ORDER RE: JURY INSTRUCTIONS AND STIPULATED FACTS
CHARLES R. BREYER, District Judge.
This Order provides guidance for Phase One of the upcoming trial. The Court agrees with Plaintiffs and Volkswagen that California Civil Jury Instruction No. 1923 provides the proper measure of economic damages for the first phase of the trial. A copy of the model instruction that the Court will use as a guide for the relevant jury instructions in this case is attached as Exhibit A to this Order.
While the parties (and the Court) agree on the appropriate model jury instruction, they dispute the meaning of that instruction. CACI No. 1923 provides that a plaintiff's out-of-pocket damages are "the fair market value of what [the plaintiff] gave" less "the fair market value of what [the plaintiff] received" (original brackets omitted). "`Fair market value' is the highest price that a willing buyer would have paid on the date of the transaction to a willing seller" if "there [was] no pressure on either one to buy or sell" and "the buyer and seller [knew] all the uses and purposes for which the [car was] reasonably capable of being used." Id. (original brackets omitted). According to Plaintiffs, this means that the fair market value is the amount each of them would have paid for their cars on the original date of sale, had they known that those cars contained a defeat device. This position is belied by caselaw, the ordinary meaning of "fair market value," and the plain language of the model instructions.
Another court in this Circuit has recently considered, and rejected. Plaintiffs' interpretation of California's out-of-pocket measure of damages. Judge Birotte's analysis begins by noting that "[t]he rule is now well established that, in the typical case involving a fraudulent vendor and a defrauded vendee" the "exclusive measure of damages" is "the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received." In re: Ford Motor Co. DPS6 Powershift Transmission Prods. Liability Litig., No. 18-ML-02814-AB (FFMx), 2019 WL 7171546, at *4 (C.D. Cal. Dec. 2, 2019) (citing Walsh v. Hooker & Fay, 212 Cal.App.2d 450, 458 (1963) & Cal. Civ. Code. § 3343). Turning to California caselaw, Judge Birotte determined that "actual value" means "market value." Id. at *5 (citing Nece v. Bennett, 212 Cal.App.2d 494, 497 (1963)). He therefore concluded that "`actual value' does not mean Plaintiffs' subjective valuation of the vehicle" and so the plaintiffs' "own opinion as to the value of the vehicle" could not establish their out-of-pocket damages. Id.
The Court is persuaded by Judge Birotte's reasoning and adopts it here. As noted above, California caselaw and CACI No. 1923 establish that the proper measure of damages is the amount Plaintiffs paid for their cars, less the actual fair market value of those cars at the time of sale. See Nece, 212 Cal. App. 2d at 497. "Fair market value" is an objective measure. It asks what price a typical, willing, and informed buyer and seller would arrive at in an arm's-length transaction, not how much a particular individual would have paid if that person had been fully informed. See Value, Black's Law Dictionary (11th ed. 2019) (defining "fair market value" as "[t]he price that a seller is willing to accept and a buyer is willing to pay on the open market and in an arm's-length transaction; the point at which supply and demand intersect.").
The language Plaintiffs cite from CACI No. 1923 confirms this conclusion. That model instruction defines fair market value as "the highest price that a willing buyer would have paid on the date of the transaction to a willing seller, assuming:" no pressure and full knowledge on both sides of the transaction. CACI No. 1923. The instruction speaks in terms of a generic buyer, paying the price determined by the market as a whole. Plaintiffs' reading would substitute the words "this Plaintiff" for "a willing buyer," but neither the language of the statute nor any case cited by the parties justifies that alteration.1 Ultimately, Plaintiffs' position amounts to an unjustifiable effort to seek rescission in the guise of out-of-pocket damages.
Plaintiffs rely heavily on Schroeder v. Auto Driveaway Co., 11 Cal.3d 908 (Cal. 1974), but that case does not support their position. The Schroeders hired Auto Driveaway to drive to Susanville, California a van loaded with merchandise for their new store. Id. at 912. Auto Driveaway's driver drove the van off the side of a mountain road, resulting in the total destruction of the van and substantial destruction of the Schroeder's goods. Id. at 913. The Schroeders sued for breach of contract, fraud, and conversion. Id. at 914.
Schroeder does not help Plaintiffs because it is distinguishable. The main measure of damages in Schroeder was "the difference between the value of the goods stored in the van and the salvage value." Id. at 921. Schroeder even distinguished a case that had applied the out-of-pocket measure of damages applicable here. Id. at 916-17 (holding there was "no similarity between ... this case" and one which measured damages from fraud by "the difference between the amount the plaintiffs had paid for the property and what it was actually worth"). The disputed issue here—how to measure the fair market value of goods at the time of the original sale—was not relevant in Schroeder.
Plaintiffs have emphasized Schroeder's instruction that "[t]he opinion of an owner of personal property is in itself competent evidence of the value of that property, and sufficient to support a judgment based on that value." Id. at 921. This statement related to Mrs. Schroeder's testimony as to the original value and salvage value of her possessions. See id. at 920-21. Read in context, it does not establish that a plaintiff's subjective estimation of what she would have paid for an item can establish its fair market value.2
To the extent Schroeder is analogous to this case, it supports Volkswagen's preferred approach, not Plaintiffs'. Mrs. Schroeder's testimony established the original value of her possessions in part by estimating the amount she paid for them. Id. at 920. That is exactly what Plaintiffs will be allowed to do here. During Phase One, Plaintiffs may testify to the amount they paid for their TDI vehicles. But the Plaintiffs may not testify to the amount they would have paid for their vehicles if they had known about the defeat device at the time of the original sale. See Fed. R. Evid. 402 ("Irrelevant evidence is not admissible.").
