Adeli v. Silverstar Auto., Inc.

• Decision Date: 21 May 2020
• Docket Number: Nos. 19-1481/19-1602,s. 19-1481/19-1602
• Citation: 960 F.3d 452
• Parties: Hamid ADELI, Plaintiff - Appellee/Cross-Appellant v. SILVERSTAR AUTOMOTIVE, INC., doing business as Mercedes Benz of Northwest Arkansas, Defendant - Appellant/Cross-Appellee
• Court: U.S. Court of Appeals — Eighth Circuit

960 F.3d 452

Hamid ADELI, Plaintiff - Appellee/Cross-Appellant

v.SILVERSTAR AUTOMOTIVE, INC., doing business as Mercedes Benz of Northwest Arkansas, Defendant - Appellant/Cross-Appellee

Nos. 19-1481/19-1602

United States Court of Appeals, Eighth Circuit.

Submitted: January 16, 2020

Filed: May 21, 2020

William Thomas Crowder, Corey D. McGaha, Crowder & McGaha, Little Rock, AR, Deepak Gupta, Jonathan E. Taylor, Gupta & Wessler, Washington, DC, Nicholas A. Migliaccio, Jason S. Rathod, Migliaccio Rathod, LLP, Washington, DC, for Plaintiff-Appellee.

Staci Dumas Carson, David Michael Donovan, Watts & Donovan, Little Rock, AR, for Defendant-Appellee.

Before BENTON, GRASZ, and STRAS, Circuit Judges.

GRASZ, Circuit Judge.

Hamid Adeli brought this action against Silverstar Automotive, Inc. ("Silverstar"), claiming Silverstar intentionally misrepresented the condition of the used Ferrari it sold him. After trial, a jury awarded Adeli $20,201 in compensatory and incidental damages and $5.8 million in punitive damages on his claims for fraud, breach of express warranty, and deceptive trade practices under Arkansas law. Silverstar then renewed its pre-verdict motion for judgment as a matter of law on all claims and separately moved to alter or amend the judgment, arguing the jury’s $5.8 million punitive damages award was unconstitutionally excessive. The district court¹ denied Silverstar’s renewed motion for judgment as a matter of law but partially granted Silverstar’s motion to alter or amend the judgment, reducing the jury’s punitive damages award to $500,000. Now, Silverstar appeals the denial of its motion for judgment as a matter of law and the partial grant of its motion to alter or amend the judgment, arguing the district court should have further reduced the punitive damages award. Adeli cross-appeals, arguing the district court should not have reduced the punitive damages award at all. We affirm the district court’s judgment.

I. Background

Silverstar, an Arkansas dealership, acquired a used 2007 Ferrari F430 in a trade with its previous owner. To prepare the car to be sold, Michael Slone, a Silverstar salesman, took it to Boardwalk Ferrari ("Boardwalk"), a certified Ferrari dealership, for a pre-purchase inspection. The technician who performed the inspection listed five recommended repairs in an internal report titled "Recommended Services" and passed the report on to Larry Neighbors, a service advisor, who called Slone to discuss each of the recommendations. Boardwalk did not, at this time, send Slone a copy of the Recommended Services report. They discussed the report over the phone, and Slone declined two of the five recommended repairs, one to the tire pressure monitoring system and one to the exhaust headers.

At trial, Slone and Neighbors gave conflicting testimony about the recommended repair to the exhaust headers. Neighbors testified he told Slone the car’s exhaust headers were cracked and needed to be replaced. He clarified that his recommendation to Slone was to replace the exhaust headers "on this visit." Slone, on the other hand, testified he "was never told ... there was a cracked exhaust manifold [headers]." According to Slone, Neighbors told him the exhaust headers were only "beginning to have an issue" that had "not come to fruition" and that could "be addressed in the future." Slone testified that Neighbors also told him "the car was completely fine with the repairs [Slone elected to have done]" and could be driven safely by the next owner. When asked about Slone’s conflicting testimony, Neighbors specifically denied ever telling Slone that a prospective buyer would be satisfied with Slone’s decision to decline replacing the exhaust headers.

Slone took the car back from Boardwalk with the elected repairs completed, and Silverstar advertised it for sale online. Silverstar’s advertisement caught Adeli’s eye. Adeli, a resident of Virginia, was in the market for an exotic sports car and found Silverstar’s advertisement particularly appealing because it referenced a completed pre-purchase inspection by Boardwalk, a dealership Adeli considered reputable. Adeli testified he felt assured of the car’s good condition by the fact that the seller was proactive in having Boardwalk complete a pre-purchase inspection. He decided to inquire.

