Virginia M. Edgar v. Fred Jones Lincoln-Mercury of Oklahoma City, Inc. and Fred Jones, Inc., 524 F.2d 162, 10th Cir. (1975)

524 F.
2d 162
Virginia M. EDGAR, Plaintiff-Appellant,

v.
FRED JONES LINCOLN-MERCURY OF OKLAHOMA
CITY, INC. and Fred
Jones, Inc., Defendants-Appellees.
No. 74-1857.
United States Court of Appeals,

Tenth Circuit.
Oct. 24, 1975.
Gene A. Castleberry, of Castleberry & Lisle, Oklahoma City, Okl., for

plaintiff-appellant.
Coleman H. Hayes, of Monnet, Hayes, Bullis, Thompson & Edwards,
Oklahoma City, Okl., for defendants-appellees.
Before HILL, SETH and DOYLE, Circuit Judges.
WILLIAM E. DOYLE, Circuit Judge.
This is a diversity action in which the plaintiff sought the sum of $1,000 actual
damages and $40,000 punitive damages from the two corporate defendants,
Fred Jones Lincoln-Mercury of Oklahoma City, Inc., and Fred Jones, Inc.,
subsidiary and parent, respectively. The action was filed following the purchase
by plaintiff of a used automobile from Fred Jones Lincoln-Mercury. It had been
stipulated that the odometer had been turned back. At the time of purchase it
read 30,137 miles. A true reading was 58,702 miles.
The lawsuit was based on common law fraud. The plaintiff had also demanded
a jury trial. However, the trial court discharged the jury, treated it as a court
case and entered a judgment for actual damages in the amount of $1,500
(notwithstanding that there had been a stipulation that the judgment for actual
damages should be in the amount of $250.00). The court denied exemplary
damages, but awarded $1,000 attorneys fees. At the same time, it assessed costs
against plaintiff because the amount of the recovery had not satisfied the
jurisdictional amount of $10,000. See 28 U.S.C. 1332(b).
3
There was no dispute of fact as to the turnback of the odometer. The award of
the court was derived from the amounts prescribed in 15 U.S.C. 1989,1
although this section had not been invoked by plaintiff.
The cited federal statute creates a private federal claim in favor of a person who
has been defrauded by one who has reset an automobile odometer. The plaintiff
is allowed under its provisions to recover up to $1,500 in actual damages and to
receive attorneys fees and costs. This became effective in January 1973.
Plaintiff's purchase had predated this to a considerable extent, the purchase
having been made on May 26, 1971. The district court utilized the federal
statute only for the purpose of measuring the damages. It indicated its belief
that this was the maximum recovery which was available to the plaintiff. The
court also expressed its belief that this disposition was equitable.
On this appeal we consider the following issues:
First, whether the federal statute, once it was adopted, preempts the field, so to
speak, so as to preclude a plaintiff from pursuing a common law fraud action
which this is.
Second, whether the court erred in dismissing Fred Jones, Inc. as a defendant.
This ruling is based upon the court's conclusion that the evidence had failed to
establish that the cause was a proper one for piercing the corporate veil.
Third, whether the plaintiff may in support of its allegation of fraud introduce
evidence as to other similar odometer transactions practiced by defendant.
The evidence of prior wrongful odometer rollbacks would be in our judgment

relevant in proving malice or wanton conduct on the part of the defendant or
defendants, and thus it was error for the court to close the door to all such
showing.
10
We are of the opinion that the federal Act did not supersede the state remedy
and that it was therefore improper to use the federal Act as a measure of the
damages and as a limitation on damages in a state diversity action. We also
conclude that it was error to dismiss the action against Fred Jones, Inc. without
allowing the plaintiff to discover all relevant facts with respect to the parent-
subsidiary relationship.
I.
11
Does the Federal Motor Vehicle Information and Cost Savings Act supersede
the common law fraud remedy which was pursued in this case?
12
The clearest reason for the federal law not limiting the plaintiff's recovery is
that the action arose before the statute was enacted. Section 412 of the Motor
Vehicle Information and Cost Savings Act, Public Law 92-513, provides for the
operative part of the Act taking effect 90 days after the date of enactment
(October 20, 1973). The effective date was, therefore, January 18, 1974. The
state cause of action for common law fraud having arisen May 26, 1971, at the
time of the purchase of the car, it would not be subject to a subsequent federal
statute unless the statute applied retrospectively. There is no expressed intent
on the part of Congress to apply it retrospectively; indeed, there is an express
intent that it is to be effective 90 days subsequent to the enactment. And there is
no basis for Implying a congressional intent that the statute is to be applied
retrospectively. The general rule is that retrospective application is not implied.
A clear expression of legislative intent is required. Cf. Claridge Apartments Co.
v. Comm'r, 323 U.S. 141, 164, 65 S.Ct. 172, 89 L.Ed. 139 (1944); Gibbons v.
Pan American Petroleum Corp., 262 F.2d 852, 855 (10th Cir. 1958); Benjamin
v. Hunter, 176 F.2d 269, 272 (10th Cir. 1949).
13
We are not holding that there exists a conflict between the federal law and the
state remedy which was here followed, whereby there could be a holding that
the federal law preempts the state law. No such conflict is apparent.
14
The congressional intent is set forth in 15 U.S.C. 1991 as follows:
15 subchapter does not (1) annul, alter, or affect the laws of any State with respect
This
to the disconnecting, altering, or tampering with odometers with the intent to defraud
* * * except to the extent that those laws are inconsistent with any provision of this
subchapter and then only to the extent of the inconsistency.
15 U.S.C. 1991.
16
17
The federal statute when it speaks of inconsistent provisions is talking about

