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Veluvolu v. Nissan North America, Inc.

United States District Court, W.D. Louisiana, Shreveport Division

August 9, 2019

ANIL VELUVOLU, ET AL.
v.
NISSAN NORTH AMERICA, INC., ETAL

          HORNSBY MAGISTRATE JUDGE.

          MEMORANDUM RULING

          ELIZABETH ERNY FOOTE UNITED STATES DISTRICT JUDGE.

         Now before the Court are briefs filed by both parties addressing whether nonpecuniary damages can be awarded pursuant to Louisiana Civil Code article 1998 in an action for redhibition when the remedy is reduction of the purchase price rather than rescission of the sale.

         I. Background

         This matter arises out of the sale of a new vehicle, a 2017 Acura NSX ("the Acura"). Record Document 3, ¶ 8. Plaintiffs purchased the Acura from Orr Infiniti in Shreveport, Louisiana on November 3, 2016. Id. Plaintiffs claim that the Acura began to manifest several defective conditions within a few months after the sale. Record Document 3, ¶ 15. The main defective condition was the failure of the car to start, which occurred on four separate occasions in 2017. Record Document 17-6, pp. 18, 23, & 25-26. Plaintiffs brought suit against American Honda Motor Company, Inc. ("AHM") for breach of implied and express warranties. Record Document 3, p. 3. Plaintiffs request a rescission of the sale, a return of the purchase price, and costs related to the sale, pursuant to the Louisiana law of redhibition and the Magnuson-Moss Warranty Act, along with attorney's fees and damages for mental anguish, humiliation, and inconvenience pursuant to Louisiana Civil Code article 1998 which allows the recovery of nonpecuniary damages in certain circumstances. Id. AHM has admitted that it is considered to be the legal manufacturer of the Acura for the purposes of relevant Louisiana law. Record Document 37, p. 1.

         Louisiana Civil Code article 2520 states that a seller warrants the buyer against redhibitory defects in the thing sold, and a defect is considered redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect. La. Civ. Code Ann. art. 2520. The existence of such a defect entitles the buyer to obtain rescission of the sale. Id. Article 2520 also provides that a defect can be redhibitory even when it merely diminishes the usefulness or value of a thing so that it must be presumed that a buyer would still have bought it but for a lesser price. Id. In such a case, the proper remedy is a reduction of the purchase price rather than a rescission of the sale. Id. On summary judgment, the Court held that whether the Acura contained a redhibitory defect when it was sold, and whether the proper remedy is rescission of the sale or a reduction of the purchase price, were issues of fact to be decided at trial. Record Document 29, pp. 11 & 14-15. The Court also held that whether Dr. Veluvolu was eligible to receive nonpecuniary damages pursuant to article 1998 was a factual issue to be decided at trial. Id. at 16-17.

         In their joint pretrial order, the parties highlighted an additional legal issue to be determined by the Court: whether general damages, interest, and other expenses surrounding the sale can be recovered by a plaintiff whose recovery in redhibition has been limited to a reduction of the purchase price. Record Document 29, p. 4. During the pretrial conference, this issue was narrowed further. The Court ordered the parties to submit briefing on whether nonpecuniary damages are recoverable in a redhibition case where the plaintiffs recovery has been limited to a reduction of the purchase price. Record Document 42, p. 8.

         II. Nonpecuniary Damages are Available

         Despite the Court's clear instructions, AHM's brief does not address whether nonpecuniary damages can be awarded in a redhibition case where the remedy is a reduction in price. AHM provided the Court with no legal authority on the requested topic and instead argued that a manufacturer cannot be liable for nonpecuniary damages in a redhibition action at all. Record Document 43, p. 2. In order to reach this broad conclusion, AHM was either lax in its research efforts or lacks candor with the Court.

