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Gonzales v. CarMax Auto Superstores, LLC

United States Court of Appeals, Ninth Circuit

October 20, 2016

Travis Z. Gonzales, an individual, Plaintiff-Appellant,
v.
CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants-Appellees. Travis Z. Gonzales, an individual, Plaintiff-Appellee,
v.
CarMax Auto Superstores, LLC, a Virginia Limited Liability Company; Santander Consumer USA, Inc., an Illinois Corporation; Safeco Insurance Company of America, a New Hampshire Corporation, Defendants-Appellants.

          Argued and Submitted August 2, 2016 Pasadena, California

         Appeal from the United States District Court for the Central District of California Cormac J. Carney, District Judge, Presiding D.C. No. 8:13-cv-01391-CJC-RNB

          Hallen D. Rosner (argued), Rosner, Barry & Babbitt, LLP, San Diego, California, for Plaintiff-Appellant/Cross-Appellee.

          Kurt A. Schlichter (argued), Steven C. Shonack, Jamie L. Keeton, Schlichter & Shonack, LLP, El Segundo, California, for Defendants-Appellees/Cross-Appellants.

          Before: Stephen Reinhardt, Alex Kozinski, and Kim McLane Wardlaw, Circuit Judges.

         SUMMARY [*]

         California Law

         The panel reversed the district court's summary judgment in favor of CarMax Auto Superstores, LLC, and remanded with instructions to enter summary judgment for Travis Gonzales on his Consumer Legal Remedies Act and Unfair Competition Law claims, based on CarMax's alleged violations of California Vehicle Code section 11713.18(a)(6), which requires a car dealer to provide consumers with a "completed inspection report" prior to the sale of any "certified" used vehicle.

         The panel held that the district court properly exercised diversity-based subject matter jurisdiction over the case. The panel held that the district court did not err in finding that the jurisdictional amount-in-controversy requirement was satisfied where the potential cost of complying with injunctive relief was considered along with Gonzales's claims for compensatory damages and punitive damages.

         Interpreting the requirements of Cal. Veh. Code § 11713.18(a)(6), the panel held that a report that fails to indicate the results of an inspection in a manner that conveys the condition of individual car components to a buyer is not a "completed inspection report" under California law. The panel concluded that CarMax's generic list of car parts inspected failed to inform consumers of the material results of the inspection.

          OPINION

          REINHARDT, Circuit Judge

         Travis Z. Gonzales sued CarMax Auto Superstores, LLC ("CarMax"), a used car retailer, after experiencing problems with a vehicle he purchased at one of its lots. Gonzales alleged violations of four California consumer protection laws: (1) the Consumer Legal Remedies Act ("CLRA"); (2) the Song-Beverly Consumer Warranty Act ("Song-Beverly"); (3) common law fraud and deceit; and (4) the Unfair Competition Law ("UCL"). Gonzales's claims under the CLRA and UCL were both based on CarMax's alleged violation of California Vehicle Code section 11713.18(a)(6), which requires a car dealer to provide consumers with a "completed inspection report" prior to the sale of any "certified" vehicle. The district court dismissed Gonzales's fraud and Song-Beverly claims and granted CarMax summary judgment on his CLRA and UCL claims.

         The key issue before us is whether a report that fails to indicate the results of an inspection in a manner that conveys the condition of individual car components to a buyer is a "completed inspection report" under California law. Because we conclude that it is not, we reverse the district court's decision to grant summary judgment to CarMax on Gonzales's CLRA and UCL claims.[1]

         Factual and Procedural Background

         Gonzales purchased a 2007 Infiniti G35 from CarMax's Costa Mesa sales lot. Gonzales alleges that he was drawn to CarMax after hearing radio and online advertisements regarding the benefits of purchasing a "certified" vehicle that had passed CarMax's rigorous "125-point" certification inspection. Gonzales further alleges that he would have paid less, or possibly not even purchased the car, had it not been a "certified" vehicle.

         According to Gonzales, it is CarMax's policy to simply provide purchasers of used vehicles with a pre-printed "CarMax Quality Inspected Certificate" ("CQI Certificate") listing vehicle components that were inspected. Gonzales received two versions of the CQI Certificate: a one-sided CQI Certificate provided to him prior to sale, and a two-sided CQI Certificate, which was placed in the glove compartment before he took possession of the car. In addition to the two CQI Certificates that CarMax provides to purchasers of used vehicles, CarMax also uses a third document known as the "CQI/VQI Checklist." This is a checklist which contains 236 points of inspection and is filled out by a technician during the inspection process. The CQI/VQI Checklist, unlike the CQI Certificates, indicates the condition of each individual component inspected. Rather than provide the CQI/VQI Checklist to consumers, CarMax destroys the document after the inspection results are entered into its electronic system, and no copy of the Checklist is retained.

         Shortly after purchasing the Infiniti, Gonzales experienced some difficulty with the car. He contended that the brake pads needed replacing, there was a clicking noise coming from the engine, and the windows malfunctioned. Additionally, the check-engine light illuminated routinely, there were problems with the transmission, the clicking noise from the engine persisted, and other warning lights on the dashboard illuminated "in clusters."

         Gonzales filed suit in California state court alleging that CarMax violated California consumer protection laws by selling him a lemon and falsely claiming that the car was certified. Gonzales's central argument is that CarMax violated California law by failing to provide him with a "completed inspection report" prior to the sale of the "certified" vehicle.

         CarMax timely filed a notice of removal pursuant to 28 U.S.C. § 1441(b) claiming diversity jurisdiction. A week after removal, CarMax filed a motion to dismiss the first amended complaint, as well as a motion to strike Gonzales's punitive damages claim. The following month, while the motion to dismiss the first amended complaint was pending, the district judge issued an order to show cause regarding subject matter jurisdiction, noting that he had "serious doubts" whether the case met the amount-in-controversy requirement. After the parties responded to the order to show cause, the district judge found that CarMax had shown by a preponderance of the evidence that the amount in controversy was over $75, 000 and thus the action was properly removable.

         The district court then granted CarMax's motion to dismiss on all claims except for Gonzales's CLRA and UCL claims. Following discovery, CarMax filed a motion for summary judgment on Gonzales's CLRA and UCL claims. The district court granted the motiom, holding that there was no material legal difference between the one-sided form and the two-sided form, and that both forms were legally sufficient. Gonzales appeals the district court's dismissal and summary ...


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