Coghlan v. Wellcraft Marine Corp.

Decision Date26 January 2001
Docket NumberNo. 99-41443,99-41443
Citation240 F.3d 449
Parties(5th Cir. 2001) FRANK E. COGHLAN, III, on behalf of themselves and all other similarly situated persons; JOANNA L. COGHLAN, on behalf of themselves and all other similarly situated persons, Plaintiffs-Appellants, v. WELLCRAFT MARINE CORPORATION; GENMAR INDUSTRIES, INC.; GENMAR HOLDINGS, INC.; AQUASPORT MARINE CORPORATION, Defendants-Appellees
CourtU.S. Court of Appeals — Fifth Circuit

Appeal from the United States District Court for the Southern District of Texas.

Before JOLLY, JONES, and SMITH, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The Coghlans, dissatisfied boat purchasers, appeal from the district court's sua sponte dismissal of their case for failure to state a claim. Because they have stated several legally cognizable claims upon which relief might be granted, we reverse and remand in part, and affirm in part.

BACKGROUND

In May 1998, the Coghlans, residents of Texas, purchased an Aquasport 205, a type of recreational fishing boat manufactured by Wellcraft Marine Corporation. Wellcraft is a Delaware corporation with its principal place of business in Florida. The boat cost about $28,000. The Coghlans' purchase was motivated, at least in part, by Wellcraft's marketing campaign for this line of boats, which emphasized the advantages of all-fiberglass construction. In addition to rot-resistance and durability, it is generally believed among mariners that all-fiberglass boats tend to hold their value better than their wood-fiberglass hybrid counterparts.

The Coghlans assert that they relied on Wellcraft's representations that the Aquasport 205 was made entirely of fiberglass. A few months after the purchase, they discovered that the deck of the Aquasport 205 is actually composed of 1.5 inches of plywood encased entirely within fiberglass. Disappointed by this revelation, the Coghlans filed suit against Wellcraft, seeking class certification on behalf of all similarly situated Aquasport owners.

The Coghlans' suit alleged a claim against Wellcraft under the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. §§ 2301-2312, for breach of the implied statutory warranty of fitness for a particular purpose. They also pled state law claims for fraud, negligent misrepresentation, breach of contract, deceptive trade practices, unjust enrichment and civil conspiracy. In response to this laundry list of accusations, Wellcraft filed a limited motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), seeking dismissal on the pleadings of the MMWA and civil conspiracy claims.

The district court independently analyzed the pleadings and concluded that the Coghlans had failed to allege any real damages, a required element for each of their causes of action. The court went well beyond the scope of the 12(b)(6) motion before it and sua sponte ordered all the Coghlans' claims dismissed, pending a satisfactory attempt to re-plead.

The Coghlans attempted in an amended pleading to cure the deficiencies identified by the district court, but the court again concluded that the Coghlans had failed to assert the requisite "palpable injury." The court denied leave to file the amended complaint and reiterated its order dismissing all claims. The Coghlans timely appealed.

DISCUSSION

The question whether the Coghlans alleged facts stating a justiciable controversy is a matter of law, reviewed de novo. See Southwest Livestock and Trucking Co. v. Ramon, 169 F.3d 317 (5th Cir. 1999); Treaty Pines Invs. v. Commissioner of Internal Revenue, 967 F.2d 206, 210 (5th Cir. 1992).1 While the trial court's denial of the motion to amend is reviewed for abuse of discretion by this court, the discretion of the district court is limited by Fed. R. Civ. P. 15(a), which provides that "leave [to amend] shall be freely given when justice so requires.". Lowery v. Texas A&M Univ. System, 117 F.3d 242, 245-46 (5th Cir. 1977). It contravenes the liberal pleading presumption of Rule 15(a) and constitutes an abuse of discretion for a district court to deny a timely motion to amend where the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief. Id. at 245. A court may not dismiss on the pleadings if the allegations support relief on any possible theory. Cinel v. Connick, 15 F.3d 1338, 1341 (5th Cir. 1994).

