Sunday Enterprises, Inc. v. United Rentals Incorporated

Filing 63

OPINION. Signed by Honorable Judge Myron H. Thompson on 10/14/2011. (cc, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

SUNDAY ENTERPRISES, INC.,
Plaintiff,
v.
UNITED RENTALS (NORTH
AMERICA), INC.,
Defendant.

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CIVIL ACTION NO.
1:11cv85-MHT
(WO)

OPINION
In this lawsuit, plaintiff Sunday Enterprises, Inc.
(“SEI”), a swimming-pool construction company, asserts
various fraud, negligence, and product-liability claims
against defendant United Rentals (North America), Inc.
(“United Rentals”), arising out of SEI’s purchase of
surveying equipment from United Rentals.

In addition to

responding with an indemnity counterclaim, United Rentals
removed this case from state to federal court based upon
diversity-of-citizenship jurisdiction, 28 U.S.C. §§ 1332,
1441.

This cause is now before the court on United Rentals’
motion for summary judgment in its favor on SEI’s claims.
Summary

judgment

is

warranted

if,

after

viewing

the

evidence in the light most favorable to the non-moving
party and drawing all reasonable inferences in their
favor, the court is convinced “that there is no genuine
dispute as to any material fact and the movant is entitled
to judgment as a matter of law.”

Fed. R. Civ. P. 56(a);

Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986).

For the reasons that follow,

the

summary

court

entered

in

concludes
favor

of

that

United

judgment

Rentals

on

all

should
of

be

SEI’s

claims.1

I. BACKGROUND
2005:

In July 2005, the owner of SEI purchased two

brand-new “CST Berger 20X Transit Levels” from United
1. United Rentals also seeks summary judgment in its
favor on its counterclaim.
Whether United Rentals is
entitled to summary judgment on its counterclaim will be
addressed separately and later.
2

Rentals in Dothan, Alabama.

The sales agreement, which

the owner signed, provides that, “Unless United indicates
otherwise on the front page of this Sales Agreement, the
Equipment is used and was previously rented out by United
to numerous persons”; that, “Whether or not the Equipment
is used, it is being sold by United ‘AS IS’, WITH ALL
FAULTS”; that “United makes no representation or warranty
on any matter whatsoever”; and that “ALL WARRANTIES,
INCLUDING

ANY

IMPLIED

WARRANTY

OR

MERCHANTABILITY

OR

FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY EXCLUDED
AND DISCLAIMED.”

Sales Agreement (Doc. No. 35-3, at 3).

The agreement also provides that, “Any oral or other
statements that United’s employees may have made regarding
the Equipment do not constitute warranties, are disclaimed
by United, and shall not be relied upon by the Customer.”
Id. Despite these disclaimers, United Rentals often sends
equipment to manufacturers or other companies for repair
or calibration as a service to customers.

3

Because the pools that SEI built with the CST Berger
units were out of level, SEI’s owner complained to United
Rentals that the units were either defective or needed to
be re-calibrated, and, in October 2005, he returned the
CST

Berger

units

and

obtained

two

different,

more

expensive, levels; one was purchased, and the second one
was bought on store credit from the return of the CST
Berger units.

SEI’s owner signed another sales agreement

identical to the one he had signed before.
During the July and October 2005 purchases, SEI’s
owner spoke with the same Inside Sales Coordinator, Norman
Scott.

In the first sale, Scott told the owner that the

CST Berger unit was a “good product.”

Scott was also the

one who allowed the owner to return the CST Berger transit
levels and use that money towards the purchase of the
other

two

levels.

After

the

October

2005

sale

and

exchange, Scott told SEI’s owner that he was “good to go.”
But, because he was only a salesman, Scott did not have
special expertise in operating transits or levels and

4

would

tell

customers

to

follow

the

manufacturer’s

instructions when using them.
2005-2006:

Between October 2005 and March 2006, SEI

had no problems building level pools with the levels
purchased at United Rentals.

In March and April of 2006,

however, several swimming pools SEI built using levels
from the October 2005 purchase were out of level.
In total, SEI built 11 un-level pools using equipment
purchased at United Rentals.
out

of

level,

SEI’s

Each time a pool was built

owner

discovered

the

defect

contemporaneously with finishing the pool when it was
filled with water.

Upon discovering the defect, he would

demolish and rebuild each pool.

