Highway Sales, Inc. v. Blue Bird Corp.

• Decision Date: 11 March 2009
• Docket Number: No. 07-3225.,07-3225.
• Parties: HIGHWAY SALES, INC.; Donald Oren, Appellants, v. BLUE BIRD CORPORATION; Thermo Leasing Corporation, doing business as Shorewood RV Center, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

559 F.3d 782

HIGHWAY SALES, INC.; Donald Oren, Appellants, v. BLUE BIRD CORPORATION; Thermo Leasing Corporation, doing business as Shorewood RV Center, Appellees.

No. 07-3225.

United States Court of Appeals, Eighth Circuit.

Submitted: April 15, 2008.

Filed: March 11, 2009.

William L. Davidson, argued, Minneapolis, MN (Brian A. Wood, Kevin J. Rodlund, on the brief), for appellant.

Edward H. Wasmuth, Jr., argued, Minneapolis, MN (Randall J. Pattee, Mark S. Enslin, on the brief), for appellee.

Before WOLLMAN, BEAM, and RILEY, Circuit Judges.

RILEY, Circuit Judge.

Donald Oren (Oren) and Highway Sales, Inc. (Highway Sales) (collectively, plaintiffs), asserted claims against Blue Bird Corporation (Blue Bird) for (1) breach of express and implied warranties; (2) violation of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301-2312; (3) violation of Minnesota's Lemon Law, Minn.Stat. § 325F.665; and (4) revocation of acceptance under Minn.Stat. § 336.2-608. Plaintiffs also asserted a claim for revocation of acceptance against Thermo Leasing Corporation d/b/a Shorewood RV Center (Shorewood RV). The district court granted Blue Bird's and Shorewood RV's (collectively, defendants) motion for summary judgment on all of plaintiffs' claims. Plaintiffs appeal. We affirm in part and reverse in part.

I. BACKGROUND

Plaintiffs' claims arose from their purchase of a defective recreational vehicle (RV) manufactured by Blue Bird. On July 31, 2003, Highway Sales purchased, for Oren's use,¹ a Blue Bird Wanderlodge M380 RV from Shorewood RV, a Blue Bird authorized dealer. The purchase price was $337,244.

In the months following the sale, Oren discovered numerous defects, including failures of the RV's electrical system, batteries, seals, slides, gauges, compressor, monitor, and lighting. Oren returned the RV to Shorewood RV for repairs on a number of occasions, and Shorewood RV attempted to remedy the RV's various defects. Despite Shorewood RV's efforts, Oren continued experiencing problems with the RV.

On July 2, 2004, Oren delivered the RV to Shorewood RV's lot, giving the keys to Shorewood RV and removing his belongings. Oren informed Anthony Santarsiero (Santarsiero), a Shorewood RV employee, that Oren was returning the RV as of that day. Santarsiero gave Oren the name of Blue Bird's CEO and told Oren to call or write the CEO a letter to try to resolve the problem. On July 8, 2004, Oren wrote a letter to Blue Bird's CEO asking him to authorize repurchase of the RV at its original cost. Oren copied Santarsiero on the letter. The letter stated, in part:

... After almost a year of continued problems with this motor home, I have come to three conclusions. First, the Model M380 was released before it had been properly designed, tested, and debugged. Second, Shorewood RV is a terrific dealer for you, but even they could not overcome the inherent problems in the M380. Third, I have run out of patience, confidence, and trust that the problems can be fixed in a reasonable time, and I request that you return my purchase price.

... On July 2, 2004, after the engine batteries once again died, I removed all my personal belongings and returned the coach to the dealer. This was the final event—the last straw.... I spoke with Anthony Santarsiero and told him I was returning the coach as of that day....

Suffice it to say that I am out of patience, and that both of our lives will be made easier if you will simply authorize a repurchase of the coach at its original cost. This coach simply needs to be permanently recalled until major corrections are made.

... I'm not interested in further retrofits, patches, or excuses. I will never take this coach back.

Neither Blue Bird nor Shorewood RV refunded plaintiffs' purchase price. Instead, on July 31, 2004, a Blue Bird technician performed a major electrical retrofit on the RV. Despite this repair, the batteries failed again on August 12, 2004. Additional repairs were completed on August 19, 2004, while the RV was in Shorewood RV's possession.

On September 7, 2004, Blue Bird's Director of Customer Service formally rejected Oren's request for a refund, asserting, "[y]our electrical issue on your M380 has been repaired.... We do not refund purchases or buy units back. We are committed to working with our Dealers and Customers to resolve any service needs that may occur. I know you have had some battery issues with your unit, but I am confident that these issues have been resolved. You have a reliable unit that should give you the service and performance it is designed for."

