Pegg v. Nexus RVs LLC
Filing
72
OPINION AND ORDER DENYING 48 MOTION in Limine to Strike the Expert Opinion, 50 MOTION for Summary Judgment , and 70 MOTION to Continue Trial. Signed by Judge Philip P Simon on 7/2/2019. (bas)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
STEVE PEGG,
Plaintiff,
vs.
NEXUS RVS LLC,
Defendant.
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3:16-CV-783-PPS
OPINION AND ORDER
This case involves the purchase of an RV which, according to the plaintiff Steve
Pegg, was riddled with problems from the moment he drove it off the lot. Pegg claims
the manufacturer and seller, Nexus RVs, LLC, failed to live up to its express and
implied warranties and also asks the court to strike Pegg’s expert [DE 48, 50]. Because I
find that the expert opinion is reliable and relevant, and that genuine issues of material
fact remain as to Pegg’s claims, both motions will be denied. In other words, a jury is
going to have to decide whether Mr. Pegg is a fussy nitpicker, on the one hand, or was
an aggrieved customer, on the other.
Background
Pegg, a Texas resident, purchased a 2017 Nexus Ghost Recreational Vehicle on
May 4, 2016, for a total purchase price of $198,322.13 (which included a vehicle service
contract). [Pegg Aff., DE 56 at 2.]1 Nexus RV manufactured the RV which was
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Nexus complained that Pegg’s affidavit is unsigned, and that Pegg cited to non-existent
paragraphs in the affidavit. [DE 55 at 2.] Clearly, Pegg’s incomplete affidavit was filed in error,
and at my request, he filed a supplement on May 9, 2019 [DE 56], attaching a complete copy of
purchased by Pegg, and as part of the deal, Nexus provided Pegg a 1 year warranty.
[Id.; DE 52-3.] The warranty covered “defects in Nexus materials and/or workmanship
in construction of the recreational vehicle.” [DE 52-3 at 1.] The warranty also provided
that “[a]ll obligations of Nexus pursuant to this Limited Warranty are limited to
replacing or repairing the defective part of component.” Id.
On May 5, 2016, Pegg took delivery of the RV from the Nexus factory in Elkhart,
Indiana. During the pre-delivery walk through inspection, Pegg discovered a number
of problems with the RV, including: wrong size bed installed, safe box not installed,
trim behind rear, bunk wiring missing, trim behind rear TV falling off, trim missing
between bedroom and bunk, passenger slide out not closing properly, no hot water,
squeak in transition plate, missing tile work, no air compressor, no slide trade in cargo,
and the rear cargo doors were coming open. [DE 56 at 2-3; spreadsheet (DE 52-4).]
Pegg stayed overnight so that Nexus could repair the problems. [DE 56 at 3.] The
next day, Nexus told Pegg that the defects were repaired, so he took delivery and
headed home. Id. According to Pegg, he began experiencing problems with the RV on
his way home from the Nexus factory. Id. For example, he discovered that the hot
water was intermittently inoperable, the rear doors were still coming open, trim still
needed to be fixed, and the transition plate still squeaked. [DE 52-4.]
the affidavit, which was properly signed and certified. I then granted Nexus the opportunity to
file a supplemental reply so that it could respond to the complete affidavit. [DE 63.]
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When he got home, Pegg notified Steve Tobias (the Nexus service manager), via
text message of the following issues:
a.
Shower leak dripping from the left side of the shower pan;
b.
transition plate still squeaking;
c.
Water tank was sliding to the passenger side, drooping, and spilling while
moving. The overflow and the outlet were only a few inches apart;
d.
rear passenger cargo door doesn’t close properly because of the tank;
e.
suspension squeaky while turning right;
f.
bumper dent;
g.
mirror had a crack;
h.
access panel to laundry;
i.
hot water in and out;
j.
MCD shade in dinette would not go all the way up;
k.
cargo bay in front of passenger tire was banged up; and
l.
leak above the battery bay.
[DE 51-5.]
Prior to leaving on a two-week family trip, Pegg contacted Tobias in order to
obtain warranty repairs of these defects. [DE 56 at 3.] However, Tobias could not
arrange for an authorized repair facility to perform the warranty repairs on the route
for the family trip. Id. Instead, Tobias mailed parts to Pegg so he could repair the RV’s
water tank himself. Id.
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After returning from the family trip, Nexus selected and arranged for Mike’s RV
to repair the defects beginning on June 15, 2016. [Id.] Nexus authorized Mike’s RV to
perform warranty repairs on its behalf. [Donati Dep., DE 52-18, at 39-40.] In
anticipation of the service visit, Pegg provided a list of defects directly to Tobias
including: transition plate squeak, screen in top bunk falling out, dent in bumper from
the factory, shower leaks, sink leaks, fresh water tank loose and sliding around, rear
door not closing properly, driver’s side suspension squeaky, crack in mirror, access
panel falling off, hot water intermittently inoperable, shade in dinette won’t go all the
way up, cargo door damaged from loose fresh water tank, squeak in dining window,
cargo door misaligned, wood trim bubbling, wall seam tape peeling, water leak over
battery door, passenger side cargo compartment leaks, bath sink inoperable, and
electrical plugs inoperable. [DE 56 at 4; DE 52-4.]
