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08/27/86 LOUISIANA
AFL-CIO, v. LANIER
BUSINESS PRODUCTS,
[Editor's note: footnotes (if any) trail the opinion]
[1] UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
[2] LOUISIANA AFL-CIO,
Plaintiff-Appellee,
v.
[3] LANIER BUSINESS PRODUCTS, INC., Defendant,
Third Party
[4] Plaintiff-Appellant, v. MARTIN BENNETT, Third Party
[5] Defendant-Appellee
[6] No. 85-3646
[7] 797 F.2d 1364
BLUE BOOK CITATION FORM: 1986.C05.660 (http://www.versuslaw.com)
[8] Date Filed: August 27, 1986
[9] Petition for Rehearing Denied September 23, 1986.
[10] Appeal from the United States District Court for the Middle District
of Louisiana, Frank J. Polozola, District
Judge, Presiding.
[11] APPELLATE PANEL:
[12] Will Garwood and Robert M. Hill, Circuit Judges, and Hubert L.
Will,* Senior District Judge.
[13] DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HILL
[14] In this Louisiana diversity case we
are presented with the question whether a plaintiff in a redhibitory action
may obtain a reduction in price for the inconvenience caused by the product
and for the overall poor performance of the product. We answer the question
in the affirmative. We further hold that the district court's findings
of fact are not clearly erroneous, that the district court acted within
its discretion in determining the amount of the reduction, and that an
unincorporated association may obtain a reduction in price for inconvenience
and poor performance. We therefore affirm the judgment of the district
court.
I.
[15] In early 1980 Gordon Flory, an employee of the plaintiff Louisiana
AFL-CIO (the
AFL-CIO), contacted
the defendant Lanier Business Products, Inc.,
(Lanier) concerning the AFL-CIO's
interest in purchasing a word processing system. A Lanier
salesperson, Martyn Bennett, contacted Flory and discussed with Flory the
AFL-CIO's needs
and explained to him the Lanier word processing
product line. The AFL-CIO
wanted a system that would, in addition to the the usual word processing
capabilities, prepare a paper master with the same reproductive qualities
as the metal masters the AFL-CIO
was then using to produce its annual convention booklets.
[16] In February 1980 the AFL-CIO
purchased a Lanier word processing system,
consisting of two work stations, two printers, a central memory unit, and
various accessories, for approximately $52,000. After Lanier
installed the system the AFL-CIO
encountered numerous difficulties with it. The system occasionally lost
stored information, periodically froze up, and at times the work station
screens would go blank or dots would appear all over the screen. At other
times the envelope feeding system failed, the sorter was inoperable, the
bold type function did not work, the right hand margin justification feature
failed, and the proportional print option would not operate properly. Additionally,
and of great importance to the AFL-CIO,
the system failed to produce satisfactory paper masters for use with the
AFL-CIO's multilith
machine. By the summer of 1981 Lanier had,
at its own expense, corrected all of the repairable problems with the system,
and the system was operating as best it could; however, the system still
did not meet the ALF-CIO's expectations. Specifically, the AFL-CIO
could not use the system to produce a high quality convention booklet.
[17] In the fall of 1981 the ALF-CIO filed an action in redhibition
in Louisiana state court to rescind the sale.*fn1
Lanier, a Georgia corporation, removed the
action to federal court. Following a three-day trial the district court
denied the AFL-CIO's
request for rescission, but the court did award the AFL-CIO
a reduction in price in the amount of $25,000.*fn2 Lanier
appealed to this court. In an unpublished opinion we found that the evidence
warranted a reduction in price, Louisiana
AFL-CIO v. Lanier
Business Products, Inc., 740 F.2d 965 (5th Cir. 1984); however, we considered
the district court's findings of fact and conclusions of law inadequate
to justify the almost fifty percent reduction in price and remanded the
case "for the sole purpose of more complete findings of fact and conclusions
of law to justify the reduction in price of the equipment sold in the amount
of $25,000, or in such other amount as the district court on remand determines
is justified."
