Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-56305/USCOURTS-ca9-14-56305-0/pdf.json

Parties Involved:
Carmax Auto Superstores, LLC
Appellant
Travis Z. Gonzales
Appellee
Safeco Insurance Company of America
Appellant
Santander Consumer USA, Inc.
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

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.

No. 14-56842

 

D.C. No. 

8:13-cv-01391-CJCRNB

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2 GONZALES V. CARMAX

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.

No. 14-56305

D.C. No. 

8:13-cv-01391-CJCRNB

OPINION

Appeal from the United States District Court

for the Central District of California

Cormac J. Carney, District Judge, Presiding

Argued and Submitted August 2, 2016

Pasadena, California

Filed October 20, 2016

Before: Stephen Reinhardt, Alex Kozinski, and

Kim McLane Wardlaw, Circuit Judges.

Opinion by Judge Reinhardt

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GONZALES V. CARMAX 3

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 alongwith 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.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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4 GONZALES V. CARMAX

COUNSEL

Hallen D. Rosner (argued), Rosner, Barry & Babbitt, LLP,

San Diego, California, for Plaintiff-Appellant/CrossAppellee.

Kurt A. Schlichter (argued), Steven C. Shonack, Jamie L.

Keeton, Schlichter & Shonack, LLP, El Segundo, California,

for Defendants-Appellees/Cross-Appellants.

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)

theSong-BeverlyConsumer WarrantyAct (“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

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GONZALES V. CARMAX 5

“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 CQICertificate: a one-sided CQI

Certificate provided to him prior to sale, and a two-sided CQI

1 Gonzales sued Santander Consumer USA, Inc. (“Santander”) as the

assignee of the purchase agreement for the vehicle. He also asserted a

separate cause of action against Safeco Insurance Company of America

(“Safeco”), as CarMax’s bond holder, under California Vehicle Code

section 11711, a fraud provision. The parties do not dispute that Santander

and Safeco are liable only to the extent that CarMax is.

Finally, the district court denied CarMax’s motion under California

Civil Code section 1780(e) for attorney’s fees as the prevailing party on

Gonzales’s CLRA claim. Because we reverse the district court’s grant of

summary judgment to CarMax on the CLRA claim, CarMax is no longer

a prevailing party under § 1780(e) and therefore has no claim for

attorney’s fees.

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6 GONZALES V. CARMAX

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/VQIChecklist.” 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. Aweek after

removal, CarMax filed a motion to dismiss the first amended

complaint, as well as a motion to strike Gonzales’s punitive

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GONZALES V. CARMAX 7

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 controversywas 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 judgment orders. We consider only the latter here.

We dispose of the other claims in a memorandum disposition

filed concurrently.

Discussion

I. Standards of Review

We review de novo a district court’s determination that

diversity jurisdiction exists, but review any factual

determinations necessaryto establish diversityjurisdiction for

clear error. Kroske v. U.S. Bank Corp., 432 F.3d 976, 979–

80 (9th Cir. 2005).

An order granting summary judgment is reviewed de

novo. “We must determine, viewing the evidence in the light

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8 GONZALES V. CARMAX

most favorable to the non-moving party, whether there are

any genuine issues of material fact and whether the district

court correctly applied the relevant law.” Ventura Packers,

Inc. v. F/V JEANINE KATHLEEN, 305 F.3d 913, 916 (9th

Cir. 2002).

II. Subject Matter Jurisdiction

Gonzales contends that the district judge erred in

exercising diversity-based subject matter jurisdiction over

this case. We conclude that he did not. 

A defendant generally may remove any action filed in

state court if a federal district court would have had original

jurisdiction. 28 U.S.C. § 1441(a). To establish original

jurisdiction based on diversity of parties, the amount in

controversy must “exceed[] the sum or value of $75,000,

exclusive of interest and costs.” 28 U.S.C. § 1332(a). We

have defined the amount in controversy as the “amount at

stake in the underlying litigation,” Theis Research, Inc. v.

Brown & Bain, 400 F.3d 659, 662 (9th Cir. 2005); this

includes any result of the litigation, excluding interests and

costs, that “entail[s] a payment” by the defendant. 

Guglielmino v. McKee Foods Corp., 506 F.3d 696, 701 (9th

Cir. 2007). This amount includes, inter alia, damages

(compensatory, punitive, or otherwise) and the cost of

complying with an injunction, as well as attorneys’ fees

awarded under fee shifting statutes. Chabner v. United of

Omaha Life Ins. Co., 225 F.3d 1042, 1046 n.3 (9th Cir. 2000).