On June 15, 2016, Mike’s RV picked up the RV to perform those repairs. [DE 56 at
4.] Because Pegg hoped to use the RV for the long Fourth of July weekend, and since
Mike’s RV was waiting for parts from Nexus, Mike’s RV returned the RV to Pegg on
June 28, 2016. Id. However, upon return of the RV, Pegg discovered roof damage to the
RV. Id. Mike’s RV acknowledged the roof damage and stated it would take the RV
back, patch up the roof, and install a new vent hood. Id. Mike’s RV took the RV back
that same day and returned it to Pegg on June 29, 2016. Id.
When he got the RV back, Pegg discovered that the RV was filthy, as if someone
had stayed in it, and there were scratches down both sides of the RV. Id. Although
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Mike’s RV attempted to buff out the scratches and repair the issues, Mike’s RV failed to
repair all of the problems. Id.
About a week later, on July 7, 2016, something strange happened; Pegg received
a letter from the Fort Worth Traffic Division indicating the RV had been in an accident
on June 17, 2016 — a time period during which Mike’s RV was supposed to be repairing
the RV. [DE 56 at 5.] Pegg then immediately contacted Tobias and told him the RV had
been in an accident while in the possession of Mike’s RV, and asked Tobias to find
another authorized repair facility to service the RV. Id.
Nexus then indicated that it would arrange for the RV to be transported to the
Nexus factory in Elkhart, Indiana. Id. In a letter dated July 20, 2016, Nexus agreed to
complete the repairs, but noted that Nexus was not responsible for the accident at
Mike’s RV, and that it was “not responsible for this situation.” [DE 52-8 at 2.] Evidently,
this was Pegg’s problem to work through. Nexus did say it was willing to work with
Pegg’s insurance carrier on the items that were damaged in the accident, provide
estimates, and perform the repairs if given authorization from State Farm. Id. This
response ticked Pegg off, and he responded with an e-mail dated July 25, 2019, stating
he was “not in agreement with your letter. As stated before I will not release you from
any obligation while my vehicle [is] in for service with you and your contracted
company.” [DE 51-11.]
After missing multiple pick up deadlines, Nexus finally picked up the RV on
August 19, 2016. [DE 56 at 6.] Pegg provided Nexus with a list of 72 defects to be
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repaired at the Nexus factory. Id. Despite telling Pegg that the repairs would be
completed by September 16, 2016, Nexus again missed its deadline. Id. Pegg claims
that in reality, Nexus did not even start work on the RV until October 1, 2016. [Spratt
Dep., DE 52-19 at 29, 33.] However, Nexus points to an e-mail to Pegg dated September
27, 2019, stating that “[t]he coach warranty repairs are completed and the Body and
Paint repairs are going to start as soon as I get the estimate into State Farm.” [DE 5115.] Ultimately, Pegg believed, “[a]fter months of waiting, I felt like I had no choice but
to file a lawsuit.” [DE 56 at 6.]
Pegg filed his complaint on November 21, 2016 [DE 1], and subsequently an
amended complaint. The amended complaint contains two counts: (1) breach of the
warranty and contract; and (2) breach of the Magnuson Moss Warranty Act (“MMWA”)
premised upon the breaches of warranty in the first count. [DE 16.]
Although Nexus disputes the amount of time the RV was out of service,
according to Pegg, the RV was out of service for 112 days, or more than half the first
seven months of his ownership. [DE 56 at 8.] Pegg states if he had known about the
RV’s many problems, he never would have purchased it. [Id. at 7.]
Plaintiff’s expert, Thomas Bailey, inspected the RV on April 23, May 10, and May
11, 2018. [DE 52-10 at 2.] Bailey opined that 64 of the 72 defects Pegg presented to Nexus
were covered under the warranty and were not repaired within a reasonable amount of
time. [DE 52-14 at 6-15; DE 52-10 at 3.] He also opined that 19 defects from Pegg’s list
of 72 defects that he reported to Nexus were never repaired. [DE 52-10 at 2-3; DE 52-14
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at 6-30.] Additionally, during his inspections, Bailey discovered 86 additional defects
with the materials and workmanship in the RV. [DE 52-10 at 3; DE 52-14 at 34-76.]
Bailey also believes that Pegg gave Nexus a reasonable opportunity to repair all of the
defects, and those defects caused the RV to be out of service for an unreasonable
amount of time. [DE 52-10 at 4; DE 52-14 at 6-15.] According to Bailey, the RV was not
merchantable, and the defects in the RV substantially impair the RV’s use, value,
and/or safety. [DE 52-10 at 4; DE 52-14 at 16-76.] Finally, it is Bailey’s opinion that the
RV is worth $123,833.13 less than Pegg paid for it due to the many defects, repair
history, failed repair attempts, and inherent diminished value. [DE 52-10 at 5-6; DE 5215 at 24-26.]
