Court Opinion

ID: 2976672
Source: CourtListenerOpinion
Date Created: 2015-09-22 17:55:44.892459+00
Date Added: 2024-06-11T11:44:02.737490
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                           File Name: 08a0410n.06
                              Filed: July 9, 2008

                                           No. 07-5533

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

KENNETH E. CORDER, SR.,                            )
                                                   )
       Plaintiff-Appellant                         )
                                                   )   ON APPEAL FROM THE UNITED
v.                                                 )   STATES DISTRICT COURT FOR THE
                                                   )   WESTERN DISTRICT OF KENTUCKY
FORD MOTOR CO.,                                    )
                                                   )   OPINION
       Defendant-Appellee.                         )
                                                   )
                                                   )

BEFORE:        MOORE and MCKEAGUE, Circuit Judges; SCHWARZER,* District Judge.

       WILLIAM W SCHWARZER, District Judge. Kenneth Corder, Sr., brought this

action against Ford Motor Company on behalf of himself and others similarly situated seeking

damages under the Kentucky Consumer Protection Act (“KCPA”), Ky. Rev. Stat. Ann. §

367.100 et seq., restitution and other equitable and declaratory relief. Corder alleges that in May

2004 he purchased a Model Year 2004 F-250 Ford F-Series Super Duty Truck with a 6.0L Power

Stroke Diesel engine and that he subsequently discovered that the truck he purchased contained a

2003.25 6.0L Power Stroke Diesel engine instead of the improved 2004 6.0L Power Stroke

Diesel engine which Ford had installed in 2004 F-250 Series Super Duty trucks beginning in

       *
       The Honorable William W Schwarzer, Senior United States District Judge for the
Northern District of California, sitting by designation.
October 2003. Corder had waited to purchase the 2004 model of the truck because of widely-

reported problems with the engine in the 2003 model. Corder alleges that the sale of a 2004

truck with a 2003 engine was a deceptive practice and unjustly enriched Ford.

       After initial discovery, Ford moved for summary judgment. The district court granted the

motion. It held that Ford’s actions were not unfair, false, misleading or deceptive. The court

reasoned that the changes implemented in the 2004 engine did not result in an engine

substantially different from that installed in Corder’s truck and that Ford’s failure to disclose the

engine’s manufacturing history was not a material omission. It further held that Corder had

failed to show that he had suffered “ascertainable loss of money or property” within the meaning

of the KCPA. Finally, the court rejected the claim for equitable relief. Corder timely appealed.

                                            ANALYSIS

       We review a summary judgment de novo. Bennett v. City of Eastpointe, 410 F.3d 810,

817 (6th Cir. 2005). Summary judgment is appropriate where “the pleadings, the discovery and

disclosure materials on file, and any affidavits show that there is no genuine issue as to any

material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Proc.

56(c). We “must view all evidence and draw all reasonable inferences in the light most favorable

to the nonmoving party.” Leary v. Daeschner, 349 F.3d 888, 897 (6th Cir. 2003).

                                                  I.

       The KCPA prohibits “[u]nfair, false, misleading, or deceptive acts in the conduct of any

trade or commerce.” Ky. Rev. Stat. Ann. § 367.170(1). The words “unfair, false, misleading or

deceptive” are “defined in terms generally understood and perceived by the public.” Smith v.

General Motors Corp., 979 S.W.2d 127, 131 (Ky. Ct. App. 1998). Kentucky courts construe the

                                                  2
KCPA “broadly to effectuate its purpose of ‘curtail[ing] unfair, false, misleading or deceptive

practices in the conduct of commerce . . . . ’” Commonwealth of Kentucky ex rel. Chandler v.

Anthem Ins. Co., Inc., 8 S.W.3d 48, 54 (Ky. Ct. App. 1999) (quoting Commonwealth of Kentucky

ex rel. Stephens v. North American Van Lines, Inc., 600 S.W.2d 459, 462 (Ky. 1979)). The

Federal Trade Commission defines an act as deceptive under the analogous Federal Trade

Commission Act if “first, there is a representation, omission, or practice that, second, is likely to

mislead consumers acting reasonably under the circumstances, and third, the representation,

omission, or practice is material.” In the Matter of Cliffdale Associates, Inc., 103 F.T.C. 110,

165 (1984).

