Grabinski v. Blue Springs Ford Sales, Inc.

• Decision Date: 12 February 1998
• Docket Number: Nos. 96-3266,96-3457,s. 96-3266
• Parties: Vicki GRABINSKI, Appellee/Cross-Appellant, v. BLUE SPRINGS FORD SALES, INC.; Blue Springs Ford Wholesale Outlet, Inc.; Don Isom; Fred Graham; and Bob Dudley, Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 565

136 F.3d 565

Vicki GRABINSKI, Appellee/Cross-Appellant, v. BLUE SPRINGS FORD SALES, INC.; Blue Springs Ford Wholesale Outlet, Inc.; Don Isom; Fred Graham; and Bob Dudley, Appellants/Cross-Appellees.

Nos. 96-3266, 96-3457.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 11, 1997.

Decided Feb. 12, 1998.

William E. Quirk, Kansas City, MO, argued (Richard M. Paul, III, on the brief), for appellants.

Bernard E. Brown, Westwood, KS, argued (Mark A. Buchanan, on the brief), for appellee.

Before BOWMAN, Circuit Judge, HENLEY, ¹ Senior Circuit Judge, and MORRIS SHEPPARD ARNOLD, Circuit Judge.

MORRIS SHEPPARD ARNOLD, Circuit Judge.

Blue Springs Ford Sales, Inc. (BSF), Blue Springs Ford Wholesale Outlet, Inc. (Outlet), and three Outlet employees, Don Isom, Fred Graham, and Bob Dudley, appeal from a judgment entered on jury verdicts in favor of Vicki Grabinski on her claims based on the common law and on the Missouri Merchandising Practices Act, see Mo.Rev.Stat. §§ 407.010-407.1020. The jury awarded Ms. Grabinski $7,835 in actual damages and $210,000 in punitive damages. Ms. Grabinski cross-appeals from the trial court's denial of her motion for attorney fees. We affirm the judgment as to liability and actual damages, reverse and remand as to punitive damages, and dismiss the cross-appeal as moot.

I.

Bob Balderston is the owner and president of BSF, Mark Talbott is the vice-president and general manager of BSF, and Tom Riddings is the president and general manager of the Outlet. Mr. Balderston, Mr. Talbott, and Mr. Riddings own the Outlet in equal shares. About seventy percent of the Outlet's cars come from BSF.

Early in 1993, BSF took a 1984 GMC Jimmy truck as a trade-in, and Steve Lotspeich, BSF's used-car manager, examined it. As a general rule, Mr. Lotspeich looked at vehicles for about ten to fifteen minutes and took them for a short drive at speeds of up to thirty-five miles an hour. Because the Jimmy was to be wholesaled, however, Mr. Lotspeich probably spent less time examining it. Mr. Lotspeich then called Mr. Isom, the Outlet's business manager, to offer the Jimmy for sale. Mr. Lotspeich, who expected his descriptions of vehicles to be passed along to the Outlet's customers, described the Jimmy as "very nice" and stated that it was "driving fine" and needed only a cleanup and standard servicing.

A few days later, Ms. Grabinski called the Outlet and spoke to Mr. Graham, a salesman, about buying a dependable four-wheel-drive vehicle. Mr. Graham told her about the Jimmy. Later that day, Ms. Grabinski and her fiance, Matt Walker, went to the Outlet. Mr. Graham showed them the Jimmy, telling them that except for an obvious crack in the windshield it was in "A-1" condition. He also stated that it had never been in a wreck, had had only one owner, and ran perfectly. After a short test drive and some negotiations, Ms. Grabinski agreed to pay $5,500 for the Jimmy. When Ms. Grabinski talked to Mr. Isom about financing, he assured her that she was getting a good deal because the Jimmy was dependable and in "excellent condition." Ms. Grabinski then put a deposit on the Jimmy.

After obtaining financing from a bank, Ms. Grabinski and Mr. Walker returned to the Outlet the next week to close the deal. Mr. Graham told her that she had to sign a "tow-away" affidavit, which, in relevant part, stated:

I understand that the [Jimmy] which I purchased from [the Outlet] has not been Missouri State inspected and is considered to be in an unsafe mechanical condition. This vehicle is being purchased for the purpose of rebuilding, salvage, or junk. I understand that the vehicle cannot be operated in its present condition[;] therefore I agree that the vehicle be towed or hauled from its place of purchase.

Under Missouri law, if a purchaser of a vehicle executes an affidavit stating that the vehicle is being purchased for "junk, salvage, or for rebuilding," the seller is exempt from a state requirement that "[a]t the seller's expense [the] vehicle ... shall immediately prior to sale be fully inspected regardless of any current certificate of inspection and approval, and an appropriate new certificate of inspection and approval ... shall be obtained." See Mo.Rev.Stat. § 307.380.