Discussion
Motion to Exclude Expert Tom Bailey’s Appraisal/Diminished Value Report
Plaintiff’s expert, Tom Bailey, proffered three reports: (1) a Certified Independent
RV Investigation Report of Alleged Manufacturer Defects; (2) a Certified Independent
Infrared Thermography Report; and (3) a Certified Independent RV
Appraisal/Diminished Value Report. It is only the last report that Nexus takes issue
with, claiming the diminished value calculation is inadmissible and should be excluded.
Let’s start with some basics. Federal Rule of Evidence 702 governs the
admissibility of expert testimony. It states, in relevant part, that a “witness who is
qualified as an expert by knowledge, skill, experience, training, or education may testify
in the form of an opinion or otherwise if: (a) the expert’s scientific, technical or other
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specialized knowledge will help the trier of fact to understand the evidence or to
determine a fact in issue.” Fed. R. Evid. 702. The Rule “also requires that: (1) the
testimony must be based upon sufficient facts or data; (2) it must be the product of
reliable principles and methods; and (3) the witness must have applied the principles
and methods reliably to the facts of the case.” Happel v. Walmart Stores, Inc., 602 F.3d
820, 824 (7th Cir. 2010). The district court must perform a “gatekeeping” function
before admitting scientific testimony in order to ensure that “all scientific testimony or
evidence admitted is not only relevant, but reliable.” Daubert v. Merrell Dow Pharms.,
Inc., 509 U.S. 579, 589 (1993). As a threshold matter, the district court must determine
(1) whether the expert would testify to valid scientific knowledge, and (2) whether that
testimony would assist the trier of fact with a fact at issue. Smith v. Ford Motor Co., 215
F.3d 713, 718 (7th Cir. 2000).
The first step is to analyze the reliability of the expert. In doing so, the role of the
court is to determine whether the expert is qualified in the relevant field and to examine
the methodology the expert has used in reaching his conclusions. Id. Rule 702
contemplates that an expert may be qualified by “knowledge, skill, experience, training,
or education.” Fed. R. Evid. 702. Thus, in determining whether a proposed expert is
qualified, a court may consider the proposed expert’s full range of practical experience,
as well as academic or technical training. Smith, 215 F.3d at 718. But “even a supremely
qualified expert cannot waltz into the courtroom and render opinions unless those
opinions are based upon some recognized scientific method.” Id. (internal quotation
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marks and brackets omitted). This means that a court “must rule out subjective belief or
unsupported speculation.” Cummins v. Lyle Indus., 93 F.3d 362, 368 (7th Cir. 1996)
(internal quotation marks omitted).
In Daubert, the Supreme Court identified four factors that are pertinent to the
reliability inquiry: (1) whether the theory has been tested; (2) whether the theory has
been subjected to peer review and publication; (3) the known or potential rate of error;
and (4) whether it has been generally accepted within the relevant scientific community.
509 U.S. at 593-94. The inquiry is flexible and must focus solely on the principles and
methodologies, not the conclusions they generate. Id. at 594. No single factor is either
required in the analysis or dispositive as to the outcome. See Kumho Tire Co., Ltd. v.
Carmichael, 526 U.S. 137, 141 (1999). And while Daubert involved scientific expert
opinion, the logic of Daubert was extended by the Supreme Court to expert opinion
based on technical and other specialized knowledge. Id.
If I think the expert’s testimony is reliable, the next step is to determine whether
the testimony is relevant. In making this determination, I must consider whether the
testimony assists the trier of fact in understanding the evidence or in determining a fact
at issue. Cummins, 93 F.3d at 368.
First, I am satisfied that Bailey is qualified to give expert valuation testimony. I
have reviewed his CV, he has conducted more than 2,000 specialized RV and bus
appraisals, has been retained as an expert in a number of similar appraisal and defect
investigations, and has been in the RV industry for more than 50 years. [DE 53-2.] This
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education, training, and experience makes him more than qualified to testify as an
expert under Rule 702.
Next, in looking at Bailey’s methodology and valuation opinions, I also find that
these are reliable. Although Nexus argues that Bailey’s opinion fails to show how he
arrived at the fair market value and diminished value calculations, but rather provided
a conlcusory number, I disagree. In his appraisal/diminished value report, Bailey set
forth 15 forces that can affect the value of an RV (including, among others, deterioration
of constructed material, the existence of defects and malfunctions, and time out of
service which could substantially impair the use or value of the RV), he defined an
appraisal, he set forth the accepted methods to determine fair market value (FMV), he
consulted sources such as the NADA (National Automobile Dealer Association) guide
book which is published and an accepted guideline, he defined diminished value, and
he then laboriously set forth the condition of everything in the RV from the siding on
the exterior to the beds on the interior. [DE 49-2 at 6-22.]