[18] On remand the district court entered further findings and conclusions
to justify the award. The district court detailed the numerous difficulties
encountered with the equipment, the numerous service calls required, the
time wasted when the machinery malfunctioned, and the various ways in which
the system failed to meet the AFL-CIO's
needs and expectations. The principal justifications for the court's reduction
in price were the inconvenience caused by the difficulties with the system
and the poor performance of the system vis-a-vis the ALF-CIO's expectations
and Lanier's representations. The court again
reduced the price by $25,000, and Lanier has
again appealed.
II.
[19] Lanier argues that the district court
erred in considering inconvenience to the AFL-CIO
when determining the price reduction. Lanier
further maintains, if inconvenience can be considered, that the district
court's findings and conclusions do not support a reduction of $25,000
and that an unincorporated association cannot suffer inconvenience. We
reject all of Lanier's arguments.
[20] A.
[21] Lanier first argues that the district
court should not have considered inconvenience as an element when determining
the price reduction. The Louisiana Supreme
Court has yet to decide whether inconvenience is a proper element of price
reduction in a redhibitory action;*fn3 thus, we must predict whether a
Louisiana court would permit the consideration
of inconvenience in a redhibitory suit. See Erie R.R. v. Tompkins, 304
U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938); Dispascal v. New York Life
Insurance Co., 749 F.2d 255, 260 (5th Cir. 1985). In the absence of specific
guidance from the Louisiana Supreme Court
we look to the following sources when making a prediction of state law:
(1) lower state court decisions and supreme court dicta, (2) the lower
court ruling in this case, (3) the general rule on the issue, (4) the rule
in other states looked to by Louisiana courts
when they formulate the substantive law of Louisiana,
and (5) other available legal sources, such as treatises, law review commentaries,
and restatements. See Jackson v. Johns-Manville Sales Corp., 781 F.2d 394,
397-98 (5th Cir. 1986) (en banc). Due to the unique nature of the Louisiana
civil law system, the third and fourth listed sources provide little guidance;
however, the first and second listed sources provide ample guidance for
our decision. In light of the ample guidance provided by the first and
second sources, we need not resort to the fifth source.
[22] While the Louisiana Supreme Court
has never addressed the issue, the intermediate Louisiana
courts have repeatedly faced the issue of whether a plaintiff in a redhibitory
action may obtain a reduction in the price due to inconvenience,; however,
the decisions of the five Louisiana courts
of appeal are not in complete unanimity. In the leading case on the subject
the Louisiana Court of Appeals for the Fourth
Circuit wrote:
[23] When a judge orders reduction of the sale price, one of the principal
elements in formulating the award is the cost of repairing the defects
which existed at the time of the sale. The cost of repairs, however, is
not necessarily the sole measure of the diminution of value resulting from
these defects. If the defects are few in number and quickly and simply
remedied, the cost of repair may well be the only consideration. But when
the defects are numerous and the repairs lengthy and frequent, then a greater
reduction is warranted, because a forewarned buyer would not reasonably
pay the full price, reduced only by the cost of repairs, if he knew the
extensive repairs of the defects would significantly curtail his use and
cause him considerable inconvenience and aggravation. The diminution which
the trial judge may decree under C.C. art. 2543 is theoretically the difference
between the sale price and the price the reasonable buyer and seller would
have agreed upon if they had known of the defects.
[24] We conclude that the trial judge, in making this determination,
properly considered the numerous problems, the frequent inconvenience associated
with breakdowns and repairs of these problems, and the overall poor performance
in relation to that expected of Chevrolet's highest priced car.
[25] Menville v. Stephens Chevrolet, Inc., 300 So. 2d 858, 861-62 (La.
Ct. App. 4th Cir.), writ denied, 303 So.2d 186 (La. 1974).
[26] Since the decision in Menville, the Louisiana
Court of Appeals for the Fourth Circuit has repeatedly recommitted itself
to the proposition that a court may consider inconvenience as a element
of price reduction in a redhibitory action. See, e.g., Chalmers v. Stephens
Chevrolet, Inc., 461 So. 2d 395 (La. Ct. App. 4th Cir. 1984) ($12,500 reduction
for inconvenience and loss of use of car reasonable); Lehn v. Clearview
Dodge Sales, Inc., 400 So. 2d 317 (La. Ct. App. 4th Cir.) ($6,000 reduction
for inconvenience and loss of use of recreational vehicle reasonable),
writ denied, 406 So. 2d 608 (La. 1981); Bendana v. Mossy Motors, Inc.,
347 So. 2d 946 (La. Ct. App. 4th Cir. 1977). The Louisiana
Court of Appeals for the Third Circuit has aligned itself with the Fourth
Circuit in holding that a court may order a reduction in purchase price
due to inconvenience and overall poor performance in relation to the expected
performance. Rozas v. Eunice Implement Co., 460 So. 2d 729, 731 (La. Ct.
