Opinion ID: 2738497
Heading Depth: 2
Heading Rank: 2

Heading: The Purchase of the Gray-Market Tractor

Text: Arnold Trimm owned Artec Tractor and Equipment, Inc. (Artec), from 1994 until 2006. In the late 1990s Trimm saw an advertisement in a magazine for used Japanese farm tractors. Trimm contacted the suppliers of the tractors and eventually traveled to Japan to meet with the suppliers. Trimm testified that he was told by the suppliers that the tractors were good used farm tractors. Trimm stated that he was not told that the tractors had been specifically designed and manufactured for use in Japan and not for use in the United States. Trimm testified that Artec imported and sold the used Japanese farm tractors from 1998 until 2005. Artec sold parts for the used gray-market Yanmar tractors it 10 1130214 imported. Artec became an authorized Yanmar America dealer in July 2005.4 In 2005, some 26 years after the subject Yanmar tractor Randy was operating was manufactured and first sold primarily for use in the rice paddies of Japan, Artec purchased the tractor from a gray-market supplier and imported the tractor into the United States. On April 28, 2005, Artec sold the Yanmar tractor to Northside, which, in turn, sold the tractor to Autrey Nichols. After purchasing the tractor, Autrey purchased an English-language version of the operator's manual for the tractor. The operator's manual explained that the Yanmar model 2210BD tractor was a gray-market tractor that was originally manufactured for sale in Japan and that was subsequently purchased used by a dealer or broker and imported into the United States. The manual explained certain differences between the gray-market tractors and the Yanmar brand tractors manufactured for use in the United States, 4 The 2005 dealer agreement appointed Artec as an authorized dealer of certain Yanmar brand excavators, wheel loaders, crawler carriers, and compact back-hoe loaders. Artec did not become an authorized dealer of Yanmar tractors because Yanmar had ceased distributing Yanmar tractors to the United States market in 1991. 11 1130214 including the fact that Japan does not require its tractors to be equipped with a ROPS, although the tractors manufactured for use in the United States are required to be equipped with a ROPS. The manual also contained information and warnings on the risk of rollovers, particularly while operating the tractor on slopes; stability issues and the need for ballasts when operating the tractor with a front-end loader; the importance of a ROPS; and the need to inspect unfamiliar terrain before operating the tractor. Autrey did not provide Randy with the manual and did not discuss with him any information contained in the manual. Additionally, the frontend loader and bush hog attachment that accompanied the Yanmar tractor when it was purchased also came with operator manuals, and each was affixed with warning decals. Those warning decals were printed in English and warned of the possibility of rollover and recommended using a ROPS at all times. When asked whether he usually read all warning labels before operating a tractor or other equipment, Randy stated that he probably glanced at them, but ... felt like [he] was a safe operator, and [he] just overlooked them. Randy testified that he did not need a warning with regard to the 12 1130214 Yanmar tractor in this case. He stated that when he glanced at the labels on the tractor he was not concerned that the labels were in Japanese. Randy never saw the operator's manual for the tractor, the front-end loader, or the bush hog. He testified that he did not need to read an operator's manual to know how to operate a tractor and the attached front-end loader and bush hog. He stated that reading the operator's manuals for either piece of equipment did not interest him because he had become so familiar with operating heavy equipment that he did not need to read the manuals in order to know how to operate the tractor with the attachments. IV. Yanmar America's Efforts to Warn Against the Gray-Market Tractors Ryan Pott, the director of legal affairs for Yanmar America, testified that Yanmar America first discovered in 1990 that gray-market Yanmar tractors were being imported into the United States. Pott testified as to various documents relating to the gray-market tractors. In December 1991, Gary Bilek, an employee of Yanmar America, notified Yanmar Japan by letter of certain problems Yanmar America was having with the gray-market tractors, specifically noting that the purchasers of the gray-market tractors were being told that 13 1130214 they could purchase parts for the tractors from Yanmar America. Bilek stated in his letter that we've been instructed not to help these customers procure spare parts because they come into the United States without any rollover protection. Bilek then asked can anything be done in Japan to stop the unauthorized