When rebuilding the

pools, he would typically use equipment not purchased at
United Rentals.
2007-2008:

United

Rentals

employment in November 2007.

terminated

Scott’s

On December 30, 2008, SEI’s

owner ran into Scott while shopping at a Wal-Mart.

The

owner asked Scott “questions about the levels or transits

5

and said that he had lost his pool business.”

Scott Aff.

(Doc. No. 35-2, at 4). Scott expressed his sympathies and
“commented
experiencing

...

that

[he]

problems

recalled

using

some

other
levels,”

customers
but

was

referring to a laser level that SEI had never purchased or
used.

Id. at 5.

Scott also indicated that near the end

of his tenure at United Rentals he “became uncomfortable
selling certain levels.”

Id.

Scott does not recall the

exact date he became “uncomfortable,” but is certain that
this date “was after [his] sales to [SEI]” and swears that
he “never sold [SEI’s owner] a level or transit where [he]
believed there was a problem with the product.”
2010-2011:

Id.

SEI filed this lawsuit in state court on

December 29, 2010, and United Rentals removed it to
federal court on February 3, 2011.

6

II. DISCUSSION
Invoking Alabama law and relying on the two sales in
July and October of 2005, SEI charges United Rentals with
(1) fraud; (2) deceit; (3) fraudulent misrepresentations;
(4) negligence; and (5) violation of the product-liability
law,

that

is,

the

Liability Doctrine.

Alabama

Extended

Manufacturer’s

nited Rentals seeks summary judgment

in its favor on all of SEI’s claims, with its primary
defense being that the claims are barred by Alabama’s
statute of limitations. United Rentals also seeks summary
judgment

in

its

indemnification.

favor

on

its

counterclaim

for

The court agrees that, under Alabama

law, the time for bringing SEI’s claims had expired when
SEI filed its complaint in state court in December 2010.
All of the claims asserted in SEI’s complaint come
with a two-year statute of limitations.

See 1975 Ala.

Code § 6-2-38(l); Spain v. Brown & Williamson Tobacco
Corp., 872 So.2d 101, 112 (Ala. 2003).2
2.

Section

6-2-38(l)

of
7

the

1975

The principal
Alabama Code
(continued...)

issue here is when that statute of limitations begins to
run.
As a general matter, under Alabama law, where “the act
of which the injury is the natural sequence is itself a
legal injury to the plaintiff, a completed wrong, the
cause of action accrued and the statute begins to run from
the time the act is committed, be the actual damage [then
apparent] however slight.”

McWilliams v. Union Pac. Res.

Co., 569 So.2d 702, 703 (Ala. 1990) (internal quotes and
citations omitted) (bracketed part in original).
fraud-related claims, however,

For

Alabama law sometimes

permits tolling of the accrual date until a later moment
of “discovery.”

1975 Ala. Code § 6-2-3.3

2. (...continued)
provides that, “All actions for any injury to the person
or rights of another not arising from contract and not
specifically enumerated in this section must be brought
within two years.”
3. Section 6-2-3 fo the 1975 Alabama Code provides
that, “In actions seeking relief on the ground of fraud
where the statute has created a bar, the claim must not
be considered as having accrued until the discovery by
the aggrieved party of the fact constituting the fraud,
(continued...)
8

The parties agree that § 6-2-3's “discovery rule” does
not

apply

claims.
Inc.,

to

SEI’s

negligence

and

product-liability

See Russell Petroleum Corp. V. Environ Prods.,

333

F.

Supp.

2d

1228,

1232

(M.D.

Ala.

2004)

(Thompson, J.); Singer Asset Finance Co., LLC v. Conn.
Gen. Life Ins. Co., 975 So.2d 375, 382 (Ala. Civ. App.
2007).

The court therefore addresses these counts first.

Taking the two 2005 purchases together, United Rentals
argues that any legal injury accrued in 2005 and 2006 when
SEI built out-of-level pools with equipment purchased from
United Rentals.

United Rentals emphasizes that, in each

instance, both in October 2005 (when SEI, after building
out-of-level

pools,

returned

the

CST

Berger

units

purchased in July 2005) and then again in March and April
of 2006 (when several swimming pools SEI built using
levels from the October 2005 purchase were out of level),
SEI’s owner realized the pools were un-level.

