Diersen v. Chicago Car Exchange, 96-1588

• Decision Date: 13 May 1997
• Docket Number: No. 96-1588,96-1588
• Citation: 110 F.3d 481
• Parties: , 37 Fed.R.Serv.3d 400 David J. DIERSEN, Plaintiff-Appellant, v. CHICAGO CAR EXCHANGE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 481

110 F.3d 481

65 USLW 2659, 37 Fed.R.Serv.3d 400

David J. DIERSEN, Plaintiff-Appellant, v. CHICAGO CAR EXCHANGE, Defendant-Appellee.

No. 96-1588.

United States Court of Appeals,Seventh Circuit.

Argued Sept. 16, 1996.

Decided March 31, 1997.

Rehearing Denied May 13, 1997.

David J. Diersen (argued), Wheaton, IL, for Plaintiff-Appellant.

Christopher V. Langone (argued), Chicago, IL, for Defendant-Appellee.

Before POSNER, Chief Judge, COFFEY and KANNE, Circuit Judges.

COFFEY, Circuit Judge.

David Diersen filed a complaint against the Chicago Car Exchange ("CCE"), an automobile dealership, alleging that the CCE fraudulently furnished him an inaccurate odometer reading when it sold him a 1968 Dodge Charger, in violation of the Vehicle Information and Cost Savings Act ("the Odometer Act" or "the Act"). 49 U.S.C. § 32701 et seq. (formerly 15 U.S.C. § 1981 et seq.). The Odometer Act requires all persons transferring a motor vehicle to give an accurate, written odometer reading to the purchaser or recipient of the transferred vehicle. Under the Act, those who disclose an inaccurate odometer reading with the intent to defraud are subject to a private cause of action by the transferee and may be held liable for treble damages or $1500, whichever is greater. 49 U.S.C. § 32710. The district court granted the defendant's motion for summary judgment, relying upon a regulation promulgated by the National Highway Traffic Safety Administration ("NHTSA") which purports to exempt vehicles that are at least ten years old (such as the one Diersen purchased from the CCE) from the Act's odometer disclosure requirements. 49 C.F.R. § 580.6(a)(3). Because we hold that the NHTSA exceeded the scope of its statutory authority when it created this exemption for older cars, we reverse that portion of the district court opinion which relies upon the NHTSA regulation as a ground for ruling in favor of the CCE. We affirm the grant of summary judgment on other grounds.

I. BACKGROUND

1. Diersen's Purchase of the 1968 "Charger R/T" From the CCE

On July 23, 1994, Diersen purchased a 1968 Dodge "Charger R/T" from the CCE for $16,790. The CCE provided Diersen with a written odometer disclosure statement, as required under the Act, stating that the actual mileage of the vehicle was 22,633. A caption at the top of the disclosure document stated:

Federal (and State law, if applicable) requires that you state the mileage upon transfer of ownership. Failure to complete or provide a false statement may result in fines and/or imprisonment.

The CCE also provided Diersen with an appraisal document stating that the car had 22,600 original miles, as well as a fact sheet stating that the car had 22,600 miles and just one prior owner.

The CCE had purchased the vehicle in question from an individual named Joseph Slaski, who certified to the CCE that the mileage on the car was approximately 22,600 miles and stated that the vehicle had but one prior owner. After acquiring the vehicle but before selling it to Diersen, the CCE inspected the car visually, test-drove the car, and looked at the car's engine. The CCE concluded that the car was in good condition and did not suspect that the odometer reading was inaccurate.

Diersen, after purchasing the Charger, conducted an extensive investigation into the car's title history and discovered that the vehicle had previously been described in title documents as having mileage of 75,000. As part of his investigation, Diersen telephoned two of the car's prior owners, Dennis Sobieski and Robert Dreschbourg (the original owner of the car). Both individuals informed him that the high mileage noted on the title documents was a discrepancy, arising from a clerical error, and asserted that the vehicle was in fact a low-mileage car. Sobieski later gave deposition testimony reiterating what he initially told the plaintiff: that the 75,000 mile figure was inaccurate and the result of a clerical error.

Before Diersen filed this lawsuit, the CCE offered to have Diersen return the car for a complete refund. Diersen refused this offer and decided instead to sue the CCE for fraud under the Act.