sale of these units? In 1992, Yanmar America began disseminating in various trade publications safety notices concerning the safety issues associated with the gray-market tractors. On July 24, 1992, Yanmar Tractor Service U.S.A., Inc.,5 issued a statement to all Yanmar tractor parts and service dealers, informing them that the gray-market tractors were not designed for distribution in the United States, that they were being imported without the approval of Yanmar Japan, and that, therefore, a parts- and service-support network was not available for the gray-market tractors. Yanmar America 5 Yanmar Tractor Service U.S.A., Inc. (Yanmar Tractor Service), was a former distributor of authorized Yanmar tractors in the United States. Subsequent to Yanmar Japan's cessation of the distribution of Yanmar tractors to the United States market in 1991, Yanmar Tractor Service became a service and parts provider for Yanmar tractors in the United States. It appears from the record that at some point Yanmar Tractor Service merged with Yanmar America, and Yanmar America became the service and parts provider for Yanmar tractors intended for the United States market. 14 1130214 requested that the dealers inform those considering purchasing a gray-market tractor as to the lack of available parts and service support and to inform them that most all the safety decals were printed in Japanese. Yanmar America also noted in this statement that the long term response to the problems created by Gray Market Tractors will take some time and careful consideration. In August 1992, Yanmar Japan conducted a Study Meeting on Policy to Cope with Sales in USA of Used Tractors that were Manufactured for Domestic Market. The purpose of the meeting was to discuss the concerns of Yanmar Japan management regarding potential liability arising from the sales in the United States of the gray-market tractors. It was determined at this meeting that Yanmar Japan would honor the requests for parts for the gray-market tractors while it continued to assess the issue of the gray-market tractors. Pott testified that there was an internal debate within Yanmar Japan at the time as to whether it should support the gray-market tractors with parts and service. In May 1995, John Sonnentag, a manager in the parts and service department at Yanmar America, reported by internal 15 1130214 memorandum addressed to Koju Saski, a manager with Yanmar Japan, regarding a recent meeting he had attended in Japan in which it had been indicated [that] all parts are available, regardless of status. Sonnentag also noted in his memorandum that the above information contradicts the position taken by Gary Bilek's letter. Pott stated that this correspondence indicated that the gray-market tractors would be supported with parts and service. On January 18, 2000, Yanmar America posted on its Web site an Important Safety Notice regarding the gray-market tractors, which was intended for the parts and service dealers, for potential purchasers of gray-market tractors, and for owners of gray-market tractors. The safety notice explained what a gray-market tractor was and also explained the important design and operating differences between a graymarket tractor and those Yanmar tractors specifically manufactured for use in the United States. The safety notice did not contain any specific reference to differences in the stability of gray-market tractors and those tractors manufactured for use in the United States, nor did the notice 16 1130214 contain a specific warning regarding the use of front-end loaders or bush hogs with the gray-market tractors. In 2002, Yanmar America implemented a computer partsblocking program to combat the sale of Yanmar gray-market tractors in the United States. The parts-blocking program was designed to stop the sale of replacement parts for the graymarket tractors. The program required a parts dealer purchasing parts from Yanmar America to specify both the model number and the serial number of the tractor for which the part was being purchased. Yanmar America would be able to discern from a computer database whether the part was being purchased for a gray-market tractor based on the model and serial numbers, and it could then block the sale of that part. On July 20, 2005, Yanmar America issued another Important Safety Notice that was posted to its Web site regarding Gray Market Tractors, Excavators, Wheel Loaders, and Carriers. This safety notice was substantially similar to the safety notice issued in January 2000, except that this notice included excavators, wheel loaders, and carriers, in addition to the gray-market tractors. The safety notice explained what a gray-market product was and also explained 17 1130214 the important design and operating differences between graymarket products and those Yanmar products specifically manufactured for use in the United States. This particular safety