         Louisiana Civil Code article 2545 sets forth the liability of bad faith sellers (those who knew of a redhibitory defect in the thing sold) and manufacturers (who are presumed to know of any defects in the things they sell). Comment (j) to article 2545 clearly states, "Under this Article, nonpecuniary damages are recoverable, as in other cases of contractual breach, whenever the requirements set forth in Civil Code Article 1998 ... are met." La. Civ. Code Ann art. 2545 cmt. (j). Nothing about this comment indicates that its meaning does not apply equally to sellers and manufacturers. In fact, in the seminal Louisiana case regarding nonpecuniary damages under article 1998, Young v. Ford Motor Company, Inc., the plaintiff sued both the manufacturer and the seller in redhibition. 595 So.2d 1123 (La. 1992). The Louisiana Supreme Court held that nonpecuniary damages are recoverable in a redhibition case if it can be established that "the obligee intended-and if the nature of the contract supports this contention-to gratify a significant nonpecuniary interest by way of the contract, and that the obligor either knew or should have known that failure to perform would cause a nonpecuniary loss to the obligee." Id. at 1133. This holding does not exclude the manufacturer from liability for nonpecuniary damages where the requirements of article 1998 are met. Furthermore, every Louisiana appellate court has followed suit and evaluated whether a plaintiff in redhibition has met the requirements of article 1998 and is therefore eligible to receive nonpecuniary damages from a manufacturer. See Lovell v. Blazer Boats Inc., 2011-1666 (La.App. 1 Cir. 10/24/12); 104 So.3d 549, 555; Jones v. Winnebago Indus., Inc., 47, 137 (La.App. 2 Cir. 5/16/02); 92 So.3d 1113, 1121; Landry v. Forest River, Inc., 2006-1424 (La.App. 3 Cir. 3/14/07); 953 So.2d 1046, 1051; Nelson Radiology Assocs., L.L.C. v. Integrity Med. Sys., Inc., 2008-0443 (La App. 4 Cir. 7/29/09); 16 So.3d 1197, 1208-09; Poche v. Bayliner Marine Corp., 93-CA-721 (La.App. 5 Cir. 2/09/94); 632 So.2d 1170, 1175.

         Nevertheless, AHM argues against this well-established facet of Louisiana law. It begins its argument by stating that the Louisiana Products Liability Act ("LPLA") is the exclusive theory of liability against manufacturers for damages caused by their products. Record Document 43, p. 2. Notably, Plaintiffs do not assert that the Acura caused personal injury or economic damages within the meaning of the LPLA. AHM cites Brandner v. Abbott Laboratories, Inc., No. 10-3242, 2012 WL 195540 at *6 (E.D. La. Jan. 23, 2012) which states that "[t]he Fifth Circuit has held that redhibition damages are limited to economic loss, which includes 'the cost of the product, and the loss of income or profits resulting from the loss of or inability to use the product as intended."' (quoting Chevron USA, Inc. v. Aker Maritime, Inc., 604 F.3d 888, 900-01 (5th Cir. 2010)). In Chevron, the Fifth Circuit was asked to determine whether the LPLA precluded the trial court's award of attorney's fees to a plaintiff who brought claims under the LPLA and redhibition. 604 F.3d at 899. The court observed that the LPLA provides the exclusive theory of recovery against manufacturers for damage caused by their products and does not allow the recovery of attorney's fees. Id. at 900. Examples of damages under the LPLA include pain and suffering, medical expenses, damage to other property, and loss of consortium, as opposed to the economic losses recoverable in a redhibition action. Id. The court held that the damages the plaintiff was asserting were primarily for damage that the defective product caused to other property, rather than economic loss related to the cost of the defective product itself. Id. at 901. For that reason, the court found that the plaintiffs damages fell entirely under the LPLA and not redhibition. Id. Therefore, the plaintiff could not recover attorney's fees. Id.

         AHM argues that this Court is bound by stare decisis to hold that nonpecuniary damages are not recoverable in a redhibition action based on the Fifth Circuit's holding in Chevron[1]Record Document 43, pp. 3-4. In context, the Fifth Circuit's holding that the plaintiffs losses were non-economic and therefore could not be awarded as part of a redhibition action was intended to contrast those economic damages with the personal injury-type damages that are recoverable under the LPLA. See Id. This statement does not reflect a holding by the Fifth Circuit that nonpecuniary damages cannot be recovered in a redhibition action. In fact, Chevron does not mention nonpecuniary damages at all. Therefore, stare decisis does not dictate AHM's desired result as to nonpecuniary damages.

         Whether nonpecuniary damages are available in a redhibition case where the proper remedy is a reduction of the purchase price is somewhat unclear under Louisiana law. This confusion has been noted by Louisiana legal scholars:

Article 2545 does not refer to the distinction between rescission and price reduction. The article, however, does use the term redhibition, which under the sales revision leads to either rescission or price reduction. Yet this article seems to have only rescission in mind. The remedies it provides seem only to fit rescission, not reduction of the price. Yet for both kinds of ...

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