Kendall Dealership Holdings, LLC v. Warren Distribution, Inc.

• Decision Date: 09 June 2021
• Docket Number: No. 3:18-cv-0146-HRH,3:18-cv-0146-HRH
• Parties: KENDALL DEALERSHIP HOLDINGS, LLC, Plaintiff, v. WARREN DISTRIBUTION, INC., a Nebraska Corporation, Defendant. WARREN DISTRIBUTION, INC., Third-party plaintiff, v. ELECTRONIC COMPONENTS INTERNATIONAL, INC. and ELECTRICAL COMPONENTS CANADA, INC., Third-party defendants.
• Court: U.S. District Court — District of Alaska

KENDALL DEALERSHIP HOLDINGS, LLC, Plaintiff, v. WARREN DISTRIBUTION, INC., a Nebraska Corporation, Defendant.

WARREN DISTRIBUTION, INC., Third-party plaintiff, v. ELECTRONIC COMPONENTS INTERNATIONAL, INC.and ELECTRICAL COMPONENTS CANADA, INC., Third-party defendants.

No. 3:18-cv-0146-HRH

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA

June 9, 2021

ORDER

Motion for Summary Judgment

Defendant Warren Distribution, Inc. ("Warren") moves for summary judgment.¹ Third-party defendants Electrical Components International, Inc. ("ECI") and ElectricalComponents Canada, Inc. ("ECC") join in Warren's motion.² The motion for summary judgment is opposed by plaintiff Kendall Dealership Holdings, LLC.³ Oral argument was requested and has been heard.

Facts

This case arises out of claims that some 8,000 engine block heaters which plaintiff purchased from Warren were defective. The various models of the PU140-00913 engine block heater which are at issue in this case were manufactured by ECC and distributed by ECI.

"The PU140-00913 is a kit consisting of a cord and cartridge heater. . . ."⁴ "The cord in the original PU140-00913 [the '913 heater'] is an HPN cord sleeve with PVC tubing, and it has a molded plastic or molded PVC plug on the wall end and a molded silicone plug on the heater interface end."⁵ The 913 heater had a 400-watt cartridge.

In March of 2017, ECC/ECI put Warren's orders for the 913 heater "on hold" because of "information received from Toyota [Canada] that they may have an issue with their 2016 and 2017 models. . . ."⁶ The issue involved thermal events in seven vehicles in WesternCanada that had 913 heaters installed. Toyota Canada launched an investigation and ultimately, in July 2017, issued a recall notice, which stated that "[t]he electrical power cords of [some] dealer installed accessory engine block heaters may have been improperly manufactured, resulting in contact between wires that could cause a short circuit. If a short circuit occurs, the wire insulation may overheat, increasing the risk of fire."⁷

In response to the issues Toyota Canada had reported, and while that investigation was ongoing, "as a proactive effort," ECC/ECI "increased the robustness of the cord set"⁸ of the 913 heater. ECC/ECI "incorporated a 6-inch piece of silicone wire between the HPN and the molded silicone plug, and . . . changed the sleeving from PVC to fiberglass."⁹ The engine block heater with the modified cord was PU140-00913-1 (the "913-1 heater"). The 913-1 heater "retained the 400 watt heating element, which is basically the standard in the industry."¹⁰ ECC/ECI shipped the first 913-1 heaters to Warren in May 2017. Plaintiffreceived its first shipment of 913-1 heaters from Warren in August 2017.¹¹ However, plaintiff contends that it continued to install the 913 heaters in vehicles it sold until late 2017/early 2018. At oral argument, counsel for Warren represented, and plaintiff's counsel did not dispute, that about two-thirds of the block heaters at issue in this case were 913 heaters and about one-third were 913-1 heaters.¹²

There is also a 913-2 heater which uses a 202-watt cartridge instead of a 400-watt cartridge and which ECC began selling to Warren in either December 2017 or January 2018.¹³ Warren contends that all engine block heaters sold to plaintiff after March 2018 were 913-2 heaters. There are no allegations that there have been any problems associated with the 913-2 heater.

