James Michael Leasing Company LLC v. PACCAR Inc

Filing 47

ORDER signed by Judge Lynn Adelman on 2/26/13 denying 42 MOTION for Reconsideration. (cc: all counsel) (dm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN

JAMES MICHAEL LEASING CO., LLC,
Plaintiff,
v.

Case No. 11-C-0747

PACCAR INC., d/b/a Kenworth
Truck Company,
Defendant.

DECISION AND ORDER
In this case, James Michael Leasing Company sues PACCAR Inc. for violation of
Wisconsin’s lemon law, Wis. Stat. § 218.0171. In a prior order, I addressed the parties’
motions for summary judgment and determined that PACCAR had violated the lemon law
by failing to accept return of the lemon vehicle and issue a refund within thirty days, and
that James Michael Leasing was entitled to the remedies specified in Wis. Stat.
§ 218.0171(7), including twice the purchase price of the vehicle less a reasonable
allowance for use. See James Michael Leasing Co. v. PACCAR Inc., __ F. Supp. 2d __,
2012 WL 5839246 (E.D. Wis. Nov. 19, 2012). PACCAR has filed a motion asking that I
reconsider that decision and makes two arguments in support of its request for
reconsideration. I address those arguments below.
PACCAR first argues that I failed to address its argument that James Michael
Leasing’s “pecuniary loss” is limited to the difference between the amount of the
reasonable-use allowance it proposed to deduct from James Michael Leasing’s refund and
the amount that the jury ultimately determines is the proper amount. However, I addressed
PACCAR’s arguments concerning the amount of James Michael Leasing’s pecuniary loss

in Part II.A of my prior order. As I explained there, the Wisconsin Supreme Court has
established that when a manufacturer fails to accept return of a lemon vehicle and issue
a refund within thirty days, the consumer’s “pecuniary loss” includes twice the amount of
the full purchase price of the vehicle. See Hughes v. Chrysler Motor Corp., 197 Wis. 2d
973, 982–84 (1996). As I also explained there, in this case PACCAR did not accept return
of the lemon vehicle and did not issue a refund within thirty days. Therefore, PACCAR is
liable for twice the amount of the full purchase price of the vehicle. PACCAR again points
out that it attempted to issue partial refunds to James Michael Leasing within the thirty-day
period, but that fact is irrelevant, since PACCAR ultimately refused to accept return of the
lemon vehicle or issue any refund unless James Michael Leasing agreed to waive its right
to contest PACCAR’s reasonable-use calculation. Thus, the net result was that PACCAR
did not accept return of the vehicle and did not issue any refund within the thirty-day period,
and so it is liable for twice the amount of a proper refund.
PACCAR’s second argument is that awarding James Michael Leasing twice the
purchase price of the vehicle as a remedy would violate due process. PACCAR contends
that the actual harm it caused James Michael Leasing was no more than $3,386.98, which
is the difference between the amount of the reasonable-use allowance it proposed to
deduct from James Michael Leasing’s refund and the amount that James Michael Leasing
thought PACCAR was allowed to deduct. PACCAR further contends that an award of
twice the amount of the purchase price of the vehicle will be in excess of $350,000.
PACCAR contends that imposing a statutory penalty that is more than 100 times the size
of the plaintiff’s actual harm violates the Due Process Clause of the Fourteenth
Amendment.
2

In St. Louis, Iron Mountain & Southern Railway Co. v. Williams, the Supreme Court
held that statutory penalties are subject to review under the Due Process Clause and that
a penalty may be invalidated “where the penalty prescribed is so severe and oppressive
as to be wholly disproportioned to the offense and obviously unreasonable.” 251 U.S. 63,
66–67 (1919). However, in that case, the Court also held that statutory penalties need not
be “confined or proportioned” to the plaintiff’s “loss or damage.” Id. at 66. The Court
explained that statutory penalties are designed to vindicate a “public wrong” rather than to
compensate a specific plaintiff for a “private injury.” Id. Thus, statutory penalties must be
proportioned to the state’s interest in encouraging compliance with the underlying law
rather than to the harm caused to the plaintiff by the specific violation at issue in the case.
Id. at 67 (stating that constitutionality of statutory penalty is “not to be tested” by comparing
its size to the amount of harm caused by a single violation).
In the present case, PACCAR does not contend that awarding double the purchase
price of the lemon vehicle is “wholly disproportioned” to Wisconsin’s interest in ensuring
that manufacturers voluntarily comply with the lemon law. Rather, PACCAR argues that
the specific award at issue in this case is disproportioned to the amount of James Michael
Leasing’s actual harm. But again, under Williams, the amount of James Michael Leasing’s
actual harm is irrelevant to the constitutionality of the statutory penalty. PACCAR attempts
to make the relationship between the penalty and the actual harm relevant by pointing to
the three “guideposts” for testing the constitutionality of large awards of punitive damages.
See, e.g., State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003); BMW of
N. Am., Inc. v. Gore, 517 U.S. 559, 574–75 (1996). However, all of the circuits to have
addressed the question have held that those guideposts do not apply to statutory penalties.
3

See Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899, 907–08 (8th Cir. 2012);
Vanderbilt Mortgage & Fin., Inc. v. Flores, 692 F.3d 358, 373–74 (5th Cir. 2012); Zomba
Enters., Inc. v. Panorama Records, Inc., 491 F.3d 574, 586–87 (6th Cir. 2007). Although
PACCAR correctly notes that the Seventh Circuit has not yet addressed the question, I see
no reason for it to disagree with the approach of the other circuits.1 Thus, I will not apply
the three guideposts in this case.
Accordingly, IT IS ORDERED that PACCAR’s motion for reconsideration is DENIED.
Dated at Milwaukee, Wisconsin, this 26th day of February, 2013.
s/ Lynn Adelman
_______________________________
LYNN ADELMAN
District Judge

1

PACCAR points out that in Parker v. Time Warner Entertainment Co., 331 F.3d 13,
22 (2d Cir. 2003), the Second Circuit cited Campbell and Gore in the course of noting that
use of a class action could distort a statutory-penalty scheme and result in an
extraordinarily large statutory penalty that poses due-process concerns. However, in
Parker, the court did not hold that the three guideposts were applicable to statutory
damages, and in any event it seems that the court’s concerns over the effect of class
actions on statutory penalties could be adequately addressed under Williams, which
requires comparison of the size of the penalty to the size of the public harm. Thus, nothing
in Parker suggests that the other circuits’ refusal to apply the punitive-damages guideposts
to statutory penalties is erroneous.
4