App. 3d Cir. 1984).
[27] In the one case in direct contravention with Menville the Louisiana
Court of Appeals for the First Circuit held that a plaintiff could not
receive a price reduction for inconvenience. Burns v. Lamar-Lane Chevrolet,
Inc., 354 So. 2d 620 (La. Ct. App. 1st Cir. 1977). ("We must hold that
his claims for mental anguish and inconvenience are not compensable in
an action in redhibition."). Yet, in numerous decisions since Burns the
First Circuit has consistently followed Menville and repeatedly approved
judgments containing a reduction for inconvenience. See, e.g., Coffey v.
Cournoyer Oldsmobile-Cadillac-GMC, Inc., 484 So. 2d 798, 801 (La. Ct. App.
1st Cir. 1986) (court of appeals reduced purchase price of car by $4,000
due to recurring problems); Lusk v. Durham Pontiac-Cadillac, Inc., 459
So. 2d 1277, 1281 (La. Ct. App. 1st Cir. 1984) (defendant owes plaintiff
compensation for uncured defects, curtailed use, and inconvenience caused
by the defects, as well as for the expenses of repair); Welch v. Community
Motors, Inc., 422 So. 2d 1196, 1199 (La. Ct. App. 1st Cir. 1982) (plaintiffs
entitled to $500 reduction for aggravation and inconvenience caused by
defects in vehicle), writs denied, 426 So.2d 177, 181 (La. 1983); Leonard
v. Daigle Pontiac-Buick-GMC, Inc., 413 So. 2d 577, 580-81 (La. Ct. App.
1st Cir. 1982) (plaintiff entitled to $1,500 reduction in purchase price
due to inconvenience, aggravation, and curtailment of use caused by automobile's
defects); Darville v. Daigle Pontiac-Buick-GMC, Inc., 411 So. 2d 502, 504
(La. Ct. App. 1st Cir. 1982) (plaintiff entitled to $2,500 reduction in
price due to inconvenience, curtailment of use, and fact that defect in
automobile was not ultimately repaired); Lacey v. Baywood Truck & Machinery,
381 So. 2d 863, 866 (La. Ct. App. 1st Cir.) (plaintiff entitled to $6,500
reduction in purchase price of truck for proven defects, frequent breakdowns,
associated inconvenience, and continued poor performance after repairs),
aff'd sub. nom. Capital Bank & Trust Co. v. Lacey, 393 So. 2d 668 (La.
1980). Thus, while the First Circuit has never overruled Burns, in recent
years the court has consistently and repeatedly followed Menville.
[28] The Louisiana Court of Appeals for
the Second Circuit and the Louisiana Court
of Appeals for the Fifth Circuit have not yet ruled on whether a plaintiff
in a redhibitory action may obtain a reduction in purchase price for the
inconvenience incurred. The closest the Second Circuit has come to ruling
on whether inconvenience is a consideration in a redhibitory action is
to hold that mental anguish and emotional distress are not recoverable
in a redhibitory action. Wallace v. Ford Motor Co., 395 So. 2d 884, 887
(La. Ct. App. 2d Cir. 1981). Lanier argues
that the Second Circuit's denial of a reduction for mental anguish and
emotional distress forecloses a reduction for inconvenience in that circuit.
We disagree. While a reduction for inconvenience might comprise a mental
element, see Leonard, 413 So.2d at 580-81 (aggravation), the reduction
largely goes to cover the physical inconvenience caused by the product,
i.e., the repeated trips to the shop and consequent curtailment of use,
the lost productivity due to service call interruptions and down time,
and the time lost when tasks must be repeated due to equipment failures.