The parties also dispute how best to apprise the jury of certain stipulated facts. The Court has determined that the most fair and expeditious way to present these facts is for Plaintiffs' counsel to read aloud stipulated facts 1-15 from the Joint Proposed Pretrial Order during Plaintiffs' Phase One case-in-chief. See Joint Proposed Pretrial Order (dkt. 7040) at 6-7. No other presentation of the stipulated facts is necessary or allowed during this phase of the trial.
IT IS SO ORDERED.
Ex. A
1923. Damages—"Out of Pocket" Rule
If you decide that [name of plaintiff] has proved [his/her/its] claim against [name of defendant], you also must decide how much money will reasonably compensate [name of plaintiff] for the harm. This compensation is called "damages."
The amount of damages must include an award for all harm that [name of defendant] was a substantial factor in causing, even if the particular harm could not have been anticipated.
[Name of plaintiff] must prove the amount of [his/her/its] damages. However, [name of plaintiff] does not have to prove the exact amount of damages that will provide reasonable compensation for the harm. You must not speculate or guess in awarding damages.
To decide the amount of damages you must determine the [fair market] value of what [name of plaintiff] gave and subtract from that amount the [fair market] value of what [he/she/it] received.
["Fair market value" is the highest price that a willing buyer would have paid on the date of the transaction to a willing seller, assuming:
1. That there is no pressure on either one to buy or sell; and
2. That the buyer and seller know all the uses and purposes for which the [insert item] is reasonably capable of being used.]
[Name of plaintiff] may also recover amounts that [he/she/it] reasonably spent in reliance on [name of defendant]'s [false representation/failure to disclose/false promise] if those amounts would not otherwise have been spent.
New September 2003; Revised December 2009
Directions for Use
For discussion of damages if there is both a breach of fiduciary duty and intentional misrepresentation, see the Directions for Use to CACI No. 1924, Damages—"Benefit of the Bargain" Rule.
Sources and Authority
• Damages for Fraud. Civil Code section 1709.
• Measure of Damages in Tort. Civil Code section 3333.
• Damages for Fraud in Sale of Property. Civil Code section 3343.
• This instruction should be modified in cases involving promissory fraud: "In cases of promissory fraud, the damages are measured by market value as of the date the promise was breached because that is the date when the damage occurred." (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 145-146 [135 Cal.Rptr. 802].)
• "There are two measures of damages for fraud: out of pocket and benefit of the bargain. The `out-of-pocket' measure of damages `is directed to restoring the plaintiff to the financial position enjoyed by him prior to the fraudulent transaction, and thus awards the difference in actual value at the time of the transaction between what the plaintiff gave and what he received. The "benefit-of-the-bargain" measure, on the other hand, is concerned with satisfying the expectancy interest of the defrauded plaintiff by putting him in the position he would have enjoyed if the false representation relied upon had been true; it awards the difference in value between what the plaintiff actually received and what he was fraudulently led to believe he would receive.' `In California, a defrauded party is ordinarily limited to recovering his "out-of-pocket" loss....'" (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240 [44 Cal.Rptr.2d 352, 900 P.2d 601], internal citations omitted.)
• "Of the two measures the `out-of-pocket' rule has been termed more consistent with the logic and purpose of the tort form of action (i.e., compensation for loss sustained rather than satisfaction of contractual expectations) while the `benefit-of-the-bargain' rule has been observed to be a more effective deterrent (in that it contemplates an award even when the property received has a value equal to what was given for it)." (Stout v. Turney (1978) 22 Cal.3d 718, 725 [150 Cal.Rptr. 637, 586 P.2d 1228].)
• "In fraud cases involving the `purchase, sale or exchange of property,' the Legislature has expressly provided that the `out-of-pocket' rather than the `benefit-of-the-bargain' measure of damages should apply. Civil Code section 3343 provides the exclusive measure of damages for fraud in such cases." (Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 236 [1 Cal.Rptr.3d 616].)
• "Civil Code section 3343 does not apply, however, `when a victim is defrauded by its fiduciaries.' Instead, in the case of fraud by a fiduciary, `the "broader" measure of damages provided by sections 1709 and 3333 applies.'... [¶] In the case of a negligent misrepresentation by a fiduciary, `a plaintiff is only entitled to its actual or "out-of-pocket" losses suffered because of [the] fiduciary's negligent misrepresentation under section 3333.' [¶] The Supreme Court has not decided whether `the measure of damages under section 3333 might be greater for a fiduciary's intentional misrepresentation....'" (Fragale, supra, 110 Cal.App.4th at pp. 236-237, original italics, internal citations omitted.)
• "We have previously held that a plaintiff is only entitled to its actual or `out-of-pocket' losses suffered because of fiduciary's negligent misrepresentation under section 3333. While the measure of damages under section 3333 might be greater for a fiduciary's intentional misrepresentation, we need not address that issue here." (Alliance Mortgage Co., supra, 10 Cal.4th at pp. 1249-1250.)
• "To recover damages for fraud, a plaintiff must have sustained damages proximately caused by the misrepresentation. A damage award for fraud will be reversed where the injury is not related to the misrepresentation." (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1252 [1 Cal.Rptr.2d 301], internal citations omitted.)
Secondary Sources
6 Witkin, Summary of California Law (10th ed. 2005) Torts, §§ 1710-1717
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.23 (Matthew Bender)
23 California Forms of Pleading and Practice, Ch. 269, Fraud and Deceit § 269.27 (Matthew Bender)
10 California Points and Authorities, Ch. 105, Fraud and Deceit § 105.252 (Matthew Bender)