Nexus does not like Bailey’s deposition testimony that he “consider[ed]
everything in a lump sum when I’m formulating my opinion. I’m establishing the
value.” [DE 49-3 at 69; DE 49 at 11.] But that is kind of how an appraisal works. As
several other courts have recognized, appraisal is an art, not a science. See Hawthorne
Partners v. AT&T Technologies, Inc., No. 91 C 7167, 1993 WL 311916, at *4 (N.D. Ill. Aug.
11, 1993) (holding appraisal is not a branch of social science, “[a]ccordingly, in ruling on
the admissibility of an appraisal expert’s opinions, the court need not apply the same
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standards of methodological rigor required of social scientific inquiry”); In re Bucktown
Station, LLC, No. 11 B 02004, 2011 WL 3651336, at *3 (N.D. Ill. Aug. 18, 2011) (“Expert
appraisals are based on a recognized art, not science; and on experience, not a crystal
ball.”).
Another court in this district recently dealt with a similar challenge to a
valuation opinion by Bailey in an RV case, and found it was admissible:
Mr. Bailey’s approach may not have been “scientific,” but it was
specialized as well as technical, which is allowable under Rule 702.
See Lees v. Carthage Coll., 714 F.3d 516, 524-25 (7th Cir. 2013) (“Rule
702, . . . does not condition admissibility on the state of the
published literature, or a complete and flaw-free set of data.”) As
noted recently by a district court within this circuit when
addressing an insurance field adjuster’s challenged methodology:
The Seventh Circuit has cautioned that the test for reliability for
nonscientific experts is flexible. Unlike scientific or technical
experts, whose hypotheses can be tested or subjected to peer
review and whose methods can be measured against specific
industry standards, an insurance adjuster and appraiser cannot be
so mechanically scrutinized. [The field adjuster’s] opinions rely on
his experience, and expert testimony is not unreliable simply
because it is founded on [a witness’s] experience rather than data;
indeed, Rule 702 allows a witness to be qualified as an expert by
knowledge, skill, experience, or education. Church v. Church Mut.
Ins. Co., 13 C 1625, 2016 WL 772787, at *4 (N.D. Ill. Feb. 29, 2016).
Hoopes v. Gulf Stream Coach, Inc., No. 1:10-cv-365, 2016 WL 1165683, at *10 (N.D. Ind.
Mar. 25, 2016). I concur with this analysis and conclusion about Bailey’s testimony.
Because Bailey made three inspections in this case, collected data, and then made a
valuation based upon his experience in the industry and as an appraiser, his valuation
methodology is reliable.
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In sum, like the court found in Kuberski v. Allied Recreation Group, Inc., No. 1:15cv-320-RL-SLC, 2017 WL 6765342, at *7 (N.D. Ind. Nov. 7, 2017), the challenge relating
to Bailey’s “opinions relating to the valuation of the Subject RV attacks the substance of
his conclusions rather than the reliability of the methodology he used, and the former
(unlike the latter) is something for the jury to consider.”
The next consideration is whether Bailey’s opinions are relevant and will assist
the jury in determining Pegg’s damages. Such an opinion is relevant if it is likely to
“assist the trier of fact to understand the evidence or determine a fact in issue.” Hoskins
v. Trucking, 4:07-CV-72 JD, 2010 WL 4000123, at *13 (N.D. Ind. Oct. 12, 2010). In this
case, Bailey opines that the RV’s diminished value (or the difference at the time and
place of acceptance between the value of the goods accepted and the value they would
have had if they were as warranted), is $123,833.13. [DE 52-10 at 5.] Nexus argues that
this opinion is irrelevant because the proper measure of damages is the cost of repair,
not the diminished value. [DE 49 at 9.] As discussed later in this opinion, the parties
dispute the proper measure of damages in this case. The warranty purports to limit the
obligations of Nexus to replacing or repairing the defective parts. [DE 51-4 at 1.]
However, Pegg argues that his damages are not limited to the cost of repair or
replacement because the proper measure of damages under Indiana law and the
MMWA is the difference in value of goods plus incidental and consequential damages,
and additionally, there is a question of fact as to whether the warranty failed of its
essential purpose. [DE 53 at 10-11.] Because there is a genuine issue of material fact as to
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whether the limited remedies failed their essential purpose, Bailey’s opinion on
damages is relevant.
Nexus’ main fault regarding Bailey’s calculation is that it “does not separate or
break down his opinion as to each issue or itemize damages by defect” [DE 51 at 18], so
the jury would not be able to adjust the amount of damages up or down depending on
how they see fit. But this just isn’t true. I don’t see why the jury could not adjust the
diminished value of the RV if it found that Nexus’ warranty did not cover all of the
enumerated defects. In that regard, Nexus is free to present contradictory expert
opinion focusing on individual defects in an effort to reduce the “diminished value”
that Bailey arrived at. It seems to me that Nexus’ concerns “are best considered at trial,
in the context of cross-examination, rather than at the present stage, for the purpose of
excluding [expert] testimony altogether.” Coachmen Indus., Inc. v. Kemlite, No. 3:06-CV160-CAN, 2008 WL 4858385, at *10 (N.D. Ind. Nov. 10, 2008).
