Louisiana AFL-CIO v. Lanier Business Products, Inc.

• Citation: 797 F.2d 1364
• Decision Date: 27 August 1986
• Docket Number: No. 85-3646,P,AFL-CI,85-3646
• Parties: LOUISIANAlaintiff-Appellee, v. LANIER BUSINESS PRODUCTS, INC., Defendant, Third Party Plaintiff-Appellant, v. Martin BENNETT, Third Party Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 1364

797 F.2d 1364

LOUISIANA AFL-CIO, Plaintiff-Appellee, v. LANIER BUSINESS PRODUCTS, INC., Defendant, Third Party Plaintiff-Appellant, v. Martin BENNETT, Third Party Defendant-Appellee.

No. 85-3646.

United States Court of Appeals,

Fifth Circuit.

Aug. 27, 1986.

William D. Grimley, Baton Rouge, La., for defendant, third-party plaintiff-appellant.

Daniel L. Avant, John L. Avant, Baton Rouge, La., for Louisiana, plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Louisiana.

Before GARWOOD and HILL, Circuit Judges, and WILL, ^* Senior District Judge.

OPINION

ROBERT Madden HILL, Circuit Judge:

In this Louisiana diversity case we are presented with the question whether a plaintiff in a redhibitory action may obtain a reduction in price for the inconvenience caused by the product and for the overall poor performance of the product. We answer the question in the affirmative. We further hold that the district court's findings of fact are not clearly erroneous, that the district court acted within its discretion in determining the amount of the reduction, and that an unincorporated association may obtain a reduction in price for inconvenience and poor performance. We therefore affirm the judgment of the district court.

I.

In early 1980 Gordon Flory, an employee of the plaintiff Louisiana AFL-CIO (the AFL-CIO), contacted the defendant Lanier Business Products, Inc., (Lanier) concerning the AFL-CIO's interest in purchasing a word processing system. A Lanier salesperson, Martyn Bennett, contacted Flory and discussed with Flory the AFL-CIO's needs and explained to him the Lanier word processing product line. The AFL-CIO wanted a system that would, in addition to the usual word processing capabilities, prepare a paper master with the same reproductive qualities as the metal masters the AFL-CIO was then using to produce its annual convention booklets.

In February 1980 the AFL-CIO purchased a Lanier word processing system, consisting of two work stations, two printers, a central memory unit, and various accessories, for approximately $52,000. After Lanier installed the system the AFL-CIO encountered numerous difficulties with it. The system occasionally lost stored information, periodically froze up, and at times the work station screens would go blank or dots would appear all over the screen. At other times the envelope feeding system failed, the sorter was inoperable, the bold type function did not work, the right hand margin justification feature failed, and the proportional print option would not operate properly. Additionally, and of great importance to the AFL-CIO, the system failed to produce satisfactory paper masters for use with the AFL-CIO's multilith machine. By the summer of 1981 Lanier had, at its own expense, corrected all of the repairable problems with the system, and the system was operating as best it could; however, the system still did not meet the AFL-CIO's expectations. Specifically, the AFL-CIO could not use the system to produce a high quality convention booklet.

In the fall of 1981 the AFL-CIO filed an action in redhibition in Louisiana state court to rescind the sale. ¹ Lanier, a Georgia corporation, removed the action to federal court. Following a three-day trial the district court denied the AFL-CIO's request for rescission, but the court did award the AFL-CIO a reduction in price in the amount of $25,000. ² Lanier appealed to this court. In an unpublished opinion we found that the evidence warranted a reduction in price, Louisiana AFL-CIO v. Lanier Business Products, Inc., 740 F.2d 965 (5th Cir. July 31, 1984); however, we considered the district court's findings of fact and conclusions of law inadequate to justify the almost fifty percent reduction in price and remanded the case "for the sole purpose of more complete findings of fact and conclusions of law to justify the reduction in price of the equipment sold in the amount of $25,000, or in such other amount as the district court on remand determines is justified."

On remand the district court entered further findings and conclusions to justify the award. The district court detailed the numerous difficulties encountered with the equipment, the numerous service calls required, the time wasted when the machinery malfunctioned, and the various ways in which the system failed to meet the AFL-CIO's needs and expectations. The principal justifications for the court's reduction in price were the inconvenience caused by the difficulties with the system and the poor performance of the system vis-a-vis the AFL-CIO's expectations and Lanier's representations. The court again reduced the price by $25,000, and Lanier has again appealed.

II.

