Nationwide Property & Casualty Insurance Company v.General Motors LLC

Filing 81

MEMORANDUM AND ORDER denying 64 MOTION for Summary Judgment (Signed by Judge Gregg Costa) Parties notified.(arrivera, 3)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
NATIONWIDE PROPERTY &
CASUALTY INSURANCE CO.,
As subrogee of Matthew Storm
Plaintiff,
VS.
GENERAL MOTORS, LLC, et al,

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CIVIL ACTION NO. 3:13-CV-83

Defendant.

MEMORANDUM AND ORDER
A fire occurred in the garage of Matthew Storm’s home. The cause is
believed to have been a malfunctioning component of his Chevrolet pickup truck.
Plaintiff Nationwide Property & Casualty Company paid Storm’s losses, and then
filed this subrogation action seeking to recover those amounts from Defendants
General Motors and AutoNation Chevrolet Gulf Freeway (AutoNation).

The

liability theory advanced against AutoNation is that when it serviced Storm’s truck
prior to the fire, it failed to run a computer check that would have detected a recall
on the defective component. AutoNation’s motion for summary judgment focuses
on a single question: does an authorized auto dealership have a duty to check for
recalls when a customer brings a vehicle to the dealership for service?

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I.

FACTUAL AND PROCEDURAL BACKGROUND1

Storm’s truck, a 2007 Chevrolet Avalanche, caught fire in June 2012 while
parked in his garage. Nationwide, which had issued a homeowner’s policy to
Storm, conducted an investigation and concluded that the fire was caused by a
malfunction of the Avalanche’s windshield wiper fluid heater module.2

The

defective module has been the subject of investigation by the National Highway
Traffic Safety Administration and of two separate GM recalls.
The first recall was issued in 2008. Defendant Norman Frede Chevrolet
worked on the Avalanche in July 2009 and performed the recall work. After new
reports surfaced of problems with the module, GM issued a second recall in July
2010. The recall directed dealers and retailers to permanently disable and remove
the module, and noted that one of the safety risks posed by the module was the
possibility of a fire, even with the vehicle parked and the ignition switched off. It
further provided that “whenever a vehicle subject to this recall . . . is in your
dealership for service in the future, you must take the steps necessary to be sure the
recall correction has been made before . . . releasing the vehicle.” See Docket
Entry No. 70-2 at 31 (GM Recall No. 10153). This command is in line with GM’s
agreements with dealers like AutoNation, which require the dealers to run a GM
1

The Court’s recitation of the facts resolves all reasonable doubts in favor of Johnson as the nonmovant. See Evans v. City of Houston, 246 F. 3d 344, 348 (5th Cir. 2001) (citation omitted).
2
Defendants have not designated any experts or produced any expert reports disputing the
findings of Nationwide’s investigation.
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vehicle’s vehicle identification number (VIN) to check for open recalls whenever a
GM vehicle is brought in for service to the dealership. See Santrock Dep., Docket
Entry No. 76-5 at 58–59; see also Riley Dep., Docket Entry No. 72-2 at 17–18
(explaining that any time a GM car comes in for service, AutoNation is required to
bring up the vehicle’s Global Connect, which details any recalls, among other
information). The dealership is then required to either perform recall repairs or to
note that the vehicle owner refused to have the repairs done. See Santrock Dep.,
Docket Entry No. 76-5 at 59–60; see also Docket Entry No. 70-2 at 3, 10 (GM
Recall No. 10153). GM compensates dealerships for performing recall work. See
Santrock Dep., Docket Entry No. 76-5 at 60; see also Docket Entry No. 70-2 at 30
(GM Recall No. 10153) (explaining procedure for dealers to submit reimbursement
claims).
On October 1, 2011, Storm had his Avalanche towed to AutoNation, an
authorized GM dealership, because of a flat tire. AutoNation sells new and used
cars and offers vehicle maintenance and repair services. AutoNation opened a
repair order, which listed the Avalanche’s VIN, and assigned a service advisor to
the truck.

The repair order shows that AutoNation put a spare tire on the

Avalanche and, at Storm’s request, performed a multi-point inspection which
included checking the brake lining, the tire tread depth, and the battery.3 See

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AutoNation maintains that it performed no service work beyond putting the spare tire on the
3

Docket Entry No. 70 at 13, 15 (AutoNation repair order). The Avalanche was
ready ten days later, on October 11, 2011. AutoNation did not charge Storm for
the service, and did not advise Storm of the recall notice. See id. at 14, 16.
Nationwide filed suit against GM in state district court, asserting products
liability and warranty claims.