Nothing in the three cases cited by Nexus in support of its argument mandate a
different result. In Zimmer, Inc. v. Stryker Corp., 3:14-CV-152 JD, 2018 WL 276324, at *3-4
(N.D. Ind. Jan. 3, 2018), the Court excluded a damages expert’s lost profits calculations
in an action for breach of a non-compete agreement because the expert solely attributed
lost revenues and profits to the defendants’ alleged wrongdoing without ever
considering the possibility that the lost revenues and profits flowed from other events.
That case is far afield from this one. So is the next case relied on by Nexus — an
antitrust case involving an expert study about lost profits that did not “establish any
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variation in the outcome depending on which acts of AT&T were held to be legal and
which illegal.” MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081, 1163 (7th Cir.
1983). Finally, Nexus cites a Fourth Circuit pharmaceuticals case, where the expert
testified to lost sales damages. Pharmanetics, Inc. v. Aventis Pharm., Inc., 182 F. App’x
267, 270-71 (4th Cir. 2006). These cases all involve completely different factual scenarios
that have no bearing on the case before me now, involving an expert opinion on
damages for breach of warranty in a defective goods case.
I do think that Bailey’s valuation opinions are relevant and will assist the trier of
fact in this case. Before moving on to the motion for summary judgment, there is one
last thing to address. Nexus argues in a footnote that Bailey is unreliable “because he is
a convicted felon for multiple crimes involving dishonesty.” [DE 49 at 10 n.1.] Several
courts have ruled on motions in limine on this matter, and have found under Rule
609(b) that the more than two decades old convictions had little compelling
impeachment value, and would be more prejudicial than probative. See Hoopes v.
GlulfStream Coach, Inc., No. 1:10-cv-365, at 11-12 (N.D. Ind. Dec. 2, 2016) [DE 53-6];
Herrera v. LaMesa RV Center, Inc., No. D-1314-cv-2016 (N.M. Nov. 20, 2017) [DE 53-7];
Hope v. Forest River, Inc., No. 5:17-cv-133 (N.D. Oh. Mar. 19, 2018) [DE 53-8]; Nicholson v.
Jayco, Inc., No. 5:15-cv-02010-SL (N.D. Oh. Apr. 18, 2018) [DE 53-9]. I don’t think
Bailey’s 1991 criminal convictions should preclude him from offering expert testimony
in this case. If anything, evidence about his criminal history would go towards his
credibility, not the admissibility of his opinions, but the convictions are so distant that
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they are probably not admissible at trial in any event. See Goodpaster v. City of
Indianapolis, 736 F.3d 1060, 1068 (7th Cir. 2013) (expert credibility determinations are
factual matters to be determined by the trier of fact); Fed. R. Evid. 609(b).
Having found Bailey’s expert testimony both relevant and reliable, the motion to
strike is denied.
Motion for Summary Judgment
Summary judgment must be granted when “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). A genuine dispute of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986).
Nexus criticizes Pegg for relying “heavily” upon his own personal affidavit. [DE
63 at 4.] So, what? It has long been held in this circuit that “[a party’s own] deposition
testimony, affidavits, responses to interrogatories, and other written statements by their
nature are self-serving . . . As we have repeatedly emphasized over the past decade,
[such evidence is] perfectly admissible . . . at summary judgment.” Hill v. Tangherlini,
724 F.3d 965, 967 (7th Cir. 2013). As long as a declarant makes statements based upon
personal knowledge, the affidavit can support a summary judgment motion. Id. at 968.
Pegg must first establish a breach of warranty. The parties concur that to prevail
on the breach of warranty claim under Indiana law (Count One), Pegg has the burden
of establishing, by a preponderance of the evidence, the following five elements: (1)
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Pegg complied with the terms of the warranty; (2) the RV contained a defect covered by
the warranty; (3) Nexus was given a reasonable opportunity to perform the necessary
repairs; (4) Nexus was unable to repair the defects within a reasonable time or after a
reasonable number of attempts; and (5) Pegg has suffered damage. Cimino v. Fleetwood
Enters., Inc., 542 F.Supp.2d 869, 882 (N.D. Ind. 2008).
Before addressing these factors, I also note that the MMWA creates a federal
cause of action for breach of warranty under state law. See 15 U.S.C. § 2310(d)(1). Thus,
Pegg’s MMWA claim for breach of warranty in Count Two rises and falls with his
breach of warranty claims under Indiana law. See Schiesser v. Ford Motor Co., No. 16-cv730, 2016 WL 6395457, at *4 (N.D. Ill. Oct. 28, 2016) (“The ability to sustain a cause of
action under the Magnuson-Moss Act is dependent on the existence of an underlying
viable state-law warranty claim.”).
First, Nexus claims that Pegg did not satisfy the warranty terms because he did
not send Nexus a certified letter notifying Nexus about the RV’s defects. [DE 51 at 12.]
