Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-03168/USCOURTS-ca10-89-03168-0/pdf.json

Parties Involved:
Elaine Louise Haynes
Appellant
Joseph E. Haynes
Appellant
Richard J. Manning
Appellee
Shawnee Mission Ford, Inc.
Appellee

Document Text:

PUBLISH 

FILED 

Uniced Stat~ Court of Appeals 

Temh Circuit 

UNITED STATES COURT OF APPEALS 

OCT 2 .~ 1990 

ROBERT L. HOECKER 

TENTH CIRCUIT Clerk 

JOSEPH E. HAYNES; ELAINE LOUISE HAYNES, ) 

Plaintiffs-Appellants, 

v. 

RICHARD J. MANNING; SHAWNEE MISSION 

FORD, INC., 

Defendants-Appellees. 

JOSEPH E. HAYNES; ELAINE LOUISE 

HAYNES, 

Plaintiffs-Appellees, 

v. 

RICHARD J. MANNING, 

Defendant, 

and 

SHAWNEE MISSION FORD, INC., 

Defendant-Appellant. 

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No. 89-3168 

No. 89-3185 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. No. 86-2458-S) 

Bernard E. Brown, of the Law Office of Bernard E. Brown (David M. 

Harding, of Van Osdol, Magruder, Erickson and Redmond, with him on 

the briefs), Kansas City, Missouri, for Plaintiffs-Appellants. 

RichardT. Merker (Kevin Bennett with him on the briefs), of 

Wallace, Saunders, Austin, Brown and Enochs, Chartered, Overland 

Park, Kansas, for Defendant-Appellee Shawnee Mission Ford, Inc. 

Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 1 
Before TACHA, EBEL, Circuit Judges, and JOHNSON,** District Judge. 

**Honorable Alan 

District Court 

designation. 

PER CURIAM. 

B. 

for 

Johnson, District Judge, United States 

the District of Wyoming, sitting by 

This action arises from plaintiffs', Joseph E. Haynes and 

Elaine Louise Haynes, purchase of a used Ford station wagon. The 

facts of this case are set forth in a published opinion of the 

district court and will not be repeated here. See Haynes v. 

Manning, 717 F. Supp. 730 (D. Kan. 1989). Mr. and Mrs . Haynes 

sued all prior owners of the vehicle, except the original 

dealership which sold the car, for common law fraud, breach of 

warranty, and violation of the Motor Vehicle Information and Cost 

Savings Act, 15 u.s.c. §§ 1981-1991 (federal odometer statute). 

Mr. and Mrs. Haynes alleged the car had 100,000 more miles on it 

than was represented by the odometer. After Mr. and Mrs. Haynes 

settled with most of the defendants, the case proceeded to jury 

trial against defendants Richard J. Manning and Shawnee Mission 

Ford, Inc. The jury found in favor of Mr. and Mrs. Haynes on the 

fraud claims and against them on the other claims. Mr. and Mrs. 

Haynes and Shawnee Mission Ford filed post-judgment motions. The 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 2 
district court denied Mr. and Mrs. Haynes' motion for new trial 

and for judgment notwithstanding the verdict and denied Shawnee 

Mission Ford's motion for judgment notwithstanding the verdict, 

but altered the judgment to reduce Mr. and Mrs. Haynes' award to 

zero. Id. Mr. and Mrs. Haynes appeal, and Shawnee Mission Ford 

cross appeals. We reverse and remand for a new trial on the 

federal odometer claims and affirm in all other respects. 

Mr. and Mrs. Haynes challenge the instructions regarding the 

federal odometer statutes. First, they argue that the district 

court erred in instructing the jury that the standard of proof on 

the federal odometer claims was clear and convincing rather than 

preponderance of the evidence. Because the federal odometer 

legislation failed to specify a burden of proof, the district 

court looked to the Kansas common law fraud standard of clear and 

convincing evidence. Id. at 734-35. 

Haynes that the proper burden of proof 

evidence. 

We agree with Mr. and Mrs. 

is preponderance of the 

"In a typical civil suit for money damages, plaintiffs must 

prove their case by a preponderance of the evidence." Herman & 

MacLean v. Huddleston, 459 U.S. 375, 387 {1983). Exceptions to 

this standard occur only in cases where the government has taken 

"coercive action" against an individual other than awarding money 

damages or conventional relief. Price Waterhouse v. Hopkins, 109 

S. Ct. 1775, 1792 {1989). Proof by clear and convincing evidence 

is required only when important individual interests or rights, 

such as termination of parental rights, involuntary commitment, 

deportation, or denaturalization, are at stake. Id.; Huddleston, 

3 

Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 3 
459 u.s. at 389; cf. Cruzan ex rel. Cruzan v. Director, Missouri 

Dep't of Health, 110 S. Ct. 2841 (1990)(clear and convincing 

standard applied when action taken against individual interest). 

