Haynes v. Manning

• Citation: 917 F.2d 450
• Decision Date: 22 October 1990
• Docket Number: Nos. 89-3168,89-3185,s. 89-3168
• Parties: Joseph E. HAYNES; Elaine Louise Haynes, Plaintiffs-Appellants, v. Richard J. MANNING; Shawnee Mission Ford, Inc., Defendants-Appellees. Joseph E. HAYNES; Elaine Louise Haynes, Plaintiffs-Appellees, v. Richard J. MANNING, Defendant, and Shawnee Mission Ford, Inc., Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 450

917 F.2d 450

Joseph E. HAYNES; Elaine Louise Haynes, Plaintiffs-Appellants, v. Richard J. MANNING; Shawnee Mission Ford, Inc.,

Defendants-Appellees.

Joseph E. HAYNES; Elaine Louise Haynes, Plaintiffs-Appellees, v. Richard J. MANNING, Defendant, and Shawnee Mission Ford, Inc., Defendant-Appellant.

Nos. 89-3168, 89-3185.

United States Court of Appeals, Tenth Circuit.

Oct. 22, 1990.

Bernard E. Brown, of the Law Office of Bernard E. Brown (David M. Harding, of Van Osdol, Magruder, Erickson and Redmond, with him on the briefs), Kansas City, Mo., for plaintiffs-appellants.

Richard T. Merker (Kevin Bennett with him on the briefs), of Wallace, Saunders, Austin, Brown and Enochs, Chartered, Overland Park, Kan., for defendant-appellee Shawnee Mission Ford, Inc.

Before TACHA, EBEL, Circuit Judges, and JOHNSON, ^* District Judge.

PER CURIAM.

This action arises from plaintiffs', Joseph E. Haynes and Elaine Louise Haynes, purchase of a used Ford station wagon. The facts of this case are set forth in a published opinion of the district court and will not be repeated here. See Haynes v. Manning, 717 F.Supp. 730 (D.Kan.1989). Mr. and Mrs. Haynes sued all prior owners of the vehicle, except the original dealership which sold the car, for common law fraud, breach of warranty, and violation of the Motor Vehicle Information and Cost Savings Act, 15 U.S.C. Secs. 1981-1991 (federal odometer statute). Mr. and Mrs. Haynes alleged the car had 100,000 more miles on it than was represented by the odometer. After Mr. and Mrs. Haynes settled with most of the defendants, the case proceeded to jury trial against defendants Richard J. Manning and Shawnee Mission Ford, Inc. The jury found in favor of Mr. and Mrs. Haynes on the fraud claims and against them on the other claims. Mr. and Mrs. Haynes and Shawnee Mission Ford filed post-judgment motions. The district court denied Mr. and Mrs. Haynes' motion for new trial and for judgment notwithstanding the verdict and denied Shawnee Mission Ford's motion for judgment notwithstanding the verdict, but altered the judgment to reduce Mr. and Mrs. Haynes' award to zero. Id. Mr. and Mrs. Haynes appeal, and Shawnee Mission Ford cross appeals. We reverse and remand for a new trial on the federal odometer claims and affirm in all other respects.

Mr. and Mrs. Haynes challenge the instructions regarding the federal odometer statutes. First, they argue that the district court erred in instructing the jury that the standard of proof on the federal odometer claims was clear and convincing rather than preponderance of the evidence. Because the federal odometer legislation failed to specify a burden of proof, the district court looked to the Kansas common law fraud standard of clear and convincing evidence. Id. at 734-35. We agree with Mr. and Mrs. Haynes that the proper burden of proof is preponderance of the evidence.

"In a typical civil suit for money damages, plaintiffs must prove their case by a preponderance of the evidence." Herman & MacLean v. Huddleston, 459 U.S. 375, 387, 103 S.Ct. 683, 690, 74 L.Ed.2d 548 (1983). Exceptions to this standard occur only in cases where the government has taken "coercive action" against an individual other than awarding money damages or conventional relief. Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 1792, 104 L.Ed.2d 268 (1989). Proof by clear and convincing evidence is required only when important individual interests or rights, such as termination of parental rights, involuntary commitment, deportation, or denaturalization, are at stake. Id.; Huddleston, 459 U.S. at 389, 103 S.Ct. at 691; cf. Cruzan ex rel. Cruzan v. Director, Mo. Dep't of Health, --- U.S. ----, 110 S.Ct. 2841, 111 L.Ed.2d 224 (1990) (clear and convincing standard applied when action taken against individual interest).