It is true that the warranty requires Pegg to notify Nexus by certified mail with a list of
items to be repaired [Warranty, DE 52-3], and it is undisputed that Pegg sent text
messages and emails instead. However, Nexus responded to Pegg’s texts and e-mails,
and no one ever told him that he needed to send a certified letter. [DE 56 at 3; 52-4, 529.] Substantial compliance is often sufficient in contract cases. Employers Ins. Of Wausau
v. Browner, 52 F.3d 656, 664 (7th Cir. 1995). And “[w]hether a plaintiff substantially
performed its contractual duties is ordinarily a question of fact.” F. McConnell and Sons,
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Inc. v. Target Data Sys., Inc., 84 F.Supp.2d 961, 978-79 (N.D. Ind. 1999). As such, whether
Pegg substantially complied with the terms of the warranty is a question of fact
delegated to the jury – it would not be appropriate for me to make this determination
on summary judgment.
Next, Nexus claims that Pegg fails because he did not provide Nexus with a
reasonable opportunity for repair. In an attempt to shore up this argument, Nexus first
insists that Pegg only gave it one repair attempt (the first one at the factory). [DE 51 at
13-14.]2 This is just plain disingenuous. As I see it, a reasonable jury could conclude that
Pegg gave Nexus at least three times to repair the RV. There was the first repair
attempt at the factory on May 5, 2016, the second at Mike’s RV, and the third at the
factory on August 19, 2016. To the extent Nexus argues Pegg cut the Mike’s RV attempt
short (when Pegg used the RV for a long weekend), or that the last attempt does not
count because Pegg filed this lawsuit before he could review the final repair work, or
that the RV was actually in for repair less days than Pegg claims, or that Pegg
abandoned the RV, these are all quintessential jury questions because they involve
answering the question what is “reasonable.”
Indeed, this question of reasonableness reflects the fact-specific nature of breach
of warranty claims. As I have noted before in a case involving the sale of golf carts,
Indiana law provides “[t]he standard to be applied in determining whether or not there
2
In its reply memorandum and supplemental reply, Nexus changes its tune a bit and
argues that Pegg provided Nexus with no more than two repair attempts. [DE 55 at 2; DE 63 at 3,
5-6.]
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has been a breach of warranty is one of reasonableness in light of surrounding
circumstances.” Swan Lake Holdings, LLC v. Yamaha Golf Cart Co., 3:09-CV-228-PPS, 2010
WL 3894576, at *3 (N.D. Ind. Sept. 27, 2010) (quotation omitted). Nexus cites Marchionna
v. Ford Motor Co., No. 94 C 275, 1995 WL 476591, at *11 (N.D. Ill. Aug. 10, 1995), for the
proposition that Pegg did not give them a reasonable opportunity to repair, but that
case reasoned the “plurality of the word ‘attempts’ indicates that [defendant] was
entitled to at least two, and possibly three attempts to correct the defect.” Pegg has
presented evidence that there was at least two, if not three opportunities, for Nexus to
repair the RV in this case. Nexus argues in its supplemental brief that some items were
submitted to it for repair only once. [DE 63 at 7-8.] It is free to present this argument
and supporting evidence to the jury, who must decide whether Nexus was given a
reasonable opportunity to make the repairs.
Nexus also argues that the unrepaired defects were excluded from the warranty
because they are really design defects. [DE 51 at 11.] The warranty provides for a one
year “warranty under normal use against defects in Nexus materials and/or
workmanship;” but admittedly, does not cover design defects. [DE 51-4 at 1.] There is a
difference between a design defect not covered by the warranty (which occurs when the
product is built in accordance with specifications, but the design itself is inherently
defective), and defects in material and workmanship which are covered by the
warranty (and refer to departures from a product’s intended design). Schechner v.
Whirlpool Corp., 237 F.Supp.3d 601, 613-14 (E.D. Mich. 2017).
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Pegg complained that the room was separating from the roof, and Bailey
confirmed during the inspection that the roof sides are not glued down and flexed. [DE
56 at 5; DE 52-4; DE 52-9, DE 49-2 at 26.] Nexus contends the roof separating from the
structure of the RV is a design defect, not a failure in materials or workmanship. [DE 51
at 15.] To spin this argument out, if Nexus is really claiming the separating roof was a
design defect - then it is claiming that the roof was built correctly to its specifications,
and that the design itself must be inherently defective. This scenario makes much less
sense than the other option – that the separating roof was caused by a defect in the
material and workmanship. But ultimately, it is not for me to sit here and debate
whether defects like the separating roof are design defects or a failure in
materials/workmanship - this is an issue of fact reserved for the jury. In this case, a
jury could determine either, and should be given the opportunity to make that decision.
See Hoopes v. Gulf Stream Coach, Inc., No. 1:10-cv-365 JD, 2017 WL 6884317, at *3 (N.D.
Ind. Apr. 13, 2017) (denying motion for judgment as a matter of law made during trial,
finding there was sufficient evidence for the jury to conclude that defects were covered
by the warranty, and were not design defects).
