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Business Law FLASHPOINTS August 2019

August 15, 2019Print This Post Print This Post

Joseph Kish, Segal McCambridge Singer & Mahoney, Ltd., Chicago
312-644-3538 | E-mail Joseph Kish

Narkiewicz-Laine v. Doyle

In Narkiewicz-Laine v. Doyle, No. 18-2535, 2019 WL 3244501 (7th Cir. July 19, 2019), the plaintiff, an artist, rented space from the defendants in Galena in 2004. About six years later, the defendants cleared the rental space and discarded most of the plaintiff’s property, including his only records of the stored property, due to multiple missed rent payments and nonpayment for the utilities of the property. The defendants presented evidence that, before emptying the space, they saw nothing resembling art or valuable personal property. Narkiewicz‐Laine filed suit, citing the Visual Artists Rights Act of 1990 (VARA), Pub.L. No. 101-650, Title VI, 104 Stat. 5128. For certain visual art, VARA confers on artists’ rights to attribution and integrity, including the right to prevent the work’s destruction. Narkiewicz‐Laine added claims for trespass, conversion, and negligence under Illinois law. He based the additional claims on a broader theory of recovery that would allow him to obtain damages for all his lost property — the entirety of his destroyed artwork and other items of personal property (he listed 1,457 pieces).

He asked the jury to award him $11 million for his losses. The defendants, during the trial, impeached Narkiewicz‐Laine by introducing evidence of a prior conviction for lying to an FBI agent. The jury awarded the plaintiff $120,000 in damages under the Act, plus $300,000 on the state law claims, but did not award him damages on the remainder of the 1,453 other works for which he claimed, reflecting the loss of all the belongings stored at the unit. The court reduced the total award from $420,000 to $300,000 to avoid an improper double recovery, reasoning that Narkiewicz‐Laine’s award on the common-law claims needed to be reduced by the amount he recovered for the destruction of his work protected under VARA, as some of the damages were duplicative. The district court also did not award Narkiewicz‐Laine attorneys’ fees under the Copyright Act reasoning that although he won a damages award covering some of his works, he lost the majority of the claims he brought under VARA, thus allowing the court to determine there was no clear prevailing party. Narkiewicz‐Laine appealed, challenging a number of the district court’s rulings.

The Seventh Circuit affirmed, first upholding the decision to allow Narkiewicz‐Laine’s 2003 conviction into evidence, reasoning that the court only reviews for abuse of discretion, which it did not find as the district court rested its ruling on a thoughtful analysis balancing the probative value of the evidence against the prejudicial and the admission of the conviction did not show to have any effect whatsoever on the jury’s verdict. Second, the court affirmed the decision that Narkiewicz‐Laine was not entitled to recover twice for the same property as VARA states that a plaintiff may recover either actual damages or statutory damages but not both and the plaintiff elected to receive statutory damages. The district court had to consider the actual damages attributed to the four works and subtract that out of the jury’s award of actual damages for all destroyed property, which that properly did as concluded by the Seventh Circuit. Finally, the court held that the lower court properly denied the plaintiff’s request for attorneys’ fees as neither side was declared a prevailing party, nor did the defendants’ victory on appeal transform them into one. The Seventh Circuit affirmed.

Mathews v. REV Recreation Group, Inc.

The Mathewses purchased an RV in 2014 from Mellot Brothers Trailer Sales, Inc. The RV came with a warranty from the manufacturer, REV, limiting both express and implied warranties to one year from the purchase date. Mathews v. REV Recreation Group, Inc., No. 18-1982, 2019 WL 3369563 (7th Cir. July 26, 2019). To take advantage of the warranty, the Mathewses had to notify REV or an authorized dealer within five days of discovering a defect. The warranty stated that “[i]f the repair or replacement remedy fails to successfully cure a defect after [REV] received a reasonable opportunity to cure the defect[ ], your sole and exclusive remedy shall be limited to Warrantor paying you the costs of having an independent third party perform repair(s).” 2019 WL 3369563 at *1. The Mathewses were told about the warranty when they bought the RV, but they were not initially given a hard copy.

The Mathewses said that they encountered problems with the RV almost immediately and several times thereafter. Mellot Brothers’ service manager recommended that the Mathewses go to an auto parts store and replace the fuses in order to fix the issues they had with the interior lights, refrigerator, and the leveling system, which they did. The Mathewses also noticed other problems but did not contact anyone about the additional issues. A month later, the Mathewses went on another trip and claim to have had even more difficulty as the converter was blowing fuses, the leveling jacks did not always work, and the curbside cable broke. After calling Mellot Brothers again, they were given the number for REV who told them they could go to a local dealer near them but would need to obtain approval from REV before the dealer performed repairs. The dealer completed the repairs and told the Mathewses the work was covered, but neither the Mathewses nor anyone from the dealer ever contacted REV about the work (though the Mathewses never were forced to pay for any of the repairs). The Mathewses begun to have issues again soon after, and REV arranged to repair the RV at its factory store, afterwards issuing an extended goodwill warranty for “defective workmanship or materials in manufacturing.” Id.

