Raatz et al v. Dealer Trade Incorporated et al

Filing 124

ORDER granting in part and denying in part 114 Motion for Summary Judgment; denying 116 Motion for Summary Judgment. The Court will hold a telephonic hearing on June 30, 2017 at 2:00 p.m. to set a date for a trial on damages. Counsel for Plain tiffs shall initiate a conference call to include counsel for all parties and the Court. If a dial-in number is to be used, counsel for Plaintiffs shall provide the dial-in information to all parties and the Court no later than June 29, 2017 at 12:00 noon. Signed by Judge David G Campbell on 6/8/2017.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Tom Raatz, et al.,
Plaintiffs,

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ORDER

v.

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No. CV-16-00170-PHX-DGC

Dealer Trade Incorporated,

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Defendant.

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Plaintiffs Tom Raatz, Marcine Raatz, and TMR LLC filed this action against

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Defendant Dealer Trade Inc. d/b/a Luxury Motorsports, asserting violation of the Federal

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Odometer Act (49 U.S.C. § 32701) and breach of contract. Doc. 1. After stipulating to

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the dismissal of Plaintiffs’ Odometer Act claim (Doc. 104), the parties have filed cross-

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motions for summary judgment on the breach of contract claim. Docs. 114, 116, 119,

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123. No party requests oral argument. The Court will grant Plaintiffs’ motion in part and

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deny Defendant’s motion.

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I.

Background.

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The following facts are undisputed. In the summer of 2015 Plaintiffs were looking

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to purchase a vehicle for their family. Doc. 115, ¶ 1; Doc. 116 at 2 (stating that

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Defendant does not contest ¶¶ 1-24 of Doc. 115).

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advertisement for a used 2010 Infiniti QX56 with less than 36,000 miles (“QX56,” or

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“the Vehicle”). Doc. 115, ¶ 2. In August 2015, Plaintiffs traveled from Iowa to Arizona

Plaintiffs saw Defendant’s

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to purchase the Vehicle. Id., ¶ 3. Throughout the sales process, Defendant represented to

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Plaintiff that the Vehicle had less than 36,000 actual miles. Id., ¶ 4.

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On August 24, 2015, the parties entered into a Retail Buyer’s Order (“RBO”), in

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which Defendant stated that the Vehicle had 35,648 miles and Plaintiffs agreed to

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purchase the Vehicle for $33,359.75. Id., ¶¶ 6-8. The RBO stated that the Vehicle “is

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sold ‘AS IS – NOT EXPRESSLY WARRANTED OR GUARANTEED.’” Doc. 117, ¶ 14; Doc. 120

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at 1 (stating that Plaintiffs do not dispute ¶¶ 10-15 of Defendant’s separate statement of

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facts (Doc. 117)). Plaintiffs put $3,000 down, and financed the remaining purchase

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amount through a credit union. Doc. 115, ¶ 9.

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Plaintiffs drove the Vehicle back to Iowa and took it to the Willis Infiniti

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dealership for service. Id., ¶ 10. The dealership informed Plaintiffs that service records

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showed the Vehicle was serviced approximately four years earlier, on September 29,

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2011, at which time it had an odometer reading of 46,731 miles. Id., ¶ 11. After learning

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of the mileage discrepancy, Plaintiffs immediately contacted Defendant. Id., ¶ 14.

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Between October 6 and October 19, 2015, Plaintiffs reached out to Defendant on

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four separate occasions – once by telephone and three times by email – seeking a refund

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of the sales price, but Defendant did not respond. Id., ¶¶ 15-20. Plaintiffs have been

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forced to pay off their loan with the credit union due to the reduced value of the Vehicle.

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Id., ¶ 21. Plaintiffs would not have purchased the Vehicle had they known it had more

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mileage than was reflected by the odometer. Id., ¶¶ 22-23.

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II.

Legal Standard.

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A party seeking summary judgment “bears the initial responsibility of informing

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the district court of the basis for its motion, and identifying those portions of [the record]

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which it believes demonstrate the absence of a genuine issue of material fact.” Celotex

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Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the

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evidence, viewed in the light most favorable to the nonmoving party, shows “that there is

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no genuine dispute as to any material fact and the movant is entitled to judgment as a

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matter of law.” Fed. R. Civ. P. 56(a). Summary judgment is also appropriate against a

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party who “fails to make a showing sufficient to establish the existence of an element

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essential to that party’s case, and on which that party will bear the burden of proof at

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trial.” Celotex, 477 U.S. at 322. Only disputes over facts that might affect the outcome

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of the suit will preclude the entry of summary judgment, and the disputed evidence must

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be “such that a reasonable jury could return a verdict for the nonmoving party.”

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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

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III.

Plaintiffs’ Motion for Summary Judgment.

