As mentioned above the dealer will bully sometimes, especially if you got a better deal than they intended! ;pg; Look at it this way, and maybe present it to the dealer as well, to the best of your honest knowledge the vehicle you traded in had a clean title as certified to you, the original purchaser, by the state. I'd say the state title carries a bit more weight than CarFax, which is just a private reporting agency. It's the dealerships responsibility to verify all the pertinent info when engaging in a transaction, they're the ones licensed and regulated. You're a hapless consumer just trying to get a good product for your hard-earned buck. They want to bring legal action? Doubtful, they know they'll lose on the initial fees and then in covering yours. Best bet to put your mind at ease? Consult with your own attorney. A small investment for big peace of mind, plus the opportunity to snub the dealer. Just don't go there for service!