See, e.g., Chalmers, 461 So.2d at 397 (twelve trips to shop in thirteen
months). Thus, in our view, the Second Circuit has never faced nor rejected
a claim for inconvenience as an element in a redhibitory action. The remaining
intermediate Louisiana court, the newly created
Louisiana Court of Appeals for the Fifth Circuit,
has also not yet addressed the question whether a plaintiff in a redhibitory
action may obtain a reduction for inconvenience caused by defects in the
product.
[29] In summary, of the numerous decisions of the Louisiana
Court of Appeals addressing the inconvenience question, in only one decision
did the court hold that the plaintiff could not obtain a reduction for
inconvenience. The overwhelming weight of authority from the intermediate
Louisiana courts favors a conclusion that
a court may consider inconvenience when determining the appropriate reduction
in a redhibitory action. Thus, the first source we turn to when predicting
the course of Louisiana law, the decisions
of lower Louisiana courts, Jackson, 781 F.2d
at 397, strongly indicates that the Louisiana
Supreme court would hold that a plaintiff in a redhibitory action may obtain
a reduction for inconvenience caused by the defective product.
[30] The second source we turn to, the decision of the federal district
court, also points to the same conclusion. The district court in the instant
case held that the plaintiff could obtain a reduction in price in part
due to the inconvenience caused by the defendant's product. We give "special
weight . . . to the determination of the district court judge who is familiar
with local law." Green v. Amerada-Hess Corp., 612 F.2d 212, 214 (5th Cir.),
cert. denied, 449 U.S. 952, 101 S. Ct. 356, 66 L. Ed. 2d 216 (1980); see
also Smith v. Mobil Corp., 719 F.2d 1313, 1317 (5th Cir. 1983) ("great
weight"). Furthermore, "the district court's interpretation of state law
will not be disturbed on appeal unless it is clearly wrong." Acree v. Shell
Oil Co., 721 F.2d 524, 525 (5th Cir. 1983). Thus, the ruling of the district
court further pushes us towards the conclusion that the Louisiana
Supreme Court would hold that a plaintiff in a redhibitory action may obtain
a reduction for inconvenience.
[31] Based on the overwhelming authority provided by the intermediate
Louisiana courts, and further based on the
holding of the district court below, we conclude that a plaintiff in a
redhibitory action may obtain a reduction in purchase price due to the
inconvenience caused by the defects in the defendant's product.
[32] Lanier next argues that the findings
and conclusions of the district court do not adequately support the $25,000
reduction in purchase price. We perceive two arguments contained within
the single issue posed by Lanier: (1) the
evidence does not support the factual findings made by the district court
and (2) the district court's findings, even if they are supported by the
evidence, do not justify a reduction of $25,000. While the two subissues
are intertwined, we review the issues separately and apply a slightly differing
standard of review to each issue.
[33] We review the district court's factual findings under the clearly
erroneous standard. Fed. R. Civ. P. 52. A finding is not clearly erroneous
if it is "plausible in light of the record viewed in its entirety." Anderson
v. City of Bessemer City, 470 U.S. 564, 105 S. Ct. 1504, 1512, 84 L. Ed.
2d 518, 528 (1985). We have no hesitancy in upholding the district court's
factual findings. Numerous witnesses testified about the difficulties encountered
with the Lanier word processing system, the
inconvenience the AFL-CIO
suffered, and the failure of the system to meet the AFL-CIO's
expectations. In light of the ample testimony supporting each of the district
court's findings, the findings are entirely plausible, and we refuse to
set them aside.