In March 2015, the Mathewses again contacted REV regarding problems with the air condition cable unit and eventually asked REV to buy back the RV. REV declined but instead promised to repair the issues pursuant to the warranty, repaired the March issues, and again extended the goodwill warranty. The Mathewses were returned the RV and never again took it to REV or any other authorized or independent dealer for repair.

In July 2015, the Mathewses filed suit, alleging breaches of express and implied warranties and violations of the Indiana Deceptive Consumer Sales Act and §2310(d)(1) of the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act (MMWA), Pub.L. No. 93-637, 88 Stat. 2183 (1975). They claimed that REV had failed to fix numerous problems including the TV, DVD player, and air conditioning/slide out. REV moved for summary judgment on all counts, and the district court granted the motion stating that because REV was not given a reasonable opportunity to cure any defects, REV did not breach its express or implied warranties. The court also concluded that the warranty’s limitations were not unconscionable because the contract was not one that “no sensible man not under delusion, duress or in distress would make, and . . . no honest and fair man would accept.” 2019 WL 3369563 at *3. The Seventh Circuit affirmed summary judgment in favor of REV on all claims, supporting the lower court’s conclusion that because the Mathewses did not give REV a reasonable opportunity to cure the defects, which the warranty required, the warranty could not have failed in its essential purpose. Additionally, under Indiana law, two chances are not a reasonable opportunity to cure defects such that the warranty failed its essential purpose. Although the Mathewses “bought a lemon,” they did not show that REV failed to honor its warranties or that the warranty provisions were unconscionable. 2019 IL 3369563 at *1. The Seventh Circuit affirmed.

Nguyen v. Nissan North America, Inc.

Plaintiff Nguyen purchased a new 2012 Nissan 370Z as a present for his son. At the time of purchase, he was unaware of a design defect hidden in the vehicle’s hydraulic clutch system. Nguyen v. Nissan North America, Inc., No. 18-16344, 2019 WL 3368918 (9th Cir. July 26, 2019). The plaintiff alleged that Nissan failed to properly account for heat transfer and produced a defective aluminum/plastic composite clutch save cylinder (CSC) that caused the system to overheat. Due to this, the clutch fluid boiled and generated air that caused failure of the clutch pedal, such that the pedal stuck to the floor and prevented a driver from shifting gears. A “sticky” clutch can make it difficult to control a vehicle’s speed, presenting both safety and performance issues. After the clutch malfunctioned twice (the first time covered by the warranty, but the second time was not) and the plaintiff paid $700 for its replacement, he filed a putative class action against defendant Nissan North America, Inc., asserting causes of action under stated and federal warranty laws. A consumer complaint submitted as evidence by the plaintiff indicated that the Class Vehicles began to malfunction as early as June 2007, while Nissan’s own records identified the issue starting in October of that same year.

The Ninth Circuit panel reversed the district court’s denial of class certification in an action against Nissan North America pursuant to state and federal warranty laws arising from an allegedly faulty hydraulic clutch system in the plaintiff’s 2012 Nissan vehicle because the panel found that the plaintiff’s proposed damages model was consistent with his theory of liability. The district court had denied the plaintiff’s motion for class certification on the ground that he failed to satisfy the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) due to what the district court viewed as an inappropriate measure of damages.

Under the proposed benefit of the bargain model, damages are the difference between the value Nissan represented and the value class members received, measured at the time of purchase. However, the difference between value represented and value received only equals the cost to replace the defective CSC if consumers would have deemed the defective part valueless.” 2019 WL 3368918 at *3.

The panel disagreed and was satisfied with the plaintiff’s proposed benefit-of-the-bargain measure of the damages as they found it to be both cognizable under California’s Consumers Legal Remedies Act (CLRA) and a reasonable basis for computation.

The panel held that the plaintiff’s causes of action under CLRA, the Song-Beverly Consumer Warranty Act, and the MMWA were all viable. The panel held that the plaintiff sufficiently demonstrated a nexus between his legal theory — that Nissan violated California law by selling vehicles with a defective clutch system that was not reflected in the sale price — and his damages model — the average cost of repair. The panel determined that the plaintiff did not seek damages for the faulty performance of the clutch system, which as the district court concluded, would require an individualized analysis that might defeat predominance. Instead, the plaintiff’s theory was that the allegedly defective clutch was itself the injury, regardless of whether the faulty clutch caused performance issues. The panel concluded that the district court abused its discretion when it denied class certification based on a misconception of the plaintiff’s legal theory that is concerned with satisfying the expectancy interest of the defrauded plaintiff by putting him in the position he would have enjoyed if the false representation relied on had been true; the plaintiff should be awarded the difference in value between what the plaintiff actually received and what he was fraudulently led to believe he would receive. Ninth Circuit reversed and remanded for further proceedings.

For more information about business law, see BUSINESS AND COMMERCIAL LITIGATION — 2019 EDITION. Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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