CarMax to Face Jury for Allegedly Not Disclosing Pickup Defect

Radio Law Talk Segment

CarMax to Face Jury for Allegedly Not Disclosing Pickup Defect

 

INTRO:

First American Specialty Insurance Company is suing Carmax and Ford for a vehicle that was sold to its client, Anthony Santos, which burst into flames while in park allegedly due to a cruise-control part. Carmax California’s MSJ was denied and the case will proceed to jury trial.

 

FACTS:

First American alleged that its client, Santos, purchased a 2002 Ford F-150 from Carmax (complaint files suit against both Carmax California and Carmax West, but MSJ is granted for Carmax West) that had a defective speed control deactivation switch. That switch caused the car to be the subject of a recall because it was known to fail without warning and combust, but Carmax allegedly informed the insured that his car had been thoroughly inspected and was safe. Years after purchase, the switch caught fire causing damage to insurer’s client’s car, garage, and home. First American covered the damage and filed suit in October of 2016 against Ford, and Carmax West and California. Ford settled while both Carmax entities filed MSJ. Carmax West was denied SJ.

 

ISSUES:

 

ISSUES THAT WILL ARISE AT TRIAL: (1) whether the insured should have reasonably been aware of the defective part at the time of purchase or shortly thereafter (D says statute of limitations has run – P says it had no means of knowing); (2) whether D owed a duty to the insured to inform him of Ford’s recall (D says not at all – P alleges it does); (3) whether it was reasonable for a used car dealer to represent that its car was in top condition (D argues P should have done due diligence in buying and reasonable buyer would not only take the word of the dealer – P believes this falls under negligent misrepresentation theory); (4) whether Carmax’s failure to inform the insured of the recall induced his purchase of the vehicle (D argues based on insured’s testimony that he would have bought the car anyways – P argues that client would not have bought the car).

 

LAW:

 

STATUTE OF LIMITATIONS

CHAPTER 3. The Time of Commencing Actions Other Than for the Recovery of Real Property [335 – 349.4] ( Chapter 3 enacted 1872. )

  • 338.  Within three years: (b) An action for trespass upon or injury to real property [must be filed]. (DISCOVERY RULE) Ordinarily, the statute of limitations begins to accrue “when the cause of action is complete with all of its elements.” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797 , 806 , 27 Cal. Rptr. 3d 661 , 110 P.3d 914 (2005) (citations and quotations omitted). There is, however, an exception to this rule. Pursuant to the so-called “discovery rule” the statute of limitations is tolled until the time that a plaintiff discovers the cause of action, or has “reason to at least suspect that a type of wrongdoing has injured [him].” Id. at 807. “[P]laintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.”

 

NEGLIGENCE

To succeed in a negligence claim, First American must show that defendants owed a duty to insured, breached that duty, and that its breach caused harm to First American. See Ileto v. Glock Inc., 349 F.3d 1191 , 1203 (9th Cir. 2003).

 

DUTY TO INFORM

California legislature considered, but ultimately failed to pass a bill that would have required used car dealerships to obtain a “recall database report” prior to advertising a vehicle as “certified” and to prohibit labeling a vehicle as “certified” if it was “subject to an unremedied manufacturer’s recall.” Proposed Senate Amendment to AB 287 (2015-2016 Reg. Sess.).

 

49 U.S. Code § 30118 (b)Defect and Noncompliance Proceedings and Orders.—

(1) The Secretary may make a final decision that a motor vehicle or replacement equipment contains a defect related to motor vehicle safety or does not comply with an applicable motor vehicle safety standard prescribed under this chapter only after giving the manufacturer an opportunity to present information, views, and arguments showing that there is no defect or noncompliance or that the defect does not affect motor vehicle safety. Any interested person also shall be given an opportunity to present information, views, and arguments.

(2) If the Secretary decides under paragraph (1) of this subsection that the vehicle or equipment contains the defect or does not comply, the Secretary shall order the manufacturer to—

(A) give notification under section 30119 of this title to the owners, purchasers, and dealers of the vehicle or equipment of the defect or noncompliance; and

(B) remedy the defect or noncompliance under section 30120 of this title.

 

REASONABLENESS OF MISREPRESENTATION

A negligent misrepresentation claim carries different elements from a standard negligence claim. To prove negligent misrepresentation, a plaintiff must show that the defendant (1) asserted a material fact, (2) which was untrue, (3) without a reasonable grounds for believing it to be true, (4) with the intent that plaintiff would rely upon the assertion, (5) that the plaintiff justifiably relied upon the representation, and (6) as a result was harmed. OCM Principal Opportunities Fund v. CIBC World Markets Corp., 157 Cal. App. 4th 835 , 845 , 68 Cal. Rptr. 3d 828 (2007).

 

DETAILED FACTS:

 

First American alleged that its client, Santos, purchased a 2002 Ford F-150 from Carmax (complaint files suit against both Carmax California and Carmax West, but MSJ is granted for Carmax West) that had a defective speed control deactivation switch. That switch caused the car to be the subject of a recall because it was known to fail without warning and combust, but Carmax allegedly informed the insured that his car had been thoroughly inspected, and was safe, and failed to inform him of the recall or otherwise fix the defective part. Years after purchase, the switch caught fire causing damage to insurer’s client’s car, garage, and home. First American paid the client $267,000 to cover damage. In October 2016, First American sued defendants Ford Motor Company and Carmax to recover the money it paid to the insured. First American has since settled with Ford, and an order deemed the settlement to be in good faith, and dismissed all claims against Ford (Dkt. Nos. 42, 45). The only remaining claim in this suit is a negligence claim against defendants Carmax California and Carmax West. Carmax defendants filed MSJs on the grounds that (1) the statute of limitations has run on First American’s negligence claim, (2) defendants had no duty to warn insured of the recall, and potentially unsafe condition of his car, and (3) even if they did, their failure to warn insured did not cause him harm. Carmax West separately moved for summary judgment on the grounds that it did not sell the vehicle to insured or in any way participate in the sale, and therefore cannot be held liable for any harm.

 

Carmax California was denied SJ and the suit will proceed to a jury trial. State-law duty to inform purchasers applies, even if no federal obligation exists, court in California says.

 

OTHER FACTS (interesting facts, related facts, trivia, etc.):

  • The most frequently searched price range for a used vehicle is under $5,000 —
  • Texas has more used vehicles than any other state (more than 220,000); Houston alone has more than 32,000 on the market at any given time. —
  • The first person to receive a speeding ticket was going 12 mph when he was pulled over.

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