In this case, when the potential cost of complying with

injunctive relief is considered along with Gonzales’s claims

for compensatory damages and punitive damages, the district

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GONZALES V. CARMAX 9

court did not err in finding that the jurisdictional amount-incontroversy requirement was satisfied.2

III. Consumer Legal Remedies Act and Unfair

Competition Law Claims

Section 11713.18 of the CaliforniaVehicleCode prohibits

a car dealer from either advertising for sale or selling a used

vehicle as “certified” under nine circumstances, including if:

Prior to sale, the dealer fails to provide the

buyer with a completed inspection report

indicating all the components inspected. 

Cal. Veh. Code § 11713.18(a)(6). The statute further

provides that a violation of any of these provisions is

actionable under the CLRA, the UCL, false advertising

statutes, or any other applicable state or federal law. Cal. Veh.

Code § 11713.18(b). 

2

It remains an open question whether attorney’s fees that are

anticipated but unaccrued at the time of removal or filing in federal court,

such as those at issue in this case, may be included in the amount-incontroversy. Other circuits and the district courts in this circuit are divided

on the issue. Compare Gardynski-Leschuck v. Ford Motor Co., 142 F.3d

955, 958 (7th Cir. 1998) (holding that the inclusion of anticipated but

unaccrued fees that “have not been and may never be incurred” are not “in

controversy” between the parties because they are too uncertain given that

litigation can end through settlement at any time), with Miera v. Dairyland

Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998) (concluding, without

extensive discussion, that estimated attorney’s fees are included). Because

we conclude that the amount in controversy requirement is satisfied here

regardless of whether anticipated but unaccrued attorney’s fees are

considered in the calculation, we do not include the fees in our

calculations and do not resolve this open question here.

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10 GONZALES V. CARMAX

Here, the alleged failure to provide a completed

inspection report underlies Gonzales’s CLRA and UCL

claims. Gonzales contends that CarMax failed to provide a

“completed inspection report” before selling him a “certified”

vehicle. We must decide whether the CQI certificates that

CarMax provides to consumers satisfy the requirements of

§ 11713.18(a)(6). We hold they do not, because the CQI

certificates fail to provide the actual results of the inspection

for the individual components, thus rendering the inspection

reports incomplete.

Because this case was removed to federal court under

diversity jurisdiction, California law applies. St. Paul Fire &

Marine Ins. Co. v. Weiner, 606 F.2d 864, 867 (9th Cir. 1979). 

When a state’s highest court has not yet ruled on an issue, we

must reasonably determine the result that the highest state

court would reach if it were deciding the case. Med. Lab.

Mgmt. Consultants v. Am. Broad. Companies, Inc., 306 F.3d

806, 812 (9th Cir. 2002). In doing so, we may look to

decisions from state appellate courts for guidance. 

Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th

Cir.1986), modified on other grounds, 810 F.2d 1517 (9th

Cir. 1987). In the present case, however, there are currently

no published opinions from any California appellate courts

interpreting section 117.1318(a)(6).3 Even so, we are not

3 On August 10, 2016, during the pendency of this appeal, the

California Supreme Court ordered depublication of a decision by the

California Court of Appeal for the Fourth District in Brooks v. CarMax

Auto Superstores California, LLC, 201 Cal. Rptr. 3d 138 (Ct. App. 2016).

In an opinion certified for partial publication in relevant part, the Brooks

court had held that CarMax’s CQI certificate was a “completed inspection

report” under section 11713.18(a)(6). See id. at 144. That opinion may no

longer be cited as precedent pursuant to Rule 8.1115 of the California

Rules of Court. 

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GONZALES V. CARMAX 11

precluded from affording relief even when the state Supreme

Court and state legislature fail to provide a clear rule. AirSea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 186 (9th

Cir. 1989). 

When addressing questions of statutory interpretation

under California law, we “[must] ascertain the intent of the

Legislature so as to effectuate the purpose of the law.” People

v. Coronado, 906 P.2d 1232, 1234 (Cal. 1995) (internal

cquotation marks and citation omitted) (alteration in original).

The California Supreme Court first looks to the language of

the statute, giving effect to the words’ plain meaning; “[i]fthe

language is unambiguous, the plain meaning controls.”

