Lester et al v. Wow Car Company Ltd. et al

Filing 114

ORDER granting 109 Motion to Compel. Requested documents are to be produced within fourteen days. Signed by Magistrate Judge Terence P Kemp on 3/26/14. (Kemp, Terence)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Zachary Lester, et al.,
Plaintiffs,
v.

:
:

Case No. 2:11-cv-00850

:

Wow Car Company, Ltd.,
et al.,

:

JUDGE EDMUND A. SARGUS, JR.
Magistrate Judge Kemp

:
Defendants.
OPINION AND ORDER
This matter is before the Court to consider a motion to
compel discovery filed on February 21, 2014 by Plaintiffs Zachary
and Brandi Lester.

The motion is now fully briefed.

For the

following reasons, the Court grants the motion.
I. Introduction
The Court has described this case in numerous prior orders.
Briefly, it involves a dispute over the purchase of a used car by
plaintiffs Zachary and Brandi Lester.

The Lesters returned the

car to the seller twice within the first week they owned it, and
the engine blew six days after the purchase.

The Lesters then

sued the seller in the Court of Common Pleas for Knox County,
Ohio, and the case was removed here.

Several amended pleadings,

adding new parties and new claims, have since been filed.

The

most recent amended complaint names as defendants Amy Hartzler
dba Wow Car Company, Wow Car Company, Ltd., Max R. Erwin, Marmax
Enterprises LLC, Mid-Ohio Motor Funding Group, Ltd. and The
Hartzler-Erwin Group and asserts claims for breach of an express
warranty, breach of the implied warranty of merchantability,
breach of the implied warranty of fitness for a particular
purpose, deceptive trade practices, violations of the Truth in
Lending Act (“TILA”), violations of the Ohio Consumer Sales

Practices Act (“OCSPA”), and alter ego.
The most recent motion to compel deals with bills of sale
generated by Wow Car Company for calendar year 2010 and the first
six months of 2012.

The Lesters have received all of the

relevant bills of sale for 2011, but claim that they need
additional information in order properly to support their claim
under the Truth in Lending Act that Wow charged credit customers
more for warranties than it charged cash customers.

Wow’s

refusal to produce the bills of sale, and its opposition to the
motion to compel, rests primarily upon the argument that, to
date, the Lesters have not come forth with any evidence to
support their TILA claim.

Wow also argues that, like the 2011

bills of sale, bills of sale for prior and subsequent years will
not produce any relevant evidence to support that claim.

The

question before the Court, as in any case where the proper scope
of discovery is at issue, is whether the discovery requests which
the moving party seeks to enforce are “reasonably calculated to
lead to the discovery of admissible evidence” - that is, evidence
which would be “relevant to any party’s claim or defense...”
Fed.R.Civ.P. 26(b)(1).
II.

The Parties’ Arguments

As the Lesters note, their TILA claim is premised upon what
they believe to be pricing disparities between warranties sold to
customers who paid cash for their vehicles, and those sold to
customers who bought vehicles on credit.

Their analysis of the

2011 bills of sale shows that slightly over 2% of Wow’s cash
customers purchased a warranty of any type, while approximately
12% of buyers on credit did so.

The cash customers (and there

were only two of them) paid either $119 or $199 for their
warranties; the credit customers’ median price for a warranty was
$1,349.00.

While this is, according to the Lesters, some

evidence that Wow charged its credit customers more, it is
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probably too small a sampling to show definitively that there was
a “consistent” disparity between the amounts charged to different
types of buyers.
Citing to Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322,
327 (6th Cir. 2001), the Lesters point out that in order to show
a TILA violation based on differential pricing, the plaintiff
must provide more than “the comparison of two spot transactions”
- he or she must show a “‘causal connection’ between the higher
price and the extension of credit.”

Id.

One way to do so is to

demonstrate a “consistent difference in the base price for cash
and credit customers”; if that is done, “legitimate reasons for
the individual price differences approach the vanishing point.”
Id. at 328.

The Court of Appeals emphasized that there were

other ways to prove the same point, and that even an occasional
increase in price due to the credit status of a customer was not
permissible under TILA.

Id.

