Appeal from the United States District Court for the Northern District of Illinois, Eastern Division.
No. 95 C 2543 Suzanne B. Conlon, Judge.
Before POSNER, Chief Judge, COFFEY and KANNE, Circuit Judges.
ARGUED SEPTEMBER 16, 1996
David Diersen filed a complaint against the Chicago Car Exchange ("CCE"), an automobile dealership, alleging that the CCE fraudulently furnished him an inaccurate odometer reading when it sold him a 1968 Dodge Charger, in violation of the Vehicle Information and Cost Savings Act ("the Odometer Act" or "the Act"). 49 U.S.C. sec. 32701 et seq. (formerly 15 U.S.C. sec. 1981 et seq.). The Odometer Act requires all persons transferring a motor vehicle to give an accurate, written odometer reading to the purchaser or recipient of the transferred vehicle. Under the Act, those who disclose an inaccurate odometer reading with the intent to defraud are subject to a private cause of action by the transferee and may be held liable for treble damages or $1500, whichever is greater. 49 U.S.C. sec. 32710. The district court granted the defendant's motion for summary judgment, relying upon a regulation promulgated by the National Highway Traffic Safety Administration ("NHTSA") which purports to exempt vehicles that are at least ten years old (such as the one Diersen purchased from the CCE) from the Act's odometer disclosure requirements. 49 C.F.R. sec. 580.6(a)(3). Because we hold that the NHTSA exceeded the scope of its statutory authority when it created this exemption for older cars, we reverse that portion of the district court opinion which relies upon the NHTSA regulation as a ground for ruling in favor of the CCE. We affirm the grant of summary judgment on other grounds.
1. Diersen's Purchase of the 1968 "Charger R/T" From the CCE
On July 23, 1994, Diersen purchased a 1968 Dodge "Charger R/T" from the CCE for $16,790. The CCE provided Diersen with a written odometer disclosure statement, as required under the Act, stating that the actual mileage of the vehicle was 22,633. A caption at the top of the disclosure document stated:
Federal (and State law, if applicable) requires that you state the mileage upon transfer of ownership. Failure to complete or provide a false statement may result in fines and/or imprisonment.
The CCE also provided Diersen with an appraisal document stating that the car had 22,600 original miles, as well as a fact sheet stating that the car had 22,600 miles and just one prior owner.
The CCE had purchased the vehicle in question from an individual named Joseph Slaski, who certified to the CCE that the mileage on the car was approximately 22,600 miles and stated that the vehicle had but one prior owner. After acquiring the vehicle but before selling it to Diersen, the CCE inspected the car visually, test-drove the car, and looked at the car's engine. The CCE concluded that the car was in good condition and did not suspect that the odometer reading was inaccurate.
Diersen, after purchasing the Charger, conducted an extensive investigation into the car's title history and discovered that the vehicle had previously been described in title documents as having mileage of 75,000. As part of his investigation, Diersen telephoned two of the car's prior owners, Dennis Sobieski and Robert Dreschbourg (the original owner of the car). Both individuals informed him that the high mileage noted on the title documents was a discrepancy, arising from a clerical error, and asserted that the vehicle was in fact a low-mileage car. Sobieski later gave deposition testimony reiterating what he initially told the plaintiff: that the 75,000 mile figure was inaccurate and the result of a clerical error.
Before Diersen filed this lawsuit, the CCE offered to have Diersen return the car for a complete refund. Diersen refused this offer and decided instead to sue the CCE for fraud under the Act.
In response to Diersen's claim of odometer fraud, the CCE brought a motion for summary judgment, which the district court granted on the basis of a regulation, promulgated by the NHTSA, which purported to exempt cars ten years old or older (such as the 1968 Dodge Charger) from the disclosure requirements of the Act. Following the entry of summary judgment on December 27, 1995, Diersen filed a motion to amend his complaint, pursuant to Fed.R.Civ.P. 15(a). He sought leave to amend his complaint so that he could include additional defendants, incorporate new factual material, and advance a new argument that the NHTSA regulation exempting older vehicles was invalid as a matter of law. Diersen's motion to amend was denied January 12, 1996, without a written opinion. Diersen then filed a motion for reconsideration of the court's summary judgment order, arguing that (1) the older-car exemption created by the NHTSA lacked any basis in the Act and was therefore invalid, or alternatively, (2) newly discovered facts demonstrated that the CCE knew of the exemption ...