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Plaintiffs seek summary judgment on their breach of contract claim on the basis of

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breach of express warranty. Doc. 114 at 5-7. Defendant argues that breach of express

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warranty was not asserted in Plaintiffs’ complaint and is a separate and distinct claim.

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Doc. 116 at 1-10. Defendant also argues that the RBO disclaimed any express warranty

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and that the mileage statement in the RBO did not constitute an express warranty.

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A.

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In their complaint, Plaintiffs plead the following facts:

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[Defendant] sold the QX56 to Plaintiffs on August 24, 2015.

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Plaintiffs and [Defendant] signed a contract memorializing the purchase.

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In the contract, [Defendant] represented that the QX56 had 35,648 original
miles.

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Adequacy of Plaintiffs’ Complaint.

Plaintiffs paid [Defendant] $30,459.75 to purchase the QX56.

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Plaintiffs relied upon the affirmative representations of [Defendant] that the
QX56 had 35,648 actual miles in making the decision to buy the QX56.

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Plaintiffs did not know about the prior mileage history of the QX56.

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Had Plaintiffs known about the prior mileage history they would not have
purchased the QX56.

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Doc. 1, ¶¶ 18-24. The complaint later alleges that this constituted a breach of contract.

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Id. at 4.

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Defendant contends that these allegations fail to allege a claim for breach of

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express warranty because the complaint fails to include: (1) “separate and distinct counts

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for alleged breaches of express warranty and implied warranty of merchantability, both of

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which relate to the contract, but do not give rise to a breach of contract claim”; (2) any

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language referencing the Arizona Uniform Commercial Code, which would govern a

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breach of express warranty in this instance; and (3) any “averments that [Defendant]

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warrantied anything, much less the accuracy of the odometer.” Doc. 116 at 7.

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The Court is not persuaded. Under Arizona law, “[a]ny affirmation of fact or

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promise made by the seller to the buyer which relates to the goods and becomes part of

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the basis of the bargain creates an express warranty that the goods shall conform to the

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affirmation or promise.” A.R.S. § 47-2313(A)(1). The complaint clearly alleges an

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affirmation of fact (the mileage represented in the contract), in connection with a sale of

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goods, and facts suggesting that the affirmation became a basis for the bargain (Plaintiffs

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relied on the mileage representation and would not have entered the contract had they

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known the mileage was incorrect). The complaint thus pleads the elements of a breach of

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warranty claim.

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In Arizona, “[e]xpress warranties are treated like any other contract and

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interpreted according to general contract principles.” Chaurasia v. Gen. Motors Corp.,

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126 P.3d 165, 169 (Ariz. Ct. App. 2006). The same is true for implied warranties. Lofts

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at Fillmore Condo. Ass’n v. Reliance Commercial Const., Inc., 190 P.3d 733, 734 (Ariz.

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2008) (“A claim for breach of the implied warranty sounds in contract.”). And Arizona

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courts repeatedly have held that breach of warranty claims arise out of contract. Id. at

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174 (“Time after time, Arizona courts have held that a claim for breach of warranty does

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arise out of contract for purposes of A.R.S. § 12–341.01(A).”); Woodward v. Chirco

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Constr. Co., Inc., 687 P.2d 1269, ___ (Ariz. 1984) (holding that claims for breach of

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implied warranty arise out of contract); Colberg v. Rellinger, 770 P.2d 346, ___ (Ariz. Ct.

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App. 1998) (holding that claims for breach of express warranties sound in contract);

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Ponderosa Plaza v. Siplast, 888 P.2d 1315, ____ (Ariz, Ct. App. 1993) (awarding

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reasonable attorneys’ fees to the defendant under A.R.S. § 12–341.01(A), finding that

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any duty to the plaintiff arose out of an express warranty and that a breach of that

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warranty arises out of contract, not tort). Indeed, this Court has noted that a breach of

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contract claim can be proved by establishing breach of warranty. Palmer v. Web Indus.

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Inc., No. CV 04-2362-PCT-SMM, 2007 WL 45927, at *7 (D. Ariz. Jan. 8, 2007) (“In

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order to succeed on her breach of contract claim, Plaintiff must demonstrate that the

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dealership made an ‘express warranty,’ which was later breached.”).

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Given these authorities and the fact that Plaintiff pleaded facts which Arizona law

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would deem a breach of warranty, the Court cannot conclude that Plaintiffs have failed to

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assert a breach of warranty claim in this case. The Court notes that Defendant does not

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assert that it was unaware of a breach of warranty claim or was prejudiced by Plaintiffs’

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failure to expressly label their claim as “breach of warranty.”

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Defendant argues that each case cited by Plaintiffs in support of their motion

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expressly included a claim for breach of warranty in the complaint. Doc. 116 at 6-7.

