Opinion
Case No.11CV1798 AJB (DHB)
10-25-2013
ELECTRA CRUISES, INC., a corporation and LYNDA M. GUINTHER, an individual, Plaintiff, v. CAMPING WORLD RV SALES, a business entity, form unknown, et al., Defendants.
ORDER GRANTING IN PART AND
DENYING IN PART
DEFENDANT'S MOTION FOR
PARTIAL SUMMARY JUDGMENT
Presently before the Court is Defendant Stier's RV Centers, LLC dba Camping World RV Sales ("Stier's" ) and Defendant Freedom Roads LLC's (collectively "Defendants") Motion for Summary Judgment or in the alternative Motion for Summary Adjudication. For the reasons stated, the Court GRANTS in part and DENIES in part Defendant's Motion for Partial Summary Judgment.
I. BACKGROUND
Plaintiffs commenced this action in the Superior Court of California, County of San Diego, on August 11, 2011. Plaintiffs alleged violations of the Song-Beverly Consumer Warranty Act, Magnuson-Moss Warranty Act ("Magnuson-Moss Act"), and negligent repair against Defendants and other parties who are no longer a part of this action. Defendants removed the action pursuant to 28 U.S.C. § 1441(b). (Doc. No. 1.) Plaintiffs filed an Amended Complaint ("FAC") on June 12, 2012. (Doc. No. 38.) The FAC contains only the Magnuson-Moss Act and negligent repair causes of action.
Plaintiffs are Electra Cruises Inc. ("Electra"), a corporation that operates a fleet of yachts for weddings and corporate events, and Lynda Guinther, the Chief Financial Officer of Electra in her individual capacity. (Doc. No. 85 at 2.) Plaintiffs purchased the 2009 American Coach, American Heritage motor home at a recreational show in Pomona California in October of 2008. The motor home was manufactured by American Coach, a division of Fleetwood Enterprises Inc ("Fleetwood"). (Id. at 2-3.) Fleetwood has since filed for bankruptcy and has liquidated. (Id. at 3.) Defendant Stier's operates a recreational vehicle dealership and was on site at the Pomona RV show to assist Fleetwood in sales transactions should attendees desire to buy a motor home. (Id. at 4.)
Plaintiffs wished to purchase the motor home for business purposes, specifically as a groom's dressing room and wedding rental, as well as personal recreational activities. (Doc. No. 91 at 2). Plaintiffs were unable to identify a suitable motor home onsite, but did identify a floor plan to their liking from an American Heritage brochure. (Id.) Specifically, Plaintiffs desired the galley pull out feature. (Doc. No. 85 at 5.) Fleetwood representatives located a unit at a Georgia dealership that purportedly had a galley pull out. (Id.) Relying upon the Fleetwood representative, Plaintiffs negotiated a purchase price of $603,888.63 and made a down payment for the motor home payable to Stier's. (Id. at 2, 5-6; Doc. No. 91 at 3.) However, when the subject motor home was delivered to a San Marcos, California facility, the parties realized that motor home did not have the desired galley pull out. (Id. at 6-7.) Morever, according to Plaintiffs FAC the motor home was delivered with material defects such as blown fuses, house battery not charging, defective slide-outs, defective generator, and so forth. (Id. at 3.) Plaintiffs expressed the desire to continue with the transaction but to have the motor home redesigned and reconfigured to meet their expectations. (Id. at 7.) Representatives from Fleetwood informed the parties that they would make the necessary changes and Stier's confirmed this promise in writing. (Id. at 7-8.) The price settled upon for the renovations was $11,000. (Id.) Plaintiffs also requested additional work to be completed on the motor home. (Id. at 9). Plaintiffs delivered the motor home in December 2009 to Fleetwood for transport to the Fleetwood factory in Indiana. (Id. at 8.) Fleetwood completed the work in two months, however it appears that the results were less than satisfactory. Plaintiffs alleged a number of material defects as well as cosmetic problems associated with the reconfiguration. (Doc. No. 38 at 3-4.) The parties were unable to privately negotiate an acceptable arrangement, and thus the instant lawsuit.
Numerous cross-claims were filed then dismissed. On February 20, 2013 Defendants filed the instant Motion for Summary Judgment seeking partial summary judgment on a number of issues. (Doc. No. 66) Plaintiffs filed their Response on March 15, 2013. (Doc. No. 91.)