Nexus claims that one answer given by Pegg’s expert, Bailey, definitively
establishes that the separating roof was a design defect. Bailey was asked during his
deposition,”[i]f that is, in fact, how they design their roofs, would you say that this is a
design defect?” and Bailey answered, “I would say that that is not the proper way to
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secure a roof.” [DE 51-14 at 87.] I see this statement as a claim of a defect in
workmanship, not a claim of a design defect, or so a jury could reasonably find.
Continuing on with whether certain defects were covered by the warranty,
Nexus also asserts that the unrepaired defects were also not covered. [DE 51 at 18.]
Pegg’s expert, Bailey, has submitted that 19 defects from Pegg’s list of 72 defects were
not repaired, and with the exception of the suspension squeak that Bailey acknowledges
as being covered by the chassis warranty, Bailey believes the remaining unrepaired
defects are covered by the Nexus warranty. [DE 52-10 at 2-3.] Taking the evidence in the
light most favorable to Pegg, as I must at this stage in the proceedings, reasonable
minds could conclude that the unrepaired defects are covered under the warranty as
defects in the material and/or workmanship. Obviously additional evidence will be
presented to the jury on this issue at trial.
Nexus also argues that the additional 86 defects that Bailey discovered during his
inspection [DE 52-10 at 3] are irrelevant to Pegg’s breach of warranty claims, as those
problems were never submitted for repair. Pegg contends any defects discovered by
Bailey are relevant to Pegg’s breach of implied warranty claim. [DE 52 at 20.] All of
which brings us to an analysis of the available damages.
While Indiana Code § 26-1-2-719(1) allows buyers and sellers to limit the remedy
for breach of warranty, “[l]imitations of remedy are not favored in Indiana and are
strictly construed against the seller on the basis of public policy.” Perry v. Gulf Stream
Coach, Inc., 814 N.E.2d 634, 643 (Ind. Ct. App. 2004). “Where circumstances cause an
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exclusive or limited remedy to fail of its essential purpose, remedy may be had as
provided in IC 26-1.” Ind. Code § 26-1-2-719(2). In other words, “a limited remedy,
such as limiting damages to replacement parts, may not be valid if the warranty fails of
its essential purpose.” Pizel v. Monaco Coach Corp., 364 F.Supp.2d 790, 796 (N.D. Ind.
2005) (citing Ind. Code § 26-1-2-719). If the warranty fails of its essential purpose, a
plaintiff is entitled to all remedies available under the commercial code (regardless of
the warranty clause attempting to limit recovery), including incidental and
consequential damages. Rheem Mfg. Co. v. Phelps Heating & Air Conditioning, Inc., 746
N.E.2d 941, 947 (Ind. 2001).
In explaining the analysis for determining whether a limited remedy failed of its
essential purpose, the Perry court quoted the following example from Martin Rispens &
Son v. Hall Farms, Inc., 621 N.E.2d 1078, 1085 (Ind. 1993) (abrogated on other grounds):
Thus, for example, where the sale of a car was accompanied by the
exclusive remedy of repair and replacement of defective parts but
attempted repairs were ineffective in correcting the problems, the
purchaser was entitled to recover an amount in excess of the cost of
repairs. The exclusive remedy of repair and replacement of
defective parts failed of its essential purpose because the car could
not be repaired so as to operate free of defects as promised in the
express warranty.
Perry, 814 N.E.2d at 643 (quoting Martin Rispens, 621 N.E.2d at 1086). This line of cases
was followed in Cimino, a mobile home case like this one bringing claims under the
MMWA, which reasoned:
As in Perry, the Plaintiffs in this case have designated admissible
evidence that, if believed by a reasonable jury, could establish that
they complained repeatedly of defects to the warranting parties
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and that the defects remained after multiple attempts at repair. If a
jury viewed this evidence in a light most favorable to the Plaintiffs,
the jury could find that the limited remedies failed of their essential
purpose and the remedies for a full warranty would be available.
As such, there is a genuine issue of material fact as to whether the
limited remedies failed of their essential purpose.
Cimino, 542 F.Supp.2d at 888. I agree with these cases and this line of reasoning.
“Whether a limited remedy fails of its essential purpose is an issue of fact that a
jury may determine.” Petroleum Helicopters, Inc. v. Rolls-Royce Corp., No. 1:15-cv-840TWP-DML, 2016 WL 7179362, at *4 (S.D. Ind. Dec. 9, 2016) (quoting Rheem, 746 N.E.2d
at 948). Here, I find that there is a genuine issue of material fact as to whether the
warranty failed to serve its essential purpose. Pegg presented evidence that he
repeatedly complained about problems with the RV, and the problems remained after
several repair attempts. Viewing the evidence in the light most favorable to Pegg, as I
must do at this stage of the proceedings, a jury could reasonably find that Nexus’
limited remedy failed of its essential purpose. Moreover, as the Cimino court found,
“[e]ven if the limited remedies have not failed of their essential purpose, the Plaintiffs
are still entitled to the difference at the time and place of acceptance between the value
of the goods accepted and the value they would have had if they had been as
warranted.” Cimino, 542 F.Supp.2d at 888 (citing Ind. Code § 26-1-2-714(2)). Summary
judgment is therefore denied on this issue, and the jury can determine whether the
limited warranty fails of its essential purpose.
