TrueCar Founder and CEO Scott Painter faces another legal challenge about the site's business practices.

U.S. auto dealers have long-complained that TrueCar and its cadre of captive dealers have an unfair advantage. Now some of those affiliated dealers aren’t happy with the online data provider either and are suing for $250 million.

In a lawsuit filed in U.S. District Court in New York, 117 dealers claim TrueCar made false claims in advertisements and created unfair competition. The suit claims that TrueCar’s ads assert that potential buyers “can purchase an automobile with no haggling and ‘no negotiation’.”

The suit contends that isn’t accurate because TrueCar provides dealers with sales leads and customer contact information. However, it doesn’t eliminate the “haggling” process, according to the suit.

On TrueCar’s website, it touts that its average user saved $3,221 in 2014 using the website. The site essentially allows the user to find the type of vehicle he or she is interested in and then provides the Manufacturer’s Suggested Retail Price for the vehicle, what similar vehicles in that area have sold for and what price they should expect and the dealer or dealers with that vehicle.

However, if the dealers don’t agree to the price, the potential buyers typically walk away from the deal and have a negative perception of the dealership involved. The lawyer who filed the suit, Leonard Bellavia, said each of the dealerships involved in the suit have lost $432,000 each.

He arrived at that number by suggesting each dealership lost at least three sales each month at an average profit of $2,000. This happened every month for four years. In addition to the $250 million, the dealers are seeking reimbursement of attorney fees as well as repayment of perceived damages to the individual dealerships. In addition the suit seeks all of the profits TrueCar earned using alleged false methods of advertisement and creation of an environment of unfair competition.

According to TrueCar, it has 10,500 Certified Dealers nationwide and more than 600,000 buyers used TrueCar to buy vehicles last year. Not surprisingly, it denies the allegations.

(TrueCar exploring used-car market options. For more, Click Here.)

“At TrueCar, we take compliance with all laws very seriously,” said Alan Ohnsman, TrueCar’s chief communications officer, in a statement. “We have invested substantial resources in our compliance efforts, and we have proactively engaged in dialogues about our business model with various regulatory authorities and dealer associations across the country.

“We have high confidence that we are compliant with all laws applicable to our business, including those referenced in this litigation. We will defend the lawsuit, and our business practices vigorously and we expect to be fully vindicated.”

(Click Here for details about less-than-impressive TrueCar IPO.)

This isn’t the first time TrueCar has faced a significant legal challenge. TrueCar ran into some serious challenges in 2012 when dealers and regulators around the country questioned whether its model ran afoul of strict state franchising regulations. Notably, states like Texas and Virginia bar so-called “bird-dogging,” or auto brokering, where a third party steps in to help a customer get a better price. A number of states called the arrangement illegal under their dealer-franchise laws.

The service has since adopted a less direct model that doesn’t focus on invoice pricing. According to founder and CEO Scott Painter, it has had to also tweak its system to cope with those various franchise laws, meaning that it presents slightly different information depending upon the state a user lives in.

(To see more about problems with GM’s buyback, Click Here.)

The brouhaha initially led thousands of dealers to walk away from TrueCar but it has largely recovered since then – and it is betting that its financial improvement will signal the company’s potential to investors.