       We agree with Corder that there is sufficient evidence to raise a genuine issue of material

fact regarding whether Ford’s sale of a 2004 model Super Duty truck with a 2003 6.0L V-8

Power Stroke diesel engine installed was an “unfair, false, misleading or deceptive” act. First,

contrary to Ford’s argument that its engines do not have model years, there is substantial

evidence from which a jury could find that Ford distinguished between the 2003 model and the

2004 model of the 6.0L V-8 Power Stroke diesel engine. The engine in the 2003 F-250 truck

was notorious for its deficiencies which were widely publicized, including “leaky fuel injectors,

oil leaks, broken turbochargers, wiring harness troubles, faulty sensors, defective exhaust gas

recirculation valves and bad computers.” (Joint Appendix (“JA”) 848, 795.) Ford identified that

engine internally as the 2003 engine, (JA 638, 640), and distinguished it from the 2004 engine in

its internal documents. For example, a “Program Direction Letter” distinguished the “2004 6.0L

diesel Engine” from the “03.25MY Diesel.” (JA 1337.) A Ford document titled “Extraordinary

Measures for 2004MY Launch” referred to “03MY and other 04MY engines” (JA 2039) and

                                                  3
another document titled “6.0L Diesel Single Agenda for Quality - OVERVIEW” referred to

“2004 veh. Model year w/ 2003 engines.” (JA 1335.) Ford documents also indicate that it

initially planned to begin installing what it called “04 engines” in the 2004 model year trucks

beginning in September 2003. (JA 1339.) A supervisor at International Truck and Engine,

where the engines were manufactured, upon learning that Corder had purchased a 2004 truck,

gave Corder a 2003 engine manual and a 2004 engine manual, indicating that they were different

engines. (JA 946, 1053.)

       There is also substantial evidence from which a jury could find that Ford made significant

improvements in the 2004 engine. A 29-page memorandum created in July 2003 entitled “6L

2004 MY Issues and Resolution Plans” identifies and discusses in detail six categories of

problems with the Power Stroke engine and proposes fixes for the 2004 model. (JA 1341-1370.)

None of the problems and fixes appear to refer to compliance with EPA emissions requirements.

Ford’s internal memos contain repeated references to improvements in the 2004 engine. (JA

801-808, JA 2042.) One memo titled “Extraordinary measures for 2004MY Launch” states “all

04MY engines 100% tested . . . .” (JA 1309.) Ford admitted in interrogatory answers that the

engine in Corder’s truck and other Super Duty trucks assembled before September 29, 2003 did

not include at least 30 improvements that were included in the 2004 engine. (JA 857-865.) Ford

documents also indicate that Ford planned an early release of the 2004 model year of the Super

Duty truck as “’04 badge only” with installation of the 2004 engine delayed until the fall of 2003.

(JA 1331 - 1337.)

       A jury could find from this evidence that a reasonable purchaser would have considered

the improvements Ford made to the 2004 engine material to his choice of truck. In an analogous

                                                 4
case, the Kentucky Court of Appeals held that a jury could find that the sale of a vehicle as new

without disclosing its pre-sale repair history was a false, misleading or deceptive act under the

KCPA. Smith v. General Motors Corp., 979 S.W.2d 127, 131 (Ky. Ct. App. 1998). Here, a jury

could find that given the widely-known problems with the 2003 engine (JA 848, 795), a

reasonable purchaser of a 2004 F-250 Super Duty truck would have expected that it did not

contain a 2003 engine, and that the sale to Corder of a 2004 truck without disclosing that the

truck contained a 2003 engine was a misleading and deceptive act.

       We also disagree with the district court’s conclusion that Corder failed to show an

“ascertainable loss of money or property.” Ky. Rev. Stat. Ann. § 367.220(1). The Kentucky

courts have not specifically addressed what qualifies as an “ascertainable loss” under the statute.