The district court did not consider whether Texas or Florida law, the only two arguable candidates, governs the Coghlans' various state claims; it dismissed after reviewing precedents borrowed from a variety of circuits and jurisdictions. On appeal, the Coghlans rely on Florida law, neglecting to demonstrate why it applies.2 But regardless whether Texas or Florida law is applied, the Appellants managed to plead several legally cognizable claims which should not have been dismissed on the pleadings alone.

The only damage sought by the Coghlans is the benefit of their bargain with Wellcraft, or the difference in value between what they were promised, an all fiberglass boat, and what they received, a hybrid wood-fiberglass boat. Along with the "out of pocket" damages formula, which measures the difference between what the plaintiff paid in consideration and what he actually received, "benefit of the bargain" is a standard method for measuring damages in fraudulent representation and certain contract cases. The benefit of the bargain measure of damages is neither novel nor exotic.3 A simple example proffered by the Coghlans at oral argument makes the common-sense nature of benefit of the bargain damages clear: if a man buys what is represented to him as an 18k gold ring, but later discovers that the ring is merely 10k gold, he is entitled to the difference in value between the 18k ring that he bargained for and the 10k ring that he received.

Wellcraft and the district court misperceived the Coghlans' burden at the pleadings stage. Whether the Appellants may ultimately succeed in proving benefit of the bargain damages is a test that awaits discovery. If, however, such damages are theoretically available for the causes of action they have pled, dismissal on the pleadings was premature.

As the Coghlans contend, Texas and Florida permit recovery of benefit of the bargain damages in certain contexts. See Formosa Plastics Corp. v. Presidio Engineers and Contractors, 960 S.W.2d 41, 49-50 (Tex. 1997) (recognizing the "benefit of the bargain" measure of damages as remedy for common law fraud in Texas); Bankston Nissan v. Walters, 754 S.W.2d 127, 128 (Tex. 1988) (successful Deceptive Trade Practices Act plaintiffs may elect to receive either out-of-pocket damages or benefit of the bargain damages); Leyendecker v. Wechter, 683 S.W.2d 369, 373 (Tex. 1985) (Texas DTPA permits recovery of benefit of the bargain damages); DuPuis v. 79th St. Hotel, 231 So.2d 532, 536 (Fla. 3rd DCA 1970) (Florida courts have adopted both the "out of pocket" and "benefit of the bargain" rules in fraud cases and choose between them as circumstances require to do substantial justice); Martin v. Brown, 566 So.2d 890, 891 (Fla. 4th DCA 1990) (applying "benefit of the bargain" formula in a fraudulent representation case); Ft. Lauderdale Lincoln Mercury v. Corgnati, 715 So.2d 311, 314 (awarding benefit of the bargain-type damages for diminished value under the Florida Deceptive and Unfair Trade Practices Act); Gregg v. U.S. Industries, 887 F.2d 1462, 1466 (11th Cir. 1989) (reviewing the use of benefit of the bargain damages in Florida fraud actions). Our task is to evaluate each of the Coghlans' state law claims for the availability of benefit of the bargain relief.

1) Fraud-- Texas and Florida both follow the "flexibility theory" in fraud actions, which permits a trial court to instruct the jury under either the out-of-pocket rule or the benefit of the bargain rule, whichever will more fully compensate the defrauded party. Martha A. Gottfried, Inc. v. Amster, 511 So.2d 595, 599 (Fla. 4th DCA 1985); Formosa, 960 S.W.2d at 48; Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997). Therefore, regardless whether Texas or Florida law is applied, it was improper to dismiss the Coghlans' fraud claim on the pleadings; a fraud claim seeking benefit of the bargain damages is legally cognizable in both Texas and Florida.

2) Deceptive Trade Practices--The Coghlans also seek the benefit of their bargain under the consumer protection statutes of Texas or Florida. A successful Texas Deceptive Trade Practices Act (DTPA) plaintiff may recover under either the out-of-pocket rule or the benefit of the bargain rule. Leyendecker v. Wechter, 683 S.W.2d 369,373 (Tex. 1985); Blackstone v. Dudley, 12 S.W.3d 131, 135 (Tex. App. 1999). The rule will be applied that affords a victorious Texas DTPA plaintiff the larger sum. Leyendecker, 683 S.W.2d at 373.

