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Popham v. Keystone RV Co.

United States District Court, N.D. Indiana

September 19, 2016

PEGGY POPHAM, Plaintiff,
v.
KEYSTONE RV COMPANY, Defendant.

          OPINION AND ORDER

          THERESA L. SPRINGMANN JUDGE UNITED STATES DISTRICT COURT

         The Plaintiff, Peggy Popham, filed an Amended Complaint [ECF No. 6] against the Defendant, Keystone RV Company, alleging state law breach of warranty (Count I), a violation of the Magnuson-Moss Warranty Act (Count II), and violations of Indiana and Texas consumer protection laws (Count III). The Defendant filed a Motion for Summary Judgment [ECF No. 14] and the Plaintiff filed a Motion for Partial Summary Judgment [ECF No. 22] as to Count I.

         PROCEDURAL BACKGROUND

         The Plaintiff filed her initial Complaint [ECF No. 1] on May 7, 2015 and filed her first Amended Complaint [ECF No. 6] on June 29, 2015. The Defendant filed an Answer [ECF No. 7] on July 15, 2015. On January 11, 2016, the Defendant filed a Motion for Summary Judgment. [ECF No. 14]. On March 3, 2016, the Plaintiff filed her Response in Opposition to the Defendant's Motion for Summary Judgment [ECF No. 21] and also a Motion for Partial Summary Judgment [ECF No. 22]. The Defendant's Reply [ECF No. 24] was filed on March 17, 2016. The Court granted the Plaintiff leave to file her Statement of Material Facts Not in Dispute [ECF No. 32] and her Statement of Genuine Issues of Fact [ECF No. 33], dated March 29, 2016. On April 29, 2016, the Defendant filed its Response in Opposition to the Plaintiff's Motion for Partial Summary Judgment [ECF No. 37]. Finally, the Plaintiff's Reply [ECF No. 39] was filed on May 4, 2016.

         UNDISPUTED FACTS

         The following facts are undisputed. The Plaintiff is a resident of Texas. (Pl.'s Facts Not in Dispute in Supp. Mot. Partial Summ. J. ¶ 1, ECF No. 32; Def.'s Br. in Supp. of Mot. Summ. J. ¶ 1, ECF No. 15.) The Plaintiff's current mailing address is 170 Port Avenue, Rockport, Texas, which is located within the Palm Harbor Recreational Vehicle (“RV”) Park (Pl.'s Facts ¶¶ 1-2; Def.'s Br. ¶¶ 1-2.) On May 8, 2013, the Plaintiff purchased an RV that was manufactured by the Defendant, an Indiana business entity. (Pl.'s Facts ¶¶ 1-2; Def.'s Br. ¶¶ 3-4.) As part of that purchase, the Defendant offered and the Plaintiff received a one-year Limited Warranty for the RV. (Pl.'s Facts ¶ 3; Def.'s Br. ¶ 5.) On March 31, 2015, the Plaintiff discovered that the RV's roof was “bulging” and walls were “delaminating, ” and promptly notified the Defendant of those issues. (Pl.'s Facts ¶ 5; Def.'s Br. ¶¶ 14, 16-17.)

         THE TERMS OF THE LIMITED WARRANTY

         On the first page of the Limited Warranty is the bolded heading “Limited One Year Warranty, ” centered and larger than the other text. (First Am. Compl. Ex. 3 at 23, ECF No. 6.) In the paragraph immediately below this heading, the Defendant “WARRANTS for a period of one (1) year from the date of purchase that the recreational vehicle manufactured and assembled by [the Defendant] shall be free from defects in materials and workmanship supplied and attributable to [the Defendant].” (Id.) Additionally, the Defendant “reserves the right to substitute parts or components of substantially equal quality, repair cosmetic flaws, make design and/or manufacturing improvements, or in the event the unit cannot be repaired, provide a replacement unit as the exclusive remedy under this Limited Warranty.” (Id.)

         The next bolded heading states “Warranty Disclaimers, ” which is left aligned and of a similar size as the paragraph that follows the heading. (Id.) The subsequent paragraph states that “[t]his warranty is expressly in lieu of all other warranties, express or implied, including any implied warranty of merchantability or fitness for any particular purpose, and in lieu of all other obligations or liabilities on the part of [the Defendant].” (Id.) “Implied warranties, including implied warranty of merchantability or fitness for a particular purpose, if any, given by law, shall be limited to and not extend beyond the duration of the written limited warranty periods set forth herein.” (Id.) In addition, the Limited Warranty includes a statute of limitations that “[a]ny action to enforce this limited warranty or any implied warranty shall not be brought more than one (1) year after expiration of the one (1) year term of this limited warranty.” (Id.)

         Another bolded heading states “Warranty Exclusions - This Limited Warranty Shall Not Apply To:” that is left aligned and of a similar size as the other text on the page. (Id.) Relevant to this dispute, the warranty is excluded for “Trailers used for business, rental, commercial, residential, or disaster relief purposes, or any purposes other than recreational travel and family camping, ” which is written in bolded text unlike the surrounding bulleted list and also with an exclamation point in the margin. (Id.) Finally, on the third page of the Limited Warranty is a heading halfway down the page which reads “How To Obtain Warranty Service, ” which is bolded and left aligned. (Id. at 25.) An RV owner can obtain warranty service “within a reasonable time after discovery of the defect within the warranty period.” (Id.)

         COMPLAINT ALLEGATIONS

         The Plaintiff alleges three separate Counts in her Amended Complaint against the Defendant. In Count I, the Plaintiff alleges that the Defendant breached its “express and/or implied warranties” given that “[o]ne or more of the defects and malfunctions in the vehicle were covered under the terms of the Defendant's express and/or implied warranties” (First Am. Compl. ¶ 51.) In Count II, the Plaintiff alleges a separate violation of the Magnuson-Moss Warranty Act (MMWA) because the Defendant's breach of warranty caused its “fail[ure] to comply with its obligations under the Warranty Act.” (Id. ¶ 56.) In Count III, the Plaintiff alleges violations of state consumer protection statutes based on the Defendant's representations during the transaction, the design of the vehicle, and the Defendant's breach of warranty. (Id. ¶¶ 60-61.) The Plaintiff seeks relief in the form of damages and statutory damages for the alleged violations or, in the alternative, relief in the form of rescission of the contract.

         DISPUTED FACTS

         The parties dispute two main facts. First, whether the Plaintiff “resides” inside of the RV. The Defendant offers an Affidavit from Ms. Baumgardner [ECF No. 16-6], the Defendant's Representative, to argue that the Plaintiff called the Defendant and stated that she resided in the RV. Additionally, the Defendant points to the undisputed fact that the Plaintiff's mailing address is located within an RV Park. However, the Plaintiff offers her own Affidavit [ECF No. 21-1] that she has “never used the RV for any other purpose besides recreational travel and family camping” or that she told Baumgardner that she “was ‘living' in the RV at that time or at any time.” (Popham Aff. ¶¶ 3-4.)

         The second dispute is whether the RV's roof issues, which are the subject of this litigation, were a “latent” defect that existed at the time the Plaintiff purchased the RV. The Plaintiff offers an Affidavit from Mr. Lewis [ECF No. 23-1], a mechanic, to assert that “the roof defect is a structural defect that resulted from something being done wrong at the factory” and that such defect “was not reasonably discoverable . . . within one year [of sale].” (Lewis Aff. ¶¶ 9-10.) In opposition, the Defendant offers an Affidavit from Mr. Gaines [ECF No. 37-1], the Defendant's Service Product Manager, to argue that the “existence of bubbling is not representative of any kind of defect in the RV and that the RV is still “fit for the ordinary purpose for which it was sold.” (Gaines Aff. ¶¶ 7-13.)

         STANDARD OF REVIEW

         Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment is the moment in litigation where the nonmoving party is required to marshal and present the court with evidence on which a reasonable jury could rely to find in that party's favor. Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). A court should only deny a motion for summary judgment when the nonmoving party presents admissible evidence that creates a genuine issue of material fact. Luster v. Ill. Dep't of Corrs., 652 F.3d 726, 731 (7th Cir. 2011) (first citing United States v. 5443 Suffield Terrace, 607 F.3d 504, 510 (7th Cir. 2010); then citing Swearnigen-El v. Cook Cnty. Sheriff's Dep't, 602 F.3d 852, 859 (7th Cir. 2010)). A court's role in deciding a motion for summary judgment “is not to sift through the evidence, pondering the nuances and inconsistencies, and decide whom to believe. [A] court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial.” Waldridge v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994). Material facts are those that are outcome determinative under the applicable law. Smith v. Severn, 129 F.3d 419, 427 (7th Cir. 1997). Although a bare contention that an issue of material fact exists is insufficient to create a factual dispute, a court must construe all facts in a light most favorable to the nonmoving party, view all reasonable inferences in that party's favor, see Bellaver v. Quanex Corp., 200 F.3d 485, 491-92 (7th Cir. 2000), and avoid “the temptation to decide which party's version of the facts is more likely true, ” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).