After GM removed the case to federal court,

Nationwide filed an amended complaint asserting that AutoNation was negligent in
failing to perform the recall work on the Avalanche. See Docket Entry No. 3 at 4–
5. AutoNation then filed the pending motion for summary judgment, contending
that it owed no duty to Storm to check for open recalls or perform recall repairs.
II.

ANALYSIS

A negligence claim under Texas law requires three elements: (1) a legal duty
owed by one person to another; (2) a breach of that duty; and (3) damages
proximately caused by the breach. See D. Houston, Inc. v. Love, 92 S.W.3d 450,
454 (Tex. 2002) (citing El Chico Corp. v. Poole, 732 S.W.2d 306, 311
(Tex. 1987)). “Whether a duty exists is a question of law for the court to decide
under the facts surrounding the occurrence in question.” Lefmark Mgmt. Co. v.

truck. The repair order, however, states that “customer requested to [sic] multi-point inspection
performed this visit” and reflects that the brake lining, tire tread depth, and battery were checked.
See Docket Entry No. 70 at 15 (AutoNation repair order). In light of the summary judgment
posture, the Court must resolve all reasonable doubts in favor of Nationwide as the nonmovant.
See Evans, 246 F.3d at 348 (citation omitted). Moreover, Nationwide relies on testimony from
GM and AutoNation that the VIN check requirement applies even when a vehicle is brought in to
have a flat tire repaired. See Santrock Dep., Docket Entry No. 76-5 at 59–60; see also Riley
Dep., Docket Entry No. 72-2 at 20–21.
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Old, 946 S.W.2d 52, 53 (Tex. 1997) (citing Centeq Realty, Inc. v. Siegler, 899
S.W.2d 195, 197 (Tex. 1995)).

The decision to impose a legal duty “is a

multifaceted issue requiring [courts] to balance a number of factors,” including risk
and utility.

Tex. Home Mgmt., Inc. v. Peavy, 89 S.W.3d 30, 33 (Tex. 2002)

(citations omitted). This inquiry balances “the risk, foreseeability, and likelihood
of injury against the social utility of the actor’s conduct, the magnitude of the
burden of guarding against the injury, and the consequences of placing that burden
on the defendant.” See Nabors Drilling, U.S.A., Inc. v. Escoto, 288 S.W.3d 401,
410 (Tex. 2009) (citations omitted).

Courts also consider “whether one party

would generally have superior knowledge of the risk or a right to control the actor
who caused the harm.” Humble Sand & Gravel, Inc. v. Gomez, 146 S.W.3d 170,
182 (Tex. 2004) (quoting Praesel v. Johnson, 967 S.W.2d 391, 397–98
(Tex. 1998)).
AutoNation contends that it did not owe a duty to Storm because it did not
sell the truck and performed only a minor repair on it (replacing the flat tire) free
of charge. To support its position, AutoNation relies on New Tex. Auto Auction
Servs., L.P. v. Gomez De Hernandez, 249 S.W.3d 400 (Tex. 2008). In Gomez, the
defendant was an auction house that sold a sport utility vehicle to a business, which
in turn sold the SUV to a car dealership; the motorist who eventually purchased the
SUV from the dealership was killed in a rollover accident resulting from tire
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failure.

249 S.W.3d at 402.

The plaintiffs alleged that the auctioneer was

negligent in failing to replace the SUV’s tires pursuant to a manufacturer recall that
had been issued a few weeks before the auctioneer sold the SUV. Id. at 406. The
Gomez court applied the risk-utility test and concluded that automobile auctioneers
do not have a common law duty to “discover and remedy unknown dangers.” 249
S.W.3d at 407.
AutoNation interprets Gomez to stand for the proposition that a dealer does
not owe a duty to notify a customer about recalls and to perform the recall repairs.
Gomez, however, was about an auctioneer’s duty to discover “unknown dangers.”
That is not the case here because AutoNation’s status as a GM dealer gave it easily
accessible knowledge about the Avalanche recall via the electronic VIN check.
That drastically changes the risk-utility calculus and compels a different result.
Indeed, much of the Gomez reasoning supports the existence of a legal duty
in this authorized dealership situation—a scenario far different from one involving
an auto auctioneer that has no relationship with a particular manufacturer and no
specialized knowledge of particular vehicles. On the risk side of the equation,
Gomez noted that “[u]nquestionably, ignoring a recall may run the risk of severe
injury.” But most of the concerns it noted on the other side of the equation do not
apply to an authorized dealer servicing a vehicle after the recall. Gomez noted that
a heavy burden would flow from “imposing a duty on auto auctioneers to discover
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and repair defects” because doing so “would require them to go into a side
business other than their own.” Id. at 406. That is not the case for AutoNation,
which needed to incur only the negligible burden of entering the VIN into its
computer system to find the recall and the instructions for repairing the problem.
See Riley Dep., Docket Entry No. 72-2 at 39 (noting that complying with the
obligation to search for open recalls only takes a dealership’s service department
“a few minutes”). And, of course, “inspecting and repairing” vehicles already
constitutes the service side of AutoNation’s business.
The availability of a VIN check not only makes the burden of a duty on
AutoNation much lighter than it would be for an auto auctioneer, but it also affects
the factor concerning superior knowledge. AutoNation has specialized knowledge
of the Avalanche recall as a GM dealer, whereas an auto auctioneer has no ties to
any particular type of vehicle.