In Huddleston, the Supreme Court refused to require proof by clear and convincing evidence in a securities fraud action. 459 U.S. at 387-90, 103 S.Ct. at 690-92. In so holding, the Court stated that "[t]he interests of defendants in a securities case do not differ qualitatively from the interests of defendants sued for violations of other federal statutes such as the antitrust or civil rights laws, for which proof by a preponderance of the evidence suffices." Id. at 390, 103 S.Ct. at 691-92; see Price Waterhouse, 109 S.Ct. at 1792-93 (Title VII claim). The federal odometer statutes are not sufficiently different from securities fraud, antitrust, civil rights, and Title VII statutes to justify application of a different standard of proof. We hold that causes of action based on fraud for violation of the federal odometer statutes are governed by the preponderance of the evidence standard of proof, not the state's standard of proof for common law fraud. Cf. Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1303 (7th Cir.1987) (civil RICO claim based on fraud), cert. denied, --- U.S. ----, 109 S.Ct. 3241, 106 L.Ed.2d 588 (1989). Accordingly, we conclude the district court in this case erred in failing to instruct that proof by a preponderance of the evidence is sufficient for liability for a violation of the federal odometer statutes.

Mr. and Mrs. Haynes also argue that the district court erred in instructing the jury that "intent to defraud" is defined as a "specific intent to deceive or cheat", rather than reckless disregard. To recover under 15 U.S.C. Sec. 1989(a) of the federal odometer law, plaintiffs must prove defendants acted with an "intent to defraud." The district court defined "intent to defraud" as requiring a "specific intent to deceive or cheat." Haynes v. Manning, 717 F.Supp. at 734. Mr. and Mrs. Haynes maintain "intent to defraud" should be defined as including reckless disregard. We agree.

As the district court indicated, one district court has held that "intent to defraud" means "to act wilfully and with the specific intent to deceive any purchaser or potential purchaser of a motor vehicle who inspects the odometer of a motor vehicle as an index of the condition and value of such vehicle." Shipe v. Mason, 500 F.Supp. 243, 245 (E.D.Tenn.1978), aff'd, 633 F.2d 218 (6th Cir.1980). The majority of courts, however, have not defined "intent to defraud" in such a restrictive fashion. They have concluded that reckless disregard is sufficient to prove intent to defraud. See, e.g., Tusa v. Omaha Auto. Auction, Inc., 712 F.2d 1248, 1253-54 (8th Cir.1983); Ryan v. Edwards, 592 F.2d 756, 762 (4th Cir.1979); Nieto v. Pence, 578 F.2d 640, 642 (5th Cir.1978); Aldridge v. Billips, 656 F.Supp. 975, 978-79 (W.D.Va.1987); Kantorczyk v. New Stanton Auto Auction, Inc., 433 F.Supp. 889, 893 (W.D.Pa.1977); Jones v. Fenton Ford, Inc., 427 F.Supp. 1328, 1336 (D.Conn.1977); Duval v. Midwest Auto City, Inc., 425 F.Supp. 1381, 1387 (D.Neb.1977), aff'd, 578 F.2d 721 (8th Cir.1978).

We conclude the approach taken by the majority of courts is the more well-reasoned approach. The federal odometer law imposes an affirmative duty on automobile dealers to discover defects. Jones, 427 F.Supp. at 1335. A transferor of a vehicle may be found to have intended to defraud if he had reason to know the mileage on the vehicle was more than was reflected by the odometer or certification of the previous owner and nevertheless failed to take reasonable steps to determine the actual mileage. See Tusa, 712 F.2d at 1253-54; Nieto, 578 F.2d at 642.

[I]f a person lacks knowledge that an odometer disclosure statement is false only because he displays a reckless disregard for the truth, a fact finder can reasonably infer that the violation was committed with an intent to defraud a purchaser. The inference of an intent to defraud is no less compelling when a person lacks actual knowledge of a false odometer statement only by "clos[ing] his eyes to the truth."

Tusa, 712 F.2d at 1253-54 (citation omitted). Thus, we conclude the district court improperly instructed the jury. The jury should have been permitted to determine whether Mr. Manning's and Shawnee Mission Ford's conduct constituted an "intent to defraud" or reckless disregard of the actual miles of the vehicle.

In its cross appeal, Shawnee Mission Ford contends Mr. and Mrs. Haynes forfeited their federal odometer law claims by transferring the vehicle to their son in violation of the federal odometer law. Apparently, when Mr. Haynes transferred the vehicle to his son he indicated on the title application that there were only 57,500 miles on the vehicle and failed to execute a federal odometer statement as required by 49 C.F.R. Sec. 580.5 (1989). Section 580.5 requires the transferor of a vehicle to provide a disclosure statement if the odometer reading is less than the number of miles the vehicle has been driven or the odometer has turned over. Because Mr. and Mrs. Haynes failed to provide this information to their son, Shawnee Mission Ford maintains they are precluded from seeking recovery from prior transferors.

Shawnee Mission Ford raised this issue in its motion for summary judgment. The district court rejected the argument on the ground that the legislative history indicated Congress did not...