II. DISCUSSION
A. Legal Standard
Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(e) (West 2006). A dispute about a material fact is genuine "if 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, 106 S.Ct. 2505 (1986). In considering the motion, the court must examine all the evidence in the light most favorable to the non-moving party and "all justifiable inferences are to be drawn in his favor." Id. at 255, 267.
When the moving party does not bear the burden of proof, summary judgment is warranted by demonstration of an absence of facts to support the non-moving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548 (1986). Summary judgment must be granted if the party responding to the motion fails "to make a sufficient showing on an essential element of her case with respect to which she has the burden of proof." Id. at 323.
B. Issues for Summary Judgment
1. Stier's Alleged Breach of Any Implied Warranty of Merchantability and/or Fitness and Subsequently the Magnuson-Moss Act.
The Magnuson Moss Act provides that a consumer may assert a civil cause of action to enforce the terms of an implied or express warranty. 15 U.S.C. §§ 2301-2312, et seq. Section 2310(d) provides that any "consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract" may sue for damages and other legal and equitable relief. Breach of an obligation imposed by state law will support a claim under the Magnuson-Moss Act. In re Sony Grand Wega, 758 F. Supp. 2d 1077, 1101 (S.D. Cal. 2010). Defendants contend that Plaintiffs' Magnuson Moss Act claim must fail as a matter of law as they were: 1) not obligated not given an opportunity to cure; and 2) any duty owed to Plaintiffs to redesign was discharged by novation. (Doc. No. 66 at 10-15.)
a. Steier's was not Obligated nor were they Afforded an Opportunity to Cure.
First, Defendants argue Plaintiff's Magnuson Moss Act claim must fail as Defendants are not obligated to cure nor were they afforded an opportunity to cure as required by the Act:
"No action ... may be brought under subsection (d) of this section for failure to comply with any obligation under any written or implied warranty or service contract ... unless the person obligated under the warranty or service contract is afforded a reasonable opportunity to cure such failure to comply.15 U.S.C. 2310(e).
Defendants contend that Fleetwood promised to redesign and reconfigure the motor home and that Stier's merely "memorialized this promise for Plaintiffs in writing. (Doc. No. 66 at 11). In support, Defendants attach the Work Authorization Form prepared by Stiers confirming Fleetwood's promise in writing. (Id. Ex. 12) However, in their Response, Plaintiffs repeatedly allege Stier's as the entity that initially made the promise to reconfigure the floor plan. (See Doc. No. 91 at 3-4.) Plaintiffs further allege that all negotiations regarding the sale of the motor home as well as the reconfiguration were with Stier's. (Id. at 13.) A review of the Work Authorization Form attached as Exhibit 12 does not indicate that Fleetwood promised to do any redesign or reconfiguration. Indeed, Fleetwood is not even mentioned on the Form. The Form bears Camping World RV Sales logo and indicates the work to be done was to "install galley pull out" and "replace galley sink." (Doc. No. 66, Ex. 12.)
Defendants next argue that Plaintiffs failed to give them an opportunity to cure the defect. (Doc. No. 66 at 11.) Notice and an opportunity to cure are required to state a claim under the Magnuson Moss Act. A plaintiff must provide a defendant with an opportunity to cure the alleged breach and the defendant itself must have refused directly to provide a cure. Tietsworth v. Sears, 720 F. Supp. 2d 1123, 1143 (N.D. Cal. 2010) (citation omitted). As expected, Plaintiffs beg to differ. First, Plaintiffs contend that they did indeed give Stier's an opportunity to install the desired galley pull once the parties realized the motor home purchased and delivered lacked the desired feature. According to Plaintiffs, Stier's initially took responsibility and claimed it was going to order the necessary parts and contract out the labor. (Doc. No. 91 at 4.) However, Stier's later recanted as it did not have the capability to make the necessary modifications and Fleetwood stepped in and agreed to modify the motor home. (Id.) Mr. Randall Goodman, president of Electra, testified that a sales representative from Stier's, Mr. Rocky Eldridge, assured him that "we're going to change the motor home." (Doc. No. 91, Ex. 8, Goodman Dep. at 16.)
