Jones v. Hanley Dawson Cadillac Co.
| Citation | 848 F.2d 803 |
| Decision Date | 08 June 1988 |
| Docket Number | 87-2049,Nos. 87-1972,s. 87-1972 |
| Parties | Edward JONES, Plaintiff-Appellee, Cross-Appellant, v. HANLEY DAWSON CADILLAC COMPANY, Defendant-Appellant, Cross-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
William H. Kelly, Jr., Mitchell Russell & Kelly, Chicago, Ill., for defendant-appellant, cross-appellee.
Steven Samson, Sussman & Samson, Ltd., Chicago, Ill., for plaintiff-appellee, cross-appellant.
Before WOOD and RIPPLE, Circuit Judges, and ESCHBACH, Senior Circuit Judge.
In this appeal, we must determine the standard for imposing civil liability under the Motor Vehicle Information and Cost Savings Act (the Odometer Act), 15 U.S.C. Sec. 1981 et seq. The Odometer Act and the regulations promulgated under its authority require a transferor of a vehicle to disclose accurately the vehicle's mileage. Hanley Dawson Cadillac Company (Dawson) appeals from a decision of a magistrate finding Dawson liable under the Odometer Act to Edward Jones, the appellee. Mr. Jones cross-appeals from the magistrate's decision reducing his award of attorneys' fees. For the reasons set forth in the following opinion, we reverse the decision of the magistrate with respect to Dawson's liability. Therefore, we need not reach the merits of Mr. Jones' cross-appeal. 1
In July 1984, Dawson sold Mr. Jones a 1979 Eldorado Biarritz automobile for $10,600. The car's odometer reflected a mileage of 49,016 miles at the time of the sale. A salesman for Dawson filled out an odometer statement, as required by the Odometer Act, certifying that the car's mileage was indeed 49,016. Dawson had purchased the car at the Greater Chicago Auto Auction (Auction) from Tom's Used Cars (Tom's). Tom's delivered the car to Dawson with an odometer mileage statement of 48,964 miles. Tom's had purchased the car at the Auction several months before with a mileage statement of 65,198. The actual mileage of the car at the time Tom's purchased it was in excess of 95,000 miles. Mr. Jones does not allege that Dawson tampered with the odometer.
When Dawson purchased the car from Tom's, it inspected the car at the Auction for mechanical defects, and then reinspected it after it reached Dawson's facility. Dawson regularly inspects new vehicles for safety items such as brakes, headlights and turn signals. Dawson's only customary inspection of the odometer is to determine whether it is operating. Dawson does not usually check underneath the dashboard of a vehicle. Other than the inspection to determine whether the odometer is operating, Dawson relies upon the accuracy of the previous owner's odometer statement to verify the true mileage of a vehicle.
Mr. Jones did not discover that the odometer of his Eldorado had been rolled back until he had driven the car for nearly 20,000 miles. Mr. Jones learned of the problem when he received a notice from the state of Michigan, where the car had previously been titled, informing him that the car's odometer statements were inconsistent. Mr. Jones had had the car repaired at least five times since he purchased it, but the mechanics repairing the car had not reported any suspicion that the car's mileage was inaccurate.
Mr. Jones filed an action against Dawson and Tom's alleging liability under the Odometer Act. Tom's defaulted by failing to appear. Dawson and Mr. Jones consented to proceeding before a magistrate and to the entry of judgment by a magistrate. See 28 U.S.C. Sec. 636(c). At trial, Mr. Jones offered the testimony of George Alex, an odometer specialist. Mr. Alex testified that he had inspected the vehicle and, after removing the dashboard, had noticed that a lens for one of the colored turn signal indicators was missing. As a result, the turn signal flashed a clear arrow instead of a green arrow. According to Mr. Alex, the turn signal lens can only be dislodged if the dashboard has been removed. Mr. Alex further testified that, after removing the dashboard, he had concluded that the odometer had been tampered with, although he could not be certain that the odometer had been rolled back.
The magistrate issued an oral ruling and explanation from the bench in which he held that Dawson was liable to Mr. Jones under the Odometer Act. Tr. at 130-39. The magistrate then issued written post-trial findings of facts and conclusions of law. Jones v. Hanley Dawson Cadillac Co., No. 86 C 2098, Post-Trial Findings of Fact, Conclusions of Law and Award of Attorney's Fees (N.D.Ill., Apr. 29, 1987) [hereinafter Findings]; R. 39.