Regarding Pegg’s claims for violation of implied warranties, the MMWA
provides that “implied warranties may be limited in duration to the duration of a
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written warranty of reasonable duration, if such limitation is conscionable and is set
forth in clear and unmistakable language and prominently displayed on the face of the
warranty.” 15 U.S.C. § 2308(b). In this case, the disclaimer of warranties is a bit
confusing, and states:
The Limited Warranty is expressly IN LIEU of any other express
warranty and is further IN LIEU of any implied warranty
including, but not limited to, any implied WARRANTY OF
MERCHANTABILITY or FITNESS for a particular purpose. To the
extent that applicable state and/or federal law prohibits the
exclusion of any remedy permitted under state or federal law, any
such remedy, including, but not limited to, implied warranties of
fitness, use, merchantability or purpose, is limited to one (1), but
not limited to, any implied WARRANTY OF MERCHANTABILITY
or FITNESS for a particular purpose.
[DE 52-3 at 1.] The parties largely dispute whether Nexus properly limited the scope of
the duration of the implied warranties to one year, and whether the one year limitation
was unconscionable. But in this case, Pegg has presented evidence that, if believed by
the fact finder, he had problems from the beginning with the RV [DE 56 at 7] and Bailey
has opined that it was not merchantable at the time it was sold to Pegg. [DE 52-10 at 4.]
Therefore, summary judgment is not proper on the claims for implied warranties.
Finally, Nexus contends that even if Pegg can prevail on his claims, revocation of
the purchase agreement is not an available option for him. [DE 51 at 22-23.] Under
Indiana Code § 26-1-2-608, a buyer can revoke his acceptance of the commercial unit if
several conditions occur, including the non-conformity substantially impairs the value
of the goods to the buyer and the revocation occurs within a reasonable time after the
buyer discovered or should have discovered the grounds for revocation. “It is not
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effective until the buyer notifies the seller of it.” Ind. Code § 26-1-2-608(2). Pegg
contends that he gave Nexus notice that he revoked his acceptance when he filed the
amended complaint asking for an order finding he rescinded the transaction and/or
revoked acceptance.3 [DE 52 at 24.] However, the case Pegg cites to for the complaint
being sufficient notice, is inapplicable. LDT Keller Farms, LLC v. Brigittes Holmes
Livestock, Co., 2011 U.S. Dist. LEXIS 34209, at *26 (N.D. Ind. Mar. 30, 2011), is an
acceptance of goods case (livestock), which cites another case, Collins v. Pfizer, Inc., No.
1:08-cv-888-DFH-JMS, 2009 WL 126913, at *2-3 (S.D. Ind. Jan. 20, 2009), for the
proposition that notice is a condition precedent to recovery under Indiana Code § 26-12-607, and suggesting a complaint could serve as notice in personal injury cases. The
notice requirement under section 607 (dealing with the effect of acceptance of goods
and general notice of breach), is different than the notice requirement in section 608 (for
revocation of acceptance).
The Notes for section 608 establish that the notice is to be determined by
consideration of good faith, prevention of surprise, and reasonable adjustment. “More
will generally be necessary than the mere notification of breach required under the
preceding section. . . . [but] [f]ollowing the general policy of this Article, the
requirements of the content of notification are less stringent in the case of a non-
3
The amended complaint requests “damages as allowed by law,” or, in the
alternative, rescission of the contract plus damages and/or statutory remedies and
relief as deemed proper, plus an “Order finding Plaintiff to have rescinded the
transaction and/or to have revoked acceptance . . . .” [DE 16 at 10-11.]
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merchant buyer.” Ind. Code § 26-1-2-608 Notes ¶ 5. Frankly, both parties’ arguments
on this issue about the sufficiency of notice and whether revocation of acceptance
should be available in this case are so bare-bones, that it is difficult for me to make a
decision at this juncture. Because the adequacy of notice is usually a fact question
inappropriate for summary judgment, Boysen v. Antioch Sheet Metal, Inc., 306 N.E.2d 69,
71 (Ill. App. Ct. 1974), summary judgment will be denied on this issue as well.
Conclusion
For the reasons stated above, Nexus’s motion for summary judgment [DE 50]
and its motion in limine to strike the expert opinion [DE 48] are both DENIED.
Finally, because I do not think the case Mathews v. REV Recreation Group, Inc., No.
1:15-cv-247, 2018 WL 1586254 (N.D. Ind. Apr. 2, 2018), which is on appeal, is dispositive
of this case, the Motion to Continue Trial [DE 70] is DENIED.
SO ORDERED.
ENTERED: July 2, 2019.
/s/ Philip P. Simon
PHILIP P. SIMON, JUDGE
UNITED STATES DISTRICT COURT
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