However, in Smith, the Kentucky Court of Appeals reversed a summary judgment for General

Motors, holding that “a fact finder might reasonably conclude that the sale of the van as ‘new’

without disclosure of its pre-sale history constituted a false, misleading or deceptive act.” 979
S.W.2d at 131. The court did not find it necessary to consider whether Smith had suffered

“ascertainable loss.”

       The result in Smith is consistent with the result reached by other courts. In an analogous

case involving the purchase of an automobile that plaintiff claimed was not as represented, the

Connecticut Supreme Court held, interpreting Connecticut’s unfair trade practices act, that “the

words ‘any ascertainable loss’ . . . do not require plaintiff to prove a specific amount of actual

damages in order to make out a prima facie case.” Hinchliffe v. American Motors Corp., 440
A.2d 810, 813-14 (Conn. 1981). The court reasoned:

               Moreover, the inclusion of the word “ascertainable” to modify the

                                                  5
                  word “loss” indicates that plaintiffs are not required to prove actual
                  damages of a specific dollar amount. “Ascertainable” means
                  “capable of being discovered, observed or established.” . . .

                  . . . Whenever a consumer has received something other than what
                  he bargained for, he has suffered a loss of money or property. That
                  loss is ascertainable even though the precise amount of the loss is
                  not known.

          Id. at 814.

          And in Scott v. Western Int’l Surplus Sales, Inc., 517 P.2d 661, 663 (Or. 1973), the court

held that the plaintiff, who sought statutory damages under the Oregon Consumer Protection Act,

had sufficiently established an “ascertainable loss,” saying:

                  [T]he plaintiff did not have to prove in what amount the value of
                  the tent [he had purchased] was reduced because it was not as
                  represented. He merely had to prove he suffered some loss.

          Here, Corder produced evidence from which a jury could find that the truck he purchased

was not as a reasonable consumer would expect it. Though he purchased a 2004 model Super

Duty truck, the engine it contained was a 2003 engine that lacked the improvements in the 2004

engine.

          Moreover, Corder offered expert evidence of a professional appraiser who opined that a

more recent model year Ford F-Series Super Duty truck with a 6.0L Power Stroke diesel engine

generally is more valuable than earlier models. He opined that “a consumer like [plaintiff] can

reasonably expect a later model vehicle will contain improvements, including engine

improvements over a previous model year, and would associate an engine with a given model

year as having characteristics associated with that year.” (JA 2159.) We conclude that Corder

has presented evidence from which a jury could find that he suffered an “ascertainable loss of

                                                    6
money or property” within the meaning of the KCPA.1

                                                 II.

       The district court also dismissed Corder’s claims for unjust enrichment and money had

and received, reasoning that there is no support for the contention that Ford’s retention of any

benefit would be unjust. We agree with that disposition. As the district court observed, quoting

Luithly v. Cavalier Corp., 181 F.3d 102, at *4 n.2 (6th Cir. 1999), such an action lies “when

money has been received by one party that, in justice and equity, belongs to another.” This is not

such a case.

       For the reasons stated, we VACATE the judgment of the district court and REMAND

for further proceedings.

       1
         Because we hold that Corder presented sufficient evidence to raise a genuine issue of
material fact regarding the KCPA claim, we do not address Corder’s argument that the district
court abused its discretion in denying his motion to defer consideration of Ford’s summary
judgment motion until the completion of merits discovery.

                                                 7
      McKEAGUE, Circuit Judge, Dissenting. The 2004 F-250 Super Duty

Truck plaintiff Kenneth Corder purchased is equipped with a non-defective engine

that conforms to Ford’s representations. Yet, Corder believes the engine he

received is less valuable than the engine he assumed the truck was equipped with.

Although he is largely satisfied with the performance of the truck and its engine,

Corder believes he was misled by Ford’s material omission. In my opinion,

sympathy with Corder’s indignation, whether justified or not, has clouded the

majority’s application of Kentucky law to the record facts. Without ever defining

specifically how Ford’s conduct could be deemed “unlawful” under Kentucky law,

the majority yields to plaintiff’s urging and concludes that it could be deemed

misleading or deceptive for Ford to have marketed as new a 2004 model-year

truck equipped with an engine manufactured during model-year 2003 without

disclosing the date of the engine’s manufacture. In my opinion, the majority

paints with a brush too broad, carelessly glossing over numerous critical details. I

therefore respectfully dissent.