Accordingly, a material issue of genuine fact exists as to whether Defendants are obligated to cure and whether Plaintiffs provided Defendants a reasonable opportunity to cure exists. The Court cannot grant summary judgment on this basis.
b. Stier's Has No Duty to Plaintiffs by Novation
A novation is a substitution by agreement of a new obligation for an existing one with the intent to extinguish the latter. Davies Machinery Co. v. Pine Mountain Club, Inc., 39 Cal. App. 3d 18, 24, 113 Cal. Rptr.784 (Cal. Ct. App. 1974). Whether or not a novation exists depends primarily upon the individual facts of each case. Olympic Finance Co. v. Thyret, 337 F.2d 62, 66 (9th Cir. 1964). To constitute novation, there must be some evidence of an agreement or contract to substitute and the intent of the parties is a controlling factor. See Aetna Cas. & Sur. Co. of Hartford, Conn. v. Bettens, 111 F. Supp. 111, 113 (S.D. Cal. 1953).
The Court cannot as a matter of law determine that a valid novation occurs. There is insufficient evidence in the record to indicate the intent of the original parties to create a new agreement. Plaintiffs' action of delivering the motor home to Fleetwood does not suffice to show a new agreement. Furthermore, Defendants' arguments are contradictory. On the one hand Stier's claims it was never under a duty to redesign or reconfigure the motor home. (Doc. No. 66 at 11.) Then on the other hand, by claiming a discharge of duty by novation, Stier's implies they indeed owed some duty to Plaintiffs to redesign or reconfigure the motor home. (Id. at 13.) Thus, by Defendants' own admissions, a genuine issue of material fact exists precluding the Court from granting summary judgment on this basis.
c. Motor Home has been Modified
Finally, Defendants argue Plaintiffs' Magnuson Moss claim fails as a matter of law as the motor home was "in a different condition from when Plaintiffs purchased ... [and no] warranty from Stier's attached to any work that Fleetwood performed ..." (Id. at 15.) In their response, Plaintiffs do not dispute that Stier's does not owe a warranty for work by a third party. Instead, Plaintiffs repeatedly contend that Stier's breached an implied warranty by supplying a motor home that required subsequent modifications to meet Plaintiffs' expectations. (Doc. No. 91 at 18.)
It would then appear that the parties agree Stier's warranty does not cover work performed by Fleetwood. However, the a genuine issue of contention still remains, whether or not Stier's breached an implied warranty at the time of sale for supplying a product that did not meet Plaintiffs' expectation.
D. Implied Warranties
"Merchantability" generally has been construed as a requirement that a product conforms to its ordinary and intended use. Stearns v. Select Comfort Retail Corp., No. 08-2746 JF, 2009 WL 1635941, at *7-8 (citing Am. Suzuki Motor Corp. V. Super. Ct. 37 Cal. App. 4th 1291, 1295, 44 Cal. Rptr. 2d 526 (Cal. Ct. App. 1995). Under California law, a breach of implied warranty of merchantability means the product does not possess even the most basic degree of fitness for ordinary use. Cal. Comm. Code § 2314(2). This implied warranty does not "impose a general requirement that goods precisely fulfill the expectation of the buyer. Instead, it provides for a minimum level of quality. Stearns, 2009 WL 1635941, at *8. However, this does not mean the alleged defect must preclude any use of the product itself. See Isip v. Mercedes-Benz USA, LLC, 155 Cal.App.4th 19, 26, 65 Cal. Rptr. 3d 685 (2007).
In addition to an implied warranty of merchantability, the California Commercial Code imposes an implied warranty of fitness for a particular purpose. "Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that they buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is . . . an implied warranty that the goods shall be fit for such purpose." Cal. Comm. Code § 2315. A particular purposes "envisages a specific use by the buyer which is peculiar to the nature of his business." Mills v. Forestex Co., 108 Cal.App.4th 625, 635 n.4, 134 Cal.Rptr.2d 273 (2003).