Similarly, Florida's Deceptive and Unfair Trade Practices Act (DUPTA) has been interpreted to allow victims of deceptive acts to recover the diminished value of their purchases. Ft. Lauderdale Lincoln Mercury, 715 So.2d at 313; Urling v. Helms Exterminators, 468 So.2d 451, 453 (Fla. 4th DCA 1985). The measure of damages in Florida DUTPA cases has been determined to be "the difference in the market value of the product or service in the condition in which it was delivered and its market value in the condition in which it should have been delivered according to the contract of the parties." Rollins, Inc. v. Heller, 454 So.2d 580, 585 (Fla. 3rd DCA 1984) (quoting from a Texas case, Raye v. Fred Oakley Motors, Inc., 646 S.W.2d 288, 290 (Tex. App. 1983)). While the Florida DUTPA cases do not use the phrase "benefit of the bargain" in describing this damages formula, the two are clearly synonymous: the value of the product as promised minus the value of the product delivered. Thus Texas's DUTPA and Florida's DTPA both recognize the legal cognizability of benefit of the bargain damages.

3) Breach of...

To continue reading

Request your trial
123 cases
  • In re Sony Gaming Networks & Customer Data Sec. Breach Litig., MDL No.11md2258 AJB (MDD)
    • United States
    • U.S. District Court — Southern District of California
    • January 21, 2014
    ...for unjust enrichment where a "valid, express contract governing the subject matter of the dispute exists." Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 454 (5th Cir. 2001) (applying Texas law).36 Here, neitherparty contests the validity of the PSN/SOE User Agreements and the PSN/SOE Pr......
  • In re Bridgestone/Firestone, Inc. Tires Products
    • United States
    • U.S. District Court — Southern District of Indiana
    • July 27, 2001
    ...Cos., Inc., 614 F.Supp. 210 (N.D.Ill.1985). 40. See Coghlan v. Aquasport Marine Corp., 73 F.Supp.2d 769 (S.D.Tex.1999), aff'd, 240 F.3d 449 (5th Cir.2001); Verb v. Motorola, Inc., 284 Ill.App.3d 460, 472, 220 Ill.Dec. 275, 672 N.E.2d 1287, 1295 (1996); Feinstein, 535 F.Supp. at 41. Only the......
  • Texas First Nat. Bank v. Wu
    • United States
    • U.S. District Court — Southern District of Texas
    • December 9, 2004
    ...a Claim A court may dismiss on the pleadings if the allegations do not support relief on any possible theory. Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 452 (5th Cir.2001) (citing Cinel v. Connick, 15 F.3d 1338, 1341 (5th Cir.1994)). Here, Plaintiffs, by and through their original sta......
  • Mills v. Warner-Lambert Co.
    • United States
    • U.S. District Court — Eastern District of Texas
    • September 30, 2008
    ...seek contract law damages. See, e.g., Rivera v. Wyeth-Ayerst Laboratories, 283 F.3d 315, 320 (5th Cir.2002); Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 455 n. 4 (5th Cir.2001); Ryan v. Brookdale Intern. Systems, Inc., 230 Fed. Appx. 366 (5th Cir.2007). The key distinction noted in the......
  • Request a trial to view additional results
2 books & journal articles
  • The florida deceptive and unfair trade practices act and other florida consumer protection laws
    • United States
    • James Publishing Practical Law Books Florida Small-Firm Practice Tools - Volume 1-2 Volume 1
    • April 1, 2023
    ...it should have been delivered according to the contract of the parties.” [Fla Stat. §501.211(2); Coghlan v. Wellcraft Marine Corp. , 240 F. 3d 449, 453-54 (5th Cir. 2001) (construing Florida law and comparing damages available under DUTPA with remedies under analogous Texas statute).] Such ......
  • Understanding and applying Florida's flexibility theory of damages.
    • United States
    • Florida Bar Journal Vol. 80 No. 5, May 2006
    • May 1, 2006
    ...Potomac Elec. Power Co. v. Electric Motor & Supply, Inc., 119 F. Supp. 2d 546 (D. Md. 2000). (31) Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir. 2001) (arising out of a Texas district court decision); Aerotech Resources, Inc. v. Dodson Aviation, Inc., 191 F. Supp. 2d 1209 (D.......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT