Opinion
CV 05-00318-TUC-JMR (JCG)
04-14-2006
Elizabeth Sanchez, Plaintiff, v. Fleetwood Motor Homes of Indiana, Inc. and Beaudry RV Company dba Beaudry RV, Defendants.
ORDER
Pending before the Court is the issue of whether Arizona or New Mexico substantive law will apply to the pending action. Also pending before the Court are the Plaintiff's Motion to Strike Notice of Non-Party at Fault (Doc. No. 27) and the Defendants' Motion to Strike Deposition Transcript in Plaintiff's Motion (Doc. No. 30). For the reasons explained below, the Court finds that Arizona substantive law applies. Based on the application of Arizona law, the Court denies the Plaintiff's Motion to Strike and grants the Defendant's Motion to Strike.
Factual and Procedural Background
On March 18, 2004, Plaintiff purchased a motor home at a motor home show in New Mexico. The motor home show featured out-of-state dealers, including Beaudry RV Company, a dealer located and incorporated in the State of Arizona. Plaintiff purchased from Beaudry a new Fleetwood American Eagle Motor Home manufactured by Fleetwood Motor Homes of Indiana, Inc. ("Fleetwood") and covered by Fleetwood's Limited Warranty. Fleetwood is a company incorporated in the State of Indiana. Fleetwood indemnifies Beaudry for all warranty claims.
On April 13, 2004, the motor home was delivered to Plaintiff in New Mexico where she is a resident. Plaintiff registered and titled the motor home in New Mexico. The motor home is presently located there. Plaintiff subsequently requested repairs to the motor home pursuant to the warranty. All repairs to the motor home under Fleetwood's limited Warranty were performed in Arizona.
Plaintiff brings this action in Arizona alleging that Fleetwood and Beaudry (collectively "Defendants") failed to correct defects in the motor home that were covered by the warranty. Plaintiff alleges that Defendants violated the Magnuson-Moss Warranty Act ("MMWA" or "Act"), 15 U.S.C. § 2301 et. seq, a federal statute codifying consumers' rights under state law to bring warranty actions.
On October 6, 2005, Defendants filed a Notice of Non-Party at Fault (Doc. No. 23), identifying Spartan Motor Chassis, Inc., the manufacturer of the motor home's chassis as a non-party at fault. Plaintiff moved to strike the Notice, contending that the Defendants' Notice was improper because Arizona's Non-Party at Fault provisions do not have a federal counterpart. (Doc. No. 27) Plaintiff argued that New Mexico substantive law should govern the dispute and New Mexico law does not allow a defendant to designate a non-party at fault.
Defendants urge the Court to apply Arizona law in part because of Arizona's non-party at fault provisions but also because Arizona law requires contractual privity between Plaintiff and Fleetwood before an implied warranty can arise. New Mexico law does not. Defendants also moved to strike (Doc. No. 30) a deposition transcript attached to attached as an exhibit to Plaintiff's Motion to Strike.
On January 5, 2006, the Court ordered the parties to submit supplemental briefing on the issue of which state's substantive law applies. In its Order, the Court advised the parties that in ruling on pending motions, the Court would determine choice of law based on federal common law which follows the approach of the Restatement (Second) of Conflicts of Laws (1971), hereafter "Restatement."
Law and Application
The Restatement sets forth various legal standards for determining choice of law based on the nature of the pending litigation. Plaintiff contends that this action arises out of statute, not contract, and that § 6 of the Restatement should therefore govern. Defendant contends that the provisions of the Restatement related to actions arising out of contract, specifically § 187, should govern, but that even under the general rubric stated in § 6, Arizona law should apply. This Court concludes that § 187 does not apply to the present action, and that analysis under other provisions of the Restatement applicable to actions arising in contract - §§ 188 and 191 - lead the Court to analysis under § 6, which favors application of Arizona law.
I. Restatement § 187
Section 187 (1) provides that the law of the state chosen by the parties to govern their contractual rights and duties will apply if the issue is one which the parties could have resolved by an explicit provision in their agreement.
On March 18, 2004, Plaintiff and Beaudry entered into a Retail Installment Sale Contract ("Contract"). The Contract was between Plaintiff as "Buyer" and Beaudry as "Creditor-Seller" with Beaudry assigning its interest in the Contract to the financier, Bank of the West (the "Bank"), and the Bank retaining a security interest in the motor home. (Contract, page 3). The first paragraph of the Contract provides:
You, the buyer . . . may buy the vehicle below for cash or on credit. By signing this contract, you choose to buy the vehicle on credit under the agreements on the front and back of this contract. You agree to pay the Creditor-Seller (sometimes "we" or "us" in this contract) the Amount Financed and Finance Charge according to the payment schedule below. We will figure your charge on a daily basis. The Truth-In-Lending Disclosures below are part of this contract.(Contract, page 1.)