[34] Louisiana law permits the district
court discretion in determining the amount of the price reduction, and
the price reduction awarded will be set aside only for an abuse of that
discretion. See Chalmers v. Stephens Chevrolet, Inc., 461 So. 2d 395, 399
(La. Ct. App. 4th Cir. 1984); Griffin v. Coleman Oldsmobile, Inc., 424
So. 2d 1116, 1118 (La. Ct. App. 1st Cir. 1982). Since Lanier
bore all the costs of repairs, the district court based its reduction on
the inconvenience suffered by Lanier and on
the overall poor performance of the system in relation to the AFL-CIO's
expectations. In ascertaining the price reduction the court determines
the difference between the sales price and the price the parties would
have agreed on had they known of all the defects. Capitol City Leasing
Corp. v. Hill, 404 So. 2d 935, 939 (La. 1981); Ball v. Ford Motor Co.,
407 So. 2d 777, 781 (La. Ct. App. 1st Cir. 1981).
[35] In ascertaining the price the parties would have agreed on had
they known of all the defects, the district court considered the numerous
difficulties encountered with the word processing system, the substantial
inconvenience the AFL-CIO
suffered while Lanier spent one and one-half
years repairing the system, and, most importantly, the fact that the system
will never be able to satisfy the AFL-CIO's
needs. In light of the substantial inconvenience caused by the system and
the overall poor performance of the system, we find no abuse of discretion
in the district court's ruling that, had the parties known of all the defects
in the system, they would have agreed to a sales price of only slightly
more than one-half of the purchase price. Thus, the district court did
not abuse its discretion in decreeing a $25,000 reduction in the purchase
price.
[36] C.
[37] Lanier's last contention is that an
unincorporated association, such as the AFL-CIO,
may not obtain a price reduction for frustration, mental anguish, or emotional
distress. While Lanier may be correct, Lanier's
argument misses the mark. The court did not decree a reduction based on
any mental or emotional damage to the AFL-CIO;
rather, the district court decreed a price reduction due to the inconvenience
caused by the product and the overall poor performance of the product.
As previously discussed, see supra part II.A., inconvenience is not the
same as mental anguish or emotional distress; therefore, Lanier's
reliance on cases holding that a corporation may not suffer mental anguish
or emotional distress is misplaced. We further note that the Louisiana
courts have approved reductions for aggravation and inconvenience in a
business context. E.g., Welch v. Community Motors, Inc., 422 So. 2d 1196,
1199 (La. Ct. App. 1st Cir. 1982), writs denied, 426 So.2d 177, 181 (La.
1983).
[38] Accordingly, we affirm the judgment of the district court.
[39] AFFIRMED.
[40] CASE RESOLUTION
[41] AFFIRMED.
[42] APPELLATE PANEL: FOOTNOTES
[43] * Senior District Judge of the Northern District of Illinois, sitting
by designation.
***** BEGIN FOOTNOTE(S) HERE *****
[44] *fn1 Article 2520 of the Louisiana
Civil Code defines redhibition and article 2531 outlines the seller's liability
in a redhibitory action.
[45] Redhibition is the avoidance of a sale on account of some vice
or defect in the thing sold, which renders it either absolutely useless,
or its use so inconvenient and imperfect, that it must be supposed that
the buyer would not have purchased it, had he known of the vice.
[46] La. Civ. Code Ann art. 2520 (West 1952) (emphasis in original).
[47] The seller who knew not the vices of the thing is only bound to
repair, remedy or correct the vices as provided in Article 2521, or if
he be unable or fails to repair, remedy or correct the vice, then he must
restore the purchase price, and reimburse the reasonable expenses occasioned
by the sale, as well as those incurred for the preservation of the thing,
subject to credit for the value of any fruits or use which the purchaser
has drawn from it.
[48] In any case in which the seller is held liable because of redhibitory
defects in the thing sold, the seller shall have a corresponding and similar
right of action against the manufacturer of the thing for any losses sustained
by the seller, and further provided that any provision of any franchise
or manufacturer-seller contract or agreement attempting to limit, diminish
or prevent such recoupment by the seller shall not be given any force or
effect.
[49] La. Civ. Code Ann. art. 2531 (West Supp. 1986).
[50] *fn2 Article 2543 permits the judge, rather than ordering rescission,
to decree a reduction in purchase price in a redhibitory suit. La. Civ.
Code Ann. art. 2543 (West 1952) ("But in a redhibitory suit, the judge
may decree merely a reduction of the price."); see generally Baham v. Community
Motors, Inc., 428 So. 2d 867 (La. Ct. App. 1st Cir. 1983).
[51] *fn3 Our discussion takes place in the context of a redhibitory
action; however, the principles we discuss would also apply in a quanti
minoris action, i.e., an action for a price reduction only. See La. Civ.
Code Ann. art. 2544 (West 1952). While the principles we discuss apply
to both types of action, for the sake of brevity and convenience we will
refer only to the redhibitory action throughout the remainder of our opinion.
***** END FOOTNOTE(S) HERE *****
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1986.C05.660 |