After Ms. Grabinski refused to sign the affidavit, Mr. Graham, contrary to the law, told her that Missouri law required buyers of all vehicles to sign such an affidavit because until the vehicle was inspected it was considered unsafe. Ms. Grabinski still refused to sign, asking why she had to sign the affidavit since she needed a dependable vehicle and did not have any more money to put into the Jimmy. Mr. Isom and Mr. Dudley, another salesman, then came into Mr. Graham's office. During a fifteen-minute discussion, Mr. Graham, Mr. Isom, and Mr. Dudley tried to persuade Ms. Grabinski to sign the affidavit, claiming that use of the affidavit was "universal" in sales of vehicles in Missouri. They also assured her that the Jimmy was not a "piece of junk." Mr. Dudley and Mr. Isom told her the only reason that it would not pass inspection was the cracked windshield and reiterated that it had never been wrecked. Ms. Grabinski then signed the affidavit and completed the sale, and, after the Outlet's mechanic replaced the spark plugs, she drove the Jimmy off the lot.

About a week later, while Mr Walker was driving the Jimmy back from Oklahoma, the engine began overheating. Mr. Walker had the vehicle towed back to the Outlet. Mr. Isom told Ms. Grabinski that the engine heads were cracked and offered to repair them for $360. Ms. Grabinski had the repair done elsewhere. After the repair, the Jimmy continued to experience difficulties, including lack of power, swaying, and low gasoline mileage.

Ms. Grabinski soon undertook an investigation of the Jimmy's history. She discovered that one James Cox had bought the vehicle in 1986 from a wrecking company, which had obtained it as salvage after it sustained considerable damage in a roll-over accident. Mr. Cox then spent about two or three months rebuilding the Jimmy. When Ms. Grabinski and Mr. Walker went back to the Outlet and confronted Mr. Isom about what she had learned, Mr. Isom offered to repurchase the Jimmy, but at a substantial reduction from the price that Ms. Grabinski had paid because it needed repair. Mr. Isom told them that if the Jimmy was not in good condition, BSF had "screwed" the Outlet because BSF had represented that it was in "good shape."

Ms. Grabinski then filed suit, raising claims under the common law of fraud and under the Missouri Merchandising Practices Act, the latter of which provides that the "use or employment by any person of any deception, fraud, ... misrepresentation, [or] unfair practice ... in connection with the sale ... of any merchandise in trade or commerce ... is declared to be an unlawful practice." See Mo.Rev.Stat. § 407.020.1.

Ms. Grabinski subsequently replaced the Jimmy's engine, and the defendants then offered to repurchase the Jimmy for the sale price and certain costs but less depreciation. The offer was not contingent on Ms. Grabinski's dismissal of her lawsuit. Ms. Grabinski rejected the offer and eventually traded the Jimmy.

At trial, in addition to presenting evidence relating to the sale and the history of the Jimmy, Ms. Grabinski presented the expert testimony of Richard Diklich, an instructor in automotive technology. Mr. Diklich testified that based on his examination of the Jimmy there were signs of wreck damage, such as repainting and poor door fit, which should have been obvious to a vehicle appraiser on a visual examination. He also opined that the power difficulty should have been obvious to an appraiser during a test drive. According to Mr. Diklich, had the condition of the Jimmy been as represented, it would have been worth $8,000 but at the time of purchase was worth $2,500 to $3,000.

Ms. Grabinski also presented evidence that BSF knew that the Outlet used tow-away affidavits in sales of vehicles, in violation of Missouri law. Mr. Talbott, vice-president and general manager of BSF and vice-president of the Outlet, read from a July, 1990, automobile association bulletin advising its members, which included BSF, that the "Missouri Attorney General's Office had published guidelines concerning the proper use of the 'junk, salvage or rebuilding affidavit.' " The bulletin warned: "You CANNOT substitute a 'junk affidavit' for a motor vehicle safety inspection" if "[t]he vehicle is operable and is driven rather than towed or hauled away." Mr. Talbott testified that shortly before trial the Outlet stopped using the affidavits.

The jury awarded actual damages of $7,835. It also awarded punitive damages of $100,000 against the Outlet, of $50,000 against BSF, of $30,000 against Mr. Isom, of $20,000 against Mr. Dudley, and of $10,000 against Mr. Graham.

After the verdicts, the trial court informed the parties that because under state law the matter of statutory punitive damages was left to the discretion of the court, the court would not enter judgment until it heard argument on the matter of punitive damages and on Ms. Grabinski's request for statutory attorney fees. Before argument, the defendants filed a memorandum asserting that the jury's punitive damages awards were excessive, and, with the exception of BSF, they submitted affidavits of their net worth in support. The trial court did not rule on the matters at the conclusion of argument, but later held that it would not consider the net-worth affidavits and could not "second guess" the jury's verdicts because of "equitable considerations." The trial court also denied Ms. Grabinski's request for attorney fees on the ground that the punitive damages awards were "generous." The trial court entered judgment in accordance with the verdicts. The defendants filed a postjudgment motion for judgment as a matter of law; in the alternative, they requested a new trial or remittitur,...