notice also explained that, as the result of those safety issues, Yanmar Japan would not support gray-market tractors, excavators, wheel loaders, and carriers with replacement parts. Again, this safety notice did not contain any specific reference to differences in the stability of gray-market tractors and tractors manufactured for use in the United States, nor did the notice contain a specific warning regarding the use of front-end loaders or bush hogs with the gray-market tractors. Pott testified that Yanmar Japan and Yanmar America became concerned that equipment dealers selling gray-market tractors, owners of gray-market tractors, and potential purchasers of gray-market tractors may not have been aware of the important differences between the gray-market tractors and those Yanmar tractors manufactured and intended for distribution in the United States market. Pott testified that the need for warnings arose out of the way the gray market had developed, as well as Yanmar Japan's decision to support the 18 1130214 gray-market tractors with genuine Yanmar parts during a period of time in the 1990s, which, he stated, created confusion as to whether there were significant differences between the gray-market tractors and those Yanmar tractors intended for use in the United States market. Pott testified that he therefore directed in 2008 that the safety notices be mailed to all authorized Yanmar dealers of parts and service, construction, and industrial equipment. Artec did not receive the safety notice until 2010, two years after the accident that is the basis of this action. Pott explained that the safety notices were not all mailed out at the same time but that they were done over time. Yanmar America has filed trademark-infringement lawsuits seeking to stop the importation and sale of gray-market tractors through the Internet site eBay.6 In January 2004, Yanmar America sent a letter to HDI Tractor, a nonauthorized Yanmar tractor dealer, threatening legal action if HDI Tractor did not cease importing and selling gray-market Yanmar tractors. Yanmar America further demanded that HDI Tractor 6 The Internet site eBay is a consumer-to-consumer online auction and shopping Web site in which individuals and businesses buy and sell a wide variety of goods worldwide. 19 1130214 contact its customers who had purchased gray-market Yanmar tractors and inform them that the tractors were not intended for use in the United States, that they may not be equipped with proper safety features for use in the United States, and that HDI Tractor would refund the full purchase price of the tractor. Yanmar and HDI Tractor eventually entered into a settlement agreement in which HDI Tractor agreed to send copies of the Important Safety Notice to its customers that had purchased a gray-market tractor. In September 2005, Yanmar America sent notices to its authorized parts and service dealers prohibiting those dealers from selling gray-market tractors and from providing parts and service for gray-market tractors. The authorized dealers were required to acknowledge in writing that they would not sell gray-market products, or they risked losing their status as an authorized Yanmar dealer. In several instances authorized parts and service dealers continued to participate in graymarket activity; those dealers' authorized dealer agreements were terminated by Yanmar America. It appears from the record that the notices prohibiting the sale of Yanmar gray-market tractors and the supply of parts and services for the gray- 20 1130214 market tractors were sent only to authorized Yanmar parts and service dealers and not to authorized dealers of Yanmar equipment such as Artec. As mentioned above, Artec became an authorized dealer of Yanmar equipment in July 2005. Prior to Artec's becoming an authorized equipment dealer in July 2005, Yanmar America did not inquire whether, or confirm that, Artec was selling graymarket tractors and parts. Artec did not receive any notice from Yanmar America regarding gray-market tractors until 2010. Yanmar eventually discovered that Artec had continued to participate in gray-market activity and terminated its dealer agreement in April 2013, approximately three weeks before the start of the trial in this case. On October 1, 2009, Randy sued Yanmar Japan, Yanmar America, Artec, and Northside, asserting claims under the Alabama Extended Manufacturer's Liability Doctrine (AEMLD) and a claim alleging breach of an implied warranty. Count I of the complaint alleged that the tractor was unreasonably dangerous because it was designed, manufactured, distributed, and sold without a ROPS. Count II of the complaint alleged the defendants' negligence in designing, manufacturing, 21 1130214 distributing, and selling the tractor without a ROPS as standard equipment. Count III of the complaint alleged that the defendants breached the implied warranty of fitness