In Huddleston, the Supreme Court refused to require proof by 

clear and convincing evidence in a securities fraud action. 459 

U.S. at 387-90. In so holding, the Court stated that "[t]he 

interests of defendants in a securities case do not differ 

qualitatively from the interests of defendants sued for violations 

of other federal statutes such as the antitrust or civil rights 

laws, for which proof by a preponderance of the evidence 

suffices." Id. at 390; see Price Waterhouse, 109 S. Ct. at 

1792-93 (Title VII claim). The federal odometer statutes are not 

sufficiently different from securities fraud, antitrust, civil 

rights, and Title VII statutes to justify application of a 

different standard of proof. We hold that causes of action based 

on fraud for violation of the federal odometer statutes are 

governed by the preponderance of the evidence standard of proof, 

not the state's standard of proof for common law fraud. Cf. 

Liquid Air Corp. v. Rogers, 834 F.2d 1297, 1303 (7th Cir. 

1987)(civil RICO claim based on fraud), cert. denied, 109 s. Ct. 

3241 (1989). Accordingly, we conclude the district court in this 

case erred in failing to instruct that proof by a preponderance of 

the evidence is sufficient for liability for a violation of the 

federal odometer statutes. 

Mr. and Mrs. Haynes also argue that the district court erred 

in instructing the jury that "intent to defraud" is defined as a 

"specific intent to deceive or cheat", rather than reckless 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 4 
disregard. To recover under 15 u.s.c. § 1989(a) of the federal 

odometer 

"intent to 

law, plaintiffs 

defraud." The 

must prove 

district 

defendants acted with an 

court defined "intent to 

defraud" as requiring a "specific intent to deceive or cheat." 

Haynes v. Manning, 717 F. Supp. at 734. Mr. and Mrs. Haynes 

maintain "intent to defraud" should be defined as including 

reckless disregard. We agree. 

As the district court indicated, one district court has held 

that "intent to defraud" means "to act wilfully and with the 

specific intent to deceive any purchaser or potential purchaser of 

a motor vehicle who inspects the odometer of a motor vehicle as an 

index of the condition and value of such vehicle." Shipe v. 

Mason, 500 F. Supp. 243, 245 (E.D. Tenn. 1978), aff'd, 633 F.2d 

218 (6th Cir. 1980). The majority of courts, however, have not 

defined "intent to defraud" in such a restrictive fashion. They 

have concluded that reckless disregard is sufficient to prove 

intent to defraud. See, e.g., Tusa v. Omaha Auto. Auction, Inc., 

712 F.2d 1248, 1253-54 (8th Cir. 1983); Ryan v. Edwards, 592 F.2d 

756, 762 (4th Cir. 1979); Nieto v. Pence, 578 F.2d 640, 642 (5th 

Cir. 1978); Aldridge v. Billips, 656 F. Supp. 975, 978-79 (W.D. 

Va. 1987); Kantorczyk v. New Stanton Auto Auction, Inc., 433 

F. Supp. 889, 893 (W.D. Pa. 1977); Jones v. Fenton Ford, Inc., 427 

F. Supp. 1328, 1336 (D. Conn. 1977); Duval v. Midwest Auto City, 

Inc., 425 F. Supp. 1381, 1387 (D. Neb. 1977), aff'd, 578 F.2d 721 

(8th Cir. 1978). 

We conclude the approach taken by the majority of courts is 

the more well-reasoned approach. The federal odometer law imposes 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 5 
an affirmative duty on automobile dealers to discover defects. 

Jones, 427 F. Supp. at 1335. A transferor of a vehicle may be 

found to have intended to defraud if he had reason to know the 

mileage on the vehicle was more than was reflected by the odometer 

or certification of the previous owner and nevertheless failed to 

take reasonable steps to determine the actual mileage. See Tusa, 

712 F.2d at 1253-54; Nieto, 578 F.2d at 642. 

[I]f a person lacks knowledge that an odometer 

disclosure statement is false only because he displays a 

reckless disregard for the truth, a fact finder can 

reasonably infer that the violation was committed with 

an intent to defraud a purchaser. The inference of an 

intent to defraud is no less compelling when a person 

lacks actual knowledge of a false odometer statement 

only by "clos[ing] his eyes to the truth." 

Tusa, 712 F.2d at 1253-54 (citation omitted). Thus, we conclude 

the district court improperly instructed the jury. The jury 

should have been permitted to determine whether Mr. Manning's and 

Shawnee Mission Ford's conduct constituted an "intent to defraud" 

or reckless disregard of the actual miles of the vehicle. 

In its cross appeal, Shawnee Mission Ford contends Mr. and 

Mrs. Haynes forfeited their federal odometer law claims by 

transferring the vehicle to their son in violation of the federal 

odometer law. Apparently, when Mr. Haynes transferred the vehicle 

to his son he indicated on the title application that there were 

only 57,500 miles on the vehicle and failed to execute a federal 

odometer statement as required by 49 C.F.R. § 580.5 (1989). 

Section 580.5 requires the transferor of a vehicle to provide a 

disclosure statement if the odometer reading is less than the 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 6 
number of miles the vehicle has been driven or the odometer has 

turned over. Because Mr. and Mrs. Haynes failed to provide this 

information to their son, Shawnee Mission Ford maintains they are 

precluded from seeking recovery from prior transferors. 