Defendants argue no evidence of a defect existed in the motor home at the time of sale that renders it unfit for ordinary use. (Doc. No. 66 at 17.) Plaintiffs, on the other hand, contend that there were "numerous defects that were present at the time of sale and that arose during the first year of ownership." (Doc. No 91 at 15.) The implied warranty of merchantability only requires that the good is "substantially free of defects." Mexia v. Rinker Boat Co., Inc., 174 Cal.App.4th 1297, 1303 (Cal. Ct. App. 2009). The analysis is complicated by the fact that Plaintiffs' motor home was repaired by third party, Fleetwood, after the sale which may have resulted in new defects and/or exacerbated alleged existing defects. There are inconsistencies in the parties' briefs as to when the Fleetwood Indiana repairs occurred. The UMF states that repairs started in December 2009. (Doc. No. 85.) Some portions of Plaintiffs' Response state the repairs started in late November and December 2009 while other portions imply the repairs started in December 2008. (See Doc. No. 91 at 5-7.) The exact date of the Fleetwood repairs, which parties contend created or exacerbated defects, is important for the Court to determine exactly what alleged defects existed before to implicate Stier's breach of any implied warranty. The parties' typos and inconsistencies have made it difficult for the Court to analyze this issue. Plaintiffs state that during their first year of ownership, seventeen (17) repair attempts were made to fix an estimated fifty (50) alleged defects. (Doc. No. 91 at 15-16.) However, because of Plaintiffs' own negligence in preparing their briefs, the Court could not determine from the pleadings whether these repair attempts are for defects that existed prior to or after the Fleetwood Indiana repair and renovation to install Plaintiffs' galley pull. Based upon a review of the record and work orders from Fleetwood, the Court determined the repairs occurred from December 2008 to January 2009. (Def. Mot. Ex. 19-20.)
The Court takes this opportunity to remind parties to proofread briefs submitted. Defendants' briefs were also full of spelling errors and inconsistencies, for example the table of contents did not match the actual page numbers. Such simple mistakes detracts from the substance of the briefs and wastes the Court's time in trying to determine exactly what the parties' meant. (Doc. No. 66.)
Plaintiffs allege the defects included: 1) the house batteries not charging; 2) a defective rear awning; 3) malfunctioning grey and black water tank gauges; 4) outside light failure ... (Doc. No. 91 at 4.) However, Stier's failed to address most of the items Plaintiffs cited to. (Id. at 5.) Based on the Fleetwood work order, there also appeared to be issues with unsecured wires and minor cosmetic problems. (Def. Mot. Ex. 19.) While most of these defects would not render the motor home unfit for intended use or unable to provide a minimum level of quality, the Court does note the concern with the house batteries which would severely hinder the use of the motor home. Stier's contends that its technicians replaced the transfer switch which resolved the house battery problems. (Doc. No. 66 at 17.) Plaintiffs argue the problem still exists and have proffered expert testimony that the charging problem still persists. (Doc. No. 91 at 5.) Moreover, there is also a dispute with regards to how the Aqua Hot system was damaged, with experts on both sides arguing different theories. As there are two opposing views on these problems, each supported by expert opinion, the Court is precluded from granting summary judgment on whether Stier's breached an implied warranty of merchantability.
Plaintiffs also allege Stier's breached the implied warranty of fitness. According to Plaintiffs, they communicated their intent to use the motor home for their business as a groomsmen dressing room and rental. From the record, it is clear that the primary source of Plaintiffs' dissatisfaction was the lack of galley pull in the motor home purchased. Defendants argue that Plaintiffs' inspection of the motor home precludes an implied warranty except as to latent defects unrevealed by a reasonable examination. (Doc. No. 19). Because the existence of a galley pull is so obvious that means Plaintiffs waived the implied warranty.
The Court partly agrees with Defendants argument. The Court fails to see how the lack of a galley pull would severely inhibit the motor home's use as a groomsmen dressing room. A groomsmen dressing room only needs privacy, adequate space, storage, and the like. A galley pull, indeed an entire kitchen, would appear unnecessary to serve as a changing space. However, there is a genuine issue of material fact as to whether the implied warranty of fitness was breached with regards to Plaintiffs' use of the motor home as a wedding rental. Plaintiffs have alleged they represented that particular purpose to Stier's representatives and Plaintiffs have pled they relied upon Stier's to locate a motor home that would serve this commercial purpose. Thus, there is a genuine issue of material fact as to whether the latent defects rendered the motor home unsuitable for rental purposes.
Thus, the Court DENIES summary judgment on whether Stier's breached and implied warranties and subsequently the Magnuson Moss Act.
2.Whether Subsequent Modification Bars Plaintiffs' Claims
Defendants next seek summary judgment on whether a third party's modification of the motor home bars Plaintiffs from revoking acceptance and claiming for damages. Furthermore, Defendants argues that Plaintiffs' post revocation use of the motor home nullifies and claim for damages. (Doc. No. 66 at 19-20).