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While it may be true that parties often plead both breach of contract and breach of

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warranty claims, Defendant presents no case holding that a claim for breach of warranty

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is barred if the only claim asserted in the complaint is breach of contract. The Court has

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found no such authority.

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B.

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The parties disagree on whether a seller’s representation of the mileage of a

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vehicle constitutes an express warranty under A.R.S. § 47-2313. An express warranty is

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created if four elements are met: (1) any affirmation of fact; (2) made by the seller to the

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buyer; (3) which relates to goods; and (4) becomes part of the basis of the bargain. Id.

Was An Express Warranty Created?

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In this instance, it is uncontested that Defendant affirmed to Plaintiffs that the

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mileage of the vehicle was 35,648. See Doc. 115, ¶ 7; Doc. 117, ¶ 1. Similarly, given the

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basic fact that a vehicle’s value is determined in significant part by the vehicle’s mileage,

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Defendant’s representation of the Vehicle’s mileage clearly related to the Vehicle. See

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A.R.S. § 47-2313. The only remaining question is whether the Vehicle’s mileage formed

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a basis of the bargain during the negotiation for sale. Id.

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Plaintiffs’ statement of facts asserts that they drove from Iowa to Arizona to

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purchase the Vehicle which was advertised as having less than 36,000 miles, Defendant

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affirmatively represented to them that the Vehicle had 35,642 miles, and Plaintiffs would

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not have purchased the Vehicle had they known that it had more mileage than Defendant

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represented. Doc. 115, ¶¶ 3, 7, 22. Defendant admits each of these facts. Doc. 117 at 1-

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2. These undisputed facts establish that the Vehicle’s mileage was a basis of the bargain.

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Defendant argues that “although the contract and any documents relating to the

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purchase of the QX56, reflecting the mileage at 35,648, may be characterized as an

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affirmation of fact, it does not necessarily give rise to an express warranty.” Doc. 116 at

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9. In support, Defendant relies on Roberts v. Robert V. Rohrman, Inc., 909 F.Supp. 545,

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547 (N.D. Ill. 1995). In Roberts, the district court found that a dealer’s “repeated

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representation that the mileage on [a vehicle] at the time of sale was 10,350 was an

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affirmation of fact but [did] not necessarily give rise to an express warranty” because no

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evidence had been submitted to show that the inspections reasonably performed by the

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dealer would have discovered that the odometer was incorrect. Id.. at 552. Like the

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dealer in Roberts, Defendant argues that it did not create an express warranty because it

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did not have the capability to verify the accuracy of the odometer, and only represented

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the actual mileage of the Vehicle “to the best of its knowledge,” as stated in the Secure

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Odometer Disclosure Defendant presented to Plaintiffs. Doc. 116 at 9.

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Although no Arizona case the Court could find addresses the issue, other courts

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have done so. For example, in Prishwalko v. Bob Thomas Ford, Inc., 636 A.2d 1383,

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1390 (Conn. App. Ct. 1994), a Connecticut court considered a similar dispute involving a

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plaintiff who purchased a used vehicle with an odometer that had been rolled back

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without the dealer’s knowledge. Id. at 1385. The court interpreted Conn. Gen. Stat. Ann.

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§ 42a-2-313 – Connecticut’s analogous version of A.R.S. § 47-2313 – to apply to the

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dealer, even though it was unaware of the odometer’s inaccuracy. Id. at 1390 (“In

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contracts for the sale of tangible chattels, express warranty encompasses material

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representations which are false, without regard to the state of mind or the due care of the

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person making the representation,” and “[i]nnocent misrepresentations . . . are still

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actionable.”).

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Connecticut’s § 42a-2-313 is virtually identical to Arizona’s § 47-2313, and the

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Court agrees with the Prishwalko court’s analysis. The Court finds nothing in A.R.S.

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§ 47-2313 that requires the dealer to have knowledge of the odometer’s inaccuracy in

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order to create an express warranty regarding the vehicle’s mileage.

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because Defendant presents no evidence that the mileage of the Vehicle did not form a

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“basis for the bargain,” all four elements of § 47-2313 are met and an express warranty

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was created. To the contrary, the Arizona statute is broad, covering “[a]ny affirmation of

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fact or promise made by the seller to the buyer which relates to the goods and becomes

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part of the basis of the bargain[.]” A.R.S. § 47-2313(A)(1) (emphasis added).

Accordingly,

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C.

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Defendant next argues that “the parties contracted to limit the implied warranties

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of merchantability . . . and waived all other express and implied warranties.” Doc. 116 at

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7 (citing Doc. 117, ¶¶ 13-14). In response, Plaintiffs concede that the parties agreed to

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limit the implied warranties of merchantability. Doc. 119 at 6. But Plaintiffs argue that

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“express warranties, once made, cannot be disclaimed.” Id. at 3-4 (citing Epsman v.