Lanier argues that the district court erred in considering inconvenience to the AFL-CIO when determining the price reduction. Lanier further maintains, if inconvenience can be considered, that the district court's findings and conclusions do not support a reduction of $25,000 and that an unincorporated association cannot suffer inconvenience. We reject all of Lanier's arguments.

A.

Lanier first argues that the district court should not have considered inconvenience as an element when determining the price reduction. The Louisiana Supreme Court has yet to decide whether inconvenience is a proper element of price reduction in a redhibitory action; ³ thus, we must predict whether a Louisiana court would permit the consideration of inconvenience in a redhibitory suit. See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Dispascal v. New York Life Insurance Co., 749 F.2d 255, 260 (5th Cir.1985). In the absence of specific guidance from the Louisiana Supreme Court we look to the following sources when making a prediction of state law: (1) lower state court decisions and supreme court dicta, (2) the lower court ruling in this case, (3) the general rule on the issue, (4) the rule in other states looked to by Louisiana courts when they formulate the substantive law of Louisiana, and (5) other available legal sources, such as treatises, law review commentaries, and restatements. See Jackson v. Johns-Manville Sales Corp., 781 F.2d 394, 397-98 (5th Cir.1986) (en banc). Due to the unique nature of the Louisiana civil law system, the third and fourth listed sources provide little guidance; however, the first and second listed sources provide ample guidance for our decision. In light of the ample guidance provided by the first and second sources, we need not resort to the fifth source.

While the Louisiana Supreme Court has never addressed the issue, the intermediate Louisiana courts have repeatedly faced the issue of whether a plaintiff in a redhibitory action may obtain a reduction in the purchase price due to inconvenience,; however, the decisions of the five Louisiana courts of appeal are not in complete unanimity. In the leading case on the subject the Louisiana Court of Appeals for the Fourth Circuit wrote:

When a judge orders reduction of the sale price, one of the principal elements in formulating the award is the cost of repairing the defects which existed at the time of the sale. The cost of repairs, however, is not necessarily the sole measure of the diminution of value resulting from these defects. If the defects are few in number and quickly and simply remedied, the cost of repair may well be the only consideration. But when the defects are numerous and the repairs lengthy and frequent, then a greater reduction is warranted, because a forewarned buyer would not reasonably pay the full price, reduced only by the cost of repairs, if he knew the extensive repairs of the defects would significantly curtail his use and cause him considerable inconvenience and aggravation. The diminution which the trial judge may decree under C.C. art. 2543 is theoretically the difference between the sale price and the price the reasonable buyer and seller would have agreed upon if they had known of the defects.

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We conclude that the trial judge, in making this determination, properly considered the numerous problems, the frequent inconvenience associated with breakdowns and repairs of these problems, and the overall poor performance in relation to that expected of Chevrolet's highest priced car.

Menville v. Stephens Chevrolet, Inc., 300 So.2d 858, 861-62 (La.Ct.App. 4th Cir.), writ denied, 303 So.2d 186 (La.1974).

Since the decision in Menville, the Louisiana Court of Appeals for the Fourth Circuit has repeatedly recommitted itself to the proposition that a court may consider inconvenience as an element of price reduction in a redhibitory action. See, e.g., Chalmers v. Stephens Chevrolet, Inc., 461 So.2d 395 (La.Ct.App. 4th Cir.1984) ($12,500 reduction for inconvenience and loss of use of car reasonable); Lehn v. Clearview Dodge Sales, Inc., 400 So.2d 317 (La.Ct.App. 4th Cir.) ($6,000 reduction for inconvenience and loss of use of recreational vehicle reasonable), writ denied, 406 So.2d 608 (La.1981); Bendana v. Mossy Motors, Inc., 347 So.2d 946 (La.Ct.App. 4th Cir.1977). The Louisiana Court of Appeals for the Third Circuit has aligned itself with the Fourth Circuit in holding that a court may order a reduction in purchase price due to inconvenience and overall poor performance in relation to the expected performance. Rozas v. Eunice Implement Co., 460 So.2d 729, 731 (La.Ct.App. 3d Cir.1984).

In the one case in direct contravention with Menville the Louisiana Court of Appeals for the First Circuit held that a plaintiff could not receive a price reduction for inconvenience. Burns v. Lamar-Lane Chevrolet, Inc., 354 So.2d 620 (La.Ct.App. 1st Cir.1977). ("We must hold that his claims for mental anguish and inconvenience are not compensable in an action in redhibition."). Yet, in numerous decisions since Burns the First Circuit has consistently followed Menville and repeatedly approved judgments containing a reduction for inconvenience. See, e.g....