With respect to choice of law issues, the Contract provides that "[f]ederal law and the law of the state of the Seller's address as shown on the front of [the] contract [shall] apply to [the] contract." (Contract, page 4, item 6.) Beaudry's address was identified on the front of the contract as being located in Arizona. Plaintiff was advised that any complaints concerning the Contract were to be addressed to the Arizona State Banking Department in Phoenix, Arizona. (Contract, page 3.)
The Contract by its very terms, applies to any financing dispute that might arise between Plaintiff and the Bank. If Plaintiff defaults on her loan, the Bank can repossess the motor home; if Plaintiff disputes a prepayment penalty, she can address the issue to the Arizona State Banking Department. By mutual written agreement, both Plaintiff and the Bank were on notice that any dispute regarding a financing issue would be resolved based on Arizona law.
The Contract makes only a passing reference to warranty work in a section entitled, "Warranties Seller Disclaims." That section states that the vehicle is sold (by Beaudry) "as is-not expressly warranted or guaranteed." It further states that the disclaimer provision does not affect any warranties that the manufacturer (Fleetwood) may provide. Considering all of these contractual terms, the Court finds that the contract does not contain an effective choice of law provision as between Plaintiff, Beaudry and Fleetwood regarding warranty disputes. Given the limited reference to warranty work and explicit references to financing disputes, the Court does not find persuasive Defendants' argument that § 187 (1)'s phrase "contractual rights and duties" should include all disputes pertaining to the motor home whether they arise from a contractual financing issue or from a claim of faulty warranty work.
II. Restatement § 188
Section 188 (1) provides that the rights and duties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6. In the absence of an effective choice of law by the parties, § 188 (2) provides that the contacts to be considered in determining the applicable law include:
a. the place of contracting;
b. the place of negotiation of the contract;
c. the place of performance;
d. the location of the subject matter of the contract; and
e. the domicile, residence, nationality, place of incorporation and place of business of the parties.
Section 188 (3) provides that if the place of negotiating the contract and the place of performance are in the same state, then the local law of that state usually applies except as otherwise provided in §§ 189-199 and 204. Of those sections, the only one applicable to this case is § 191, "Contracts to Sell Interests in Chattel" which will be addressed by the Court in section III below.
Sections 188 (1) and (2) do not apply in the present case. Fleetwood was not a party to the Contract between Beaudry and Plaintiff. For the reasons stated in Section I, the Contract between Plaintiff and Beaudry is really a financing agreement between Plaintiff and the Bank, not a contract giving rise to Plaintiff's warranty claims, and therefore §§ 188 (1) and (2) do not apply as between Plaintiff and Beaudry either.
The parties dispute whether Fleetwood's Limited Warranty, which was presumably in writing and apparently provided to the Plaintiff when the motor home was delivered to her in New Mexico, was a valid contract or a contract of adhesion. The Court need not resolve that dispute, which has not been fully briefed for the Court, because neither party contends that the action arises out of the warranty as a contract between Fleetwood and Plaintiff.
Of course, there was a contract between Plaintiff and Beaudry prior to Beaudry assigning its rights to the Bank. Applying the § 188 factors to Plaintiff and Beaudry, the factors balance in favor of Plaintiff and the application of New Mexico law. The only factor in favor of Beaudry is that it is incorporated in Arizona. The place of negotiating the sale was in New Mexico. The motor home is presently located in New Mexico where Plaintiff resides and is domiciled. As Beaudry did not perform under the Contract until it physically delivered the motor home to the Plaintiff in New Mexico, the place of performance was also in New Mexico. However, even if the Court followed this reasoning, because the place of negotiating the contract and the place of performance are in the same state, the Court would nonetheless have to perform the § 188 (3) analysis, which directs it to § 191, "Contracts to Sell Interests in Chattel."
Defendants point out that application of § 188 (2), which factors in the location of the subject matter of the contract, would mean that the Court would have to change its choice of law decision whenever Plaintiff drove the motor home to another state. Anticipating such problems, the creators of the Restatement included § 188 (3), which provides that "the local law of that state usually applies except as otherwise provided in §§ 189-199 and 204." (Emphasis added.)