Voices of the Wetlands v. State Water Res. Control Bd., 52

Cal 4th 499, 519 (2011).

A statute’s plain meaning, however, cannot be determined

without reference to the context in which the words are used.

See Prof’l Engineers in California Gov’t v. Brown, 177 Cal.

Rptr. 3d 567, 572 (Ct. App. 2014). Consequently, when

California courts construe the plain meaning of statutory

language, they consider whether the statute contains a term of

art with a specific legal or technical meaning. See In re

Marriage of Davis, 352 P.3d 401, 404 (Cal. 2015) (“In

considering whether this statute has a plain meaning, we

recognize that the phrase ‘living separate and apart’ is a term

of art.”) (internal quotation marks and citations omitted); Tex.

Commerce Bank v. Garamendi, 14 Cal. Rptr. 2d 854, 863 (Ct.

App. 1992) (“[W]ords employed in a statute dealing with

legal or commercial matters are presumed to be used in their

established legal or technical meanings unless otherwise

clearly indicated by the statute.”); see also Ruiz v. Podolsky,

50 Cal. 4th 838, 850 n.3 (2010) (“[W]hen the Legislature uses

a term of art, a court construing that use must assume that the

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12 GONZALES V. CARMAX

Legislature was aware of the ramifications of its choice of

language.”); Prof’l Eng’rs in Cal. Gov’t v. Brown, 177 Cal.

Rptr. 3d at 572.

With these principles of California law in mind, we first

turn to the plain meaning of the statutory language. Section

11713.18(a)(6) requires sellers of used cars to provide buyers

with a completed inspection report. The statute does not

define the term “inspection report,” but in the automobile

industry, “inspection report” is a term of art with an

established technical meaning. Consequently, we must

assume that the Legislature was aware of the meaning of

“inspection report” and intended this meaning to control. Cf.

Prof’l Eng’rs in Cal. Gov’t v. Brown, 177 Cal. Rptr. 3d at 572

(explaining that the term “‘personal services’ has an accepted

meaning in the context of budget legislation” and construing

the term in accordance with that accepted meaning).

In the automobile industry, an “inspection report” is

understood to mean a report that lists the components

inspected, with a space corresponding to each component in

which the inspector designates whether or not that component

is functional. A “completed inspection report” is one in which

those spaces have been appropriatelymarked so as to indicate

the result of the inspection. Examples of automobile

“inspection reports” abound in statutes, regulations, and

everyday usage in the context of the industry. For example,

this technical understanding of the term is reflected in Form

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GONZALES V. CARMAX 13

OL 221A, the safety inspection report utilized by the

California DMV for instructional vehicles,4and in the

“Vehicle Inspection Report” form5used by the California

Department of Transportation (“CalTrans”) under its

“Enhanced Mobility of Seniors and Individuals with

Disabilities Program.”6 Similarly, California Department of

Highway Patrol Regulations and Federal Motor Carrier

Safety Administration Regulations both demonstrate that

“inspection report” is a technical term that means a list of

components specifying whether the components are

operational: both sets of regulations require “vehicle

inspection reports” to “list any defect or deficiency

discovered by or reported to the driver.” See C.F.R.

§ 396.11(a)(2)(i); Cal. Code Regs. tit. 13, § 1215(b)(1)(B),

(e).

Finally, while § 11713.18 itself does not define

“inspection report,” the statutes of other states demonstrate

that this term is consistently understood to bear a technical

4

See Cal Dep’t of Motor Vehicles, Safety Inspection Report, Vehicle

Used for Instruction, OL 221A (2007), https://www.dmv.ca.gov/portal/

wcm/connect/ea268eba-b3ed-44f3-965a-190e62aa9dcd/ol221a.pdf?MO

D=AJPERES. 

5

See Fed. Transit Admin., Vehicle Inspection Report (2008),

http://dot.ca.gov/hq/MassTrans/Docs-Pdfs/5310/5310-AgcyMon.doc.

6 Pursuant to 49 U.S.C. § 5310, states receive formula funding “for

the purpose of assisting private nonprofit groups in meeting the

transportation needs of older adults and people with disabilities when the

transportation service provided is unavailable, insufficient, or

inappropriate to meeting these needs.” See Enhanced Mobility of Seniors

& Individuals with Disabilities – Section 5310, Fed. Transit Admin.,

https://www.transit.dot.gov/funding/grants/enhanced-mobility-seniorsindividuals-disabilities-section-5310 (last visited Oct. 5, 2016). 