      From the outset, we recall that our appellate task is to identify error in the

district court’s judgment. Absent error, the district court’s judgment should be

affirmed. The district court held that plaintiff Kenneth Corder failed to carry his

burden of demonstrating the existence of a triable fact issue by presenting

                                          8
substantial evidence (i.e., more than a mere scintilla of evidence) of material facts

supporting the essential elements of his claim, as defined by the Kentucky

Consumer Protection Act (“KCPA”). Like the district court, the majority focuses

on two essential elements of the claim: whether Corder suffered an “ascertainable

loss of money or property” as a result of Ford’s use of “an unfair, false,

misleading or deceptive practice.”

      1. Misleading or Deceptive Practice

      Ford is not alleged to have engaged in any “unfair” or “false” practice. In

fact, Corder admits that he did not rely on any affirmative misrepresentation in

deciding to purchase his Ford F-250 Super Duty Truck. On purchasing his truck,

he received what Ford represented he would receive, i.e., a 6.0L V-8 Power-Stroke

diesel engine. His claim is based rather on the theory that Ford failed to disclose

material information about the engine and that this failure is actionable as a

material omission amounting to a “misleading or deceptive practice.” The district

court concluded that Ford had no duty to disclose the manufacturing history of its

vehicles’ component parts. Absent such a duty, the district court held that failure

to disclose such information was neither a material omission nor a deceptive act.

      The Kentucky Consumer Protection Act does does not define “misleading”

                                          9
and “deceptive.” As the majority recognizes, they are terms to be defined as they

would be “generally understood and perceived by the public.” Smith v. General

Motors Corp., 979 S.W.2d 127, 131 (Ky. App. 1998). Under Kentucky law, a

material omission may be misleading or deceptive. Id. In Smith, the court held

that the sale of a vehicle as new without disclosure of its pre-sale history of repairs

by the dealer—repairs that had been ineffective to correct the defect—could be

deemed a misleading or deceptive practice. Id. The majority believes this case is

analogous to Smith. In so concluding, however, my colleagues ignore significant

differences.

      In Smith, the court recognized that generally, an omission is a material

omission and is actionable only if the defendant had a duty to disclose. Id. at 129.

A duty to disclose “may arise from a fiduciary relationship, from a partial

disclosure of information, or from particular circumstances such as where one

party to a contract has superior knowledge and is relied upon to disclose same.”

Id. In concluding that General Motors could be deemed liable for a material

omission amounting to a misleading or deceptive practice, the Smith court

identified three sources of a duty to disclose, two statutory and one in common

law. Id. at 129-130. Here, in contrast, the majority has conspicuously failed to

identify what duty Ford breached by failing to disclose the date the engine in

                                          10
Corder’s truck was manufactured or what the source of any such duty is under

Kentucky law.

      The majority purports to follow Smith by allowing the trier of fact to decide

whether Ford’s material omission was “misleading” or “deceptive.” However,

unlike the Smith court, the majority has failed to lay the legal groundwork for such

a ruling by first identifying the legal basis for Ford’s supposed duty to disclose,

the breach of which rendered the nondisclosure a “material omission” under

Kentucky law, potentially actionable as a misleading or deceptive act under the

Kentucky Consumer Protection Act.

      Corder argues that Ford had a duty to disclose the date the engine was

manufactured and that the failure to disclose was a material omission because the

information would have affected his choice of truck. Corder does not complain

that the 6.0L V-8 Power Stroke diesel engine he received is defective.1 Whereas

      1
       The majority refers to the fuel-injector problems which plagued the Power
Stroke engine when it was initially introduced in late 2002 and early 2003 as
“notorious.” Yet, Corder, who happened to work in the very Navistar plant in
Indianapolis where the engines were manufactured, acknowledged that these fuel
injector problems—the only problems he had been aware of—were corrected
through “running” design changes by Navistar engineers before his engine was
manufactured. Corder dep. p. 79, JA 896. Yes, Corder did notice black smoke
coming from the tailpipe of his truck shortly after he bought it, but he admits this
problem was easily corrected when he had the fuel injector reprogrammed. Id. at
73, JA 894.
                                          11
Smith received an engine that remained defective despite substantial undisclosed

pre-sale repairs by the dealer, Corder received an engine that was not defective,

precisely because pre-manufacture design changes demanded of Navistar by Ford

had successfully corrected the earlier problems. Corder does not allege that Ford

had a duty to disclose the design refinements made in the earlier generation Power