Nevertheless, the Lesters’ avenue

of proof in this case appears to involve the “consistent
difference in ... price” approach, and they contend that the
bills of sale are either admissible evidence as to the price
differential, or reasonably calculated to lead to the discovery
of such evidence.

And, because the 2011 bills of sale show so

few cash sales, they worry that without the additional 18 months
of records, they may not be able to prove that there was a
consistent difference in the cash and credit prices for
warranties, or that Wow will attack their proof as inadequate if
they rely exclusively on what the 2011 bills of sale show.
Wow’s response to this argument is interesting.

It does, as

the Lesters fear, consist, in part, of an argument that the
current evidence - the 2011 bills of sale - “does not come
remotely close to establishing” a TILA violation.
Opposition, Doc. 110, at 2.

Memorandum in

That is so, says Wow, because in

order for it to have violated TILA, it must have charged
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different prices for the same warranty contract, depending upon
whether the customer paid cash or bought on credit, and that the
bills of sale do not show which warranty any particular customer
purchased.

In other words, the bills of sale, by themselves, may

show that customers paid different prices for warranties, but
they do not explain why.

One possible explanation, of course,

would be the one offered by the Lesters, but another is the fact
that Wow offered its customers a range of warranty providers who,
in turn, offered a range of warranties, so each bill of sale
might reflect the purchase of a different warranty product.
Based on what has been produced so far, Wow claims that the
Lesters have “no evidence to support” their “outrageous” TILA
claim.

Id. at 3.

Responding to the Lesters’ argument that Cornist provides
legal support for a differential pricing theory, Wow asserts
that, in actuality, Cornist turned on the fact that the plaintiff
was unable to show that buying a warranty was a precondition for
obtaining an extension of credit.

Wow then argues that because,

in this case, the 2011 bills of sale show that the great majority
of credit customers did not purchase a warranty, “it is simply
impossible for Plaintiffs to prevail in this case, as there are
no facts to remotely suggest that [Wow] was charging service
agreement fees to customers as a condition of extending credit.”
Id. at 5.

Based on this reading of Cornist and upon the argument

that the bills of sale do not show details about the warranties
purchased, Wow concludes that the production of additional bills
of sale would not solve these problems nor move the Lesters any
closer to proving a viable TILA claim.
III.

Discussion

The Court begins its analysis with a brief discussion of the
difference in the parties’ reading of the Cornist case.

The

plaintiff in that case made three separate claims under TILA:
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that the seller “charged increased base prices for cars to credit
customers without disclosing such increased prices as finance
charges, failed to disclose the distribution of document fees and
service agreement fees to third parties, and assessed those fees
only on credit customers without disclosing them as finance
charges.”

Cornist, 272 F.3d at 324.

In the district court, the

plaintiff presented evidence about cash and credit transactions
which showed a “mark-up” (or the difference between what the
seller had paid for the car and what it was sold for) which was
consistently higher (and actually much higher) for credit
transactions than for those based on cash.

The district court

held that although the evidence showed differences in the two
types of transactions, those differences were “sporadic” rather
than “systematic” and that a TILA violation required proof of
systematically different pricing.

It also dismissed the other

two claims, which had to do with failure to disclose that certain
fees were allocated in part to third parties and with an alleged
assessment of an undisclosed finance charge, in the form of a
document fee, to credit customers.
The only claim raised in Cornist which is relevant to this
case is the differential pricing claim.

As to that claim, the

Court of Appeals said that “[a]n increase in the base price of an
automobile that is not charged to a cash customer, but is charged
to a credit customer, solely because he is a credit customer,
triggers TILA's disclosure requirement.”

Id. at 327.

After

discussing, as set forth above, what type of proof was needed to
show a “consistent” pattern of differential pricing, the Court of
Appeals held that the chart presented by the plaintiff was
sufficient to advance the case beyond the summary judgment stage;
even though it analyzed only nineteen cash sales, and even though
that small number might be statistically insignificant, such
potential insignificance could not be determined on the basis of
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the record.

The Court of Appeals also pointed out that the

seller might well be able to offer some explanation for why each
credit sale mark-up was so large, but that “most such
explanations would create genuine issues of material fact
incapable of resolution on summary judgment.”