III. Restatement § 191
Under § 191, the state of delivery governs choice of law. Section 191provides:
The validity of a contract for the sale of an interest in a chattel and the rights created thereby are determined, in the absence of an effective choice of law by the parties, by the local law of the state where under the terms of the contract the seller is to deliver the chattel unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.Restatement § 191 (emphasis added).
It is undisputed that on April 13, 2004, the motor home was delivered to Plaintiff in Albuquerque, New Mexico (Delivery Affidavit) where she is a resident. Plaintiff registered and titled the motor home in New Mexico and the motor home is presently located there. In this case, the state of delivery is New Mexico.
Defendants argue that application of the "rule of delivery" in this case would not advance the interests of predictability but would in fact create confusion. The Court agrees. Typically, selecting the state of delivery is addressed by the parties before the final sale. Here, Beaudry, an Arizona company, attended a motor home show in New Mexico, presumably with other out-of-state dealers as well as out-of-state buyers. While the parties should have known that the state of delivery would be determined in the event of a sale, the state of delivery was not discussed between Beaudry and Plaintiff until after the parties had reached an agreement. The Court will not apply New Mexico law based on an issue that did not arise until after the sale had been completed.
Irrespective of whether the court applies the "state of delivery" rule or not, the court must nonetheless conduct further analysis. Section 191 directs the court to § 6 when, ". . . with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties . . . ." Thus, even if § 191's "state of delivery" rule suggests application of New Mexico law, the Court must determine whether another state has a more significant relationship under § 6 than the state of delivery. If it does, the other state's law applies. See Weber v. Fleetwood Motor Homes of Indiana, Inc., CIV-03-2606-PHX-JWS at 15-16 (D.Ariz. Dec. 30, 2005), (choice of law issues in cases arising under the MMWA are best resolved under § 6 of the Restatement, because the claims do not arise from contract or tort, but from statute.) IV. Restatement § 6
Under § 6 a court must consider seven factors when determining which state law has the more significant relationship:
a. the needs of the interstate and international systems;In applying these factors, the court is mindful that the purpose of the MMWA is to protect consumers. Under the Act, a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with an obligation under a written warranty may bring a suit for damages and other legal and equitable relief. 15 U.S.C. § 2310(d)(1). The statute is a remedial one designed to protect the purchasers of consumer goods from deceptive warranty practices. Miller v. Willow Creek Homes, Inc., 249 F.3d 629, 630 (7th Cir.2001). In part, the legislative purpose of the Act was to make warranties on consumer products more readily understood and enforceable. H.R. Rep. 93-1107.
b. the relevant policies of the forum;
c. the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue;
d. the protection of justified expectations;
e. the basic policies underlying the particular field of law;
f. certainty, predictability and uniformity of result; and
g. ease in the determination and application of the law to be applied.
Weber v. Fleetwood Motor Homes of Indiana, Inc., CIV-03-2606-PHX-JWS at 15-16 (D.Ariz. Dec. 30, 2005) provides a good example of the application of § 6 factors in the context of an MMWA lawsuit. As in the present case, Weber was a resident of New Mexico, who purchased a motor home from Beaudry, a dealer incorporated in Arizona. The motor home was manufactured and warranted by Fleetwood, a company incorporated in Indiana. Beaudry delivered the motor home to Weber in New Mexico and, when Weber experienced problems with the motor home, Fleetwood conducted the repairs. Weber was not satisfied with the work and sued Fleetwood in federal court under the MMWA. Unlike the present case, Weber negotiated the sale of the motor home in Arizona, not in New Mexico where he lived. Also unlike the present case, Weber sued only the manufacturer, Fleetwood, and not the dealer, Beaudry.
After analyzing the policies underlying the MMWA and considering the Restatement factors enunciated in § 6, the Weber court held that Arizona law applied. In reaching this result, the court explained:
Arizona is where Weber purchased his American Dream and if the law of the state of purchase were applied to all MMWA cases, it would benefit both consumers like Weber and sellers like Fleetwood. Consumers could choose to buy products in states with warranty laws favorable to them, such as those that do not require privity before implied warranties will arise. And it would be easier for sellers to gauge their potential liability and adjust their prices accordingly. These two benefits are reflected in interests (a), (d), (e), and (g). This rule also would advance interest (b) in this case because Arizona is both the state of purchase and the forum state.Weber, No CIV-03-2606-PHX-JWS at 16-17.