Stroke engine. Still, he believes that knowing the engine was manufactured in

August 2003 (a so-called “2003.25" Power Stroke engine), rather than after

September 2003 (when the “Job 1.5" Power Stroke engine was put into

production), would have affected his choice because the difference, in his mind, is

actually a one-year difference in the age and value of the engine. Corder dep. pp.

108-10, JA 903-04. Because the information was allegedly material to his

decision, Corder argues that Ford’s nondisclosure of the date of manufacture

constitutes a “material omission.”

      Corder’s proffered definition of “material omission,” ostensibly adopted by

the majority, is unhinged from any duty to disclose. It is in this respect

inconsistent with the teaching of Smith, and is not supported by any other

Kentucky authority.2 The majority fails to explain why, in applying Kentucky law,

      2
       The majority glosses over this shortcoming in Corder’s claim in one
sentence by citing a 1984 Federal Trade Commission decision, In the Matter of
                                                                     (continued...)
                                          12
we should expect the Kentucky courts to enforce the Kentucky Consumer

Protection Act in a manner at odds with the teaching of the Kentucky Court of

Appeals in Smith.

       The majority also sidesteps the threshold question whether Corder’s

professed expectation regarding disclosure of the date of engine manufacture may

be fairly deemed to represent the expectation of a reasonable consumer. Even

assuming the truthfulness of Corder’s testimony about the significance, in his

mind, of the precise date of the engine’s manufacture, is this the perception of a

“reasonable consumer?” Would a reasonable consumer (in contrast with an

employee at the plant where the engines were manufactured), shopping for a 2004

F-250 Super Duty Truck in May 2004, consider the precise date of the engine’s

manufacture (whether in August 2003 or October 2003), or even the label assigned

to the particular 6.0L V-8 Power Stroke diesel engine (whether “2003.25" or “Job

1.5"), a material factor in his or her purchase decision? The implied conclusion

that such an expectation is objectively reasonable strains plausibility.

      2
       (...continued)
Cliffdale Associates, Inc., 103 F.T.C. 110, 165 (1984). In Cliffdale, the Kentucky
Consumer Protection Act was not at issue, of course. Rather, the Commission was
construing and applying the Federal Trade Commission Act. Morever, even in the
language quoted from Cliffdale, it is made clear that an omission can be deemed a
deceptive act only if the omission was a material omission.
                                          13
      For this reason, ostensibly, the majority nowhere identifies specifically what

Ford was obligated to disclose in order to render its sale to Corder of the 2004 F-

250 Super Duty Truck with 2003.25 Power Stroke engine other than misleading or

deceptive. Instead, the majority points to evidence that the “Job 1.5" version of

the Power Stroke engine incorporated numerous improvements not incorporated

into the predecessor “2003.25" version. Notwithstanding undisputed record

evidence that these improvements were primarily designed to address new 2004

EPA-mandated emission-control requirements and did not materially affect any of

the engine’s performance features, such as horsepower and torque, the majority

simply states that a reasonable purchaser would have considered these

improvements material to his or her choice of truck. The majority thus impliedly

holds that Ford had a duty to affirmatively disclose to Corder, without being

asked, that the 6.0L V-8 Power Stroke diesel engine in the F-250 Super Duty

Truck he purchased was not designed to meet 2004 EPA emission-control

standards. Yet, again, no source for such a duty is identified. Absent such a duty

under Kentucky law, I fail to see how Ford’s failure to disclose this information

can properly be deemed to amount to an unlawfully misleading or deceptive

practice.