state statutes which have to do with disconnecting, altering, or tampering with
odometers with the intent to defraud, so it has in mind state laws specifically
dealing with the odometer subject. It does not refer to a common law remedy in
fraud. So, there is no basic conflict between the law of Oklahoma and the
federal statute.
18
Quite apart from the express provision, 15 U.S.C. 1991, it is clear from the
legislative history that Congress' apprehensions had to do with state provisions
that were less stringent than the statute which was being enacted. See
Statement of Rep. Staggers, 118 Cong.Rec. 18218 (May 22, 1972); Statement
of Rep. Broyhill, 118 Cong.Rec. 18219 (May 22, 1972); 1972 USCCAN 3692,
3970-72.
19
From our study we see no tenable reason for using the federal statute either on
the theory that it has supplanted state remedies or as a guide for the award of
damages. We realize that the trial court was conscientiously seeking to reach an
equitable result.2 But the method used was not proper; it was in conflict with
the law.
20
If the Oklahoma law is applied, it includes an award of punitive damages

"where the defendant has been guilty of oppression, fraud or malice, actual or
presumed." Such damages are part of a state policy of discouraging wrongdoing
by awarding damages "for the sake of example, and by way of punishing the
defendant." Okl.Stat. T.23 9. Since the Oklahoma law with respect to the jury
award must be followed by a United States district judge dealing with an
Oklahoma action, See Hanna v. Plumer, 380 U.S. 460, 475, 85 S.Ct. 1136, 14
L.Ed.2d 8 (1965), and inasmuch as the Oklahoma law allows, punitive damages
in this type of case, we perceive no reason for not submitting the punitive
damage issue. See Cates v. Darland, 537 P.2d 336 (Okl.1975), wherein actual
damages were $200 and punitive damages were $7,000. See also Boise Dodge,
Inc. v. Clark, 92 Idaho 902, 453 P.2d 551 (1969), which was cited with
approval by the Oklahoma Supreme Court in Cates ; there the court had given
actual damages of $350 and punitive damages of $12,000.
21
It is apparent that the use by the court of the federal statute as a model for the
award of damages deprived the plaintiff of important rights which were
available to her under the Oklahoma law. Therefore, this action on the part of
the court was erroneous, and it was also error for the court to award costs to the
defendant based on the amount of the judgment for no other reason than
exemplary damages could easily reach the $10,000 statutory amount, so that
there is no basis for denying that there is a justifiable good faith allegation that
the amount in controversy exceeded $10,000.
II.
Did effective control exist between Fred Jones, Inc. and
22
Fred Jones Lincoln-Mercury

23
We do not hold that the evidence before the court was sufficient as a matter of
law to establish the necessary control by the parent corporation of the
subsidiary corporation, whereby it could be said that the subsidiary was an alter
ego or agent of the parent. However, the evidence was not presented.
24
Under the law of Oklahoma it is necessary to establish something more than

ownership of virtually all of the subsidiary stock by the parent or identity of
directors in order to treat the parent and subsidiary as one. See Wallace v. Tulsa
Yellow Cab Taxi & Baggage Co., 178 Okl. 15, 61 P.2d 645 (1936); St. Louis &
S. F. R. Co. v. Sanford, 54 Okl. 185, 153 P. 650 (1915); Annotation, 7
A.L.R.3d 1343; 1 Fletcher Cyclopedia of Corporations, 43; 18 Am.Jur.2d,
Corporations 17. The evidence must establish that the parent's control is so
complete as to render the subsidiary an instrumentality of the parent. See Gulf
Oil Corp. v. State, 360 P.2d 933, 936 (Okl.1961); Wallace v. Tulsa Yellow Cab
Taxi & Baggage Co., supra ; Annotation, 7 A.L.R.3d 1343, 1353; 18
Am.Jur.2d, Corporations 17; 19 Am.Jur.2d, Corporations 717. A court will
disregard the corporate entity where fraud or illegal or inequitable conduct is
the result of the use of the corporate structures. See Robertson v. Roy L.
Morgan, Production Co., 411 F.2d 1041, 1043 (10th Cir. 1969) (applying
Oklahoma law); Sautbine v. Keller,423 P.2d 447 (Okl.1967); Gulf Oil Corp. v.
State, supra ; Annotation, 7 A.L.R.3d 1343, 1354-55; 18 Am.Jur.2d,
Corporations 17. This entire matter is, of course, a question of fact and like all
questions of fact ought to be submitted to the jury provided, of course, that
there is substantial support in the evidence. Cf. Sautbine v. Keller, supra.
25
It is clear that the plaintiff's allegations concerning stock ownership and