Shawnee Mission Ford raised this issue in its motion for 

summary judgment. The district court rejected the argument on the 

ground that the legislative history indicated Congress did not 

intend to impose liability on private persons who had no knowledge 

of the federal odometer law requirements. See 38 Fed. Reg. 2978, 

2979 (1973)("a person who does not know of the requirement will 

not have 'intent to defraud' under [15 u.s.c. § 1989(a)] ... and 

will therefore not be subject to liability solely because he has 

failed to make the required statement"). The district court 

refused to punish Mr. and Mrs. Haynes for failing to comply with a 

technical requirement of which they may have been unaware by 

absolving other parties who should have been aware of the mileage 

discrepancy and who were aware of their duty to make the statement 

and liability for failure to do so.

1 

Subsequent transferors with knowledge who fail to report 

actual mileage are not permitted to recover damages from previous 

transferors in the chain of violations. Alley v. Chrysler Credit 

Corp., 767 F.2d 138, 141-42 (5th Cir. 1985)(citing Stier v. Park 

Pontiac, Inc., 391 F. Supp. 397, 401 (S.D.W. Va. 1975)); Galano v. 

McDonald Chevrolet-Oldsmobile, Inc., 644 F. Supp. 940 (W.O. Pa. 

1 The son subsequently transferred 

Haynes. 

7 

the vehicle back to Mr. 

Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 7 
1986) 0 But cf. Perma Life Mufflers, Inc. v. Int'l Parts Corp., 

392 U.S. 134, 138-40 (1968)(doctrine of in pari delicto is not a 

defense to an antitrust action). 

To allow such recoveries would permit violators in the 

later links of the deceptive chain to profit from 

earlier violators, when all are guilty of the same 

deceptive acts. Moreover, later violators would tend to 

ignore prior violations of others and to perpetuate the 

wrongdoing, only, upon their own guilt detection, being 

moved to discover the violations and to report them to 

the courts. Further, to allow such recoveries would 

mean that the original violator, although perhaps no 

more culpable than subsequent violators, could be 

burdened with an undetermined amount of liability 

depending on the length of the deceptive chain. Also, 

it is reasonable to conclude that a subsequent violator 

in the chain approves and ratifies the acts of previous 

wrongdoers when he continues the deception instead of 

discovering and reporting it, and consequently in equity 

and justice he should not be allowed to profit from 

violations of others whose acts he has approved and 

ratified. 

Stier, 391 F. Supp. at 401 (emphasis in original). 

Although many subsequent transferors will be barred from 

recovering damages due to their own violation of the federal 

odometer law, all subsequent private transferors with or without 

knowledge of actual mileage may not be barred from recovering 

damages. Private person transferors who are unaware of the 

requirement that they must provide a federal odometer statement do 

not have an "intent to defraud," and their failure to make the 

required statement will not preclude them from seeking damages 

from previous transferors. See 38 Fed. Reg. at 2979; cf. 

Kantorczyk v. New Stanton Auto. Auction, Inc., 433 F. Supp. at 893 

(plaintiff's subsequent violation of federal odometer statute 

"perhaps innocent" and not precluding recovery). Knowledge of the 

requirement for providing a federal odometer disclosure statement 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 8 
is a fact question. Thus, whether Mr. and Mrs. Haynes knew of the 

requirement at the time they transferred the vehicle to their son 

is a question of fact appropriate for determination by a jury. 

Accordingly, the district court should have instructed the jury on 

this issue. 

Because the instructions of the district court as a whole do 

not "fairly embody the law applicable to the issues involved" and 

potentially resulted in prejudice to the parties, see Key v. 

Liquid Energy Corp., 906 F.2d 500, 505 (lOth Cir. 1990), this 

action is remanded for a new trial. 

We have considered Mr. and Mrs. Haynes' 

appeal, that (1) the district court 

other arguments on 

erred in permitting 

introduction of evidence of their settlement with, and allegations 

in their complaint against, former defendants; (2) the district 

court erred in instructing the jury that to find violations of the 

odometer statutes by Shawnee Mission Ford it must find that 

Shawnee Mission Ford knew or should have known the vehicle had 

100,000 more miles on it than the odometer showed; and (3) the 

district court erred in reducing the judgments against Mr. Manning 

and Shawnee Mission Ford after taking into account the settlement 

amounts with the former defendants. We conclude these arguments 

are without merit. Shawnee Mission Ford's argument in its 

cross-appeal that the jury verdict on common law fraud was not 

supported by the evidence or Kansas substantive law is likewise 

without merit. 

The judgment of the United States District Court for the 

District of Kansas is REVERSED as to the federal odometer claims, 

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Appellate Case: 89-3168 Document: 01019311200 Date Filed: 10/22/1990 Page: 9 
and the action is REMANDED for a new trial in accordance with the 

guidelines set forth in this opinion for proper instruction for 

determining whether Mr. and Mrs. Haynes have standing to bring 

this suit and, if so, for proper instruction on the burden of 

proof and "intent to defraud." The judgment is AFFIRMED in all 

other respects for substantially the reasons stated by the 

district court in its opinion. Haynes v. Manning, 717 F. Supp. 

730. 

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