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14 GONZALES V. CARMAX

meaning in the automobile industry, and that under this

technical understanding, an inspection report must contain

component-specific results. In Illinois, for example, a

“vehicle inspection report” must contain a “component reject

area” where an inspector can “[m]ark the appropriate

bubble(s) for any defects found on the vehicle during the

safety test.” Ill. Adm. Code tit. 92, § 451.150(k)(14)(A); see

also N.J. Admin. Code § 13:20–43.9(a)(13) (requiring motor

vehicle inspection report to include “pass/fail result of

applicable visual inspections”); Ariz. Admin. Code

§ R18-2-1011 (requiring a “uniquely numbered vehicle

inspection report” that contains, among other things, “repair

requirements; final test results; [and] repairs performed”).7

 

The term “inspection report” in § 11713.18(a)(6) thus has

a technical, industry-specificmeaning. It requires commercial

sellers of used cars to provide a form indicating the specific

results of the inspection for the individual components

inspected. The statute also requires that this “inspection

report” be “completed,” and an inspection report, under the

technical meaning accorded that term across the automobile

industry, is not completed without an indication of the

pass/fail result with respect to each component. 

To require only an unmarked list of components would

disregard the requirements of an “inspection report” and

render the word “completed” superfluous. Under California

7 That “inspection report” is a technical term of art with an industryspecific meaning is further supported by the fact that Lexus, Honda,

General Motors, Ford, Audi, and BMW all provide inspection reports on

which the inspector marks whether each individual component inspected

operates satisfactorily. This list of manufacturers is intended to be

illustrative and by no means exhaustive. 

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GONZALES V. CARMAX 15

law, “significance should be given to every word, phrase,

sentence and part of an act.” Moyer v. Workmen’s Comp.

Appeals Bd., 514 P.2d 1224, 1229 (Cal. 1973) (in bank)

(internal quotation marks and citation omitted). A

construction that would make some words surplusage is to be

avoided and words must be viewed in context, keeping in

mind the nature and obvious purpose of the statute. Id.

The purpose, history, and public policy of the statute

further support our interpretation of “completed inspection

report.” See Imperial Merch. Servs., Inc. v. Hunt, 212 P.3d

736, 740 (Cal. 2009) (“If the statutory language permits more

than one reasonable interpretation, courts may consider other

aids, such as the statute’s purpose, legislative history, and

public policy.” (internal quotation marks and citation

omitted)). 

Section 11713.18(a)(6) is part of a remedial statute that

must be construed liberally in favor of the class whom it was

passed to protect. See Cal. Assn. of Health Facilities v. Dep’t

of Health Servs., 940 P.2d 323, 329 (Cal. 1997). The

California Legislature enacted the section in 2005 as part of

California’s “Car Buyer’s Bill of Rights,” which, according

to the author of the bill, aimed to “strengthen the protections

afforded [to] California car buyers by improving laws

regarding the sales, marketing, and financing of new and

used vehicles.” Assembly Judiciary Comm., 2005–2006

Session, Analysis of AB-68 5 (March 1, 2005).8 Prior to the

enactment of this bill, there was no legal standard for use of

8 When California courts analyze legislative history, the materials

they consider “can include bill analyses prepared by staff for legislative

committees considering passage of the legislation in question.” People v.

Taylor, 68 Cal. Rptr. 3d 682, 685 (Ct. App. 2007).

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16 GONZALES V. CARMAX

the term “certified,” despite the growing trend for dealers to

“certify” used cars. Senate Judiciary Comm., 2005–2006

Session, Analysis of AB-68 5 (June 14, 2005). This bill

aimed to “provide[] some assurances to consumers that they

are getting what they bargained for,” especially given that

cars are a “big[] ticket item” and “scams involving auto sales

can have a devastating impact on a family’s budget and

ability to function productively in society.” Assembly

Judiciary Comm., 2005–2006 Session, Analysis of AB-68

5–7 (March 1, 2005) (quotingConsumers for Auto Reliability

and Safety (CARS), the sponsor of the bill). The Legislature

expressed concerns that “business practices engaged in by the

automobile industry in general and automobile dealers in

particular . . . discourage price transparency, limit consumer

choice and take advantage of consumer ignorance.” Senate

Judiciary Comm., 2005–2006 Session, Analysis of AB-68 2

(June 14, 2005). The Car Buyer’s Bill of Rights contained a

number of provisions, including a limitation on dealer

commissions for arranging financing, a requirement

mandating additional disclosures concerning a buyer’s credit

score, and, most important for the purposes of this appeal, an

inspection report that provides information to the prospective

buyer of a “certified” vehicle. Id. at 1. 