Plaintiff contends that it first learned of the Canadian recall of the 913 heater in February 2018 after it became concerned about an increasing number of vehicle fires being reported by its customers. On March 9, 2018, plaintiff sent an "Urgent Vehicle Safety Notice" to its customers. The Notice read:

Toyota Canada has determined that the electrical cords of some engine block heaters may have been improperly manufactured,potentially leading to a short circuit and increasing the risk of a fire. The manufacturer of the engine block heater has informed us that a replacement part is currently being manufactured but such parts will not be available for the Alaska market for approximately 10 to 12 weeks. Given the potential for fire, Toyota Canada has recommended its Canadian customers disable the engine block heater by severing the power plug from the power cord. Accordingly, Kendall Toyota/Lexus of Anchorage and Kendall Toyota of Fairbanks urgently recommends customers of the affected vehicles discontinue the use of their engine block heater and make an appointment at Kendall Toyota in Anchorage or Fairbanks to render the engine block heater inoperable at no cost to you.[¹⁴]

Dave Blewett, plaintiff's CEO, testified that at that time,

the only information I had . . . was the July 2017 recall that said there was a problem with these engine block heaters. And the only thing that we could do, the only information that we had was a direction from Toyota Canada to cut the cord and that the cord was bad. Cut it, so it couldn't be used.

So that's what we did. And from hearing from Jimmy and Dan [at Warren], it appeared to me that they were addressing the problem by putting a different cord on the block heater. So absent any other information, that's what we did. All of our inventory we put on this new cord. We took them off of brand new engine block heaters and put on brand new cords.[¹⁵]

Blewett testified that he was later told by Toyota USA that the problem with the block heaters was not the cords, but the wattage of the cartridge.¹⁶

Plaintiff commenced this case on May 22, 2018. In its complaint, plaintiff alleges that the engine block heaters that it purchased from Warren were "improperly manufactured due to either a short circuit in the electrical cord of the engine block heater and/or too much wattage produced by the engine block heaters."¹⁷ Plaintiff has asserted breach of contract, Unfair Trade Practices Act ("UTPA"), breach of the implied warranty of merchantability, and breach of the implied warranty of fitness for a particular purpose claims against Warren.

Warren, joined by ECC/ECI, now moves for summary judgment on liability on all issues based on a lack of evidence. In the alternative, Warren moves for summary judgment "that the model 913-1 block heater was not defective"¹⁸ and for summary judgment on plaintiff's UTPA claims.

Discussion

Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The initial burden is on the moving party to show that there is an absence of genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets its initial burden, then the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In deciding a motion for summary judgment, the court views the evidence of the non-movantin the light most favorable to that party, and all justifiable inferences are also to be drawn in its favor. Id. at 255. "'[T]he court's ultimate inquiry is to determine whether the 'specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence.'" Arandell Corp. v. Centerpoint Energy Services, Inc., 900 F.3d 623, 628-29 (9th Cir. 2018) (quoting T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir. 1987)).

Warren first argues that it is entitled to summary judgment on liability because the undisputed evidence is that engine block heaters that it sold to plaintiff were not defective. This undisputed evidence, according to Warren, includes the Rule 30(b)(6) deposition of Josh Dare, who is the Quality Manager for ECC.¹⁹ Dare testified that he oversaw quality for the 913 engine block heater.²⁰ Dare testified that in early 2017, ECC analyzed about one hundred 913 engine block heater kits that had been sold to Canadian dealers.²¹ This was done as part of the investigation that Toyota Canada had begun after the seven thermal events were reported. Dare testified that

we reviewed all those cords for potential defects in those areas that were flagged earlier. There were some noticeable anomalies or issues in those, so then we worked with Toyota torecreate those same anomalies on new parts, and then we defined a test to simulate root cause and thermal events with those parts that had those anomalies in them.[²²]

Dare testified that the anomalies were "exposed copper in the insulation jacket, broken or stray strands in . . . the conductor crimp, . . . and nicks or abrasions to the outside jacket in the molding process."²³ Dare testified that ECC/ECI and Toyota Canada were attempting to determine whether any of these anomalies "would lead to a thermal event that was reported in the field" but the tests were "inconclusive. We didn't find a root cause."²⁴ Dare testified that they were, however, "able to produce thermal events when we exposed the product to abnormal temperatures."²⁵ Dare explained that

[i]t didn't matter what test we threw at the parts when it was within the scope of . . . what the parts are supposed to meet. The part passed. They were safe. They were not producing thermal events. It was only once we exposed them to elevated temperatures that we could recreate a failure.[²⁶]

Dare testified that the tests confirmed that the cords used in the heaters would perform as intended under normal conditions.²⁷ Dare testified that "[a]t that point, we realized that everything that was observed in the manufacturing process that could be considered an issueor a concern didn't really play a fact or a - as a factor in the thermal events."²⁸ In other words, Dare testified that the anomalies that had been found "became a non-issue. . . ."²⁹ Dare testified that at that point, ECC/ECI concluded that "[t]here was no root...