interlocking directors were insufficient standing alone to justify disregard of the
corporate entity. At the same time, plaintiff was precluded from seeking
information which would perhaps have satisfied the requirements of law such
as the names and the positions of persons who may have issued orders
regarding rollback of odometers and information concerning whether the parent
actually issued such orders. Similarly, the plaintiff had no opportunity to
introduce evidence that the parent had practiced rollbacking in prior years. This
latter would be some evidence that Fred Jones Lincoln-Mercury in its turnback
activity was carrying out the policies of the parent. Since the cause is to be
remanded, plaintiff is entitled to pursue discovery which would either establish
or fail to establish the existence of facts sufficient to justify the piercing of the
corporate veil.
III.
26
Should the plaintiff have been allowed to offer evidence of other transactions?
27
Oklahoma law recognizes that proof of prior acts is admissible to show

knowledge or intent. See, e. g., Kurn v. Radencic, 193 Okl. 126, 141 P.2d 580
(1943), and See also Cates v. Darland, 537 P.2d 336 (Okl.1975), which holds
that testimony of prior acts is probative with respect to fraudulent intent and is
also admissible as bearing on the award of punitive damages.3
28
The recent decision of the Oklahoma court in Cates is so clear on this question
of receipt of similar offenses in an odometer case that on retrial plaintiff must
be allowed to present evidence of other rollbacks perpetrated both by the parent
and the subsidiary.
29
The judgment is reversed and the cause remanded for a new trial consistent
with the views expressed herein.
This is part of the Motor Vehicle Information and Cost Savings Act, 15 U.S.C.
1901 Et seq. Section 1984 of this chapter provides:
It is unlawful for any person or his agent to disconnect, reset, or alter the
odometer of any motor vehicle with the intent to change the number of miles
indicated thereon.
And 1989 is the damage provision to which reference has been made, and this
declares:
(a) Any person who, with intent to defraud, violates any requirement imposed
under this subchapter shall be liable in an amount equal to the sum of
(1) three times the amount of actual damages sustained or $1,500, whichever is
the greater; and
(2) in the case of any successful action to enforce the foregoing liability, the
costs of the action together with reasonable attorney fees as determined by the
court.
See 383 F.Supp. at 585, where the court concludes "that in no event could (it)
conscientiously approve a verdict in excess of $2500 . . .."
The Oklahoma court said:
Since evil intent (malice), actual or presumed, is or may be an important factor

in the awarding of exemplary damages; since such damages are awarded on the
theory of punishment; * * * and since when evil intent, actual or presumed, is a
material element or issue in a case, similar prior acts may, with judicial
approval, be admitted in evidence to establish such intent. * * *
Cates v. Darland, supra, at 338, quoting Kurn v. Radencic, supra, at 582.

Virginia M. Edgar v. Fred Jones Lincoln-Mercury of Oklahoma City, Inc. and Fred Jones, Inc., 524 F.2d 162, 10th Cir. (1975)

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Virginia M. Edgar v. Fred Jones Lincoln-Mercury of Oklahoma City, Inc. and Fred Jones, Inc., 524 F.2d 162, 10th Cir. (1975)

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524 F.

Virginia M. EDGAR, Plaintiff-Appellant,

United States Court of Appeals,

Gene A. Castleberry, of Castleberry & Lisle, Oklahoma City, Okl., for

On this appeal we consider the following issues:

The evidence of prior wrongful odometer rollbacks would be in our judgment

The congressional intent is set forth in 15 U.S.C. 1991 as follows:

The federal statute when it speaks of inconsistent provisions is talking about

If the Oklahoma law is applied, it includes an award of punitive damages

Fred Jones Lincoln-Mercury

Under the law of Oklahoma it is necessary to establish something more than

It is clear that the plaintiff's allegations concerning stock ownership and

Oklahoma law recognizes that proof of prior acts is admissible to show

The Oklahoma court said:

Since evil intent (malice), actual or presumed, is or may be an important factor

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