A principal purpose of the Car Buyer’s Bill of Rights was

to promote transparency in the sale of vehicles, especially

those marketed as “certified.” An interpretation of section

11713.18(a)(6) that recognized CarMax’s CQI Certificates,

which are devoid of any information about the condition of

the individual components inspected, as “completed

inspection reports” would undermine rather than foster the

statute’s goal of promoting transparency in used car sales.

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GONZALES V. CARMAX 17

When viewed in this context, the statute requires dealers

to provide consumers with information about the results of

the inspection for each particular component. Sellers cannot

merely list components that have been inspected (as

CarMax’s CQI certificate does), thereby leaving the

consumer ignorant as to whether the various components

satisfactorily passed the inspection. When section

11713.18(a)(6) requires dealers to provide a “completed

inspection report,” it guarantees consumers the right to know

whether the individual components of a car have been found

functional as the result of an inspection. Completed

inspection reports, as that term is understood in the industry

and in light of the statute’s purpose, require the provision of

that information. 

CarMax’s certificates do not provide any of the necessary

information about the status of the individual components

inspected under its “rigorous CarMax 125-point Quality

Inspection.” CarMax’s CQI certificates merelyguarantee that

the vehicle’s overall condition satisfied its certification

program and list the components inspected under that

program. After receiving this certificate, the consumer knows

neither the condition of the individual components nor which,

or how many, components must pass the test before a vehicle

is “certified.” In fact, the consumer knows nothing specific

about the status of the vehicle as a whole or of the individual

components because he does not know what the standards are

for satisfying the CarMax certification program.9 The vehicle

9 Each individual retailer of “certified” vehicles follows its own

individual “certification program”; there is no uniform substantive legal

standard governing these certification programs. As the California Motor

Car Dealers Association (CMCDA), an association consisting of

“franchised new car dealers,” explained in a hearing before the Assembly

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18 GONZALES V. CARMAX

may have passed inspection, but do the brake lines function

properly? The consumer does not know what it means to

“pass” CarMax’s inspection: are all of the inspected

components fully functional, or just a mere majority (or

fewer) of the components inspected? Which components

must be satisfactory, if any, before the car is deemed

certified? Under CarMax’s certification program, the

consumer remains uninformed, and the consumer-protection

and transparency-promoting purposes of the statute remain

unfulfilled.10

Committee on the Judiciary, the certified used car programs offered by its

members are “‘factory certified programs,’ i.e. the certification standards

and requirements are set by their franchisors.” Assem. Com. on Judiciary,

Analysis of Assem. Bill No. 68 (2005-2006 Reg. Sess.) Mar. 1, 2005, p.

7. Consequently, “one manufacturer/franchisor’s certified used car

program may differ from another,” although “they all have common

eligibility elements.” Id.

10 Gonzales also argues that the CQI certificate is incomplete for

another reason, found on the face of the certificate itself, which states:

“We check over 125 points including (but not limited to)” those listed on

the CQI certificate. In reality, CarMax inspects over 200 points during its

vehicle inspections, during which a technician completes a formcalled the

CQI/VQI Checklist. Unlike the CQI certificate, the CQI/VQI certificate

does seem to “indicate all the components inspected.” See Cal. Veh. Code

§11713.18(a)(6) (emphasis added). 

CarMax argues that “components” is not defined under section

11713.18(a)(6) and that “components” has a technical meaning, which

corresponds to the subheadings on the CQI certificates (such as “engine,”

brake system,” and “lighting system”). Under CarMax’s definition of

“components,” the “lighting system” is a component, but the “brake

lights” are not. We need not reach the issue of whether the CQI

certificates in fact indicate all components inspected, as we hold these

certificates are legally insufficient on other grounds. 

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GONZALES V. CARMAX 19

CarMax relies heavily on the statute’s drafting history to

argue that the Legislature did not intend to require car dealers

to provide more than just a list of components inspected. It

cites the deletion of a clause that initially appeared at the

end of section 11713.18(a)(6). CarMax’s argument is

unpersuasive because the statutory revision did not relate to

and had no effect upon the meaning of the words “completed

inspection report.” To the contrary, the deletion served an

entirely different purpose: it dropped from the statute a

substantive requirement while leaving unaffected the

requirement relating to disclosure of information. 

