Metropolitan News-Enterprise


Friday, October 21, 2016


Page 1


Ninth Circuit Court of Appeals Holds:

CarMax’s Inspection Reports Don’t Comply With Law


By a MetNews Staff Writer


The Ninth U.S. Circuit Court of Appeals yesterday held that providing buyers with a list of components that were inspected in the course of certifying a used car as fit is not enough to satisfy the requirements of California law.

The opinion, by Judge Stephen Reinhardt, reverses a summary judgment granted by U.S. District Court Judge Cormac J. Carney, in favor of the used car retailer CarMax. Although plaintiff Travis Z. Gonzales had not, himself, sought summary judgment, Reinhardt announced that the court would exercise its inherent powers and order that, on remand, Carney grant him summary judgment.

Reinhardt wrote:

“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 ‘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….”

The decision reinstates an action brought by Gonzales, who purchased a 2007 Infiniti G35 from CarMax’s Costa Mesa facility. The plaintiff alleged that he would not have made the purchase had the vehicle not been “certified.”

Diversity of Citizenship

Gonzales had problems with the car, and sued in state court. CarMax removed the case to federal court based on diversity of citizenship.

By the time of the hearing on the motion for summary judgment, his complaint had been pared to two causes of action: under California’s Consumer Legal Remedies Act and the Unfair Competition Law.

Reinhardt noted that under California Motor Vehicle Code §11713.18(a)(6), a seller of a used car must provide a buyer with an “inspection report.” The statute does not provide a definition of such a report, but the jurist declared:

“[I]n 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….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 appropriately marked 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….”

Reports Reveal Little

The opinion went on to say:

“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 merely guarantee 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. The vehicle 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.”

Contrary State Opinion

Reinhardt mentioned in a footnote that the California Court of Appeal’s Fourth District had held that CarMax’s certificates do constitute adequate inspection reports, but pointed out that the decision has lost efficacy because the California Supreme Court has ordered it depublished.

The case is Gonzales v. CarMax, No. 14-56305.

Hallen D. Rosner of the San Diego law firm of Rosner, Barry & Babbitt. LLP represented Gonzales. Kurt A. Sehliehter, Steven C. Shonack, and Jamie L. Keeton of Sehliehter & Shonack, LLP, an El Segundo firm, acted for CarMax.


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