2. Procedural History

In response to Diersen's claim of odometer fraud, the CCE brought a motion for summary judgment, which the district court granted on the basis of a regulation, promulgated by the NHTSA, which purported to exempt cars ten years old or older (such as the 1968 Dodge Charger) from the disclosure requirements of the Act. Following the entry of summary judgment on December 27, 1995, Diersen filed a motion to amend his complaint, pursuant to Fed.R.Civ.P. 15(a). He sought leave to amend his complaint so that he could include additional defendants, incorporate new factual material, and advance a new argument that the NHTSA regulation exempting older vehicles was invalid as a matter of law. Diersen's motion to amend was denied January 12, 1996, without a written opinion. Diersen then filed a motion for reconsideration of the court's summary judgment order, arguing that (1) the older-car exemption created by the NHTSA lacked any basis in the Act and was therefore invalid, or alternatively, (2) newly discovered facts demonstrated that the CCE knew of the exemption for older cars but waived that exemption, thus admitting that it was bound by the odometer disclosure requirements of the Act. The court denied Diersen's motion to reconsider on February 15, 1996, after both parties had submitted memoranda on the issues raised by Diersen.

II. ISSUES

The initial and most important question presented in this appeal is whether the district court properly granted summary judgment in favor of the CCE with respect to Diersen's claim of odometer fraud. Diersen argues that the NHTSA lacked statutory authority to exempt older vehicles (such as the one he purchased) from the disclosure requirements of the Act. Thus, according to Diersen, it was erroneous for the district judge to rely upon the NHTSA's regulatory exemption as a basis for granting summary judgment in favor of the defendant. The CCE contends that the NHTSA regulation is a valid exercise of the NHTSA's regulatory authority, and further argues that even if the regulation is deemed invalid (i.e., even if the Act applies to the sale of older vehicles) the CCE is entitled to summary judgment because Diersen has failed to come forward with sufficient evidence that the CCE committed odometer fraud.

In addition to challenging the district court's summary judgment order, Diersen assigns as error the denial of both his motion to amend and his motion to reconsider.

III. DISCUSSION

1. The Odometer Act and Accompanying Federal Regulations

The Act provides, in relevant part:

(a) Written disclosure requirements.--(1) Under regulations prescribed by the Secretary of Transportation, a person transferring ownership of a motor vehicle shall give the transferee a written disclosure--

(A) of the cumulative mileage registered by the odometer; or

(B) that the mileage is unknown if the transferor knows that the mileage registered by the odometer is incorrect.

(2) A person making a written disclosure required by a regulation prescribed under paragraph (1) of this subsection may not make a false statement in the disclosure.

* * * * * *

(4) The regulations prescribed by the Secretary shall provide the way in which information is disclosed and retained under this section.

49 U.S.C. § 32705. "Motor vehicle" is defined in the Odometer Act as a "vehicle driven or drawn by mechanical power and manufactured primarily for use on public streets, roads, and highways, but does not include a vehicle operated only on a rail line." 49 U.S.C. § 32101(7). The Odometer Act provides for a private cause of action against a person who violates the Act with the "intent to defraud," the violator being liable for three times the actual damages or $1500, whichever is greater. 49 U.S.C. § 32710.

In 1988, the Secretary of Transportation ("Secretary") promulgated, through the NHTSA, a regulation which purported to exempt vehicles "ten years old or older" from the disclosure requirements of the Act. 49 C.F.R. § 580.6(a)(3). ¹

2. The NHTSA's Authority to Exempt Older Vehicles from the Disclosure Requirements of the Odometer Act

Diersen argues that the NHTSA lacked any statutory authority to promulgate the regulation quoted above, exempting vehicles ten years or older from the Act's odometer disclosure requirements. Diersen did not raise this argument concerning the validity of the NHTSA regulation until after summary judgment had been entered by the district court, at which time he filed a motion to amend his complaint and a motion to reconsider. ² The general rule in civil cases is that we may not address, for the first time on appeal, an argument which has not been raised at the trial court level. Singleton v. Wulff, 428 U.S. 106, 120, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826 (1976); Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746, 749 (7th Cir.1993), cert. denied, 510 U.S. 1044, 114 S.Ct. 691, 126 L.Ed.2d 658 (1994). As the United States Supreme Court has explained, this rule is "essential in order that litigants may not be surprised on appeal by final decision there of issues upon which they have had no opportunity to introduce evidence." Hormel v. Helvering, 312 U.S. 552, 556, 61 S.Ct. 719, 721, 85 L.Ed. 1037 (1941). "[W]e should [also] not consider a litigant's issue if that litigant did not give a trial court the first opportunity to decide the issue." United States v. Payne, 102 F.3d 289, 293 (7th Cir.1996). Nevertheless, as the Supreme Court has also emphasized, "[t]he matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeal, to be exercised on the facts of individual cases." Singleton, 428 U.S. at 121, 96 S.Ct. at 2877 (quoted in Sprosty v. Buchler, 79 F.3d 635, 645 (7th Cir.1996)).

We note, first, that Diersen did...