legal woes mounted May 27 as the online car-buying service was hit with a shareholder lawsuit alleging that it misled its investors about how it does business.
The suit, filed in federal court in Los Angeles, seeks class-action status on behalf of shareholders who sustained losses on TrueCar stock since the company's May 2014 initial public offering, and opens up a new avenue of attack against the firm, which has had a history of run-ins with state regulators and conflicts with auto dealers within and outside its network.
The shareholder suit cites declines in TrueCar's stock price following two other lawsuits against the company.
In March, a group of auto dealers representing 174 franchises outside TrueCar's network filed a lawsuit in New York claiming TrueCar was falsely advertising that shoppers could use its site to avoid price negotiations. That suit seeks more than $250 million in damages. The day after that suit was filed, TrueCar's stock price fell 2.7 percent, the latest complaint says.
Last month, the California New Car Dealers Association (CNCDA) charged in a lawsuit that TrueCar functions as a car dealer and broker without proper licenses. That suits seeks clarification within California's law. As a result of the CNCDA's May 20 suit, the shareholder complaint alleges, TrueCar's stock price tumbled 6.9 percent on the news.
“As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages,” the suit reads.