The Silverstar employee who initially responded to Adeli’s inquiry was unable to answer all his questions about the car’s history, so Slone took over and became Adeli’s primary contact. They communicated about the car primarily through text messages. Slone also sent Adeli several videos of the car. When Adeli asked for a copy of Boardwalk’s pre-purchase inspection, Slone sent him an invoice from Boardwalk that reflected the declined repair to the tire pressure monitoring system but not to the car’s exhaust headers. And although Slone verbally acknowledged that he declined a recommended repair of the tire pressure monitoring system, he mentioned nothing about the exhaust headers. In text messages, Slone told Adeli the car was "turnkey," "ready to go." This led Adeli to believe Boardwalk had identified no other problems and that the only outstanding issue with the car was the tire pressure monitoring system.

Eventually, Adeli offered to buy the car for $85,000. Silverstar’s asking price was $99,906, and it countered Adeli’s offer with an offer to sell at $95,000. Slone forwarded Adeli a text message from Silverstar’s owner — Slone’s father — explaining the counter offer. He stated, "I’m only comfortable letting go of the car at 95K. If all the service was not completed, I would do 90K, but I did the service and pre-buy because it was the right thing to do. Spending an extra 5K for all the service that was completed is a great deal." This message further led Adeli to believe the car needed no additional repairs. Nevertheless, Adeli told Slone he was unwilling to pay $95,000 for the car and negotiations ended for the time being.

Slone was also dealing with another prospective buyer. Unlike Adeli, however, this buyer contacted Boardwalk directly, and Boardwalk revealed that the car’s exhaust headers were beginning to crack. After this buyer raised the issue with Slone, Slone reached out to Boardwalk. He wrote in an email, "To my knowledge, there was beginning a crack in the exhaust. This is not included in the [pre-purchase inspection], however [Neighbors] brought it up to me.² Can you check on this?" In a response email, Neighbors attached a copy of the Recommended Services report which showed Boardwalk recommended and Slone declined repairs to the exhaust headers. At trial, Slone testified Boardwalk reassured him the exhaust headers were "not an issue at this point and [the car] was completely fine to go to the next buyer." This prospective buyer did not purchase the car.

Slone then reached back out to Adeli to restart negotiations. This time, Silverstar was willing to sell the car for $90,000. Adeli agreed to that price and made a $2,000 down payment using his credit card. He financed the balance of the purchase price. Adeli also signed and returned four separate documents Silverstar had sent him in the mail: (1) a purchase form, (2) an "Odometer Disclosure Statement," (3) a legal notice stating "Arkansas law does not provide for a ‘cooling off’ or other cancellation period for vehicle sales," and (4) a "Buyers Guide."

The Buyers Guide included a large, checked box next to the following statement: "AS IS - NO WARRANTY . YOU WILL PAY ALL COSTS FOR ANY REPAIRS. The dealer assumes no responsibility for any repairs ...." The one-page purchase form included a "DISCLAIMER OF WARRANTIES" section that states Silverstar "expressly disclaims all warranties, either expressed or implied, including any implied warranty of merchantability or fitness for a particular purpose." After receiving these signed documents and Adeli’s check for the balance of the purchase price, Silverstar shipped the car from its lot in Arkansas to a car dealership a few miles away from Adeli’s home in Virginia. At no point did Slone disclose the issue with the exhaust headers.

On their way home from picking up the car, Adeli and his eight-year-old daughter noticed a problem. They smelled fuel; and by the time Adeli parked the car in his home garage, the smell was quite strong. The next day, Adeli had the car towed to Competizione, a garage specializing in Ferraris. He also told Josh Guest, Silverstar’s general manager, the car smelled like fuel, and Guest responded, "[W]e have no history of anything like that. Please get it checked out and we can possibly offer some assistance." Mechanics at Competizione discovered a fuel leak and the crack in the exhaust headers which, together, were causing the fuel smell. Adeli shared this with Guest, but Guest wanted a second opinion from a certified Ferrari dealership. So Adeli had the car towed to a certified Ferrari dealership, Ferrari of Washington, whose mechanics identified about $30,000 worth of repairs, including the fuel leak and cracked exhaust headers. At this point, Adeli asked Guest if Silverstar would rescind the sale and take the car back. Although Guest thought Silverstar should take the car back, Slone and his father overruled him. The sale was final.

At trial, Adeli called Joseph Easton, a Ferrari of Washington technician, to provide expert testimony about the condition of the car, including the cracked exhaust headers. Easton explained that part of the function of the exhaust headers is to keep harmful gas created by the engine from entering the cab of the car. When presented with a hypothetical situation where his own pre-purchase inspection identified cracked exhaust headers, Easton testified he would flag the problem and recommend fixing it. The primary reason, he said, is cracked exhaust headers pose a safety risk to the car’s occupants. Occupants could unknowingly inhale harmful gases, and because Adeli’s car also had a proximate fuel leak, Easton testified, the...