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Martin-Landers, LLC, 2007 WL 2819592, at *1 (W.D. Ark. 2007)).

The Contract Does Not Limit Express Warranties.

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The parties do not cite, and the Court has not found, any Arizona case stating that

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an express warranty cannot be disclaimed by a contract, but Arizona law clearly disfavors

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the type of disclaimer used in this case. Specifically, A.R.S. § 47-2316(A) states that

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“[w]ords or conduct relevant to the creation of an express warranty and words or conduct

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tending to negate or limit warranty shall be construed wherever reasonable as consistent

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with each other[,]” and that “negation or limitation [of an express warranty] is inoperative

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to the extent that such a construction is unreasonable.” A.R.S. § 47-2316(A). The

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U.C.C.’s comment to the model statute from which this language is drawn states that

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“[t]his section is designed principally to deal with those frequent clauses in sales

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contracts which seek to exclude ‘all warranties, express or implied.’ It seeks to protect a

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buyer from unexpected and unbargained language of disclaimer by denying effect to such

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language when inconsistent with language of express warranty[.]” U.C.C. § 2-316, cmt.

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1. The disclaimer language relied on Defendant is contained in fine print at the bottom of

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the RBO.

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representation, earlier on the same page, that the Vehicle had 35,648 miles. Doc. 115-1

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at 6.

It clearly was not bargained for and is inconsistent with the express

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The U.C.C. comment to the provision underlying A.R.S. § 47-2313 also supports

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this conclusion, stating that “a contract is normally a contract for sale of something

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describable and described. A clause generally disclaiming ‘all warranties, express or

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implied’ cannot reduce the seller’s obligation with respect to such description and

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therefore cannot be given literal effect under § 2-313.” U.C.C. § 2-313, cmt. 4. The

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RBO clearly included a specific description of the Vehicle has having 35,648 miles.

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Doc. 115-1 at 6.

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D.

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Based on uncontested facts, Plaintiffs have shown that there was an express

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warranty as to the mileage of the Vehicle, the express warranty was not validly

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disclaimed in the contract, and the warranty was breached because the mileage was

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inaccurate. The Court holds on summary judgment that Defendant breached the express

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mileage warranty in the RBO.

Summary.

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Arizona law provides that “[t]he measure of damages for breach of warranty is the

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difference at the time and place of acceptance between the value of the goods accepted

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and the value they would have had if they had been as warranted, unless special

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circumstances show proximate damages of a different amount. In a proper case any

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incidental and consequential damages under § 47-2715 may also be recovered.” A.R.S.

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§ 47-2714. This case includes a factual dispute regarding the value of the Vehicle on the

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date it was purchased by Plaintiffs. Plaintiff’s expert opines that the Vehicle had a value

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of $16,500 (Doc. 115-1 at 23), while Defendant’s expert disagrees with both the

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conclusion and the basis of Plaintiff’s expert’s opinion (Doc. 117 at 8-11). Specifically,

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Defendant’s expert disagrees with the number of actual miles Plaintiffs’ expert “threw

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out as conceivable,” and with the impact a “Box B” or “Box C” title has on a vehicle’s

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value. Id. Defendant’s expert does not, however, provide an opinion as to the precise

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actual value of the vehicle. See id. at 12. Although the absence of a defense opinion on

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the value of the Vehicle raises questions regarding the utility of a trial in this case (the

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time for expert disclosures has passed), this dispute between experts precludes summary

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judgment on the issue of damages.

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IV.

Defendant’s Motion for Summary Judgment.

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Defendant argues that Plaintiffs’ claims against Defendant must be dismissed

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because Plaintiffs plead breach of contract, not breach of warranty, and Plaintiffs admit

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that they have no evidence to support their assertion that Defendant falsely represented

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the Vehicle’s mileage. But, as discussed above, Plaintiffs complaint sufficiently pleads a

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claim for breach of warranty, and a claim for breach of warranty does not require proof

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that Defendant knew its mileage representation was false. See Prishwalko, 636 A.2d

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at 1390 (finding that even “[i]nnocent misrepresentations . . . are still actionable.”).

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Defendant’s motion for summary judgment will be denied.

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IT IS ORDERED:

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1.

Plaintiffs’ motion for summary judgment (Doc. 114) is granted in part.

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2.

Defendant’s motion for summary judgment (Doc. 116) is denied.

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3.

The Court will hold a telephonic hearing on June 30, 2017 at 2:00 p.m. to

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set a date for a trial on damages. Counsel for Plaintiffs shall initiate a

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conference call to include counsel for all parties and the Court. If a dial-in

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number is to be used, counsel for Plaintiffs shall provide the dial-in

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information to all parties and the Court no later than June 29, 2017 at

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12:00 noon.

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Dated this 8th day of June, 2017.

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