      2. Ascertainable Loss

                                         14
      My colleagues also disagree with the district court’s conclusion that Corder

failed to present evidence that he has suffered an “ascertainable loss of money or

property.” The record shows that Corder continues to own the 2004 F-250 Super

Duty Truck, that he is satisfied with the performance of the truck, that he can use

the truck for all of its intended purposes, and that he has no express plans to sell it.

Corder’s alleged disappointment stems not from the performance of his engine,

but from his sense that the truck’s value is diminished because of earlier negative

publicity about the first- generation Power Stroke engines. Even though the

earlier defects may have been corrected in the “2003.25" engine he has, Corder

wishes he had the “Job 1.5" engine introduced after September 29, 2003, which is

not only free of the notorious defects of the past, but is also perceived as such.

Corder “believes,” based on conversations with people at work and outside of

work, that his truck is worth $5,000 to $10,000 less than a 2004 F-250 Super Duty

Truck equipped with an engine manufactured after September 29, 2003. Corder

dep. p. 163, JA 917. He admitted he has no other support for his opinion. Id.

      The district court held that Corder’s bare assertion of harm is too

speculative. Such a potential loss, unsupported by factual showing or legal

support, was held to be insufficient to satisfy the ascertainable loss requirement of

the Kentucky Consumer Protection Act. The majority disagrees, observing that

                                           15
“ascertainable loss” has not been specifically defined by the Kentucky courts. My

colleagues therefore rely on opinions from courts in Connecticut and Oregon to

conclude that Kentucky law does not require evidence of actual loss to make out a

viable claim under KCPA.

      Again, I believe the majority takes improper liberties with Kentucky law.

While “ascertainable loss” has not been specifically defined by the legislature or

case law, the available authorities indicate that “ascertainable loss of money or

property” has been defined in Kentucky in accordance with its plain and ordinary

meaning. See Schlenk v. Ford Motor Credit Co., 308 F.3d 619, 622 (6th Cir.

2002) (affirming dismissal of KCPA claims for lack of showing of ascertainable

loss); Red Bird Motors, Inc. v. Endsley, 657 S.W.2d 954, 956 (Ky. App. 1983)

(reversing judgment for the plaintiff on KCPA claim for lack of proof of specific

damage). Kentucky law hardly supports the proposition that Corder has

adequately demonstrated an ascertainable loss in money or property where the

presumed loss in value has neither been actually sustained nor substantiated even

by comparative appraisals.

      The majority considers the expert opinion of automobile appraiser Wayne

Marsden sufficient to create a genuine issue of material fact. Marsden opined that

a 2004 model year Ford F-Series Super Duty Truck that has a 6.0L Power Stroke

                                         16
diesel engine manufactured prior to September 29, 2003 has reduced resale value

in comparison with trucks equipped with the same engine manufactured after

September 29, 2003. This is said to be (1) due to the reputation of the former

engine, and (2) due to improvements made in the latter engine. Marsden aff. ¶¶

10-12, JA 2061. Marsden opined that “a consumer like Mr. Kenneth Corder has

suffered a financial loss by his purchase of a 2004 vehicle containing a 6.0L

Power Stroke diesel engine manufactured prior to September 29, 2003.” Id. at ¶

13, JA 2062.

      Marsden’s opinion is as interesting for what it does not say as for what it

does say. While Marsden baldly stated that “a consumer like Corder” has

“suffered” a “financial loss,” he (a) did not explain how Corder (who is satisfied

with the performance of his truck and has no intent to sell) can be deemed to have

suffered a loss; (b) did not characterize the loss as an “ascertainable loss of money

or property;” (c) did not even attempt to ascertain or quantify the loss; and (d) did

not tie the loss to any misleading or deceptive practice by Ford (as opposed to

Corder’s inaccurate assumption), as required by the KCPA. In my opinion,

Marsden’s opinion, while probative, is insufficient, standing alone, to create a

triable fact issue on Corder’s claim under the Kentucky Consumer Protection Act.

      Having carefully reviewed the majority’s opinion in light of the

                                          17
requirements of Kentucky law and the record evidence relied on by Corder, I

remain unpersuaded that the district court erred in granting summary judgment to

Ford. Accordingly, I respectfully dissent.

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