for a particular purpose in manufacturing, distributing, and selling the tractor without a ROPS as standard equipment. On November 10, 2011, Yanmar Japan moved the trial court, pursuant to Rule 12(b)(2), Ala. R. Civ. P., to dismiss the complaint against it for lack of in personam jurisdiction. On February 28, 2012, Randy amended his complaint to allege that Yanmar Japan and Yanmar America were: a). Reckless or negligent in manufacturing and selling Yanmar parts which [they] knew were being ordered for use in Yanmar gray market tractors in the United States, for which tractors there would not have been a viable market in the United States without such parts; b). Reckless or negligent in issuing warnings that Yanmar gray market tractors could not be retrofitted with ROPS; c). Reckless or negligent in performing dealer audits of Artec before and after it became an authorized Yanmar dealer, which audits if done in a reasonable manner would have revealed that Artec was and had been for many years a volume seller of Yanmar gray market tractors, and which would have resulted in gray market tractor warnings being issued to Artec and prohibitions being imposed on Artec against selling Yanmar gray market tractors; 22 1130214 d). Reckless or negligent in failing to warn their own authorized dealer Artec that Yanmar gray market tractors were not manufactured in a manner which met U.S. safety standards, and were not manufactured for sale in the U.S. as well as in Japan, in the same manner which it undertook to warn other authorized Yanmar dealers in Alabama prior to the sale by Artec of the subject tractor and prior to Randy Nichols'[s] injuries; e). Negligent in not instructing their authorized dealer Artec to provide to any purchasers and owners of Yanmar gray market tractors which Artec had sold Yanmar's 'Important Safety Notice,' and in not instructing Artec to advise such purchasers and owners that suitable ROPS were available for retrofit on their Yanmar tractors and that such tractors were not reasonably safe for operation unless ROPS were installed on the tractors. f). Negligent in not prohibiting their authorized dealers in Alabama from selling Yanmar gray market tractors, while undertaking to prohibit Yanmar authorized dealers in Alabama from selling parts for use in Yanmar gray market tractors. On March 23, 2012, the trial court conducted a hearing on Yanmar Japan's motion to dismiss the complaint against it for lack of in personam jurisdiction. On April 10, 2012, the trial court entered an order allowing the parties to engage in further discovery and supplemental briefing addressing Randy's amended complaint. Following consideration of the parties' briefs and arguments, the trial court, on October 5, 2012, 23 1130214 entered an order granting Yanmar Japan's motion to dismiss for lack of in personam jurisdiction. On February 27, 2013, Randy moved to voluntarily dismiss the claims against Northside. Randy entered into a pro tanto settlement with Artec to settle the claims against it for $550,000. On April 8, 2013, Randy moved the trial court to dismiss Artec because of the pro tanto settlement the parties had reached. On April 10, 2013, the trial court entered an order granting Randy's motion for a pro tanto dismissal of the claims against Artec. On April 29, 2013, the trial court entered an order granting Randy's motion to voluntarily dismiss Northside, leaving only Yanmar America as a defendant. On March 18, 2013, Yanmar America moved the trial court for a summary judgment arguing, among other things, that it was entitled to a summary judgment on the claim that it negligently failed to warn Artec that Yanmar gray-market tractors did not meet United States safety standards. On April 24, 2013, the trial court entered an order denying Yanmar America's motion for a summary judgment. The case proceeded to trial against Yanmar America on April 29, 2013. At the close of Randy's evidence, Yanmar 24 1130214 America moved the trial court for a preverdict judgment as a matter of law (JML), which the trial court denied. Yanmar America renewed its motion for a preverdict JML at the close of all the evidence, which the trial court also denied. On May 3, 2013, the jury returned a verdict in favor of Randy and against Yanmar America awarding Randy $900,000 in damages. The trial court reduced the damages award by the amount of the $550,000 pro tanto settlement with Artec and entered a judgment of $350,000 in favor of Randy. On May 31, 2013, Yanmar America moved the trial court for a postverdict JML or, in the alternative, for a new trial. On August 14, 2013, the parties filed a joint motion consenting to extend the time for the trial court's consideration and ruling on Yanmar America's postverdict motion. Following a hearing, the trial court, on October 15, 2013, entered an order denying Yanmar America's postverdict motion. Yanmar America timely appeals.