This Court agrees with the reasoning of the Weber court and believes application of the law of the "state of purchase" is appropriate. Although statements in the parties' supplemental briefs could support a finding that the motor home was purchased in New Mexico, the Court is bound by the Plaintiff's Complaint which states: "Here, although the 2004 Fleetwood American Eagle ("Motor Home") was purchased in Arizona, the Motor Home was delivered in New Mexico." (Complaint, ¶ 2 emphasis added). In addition, Plaintiff's "justified expectations" (§ 6 (d)) could be said to be apparent even before filing her action. Although Plaintiff lived in New Mexico, she had all repairs to the motor home performed in Arizona. The Court therefore finds that Arizona substantive law applies to this action. V. Application of Arizona substantive law to Plaintiff's Motion to Strike
Possibly anticipating this result, Plaintiff argues that the Court should apply Weber but find that the "state of delivery" (New Mexico) governs the action and not the "state of purchase" (Arizona). The Court previously dispensed with this issue in section II.
Applying Arizona substantive, the Court concludes that Plaintiff's Motion to Strike is without merit. First, Plaintiff argues that Defendants' Notice of Non-Party at Fault must be stricken because the federal rules of civil procedure do not permit such a filing. Arizona's non-party-at-fault provisions, however, are not procedural, they are substantive. See Wester v. Crown Controls Corp., 974 F.Supp. 1284, 1288 (D.Ariz. 1996) (describing Arizona's version of the Uniform Contribution Among Tortfeasors Act ("UCATA"), which includes § 12-2506, as "substantive rules governing the allocation of liability among named and un-named parties"). Because this court applies state written and implied warranty law "except in specific instances in which Magnuson-Moss expressly prescribes a regulating rule," Walsh v. Ford Motor Co., 807 F.2d 1000, 1012 (D.C. Cir. 1986) (cited with approval in Milicevic v. Fletcher Jones Imports, Inc., 402 F.2d 912, 917 (2005)), this substantive provision of Arizona law applies because no federal procedural counterpart exists.
Second, Plaintiff contends that Arizona's non-party at fault statute, A.R.S. § 12-2506, applies only in tort claims, and that because the pending action arises from a warranty claim, the statute does not apply in this case. Section 12-2506 specifically provides, however, that it applies to claims for breach of warranty. See A.R.S. § 12-2506(F)(2).
Finally, Plaintiff argues that Defendants lack a factual basis for filing their Notice of Non-party at Fault. In support of this contention, Plaintiff presents evidence that she claims indicates that the chassis manufactured by Spartan is covered by Defendants' warranty. Plaintiff does not present any legal authority suggesting that a Notice of Non-Party at Fault can be stricken upon a finding that it lacks sufficient factual support, and the Court declines to grant the motion to strike on those grounds.
The UCATA is designed to ensure that each party to the action is liable only for his or her share of fault. See Larsen v. Nissan Motor Corp. in U.S.A., 194 Ariz. 142, 144-45, 978 P.2d 119, 121-22 (App. 1998). The statutory scheme permits a defendant to name non-parties at fault and have the trier of fact apportion liability among them, even if the plaintiff is prohibited from directly suing or recovering from the non-party. Id. The notice of non-party at fault is intended as just that - a notice requirement to ensure that the plaintiff is made aware that the defendant will defend in part or in whole on the theory that fault should be apportioned to a non-party. See LyphoMed, Inc. v. Superior Court In and For County of Maricopa, 172 Ariz. 423, 427, 837 P.2d 1158, 1162 (App. 1992). The existence and involvement of non-parties at fault are questions of fact ultimately for the jury to decide. See Rosner v. Denim & Diamonds, Inc., 188 Ariz. 431, 433, 937 P.2d 353, 355 (App. 1996). Thus, if Plaintiff believes that there is insufficient evidence to support Defendants' claim that Spartan, not Defendants, warranted the motor home's chassis, then Plaintiff is entitled to file a motion for summary judgment on that issue, or to argue against that defense at trial. A motion to strike the notice, however, is not the proper vehicle for Plaintiff to present the merits of her claim.
Accordingly, Plaintiff's Motion to Strike Notice of Non-Party at Fault (Doc. No. 27) is DENIED and Defendant's Motion to Strike Deposition Transcript in Plaintiff's Motion (Doc. No. 30) is GRANTED.
DATED this 14th day of April, 2006.
/s/_________
Jennifer C. Guerm
United States Magistrate Judge