         For a grant of summary judgment to be fair, each party must have an opportunity to present its full argument on an issue. Edwards v. Honeywell, Inc., 960 F.2d 673, 674-75 (7th Cir. 1992). It is improper for a district court to grant summary judgment on grounds to which neither party had an opportunity to respond. Id.; see also Costello v. Grundon, 651 F.3d 614, 635 (7th Cir. 2011) (citing Sublett v. John Wiley & Sons, Inc., 463 F.3d 731, 736 (7th Cir. 2006) (“[I]f the moving party does not raise an issue in support of its motion for summary judgment, the nonmoving party is not required to present evidence on that point, and the district court should not rely on that ground in its decision.”)).

         DISCUSSION

         This Court has jurisdiction over the Plaintiff's MMWA claim, pursuant to 15 U.S.C. § 2310(d)(1)-(3), as the claim alleges an amount in controversy greater than $50, 000. Additionally, this Court has diversity jurisdiction, pursuant to 28 U.S.C. § 1332, over the Plaintiff's state law claims for breach of warranty and consumer protection violations because the parties are citizens of different states and the aggregated amount in controversy exceeds $75, 000. A federal court exercising diversity jurisdiction must apply the substantive law of the forum in which it sits, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), including that pertaining to choice of law, Klaxon Co. v. Stentor Elec. Manuf. Co., 313 U.S. 487, 496 (1941). However, “[i]f the difference between the state laws is illusory and no conflict exists, ” the federal court merely applies the substantive law of the forum in which it sits. Nelson v. Sandoz Pharm. Corp., 288 F.3d 954, 963 (7th Cir. 2002).

         A. Breach of Warranty Claim

         In Count I, the Plaintiff has alleged a claim for breach of the implied warranty of merchantability and the Defendant's express warranty, [1] each arising under the laws of Indiana and Texas. However, neither of the parties have argued that one state's law should govern the dispute. Accordingly, the Court conducts a choice-of-law analysis: Indiana and Texas have adopted the Uniform Commercial Code verbatim, and thus their laws governing breach of warranty do not conflict.[2] Accordingly, the Court will apply the substantive law of Indiana, the forum in which this Court sits, to the breach of warranty claims.

         Under Indiana law, “a warranty that the goods shall be merchantable[3] is implied in a contract for their sale if the seller is a merchant with respects to goods of that kind” unless excluded or modified within the contract. Ind. Code § 26-1-2-314(1). Additionally, “any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.” Id. § 26-1-2-313. “An action for breach . . . must be commenced within four (4) years after the cause of action has accrued. By the original agreement the parties may reduce the period of limitation to not less than one (1) year, but may not extend it.” Id. § 26- 1-2-725(1). As a preliminary matter, the Court must consider whether the Plaintiff's claim commenced within the applicable limitations period, which is four years unless modified. Id.

         Here, the Plaintiff and Defendant validly reduced the limitations period to one year. Both signed the sales agreement, which stipulated that “[a]ny action to enforce the warranty shall not be brought more than one year after expiration of the one year term of this limited warranty” (First Am. Compl. Ex. 3 at 23), as well as that “[i]mplied warranties . . . shall be limited to . . . the duration of the written limited warranty periods set forth herein, ” (id.) The Plaintiff purchased her RV from the Defendant on May 8, 2013. The Defendant's one-year warranty ended on May 8, 2014, and the Plaintiff filed her initial Complaint on May 7, 2015. Thus, it would appear that the Plaintiff satisfies the requirement that an action be brought within “one year after the expiration of the one year term” under the Defendant's Limited Warranty. (Id.)

         However, the Defendant argues that to obtain repairs covered by the Warranty's express terms, an RV owner “must deliver the [RV] to an authorized Keystone dealer . . . within a reasonable time after discovery of the defect within the warranty period.” (Def.'s Br. 9-10.) The RV's roof defect was discovered 10 months after the Limited Warranty ended. Thus, the Defendant argues that it was no longer obligated to provide repair service under the terms of the Limited Warranty, and accordingly cannot be in breach. In effect, allowing the Plaintiff's claim for breach of warranty to go forward would extend the Limited Warranty's length beyond its one-year term.

         A breach of warranty “occurs when tender of delivery is made, except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance, the cause of action accrues when the breach is or should have been discovered.”[4] Ind. Code § 26-1-2-725(2). A cause of action for breach of warranty “accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.” Id.; Ne. Rural Elec. Membership Corp. v. Wabash Valley Power Ass'n, Inc., 56 N.E.3d 38, 44 (Ind.Ct.App. 2016). The Seventh Circuit instructs that “the point at which a cause of action accrues may be determined as a matter of law if the relevant facts are undisputed and they lead to but one conclusion.” Horn v. A.O. Smith Corp., 50 F.3d 1365, 1370 ...


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