Under the California Commercial Code, revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defect. Cal. Comm. Code §2608(2). Plaintiffs attempted to revoke acceptance on March 29, 2011. (Def. Mot. Ex. 1.) Plaintiffs learned the motor home did not have the galley pull upon inspection in October 2008. Based on Plaintiffs' own pleadings, they discovered the existence of material defects by November 2008 when Plaintiffs returned the motor home to Stier's for repair, including the house battery defect. (See Doc. No. 91 at 4.) After the Fleetwood repairs, Plaintiffs again had to make several repairs and at least by April 2009, discovered additional issues that allegedly severely limited their use of the motor home, such as the major damage to the Aqua Hot system, water flooding, and so forth. (Doc. No. 8.) However, Plaintiffs waited almost two years before attempting to revoke and rescind. Instead, Plaintiffs attempted numerous subsequent repairs at different facilities and even took the motor home on an 8,000 mile trip to Alaska after attempting to revoke. (Doc. No. 91 8-9; Def. Mot. Ex. 51.)
Generally, the effect of a delay and the corresponding waiver of the right to rescind is a question of fact. See Mobley v. Richfield Oil Corp., 53 Cal. App. 2d 406, 411, 128 P.2d 105 (Cal. Ct. App. 1942). However, a Court may rule as a matter of law on the issue when the delay is so palpably unreasonable. Cf. Garetto v. Almaden Vineyards, 118 Cal.App.2d 99, 102, 257 P.2d 477 (Cal. Ct. App. 1953). In the instant case, Plaintiffs notified Stier's of their intent to revoke and rescind a full two years after discovery of all the defects that allegedly existed at the time of sale. Though Plaintiffs were in fact attempting to repair the problems (first through Stier's, then Fleetwood, then numerous other facilities), the fact remains that Plaintiffs waited a full two years before notifying Stier's of any attempt to revoke and rescind. Moreover, the Plaintiffs' action after attempting to revoke and rescind is inconsistent with any intent to do so. The Court agrees with Defendants that the delay of two years was unreasonable and would find that a rational trier of fact could not disagree. However, the Court cannot conclude as a matter of law that any subsequent post revocation use or subsequent repairs by a third party completely cuts off Stier's liability for the defects Plaintiffs allege existed at the time of sale.
Finally, although Defendants argue that the substantial modification made to the motor home bars Plaintiffs' claims for damages, they have failed to cite to any case law that so establishes this rule. (Doc. No. 66 at 19.) Although Defendants cite to the California Commercial Code, this only supports their contention that Plaintiffs' have effectively waived revocation by substantially changing the motor home's condition. (Id.) The Court agrees that Plaintiffs have waived their right to revoke and rescind based on the unreasonable delay in notifying Stier's as well as their actions, inconsistent with the intent to revoke or rescind. However, the Court cannot make the next inferential leap Stier's argues for to find that Plaintiffs have also effectively waived their right to claim for damages arising from alleged defects existing at the time of sale.
Accordingly, the Court GRANTS summary judgment finding that Plaintiffs waived revocation but DENIES granting summary judgment as to whether subsequent modification completely cuts of Stier's liability for alleged defects that existed prior to the repairs. 3. Stier's Alleged Negligent Repair
Lastly, Defendants seek summary judgment to declare Stier's did not negligently repair the motor home. Defendants argue that Stier's only performed one repair on the motor home, replacing the transfer switch, and that no problem exists with the transfer switch today. (Doc. No. 66 at 22.) However, Plaintiffs argue that the initial problem was the battery charging issue which Stier's attempted to fix by repairing the transfer switch. Plaintiffs contend that Stier's negligently diagnosed the repair as the battery charge problem still persists. As stated above, both parties have proffered differing expert testimony as to the cause and remedy of the battery problem. Thus a genuine issue of material fact exists as to whether or not Stier's negligently repaired the motor home. Based on the record, the Court is precluded from granting summary judgment on this issue.
CONCLUSION
The Court:
1. DENIES Defendants' summary judgment motion on whether Stier's breached any implied warranties and subsequently the Magnuson Moss Warranty Act.
2. DENIES Defendants' summary judgment on whether a third party's repairs cuts off Stier's liability as to alleged defects existing at the time of sale.
3. GRANTS summary judgment on whether Plaintiffs may revoke acceptance and rescind the transaction.
4. DENIES summary judgment on whether Stier's negligently repaired the motor home. IT IS SO ORDERED.
_________________
Hon. Anthony J. Battaglia
U.S. District Judge