Thus,

3. (...continued)
after which he must have two years within which to
prosecute his action.”
9

United Rentals contends, any possible legal injury or harm
associated with transits and levels was known to SEI in
2005 and 2006 at the time it filled the pools with water,
which was essentially contemporaneous with building the
pool.

Because this lawsuit was not filed until December

2010 (from four to five years after the construction of
out-of-level pools), there is no possible way, United
Rentals argues, this lawsuit can come within the two-year
statute

of

limitations.

The

court

holds

that

any

reasonable factfinder would have to agree with United
Rentals.
Admittedly,

Alabama

law

recognizes

that

in

many

instances a legal injury might not be immediately apparent
when the “act complained of” occurs and further recognizes
that the plaintiff’s injury may only come “as a result of,
and in furtherance and subsequent development of, the act
defendant has done.”

Ex parte Floyd, 796 So.2d 303, 308

(Ala. 2001) (internal quotes and citations omitted).

In

such a case, an action accrues when “the first indication

10

of damage becomes apparent to the claimant.”

CertainTeed

Corp. v. Russell, 883 So.2d 1266, 1269 (Ala. Civ. App.
2003); see, e.g., Russell, 333 F. Supp. 2d at 1232-33
(describing

injuries

that

come

from

subsequent

developments, like defective pacemakers, radiation, and
asbestos).

This rule pushes the accrual date beyond the

moments United Rentals sold the levels to SEI in July and
October 2005, but, notably, United Rentals does not even
contend that SEI’s claims accrued at the time of sale;
instead, and implicit in United Rentals’ argument, is a
recognition of the fact that the “subsequent development”
that demonstrated a legal injury was the moment that SEI
realized that pools built with equipment from United
Rentals were out of level.

More concretely, a reasonable

factfinder would have to conclude that any legal damage
traceable to United Rentals’ sale of the levels was
readily apparent the moment SEI’s owner saw the un-level
pool water and subsequently demolished and rebuilt the

11

pool, especially given that he did so with different
levels.
Therefore, any injury or legal harm resulting from the
sale

of

the

equipment

in

July

and

October

of

2005

occurred, at the latest, in March or April of 2006 when
SEI used this equipment to build out-of-level pools.
Beyond the dissatisfaction of having a pool built out-oflevel (as SEI makes clear in its claim for damages),
tearing

down

endeavor,

and

which

rebuilding
endeavor

each

would

pool
be

was

a

evidence

costly
of

a

quintessential “legal injury.”
To avoid this conclusion, SEI argues that a later
accrual

date

applies

here

because

even

in

non-fraud

actions, Alabama recognizes that a “plaintiff’s ignorance
of the tort or injury” can delay the accruing of claims if
there has been “fraudulent concealment by defendant.”
McWilliams, 569 So.2d at 703–04 (internal quotes and
citations

omitted).

SEI

contends

the

Wal-Mart

conversation between SEI’s owner and Scott revealed that

12

“fraudulent concealment” had happened in the 2005 sales.
The court cannot agree.

SEI misses the fact that the

“fraudulent concealment” exception refers to concealing
either that the cause of action exists or trying to hide
the injury itself.

See DGB, LLC v. Hinds, 55 So.3d 218,

224-26 (Ala. 2010). The Wal-Mart meeting does not reflect
that United Rentals concealed either a cause of action or
any injury; indeed, because SEI’s owner knew of any
possible injury from the first sale in 2005 when he
returned the CST Berger units in October of that year and
because he knew of any possible injury from the second,
October 2005 sale when, in March and April of 2006, he
built un-level pools using the levels from that sale, the
Wal-Mart meeting added nothing.
As to the fraud claims, SEI argues that the “discovery
rule” of § 6-2-3 of the Alabama Code should apply. Again,
the Wal-Mart conversation between Scott and SEI’s owner is
the basis for this argument. SEI contends that it did not
learn of United Rentals’ possible misrepresentations,

13

fraud, or deceit until December 30, 2008, when Scott told
SEI’s owner that he had become “uncomfortable” selling
certain levels.