See Gomez, 249 S.W.3d at 406. (noting that

“whatever access to recall information [the auctioneer] may have, the dealers who
buy at the auction, prepare the cars for display, and sell them to the public would
have at least the same access”). It is not just the VIN check that provides this
knowledge. GM dealerships are sent recall bulletins, can access those bulletins
through GM’s electronic service information site, and can access applicable open
and closed recalls for each vehicle through GM’s global warranty site.

See

Santrock Dep., Docket Entry No. 76-5 at 92. This library of notices and network
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of electronic systems creates a vastly different relationship between manufacturer
and defendant than was the case in Gomez, in which the defendant was an
auctioneer not connected with the manufacturer in any way.
The only risk-utility factor that counsels against a finding of duty here is the
consideration of “the right to control the actor who caused the harm.” A dealer
does not have control over GM’s manufacturing process, although it still has more
influence than an auto auctioneer as it services numerous GM vehicles and can
alert GM to defects that it observes in those vehicles.
The overall assessment of the risk-utility factors thus strongly supports the
existence of a duty in this case. GM’s electronic systems allowing AutoNation to
easily search for open recalls makes the burden of checking for recalls
insignificant, and the consequences of doing so—preforming the recall work—are
minor given that AutoNation is already in the auto repair business and is
compensated by GM for the repairs. Against these slight inconveniences to the
dealer is the significant benefit of preventing a highly foreseeable and serious harm
as the fire that occurred in this case demonstrates (and that would have been even
more serious if a person had been harmed in the fire). Gomez was concerned about
imposing a “sweeping” recall duty that would extend to all sellers of used cars for
any type of vehicle. 249 S.W.3d at 407. A duty on an authorized dealer to run a
computerized check of recall notices on a vehicle it services—which is already
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required by the dealer’s internal policies—is far narrower. The balance of the
common law factors therefore strongly supports imposing this duty.4 Cf. Casa
Ford, Inc. v. Ford Motor Co., 951 S.W.2d 865, 872 (Tex. App.—Texarkana 1997,
pet. denied) (noting in dicta, when trial court found dealer negligent for failure to
perform recall, that dealer’s duty to perform recall “arose from its knowledge of
the recall” and that “[e]very used car dealer with knowledge of the recall would
have the same duty”).
One final point: Determining whether to impose a duty on an authorized
dealer that services a vehicle after a recall has issued is a much different inquiry
than whether to impose a duty on a dealer to send recall notices to customers to
whom it sold vehicles before a recall issued. See, e.g., Murray v. Gen. Motors,
L.L.C., 478 F. App’x 175, 182 (5th Cir. 2012) (holding that under Mississippi law
a car dealership does not have a post-sale duty to notify a buyer about
manufacturer recalls); cf. Silver v. Bad Boy Enters. L.L.C., 907 F. Supp. 2d 1351,
1356–57 (M.D. Ga. 2012) (noting that under Georgia law manufacturers have no
duty to recall after products have left their control but still finding fact issue
existed concerning whether defendant assumed a duty to conduct a recall campaign
and negligently conducted that campaign). The much broader duty rejected in

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Given this holding that a common law duty exists in these circumstances, the Court need not
reach the alternative theory advanced by Nationwide that AutoNation had a contractual duty
arising from the dealer service agreement.
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those cases would have imposed far greater costs on dealers with little additional
benefit than what a manufacturer recall notice would have already provided to
vehicle owners.
***
For the reasons explained above, Defendant AutoNation’s Motion for
Summary Judgment (Docket Entry No. 64) is DENIED.
SIGNED this 20th day of March, 2015.

______________________________
Gregg Costa
United States Circuit Judge*

*

Sitting by designation.
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