Id. at 329.

Wow’s argument that, under Cornist, it would be “impossible”
for the Lesters to prevail on their TILA claim, focuses on the
second claim made in Cornist - that a service agreement fee was
charged only to credit customers.

The Court of Appeals noted

that there was no evidence to support this claim and, in fact,
the evidence pointed the other way; many credit customers of that
seller were not charged the fee.

If the Lesters were arguing

that only Wow’s credit customers were charged a warranty or
service agreement fee, Wow would be correct that the evidence
does not appear to support such a claim, but that is simply not
the TILA claim asserted in this case.

Consequently, Cornist’s

discussion and resolution of that claim is not pertinent here.
Since Wow’s view that Cornist completely precludes the
Lesters from prevailing on their differential pricing claim is
incorrect, that leaves only Wow’s argument that such a claim
cannot be made out using only the information from the bills of
sale.

That may or may not be true, but it is largely irrelevant

to the question of whether the Lesters are entitled to these
documents as part of discovery.

The Court is aware of no

authority for the proposition that if a document does not fully
prove or refute a party’s claims or defenses, it need not be
produced in discovery.

In fact, just the opposite is true.

Even

if a particular document would not, itself, be admissible - for
example, because some Rule of Evidence would preclude its
admission at trial - the document is still discoverable if there
is “a plausible chain of inferences showing how discovery of the
item sought would lead to other admissible evidence.”
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Vardon

Golf Co., Inc. v. BBMG Golf Ltd., 156 F.R.D. 641, 651 (N.D. Ill.
1994).
Wow’s argument in opposition to the motion to compel
actually demonstrates how that principle applies here.

The bills

of sale, Wow contends, may show differential pricing, but do not
show why; the “why” involves an analysis of each warranty
purchased, because each one might be different.

But the bills of

sale are the starting point for this analysis, because they do
show that, on average (albeit, as of now, for only a handful of
cash sales) that credit customers spent more for warranties than
cash customers.

As the Lesters note in their reply, Wow’s

position seems to be that there needs to be even more factual
development on this point.

But, as of now, the Lesters are

content with the additional bills of sale.

Additionally,

especially in light of the comments made in Cornist about the
need for statistically significant sampling, and the fact that
the number of cash customers who bought warranties in 2011 is so
small, the Lesters have satisfactorily shown that the additional
bills of sale may assist them in proving a “consistent” pattern
of differential pricing, making them a proper subject of
discovery.
The Court adds these observations, which are not, of course,
binding decisions of any sort.

The Lesters have suggested that

the need for additional discovery as to the nature of the
warranties purchased by each Wow customer might be obviated by
placing the burden on Wow to come forward with evidence to rebut
a presumption created by the pricing difference shown on the
bills of sale.

That is a substantive legal ruling which cannot

be made in the context of a motion to compel discovery.

There

may also be a problem with pursuing additional discovery into the
individual warranties because the discovery cutoff has passed.
However, if the Lesters have made a previous discovery request
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that covers additional documents, or if they are documents which
should have been identified by the defendants as part of their
initial disclosures, or as a supplementation to those
disclosures, that problem may not be insurmountable.

All of

those questions are for either another day or another judicial
officer, however, and the Court does not address them further
here.
IV. Conclusion
Based on the foregoing, Plaintiffs’ motion to compel (Doc.
109) is granted.

The bills of sale in question shall be produced

within fourteen days of the date of this order.
V. Procedure for Seeking Reconsideration
Any party may, within fourteen days after this order is
filed, file and serve on the opposing party a motion for
reconsideration by a District Judge.

28 U.S.C. §636(b)(1)(A),

Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 91-3, pt.
I., F., 5.

The motion must specifically designate the order or

part in question and the basis for any objection.

Responses to

objections are due fourteen days after objections are filed and
replies by the objecting party are due seven days thereafter.
The District Judge, upon consideration of the motion, shall set
aside any part of this Order found to be clearly erroneous or
contrary to law.
This order is in full force and effect, notwithstanding the
filing of any objections, unless stayed by the Magistrate Judge
or District Judge.

S.D. Ohio L.R. 72.3.
/s/ Terence P. Kemp
United States Magistrate Judge

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