The statute originally stated: 

Prior to sale, the dealer provides the buyer

with a completed inspection report indicating

all the components inspected pursuant to the

vehicle certification program and certifies that

all of the inspected components meet the

express written standards of the vehicle

certification program. 

Cal. Assemb. B. No. 68, 2005-06 Regular Session (5/26/2005

draft of bill) (emphasis added).

The language in italics was deleted. The deleted language

would have imposed a substantive obligation on car dealers

to certify that every one of the inspected components of each

of its certified vehicles met the dealer’s certification

standards. This substantive requirement was deleted without

altering the dealer’s obligation to provide a “completed

inspection report” disclosing the results of its inspection with

respect to each component. See Knapp v. CarMax Auto

Superstores Cal., LLC, No. CV 14-0112-BRO (SPx) 2014

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20 GONZALES V. CARMAX

U.S. Dist. LEXIS 159722, at *20 (C.D. Cal. July 21, 2014).

Specifically, under the deleted language, a car dealer could

not have sold a “certified” vehicle if any of its components

failed to “meet the express written standards of the vehicle

certification program.” After the deletion of this language,

such a vehicle could be sold as certified, so long as the dealer

complied with the disclosure provision of the statute and

provided the results of the inspection in a “completed

inspection report.” Thus, under the amended version of the

statute, even if some of the various components needed

repair, the dealers were not prohibited from selling the

“certified” vehicle in less-than-perfect condition, so long as

the buyer had been informed of the vehicle’s true condition. 

In sum, interpreting the statute to require only that sellers

provide a list of vehicle components inspected, without any

indication of whether the individual components are

functional or defective, contravenes the purpose of the statute

and its plain meaning. CarMax’s generic list of car parts

inspected is not only of little use to a car buyer, but it also

fails to make the car buying process more transparent,

because it fails to inform consumers of the material results of

the inspection.11 Because we hold as a matter of law that

CarMax’s CQI certificates are not “completed inspection

reports,” we reverse the district court’s grant of summary

judgment to CarMax and grant summary judgment to

11 Gonzales also argues that the language “prior to sale” in section

11713.18(a)(6) means that dealers must provide a completed inspection

report before the sales contact is signed. CarMax argues that “prior to

sale” means after the contract is signed and the buyer “has taken physical

possession or delivery of the vehicle.” Because we hold that neither

CarMax’s one-sided CQI certificate nor its two-sided CQI certificate

qualifies as a “completed inspection report,” we need not address the

meaning of “prior to sale.” 

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GONZALES V. CARMAX 21

Gonzales on his CLRA and UCL claims. Although Gonzales

did not himself move for summary judgment in the district

court, we may grant summary judgment sua sponte to a nonmoving party if, drawing all inferences in favor of the moving

party, there are no genuine issues of material fact, the moving

party has “be[en] given reasonable notice that the sufficiency

of his or her claim will be in issue,” and the nonmoving party

is entitled to summary judgment as a matter of law. Albino

v. Baca, 747 F.3d 1162, 1176 (9th Cir. 2014) (internal

quotation marks and citation omitted). In the present case,

although CarMax, the moving party, had reasonable notice

that the question of whether the CQI certificates are

“completed inspection reports” would be at issue, it failed to

establish a genuine issue of material fact as to that question:

CarMax’s CQI certificates are facially insufficient as a matter

of law. 

Conclusion

The California Legislature adopted the Car Buyer’s Bill

of Rights to protect consumers and to foster transparency in

the sale of motor vehicles. Section 11713.18(a)(6) in

particular exists to ensure that when dealers advertise used

cars as “certified,” they must furnish a “completed inspection

report” regarding all the components inspected, thereby

providing the buyer with specific information about the

condition of each component of his vehicle. If CarMax’s

generic, and ultimately uninformative, list of components

inspected were considered a “completed inspection report,”

section 11713.18(a)(6)’s effectiveness in promoting

transparency in the sale of certified cars would be

substantially diminished. We therefore reverse the district

court’s grant of summary judgment to CarMax and remand

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22 GONZALES V. CARMAX

with instructions to enter summary judgment for Gonzales on

his CLRA and UCL claims.

REVERSED AND REMANDED.

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