On September 14, 2004, Oren and Shorewood RV signed a Consignment Agreement, giving Shorewood RV the exclusive right to sell the RV. Before putting the RV on Shorewood RV's sales lot, additional repairs were completed on September 28, 2004, and October 4, 2004.

Despite the Consignment Agreement, Oren continued his efforts to obtain a refund. On October 27, 2004, Oren again wrote to Blue Bird, demanding a refund. Oren wrote another letter to Blue Bird on November 2, 2004, this time notifying Blue Bird he considered the RV to be a "lemon" under Minnesota's Lemon Law. On November 5, 2004, Blue Bird replied to Oren's October 27, 2004 letter. Blue Bird refused to provide a refund, declaring "Blue Bird stands behind this [RV which is] a reliable unit and will give you the service and performance for which it is designed." Blue Bird then apologized for any inconvenience Oren incurred while the RV was being repaired and offered to "send a Wanderlodge factory representative to Shorewood to provide additional owner training and a systems check" of the RV. On November 17, 2004, Oren traveled to Shorewood RV to check the status of the RV. Oren found the RV would not start because the batteries were once again dead. On November 19, 2004, Blue Bird's attorney responded to Oren's November 2, 2004 letter stating, "Blue Bird and its distributor have worked on the motor home and believe that the cause of the battery problem you identified, as well as any other issues, have been remedied. Therefore, Blue Bird has fully complied with the requirements of its warranty and the Minnesota lemon law." This letter went on to reiterate Blue Bird's willingness to continue working with Oren and Shorewood RV "to assure [Oren] that the motor home conforms to the warranty."

On November 29, 2004, Oren replied to Blue Bird's attorney, enclosing a spreadsheet detailing the problems he had experienced with the RV and stating:

My purpose in sending along this information is to document the fact that neither Blue Bird, nor its authorized representative, Shorewood R.V. Center [], has succeeded in meeting its obligations to conform the vehicle to the applicable express warranties. As the record clearly demonstrates, even after a reasonable number of attempts to repair the electrical and other problems that have haunted this unit, it remains unfit for the purpose it was intended; therefore, I reiterate my demand that Blue Bird make a full refund of the purchase price of the unit.

Blue Bird's attorney responded on December 1, 2004, asserting there was "nothing wrong" with the RV, and "Blue Bird has lived up to its obligations under the warranty." Oren wrote back to Blue Bird's attorney on December 6, 2004, indicating he would consider litigation if the matter were not acceptably resolved. On January 4, 2005, plaintiffs' attorney wrote Blue Bird's attorney in an attempt to schedule the matter for informal arbitration, as provided by the alternative dispute settlement mechanism set forth in Minnesota's Lemon Law.

Thereafter, Oren learned from Shorewood RV that Parliament Coach, an RV dealer in Florida, might be interested in purchasing the RV. In February 2005, Oren agreed to sell the RV to Parliament Coach for $225,000, resulting in a loss to plaintiffs of over $100,000. Before the sale, Oren fully disclosed to Parliament Coach the problems Oren had experienced with the RV.²

Oren informed Shorewood RV someone from Parliament Coach would be coming to Shorewood RV the next day to take the RV. Oren admits he did not inform Blue Bird of the sale. Blue Bird did not learn until March 29, 2005, that plaintiffs sold the RV.

On May 24, 2005, Blue Bird informed plaintiffs it refused to participate in arbitration based on its belief the Lemon Law claim no longer applied after plaintiffs sold the RV. On July 15, 2005, plaintiffs filed suit in Minnesota state court against Blue Bird. Blue Bird removed the case to federal court based on diversity of citizenship. Plaintiffs later amended their complaint, adding Shorewood RV as a defendant.

Defendants moved for summary judgment. The magistrate recommended granting defendants' motion with respect to all plaintiffs' claims except plaintiffs' state law claim for breach of express warranty. Viewing the evidence in the light most favorable to the plaintiffs, the magistrate determined a factfinder could reasonably conclude plaintiffs' breach of express warranty claim did not accrue until on or after November 19, 2003, and, therefore, the claim was not barred by the one year limitations period contained in Blue Bird's Limited Warranty. The parties filed objections to the magistrate's Report and Recommendation.

The district court concluded defendants were entitled to summary judgment on all of plaintiffs' claims, including the state law claim for breach of express warranty. The district court determined, as a matter of law, plaintiffs' breach of express warranty claim was untimely because the claim accrued no later than July 8, 2004, and plaintiffs filed suit more than one year later, on July 15, 2005. Plaintiffs now argue: (1) their breach of express warranty claim was timely; (2) Blue Bird's repeated promises to repair the RV tolled the limitations period on plaintiffs' breach of express and implied warranty claims; (3) plaintiffs' sale of the motor home did not bar their Minnesota Lemon Law Claim; and (4) plaintiffs were...