The magistrate noted that an automobile dealer can be liable to a purchaser under the Odometer Act only if the dealer sells a vehicle with an inaccurate mileage statement and if the dealer has acted with an intent to defraud. Findings at 4. According to the magistrate, an intent to defraud exists when a dealer has acted with recklessness, gross negligence, or with constructive knowledge of an inaccuracy based on a failure to exercise reasonable care. The magistrate concluded that Dawson was liable to Mr. Jones under the Odometer Act because "Hanley Dawson did not use reasonable care to ascertain if odometer tampering had occurred on the vehicle in issue prior to sale to plaintiff." Id.
The magistrate determined that it was permissible to infer that the colored turn signal lens was missing from the vehicle when it was sold to Mr. Jones. The magistrate noted that the lens could only have been dislodged if the dashboard were removed, and that it was clear that the dashboard had not been removed during Mr. Jones' ownership of the vehicle. The magistrate conceded that "an ordinary mechanic would not be expected to recognize the missing lens as a definite warning signal that there had been odometer tampering." Tr. at 135. Nevertheless, the court determined that there is an "affirmative duty [on automobile dealers] to use reasonable care in order to protect consumers against purchasing automobiles with odometers that have been tampered with." Findings at 5. Concluding that Dawson had failed to use reasonable care, the magistrate said that Dawson should have employed an odometer expert to look for obvious signs of tampering, or it should have trained its mechanics to look for such signs. Tr. at 136.
The magistrate's conclusion that automobile dealers have an affirmative duty to use reasonable care was based on his interpretation of a Senate Report that accompanied the passage of the Odometer Act. 2 According to the magistrate, the Senate Report demonstrated that Congress intended that an automobile dealer " 'would have an affirmative duty to mark "true mileage unknown" if in the exercise of reasonable care he had reason to know that the mileage was more than that which the odometer reported or the previous owner had certified.' " Id. at 131 (quoting S.Rep. No. 413, 92d Cong., 2d Sess., reprinted in 1972 U.S.Code Cong. & Admin.News 3960, 3971-72). Thus, the magistrate ruled that a failure to exercise reasonable care was sufficient to constitute an "intent to defraud," and that Dawson was liable under the Odometer Act because it had not exercised reasonable care.
Dawson submits that the magistrate employed an improper standard of liability in finding it liable to Mr. Jones under the Odometer Act. According to Dawson, a car dealer should not have to employ an odometer expert in order to avoid an intent to defraud under the Act. Requiring a car dealer to employ odometer experts "created a standard far beyond the plain language of the Act...." Appellant's Br. at 9. Because an ordinary mechanic would not have known that the vehicle had been tampered with, Dawson contends that it cannot be held liable under the Act.
Section 1988 of the Odometer Act requires a transferor of a car to disclose mileage information to a transferee. That section reads in pertinent part:
(a) Not later than 90 days after October 20, 1972, the Secretary shall prescribe rules requiring any transferor to give the following written disclosure to the transferee in connection with the transfer of ownership of a motor vehicle:
(1) Disclosure of the cumulative mileage registered on the odometer.
(2) Disclosure that the actual mileage is unknown, if the odometer reading is known to the transferor to be different from the number of miles the vehicle has actually traveled.
....
(b) No transferor shall violate any rule prescribed under this section or give a false statement to a transferee in making any disclosure required by such rule.
15 U.S.C. Sec. 1988. This section imposes on automobile dealers various responsibilities and affirmative duties with respect to odometer statements. However, nothing in section 1988 grants a private cause of action to individuals aggrieved by a violation of the section. The private right of action in the Odometer Act is found in section 1989. That section reads:
(a) Any person who, with intent to defraud, violates any requirement imposed under this subchapter shall be liable in an amount equal to the sum of--
(1) three times the amount of actual damages sustained or $1,500, whichever is the greater; and
(2) in the case of any successful action to enforce the foregoing liability, the costs of the action together with reasonable attorney fees as determined by the court.
15 U.S.C. Sec. 1989(a) (emphasis supplied). Thus, the mere fact that an automobile dealer has violated the disclosure requirements of the Odometer Act does not necessarily mean that he is civilly liable. 3 The dealer must have acted with an "intent to defraud" in order to be subject to liability from a purchaser. In this case, the magistrate ruled that Dawson had acted with an intent to defraud by failing to exercise reasonable care. Therefore, we must decide whether an automobile dealer's failure to exercise reasonable care can constitute an intent to defraud.
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