However, even though Scott was actually

referring to levels he sold not to SEI but others, SEI
contends that this is the moment it “discovered” United
Rentals’ fraud. To be sure, if the statute of limitations
had begun to run on this date, the complaint would have
been timely.
The court cannot agree that the accrual date should
be set this far removed from the July and October 2005
purchase dates or from the numerous times in 2005 and 2006
when SEI built out-of-level pools with equipment purchased
at

United

Rentals;

nor

is

the

court

§ 6-2-3's discovery rule applies here.
“reasonable

reliance”

standard

convinced

that

In Alabama, the

applies

to

§

6-2-3,

Foremost Ins. Co. v. Parham, 693 So.2d 409, 421 (Ala.
1997),

which

“standard

requires

reasonably to discover fraud.”
concurring).

the

buyer

to

act

Id. at 438 (See, J.,

Thus, a fraud claim accrues “when the

14

plaintiff discovered the fraud or when the plaintiff
should have discovered the fraud in the exercise of
Id. at 417 (majority opinion).

reasonable care.”

Under

this standard, “where the undisputed evidence indicates
that the party or parties claiming fraud in a particular
transaction

were

fully

capable

of

reading

and

understanding their documents, but nonetheless made a
deliberate decision to ignore written contract terms,” a
court may enter judgment as a matter of law against them.
Id. at 421.
SEI does not maintain that any documents (including
United

Rentals’

sales

agreements)

were

fraudulent;

instead, SEI argues that Scott’s July 2005 comments to the
effect that GST Berger levels are “good products” and his
October 2005 statement that SEI’s owner would be “good to
go”

were

false,

misrepresentations.

deceptive,

and

fraudulent

Cf. Ex Parte Seabol, 782 So.2d 212,

216-17 (Ala. 2000) (looking to oral representations in
addition to the words of the relevant documents).

15

Relying on the reasonable-reliance standard, the court
rejects for two reasons SEI’s invocation of § 6-2-3's
discovery rule.
support

a

First, the evidence is insufficient to

finding

that

United

Rentals

actionable fraud to be discovered.

committed

any

The sales agreements

that came with each of SEI’s 2005 purchases expressly
provided that any “oral or other statements that United’s
employees may have made,” Sales Agreement (Doc. Nos. 35-3,
at

3,

34-4,

at

3),

do

not

constitute

warranties

or

guarantees about the products. Therefore, Scott’s general
statements

at

the

time

of

the

sales,

even

if

the

statements were contrary to the agreements, could not
constitute fraud, for SEI expressly agreed not to rely on
the

statements

of

salespersons.

See,

e.g.,

Alabama

Psychiatric Servs., P.C. v. 412 South Court Street, LLC,
___ So.3d ___, 2011 WL 4507364, at *6-7 (Ala. Sep. 30,
2011)

(discussing

the

elements

of

fraudulent

misrepresentation and the showing required for a claim to
be a “false representation”); Gant v. Azalea City Credit
Union, ___ So.3d ___, 2011 WL 835100, at *2-3 (Ala. Civ.
16

App. Mar. 11, 2011) (describing the reasonable reliance
standard and a plaintiff’s duty to read, inquire about,
and investigate the documents received in connection with
a particular transaction).
Second, even if one or both of Scott’s statements at
the time of the 2005 sales could support an actionable
fraud

claim

despite

the

disclaimers

in

the

sales

agreements, the statements still could not provide a basis
for invoking the discovery rule.

It cannot be overlooked

that SEI’s owner was fully aware of the problems with the
levels when he built out-of-level pools in 2005 and 2006,
especially given that SEI employees fell-back on other,
older level equipment to rebuild the pools.

A reasonable

factfinder would have to conclude that SEI knew, or should
have known, that everything was not as “good” as Scott
boasted in 2005 when, in 2005 and 2006, the equipment SEI
purchased from United Rentals resulted in out-of-level
pools.
broad

SEI’s reliance on these statements, assuming any
reliance

on

them

was

initially

reasonable,

dissipated with the building of the out-of-level pools.
17

No

reasonable

factfinder

could

find

that

§

6-2-3's

discovery rule applies here.

***

Because a reasonable factfinder would have to conclude
that all of SEI’s claims accrued in April 2006 if not
earlier and because this lawsuit was filed over four years
later, SEI’s claims are barred by the applicable the twoyear statute of limitations.
to

summary

judgment

on

all

United Rentals is entitled
of

SEI’s

claims.

appropriate judgment will be entered.
DONE, this the 14th day of October, 2011.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE

An