FOUNDATION REQUIRED FOR LAY OPINION ON DIMINISHED VALUE OF PRODUCT

August 18, 2004

Steven P. Garmisa
Hoey & Farina Attorney
garmisa@hoeyfarina.com
1-888-425-1212

Relying on the rule that "mathematical precision" is not required in proving damages, the Illinois Appellate Court concluded that the plaintiff in a breach of warranty case could prove the value of the defective vehicle by testifying that the car did not meet her expectations for a new automobile. Razor v. Hyundai Motors, 2004 Ill.App. LEXIS 703 (1st Dist., 3d Div., June 16).

A day later, another division of the 1st District -- reviewing different approaches taken by cases decided in 1972 and 2002 -- ruled that a tighter foundation is required for such lay opinion testimony in a breach of warranty case. Kim v. Mercedes-Benz U.S.A. Inc., 2004 WL 1366050 (1st Dist., 4th Div., June 17).

Tuesday's Trial Notebook reviewed the Razor court's analysis of this question, and this article is the first of two on Kim v. Mercedes-Benz.

Jung Kim sued Mercedes-Benz, alleging that the 1999 sport-utility vehicle he bought had a defective gas gauge. Here are some highlights of Justice Patrick J. Quinn's opinion on the damages issue (with various omissions not noted in the quoted text):

"Plaintiff alleged that after he took possession of the vehicle on Dec. 18, 1998, he began to experience various defects that substantially impaired the use, value and/or safety of the ML 320. Specifically, plaintiff averred that Mark Motors and/or an authorized Mercedes-Benz service dealer failed on five attempts to repair a fuel gauge that did not register the correct amount of gas.

"Defendant contends that plaintiff's trial testimony was insufficient to lay a foundation for the diminished value of the ML 320. According to defendant, plaintiff was incapable of laying a foundation because the record demonstrates that plaintiff did not understand the concept of diminished value.

"Defendant argues that plaintiff's knowledge of the value of vehicles that he previously bought during his lifetime does not provide support that he was familiar with the value of a 1999 Mercedes-Benz ML 320. Defendant further contends that no foundation was laid for the value of the vehicle in its allegedly defective state.

"Illinois authority does allow damage claims based on the alleged diminished value of a product. Pertinent here, 'a lay witness may give an opinion as to the value of personal property only if he has sufficient personal knowledge of the property and its value.' Wausau Insurance Co. v. All Chicagoland Moving & Storage Co., 333 Ill.App.3d 1116, 1128 (2002).

"The valuation opinion of a lay witness will be admitted only upon an adequate showing of the factors on which he bases his testimony.
"Although the court in Wausau noted that an adequate showing of factors is required to lay a proper foundation for the valuation opinion of a lay witness, Illinois authority does not provide guidelines for the appropriate factors necessary to establish a proper foundation.

"In Wausau, the plaintiff, an insurance company, initiated a subrogation action against the defendant moving company, alleging that it dropped and damaged an electron microscope owned by the McCrone Group Inc. and insured by the plaintiff. In order to establish damages, the plaintiff submitted the affidavit of its claims adjuster, who stated that she had no personal knowledge of how her company determined the value of the microscope, and answers to interrogatories, in which the president of McCrone valued the microscope by conferring with the manufacturer.

"The Circuit Court granted summary judgment in favor of the plaintiff and awarded damages. On appeal, the defendant argued that the plaintiff failed to prove damages. The Wausau court reversed the damage award, finding that the plaintiff failed to provide deposition testimony or an affidavit from any of the manufacturer's employees who had personal knowledge of the value of the microscope before and after the accident.

"In Behrens v. W.S. Bills & Sons Inc., 5 Ill.App.3d 567, 570 (1972), the plaintiffs filed an action for damages which were sustained when a building on the property leased by the plaintiffs collapsed as a result of an excavation made on adjoining property by the defendants.

"Plaintiff Frank Behrens testified as to the value of fixtures and merchandise lost in the building collapse and bolstered his opinion by applying a value equal to a value extracted from a commercial fixture catalog. The Circuit Court entered a judgment in favor of the plaintiffs following a jury determination of the amount of damages.
"On appeal, the defendants asserted that the plaintiffs' use of an unidentified catalog as a basis for Behrens' opinion of the pre-collapse value of the fixtures was an improper foundation for a valuation opinion.

"The Behrens court noted that there was no specific objection to the hearsay nature of the catalog, which precluded the court from determining whether the catalog prices incorrectly formed the basis of Behrens' opinion. Nevertheless, the reviewing court found that Behrens' opinion was admissible because 'a plaintiff could be allowed to establish familiarity with furniture on the basis of a knowledge of prevailing prices of such items based on shopping with friends, window-shopping, noticing newspaper advertisements and hearing radio advertisements.'

"To establish an appropriate foundation as to the value of personal property," Quinn concluded, "the lay witness, at a minimum, should be able to testify as to the following factors: (1) familiarity with the property in question; (2) actual knowledge of the value of the subject property; and (3) the basis of the knowledge of that value, i.e., how, when and where the witness obtained the knowledge.
"If the lay witness is able to testify to these three factors, the circuit court will be in a much better position to exercise its discretion as to whether or not to admit the testimony.

"Under the facts of the instant case, it really does not matter whether we apply the liberal standard of admissibility as explained in Behrens or the restrictive standard of admissibility as discussed in Wausau.

"Although plaintiff demonstrated personal knowledge of the value of the vehicle as new, he nevertheless failed to provide any testimony or other evidence demonstrating personal knowledge of the value of the ML 320 in its allegedly defective state. Further, plaintiff failed to establish the basis of his knowledge. Accordingly, plaintiff has not made an adequate showing of the factors on which he bases his proposed testimony for the diminished value of the ML 320.

"No proper foundation was laid as to the diminished value of plaintiff's vehicle and, therefore, plaintiff's proposed testimony was excluded properly."

"Damages are an element of a breach of warranty claim. Without damages, there can be no recovery.

"As noted above, plaintiff's proposed testimony properly was excluded, and no abuse of discretion by the Circuit Court was shown. Plaintiff has failed to provide any evidence of damages.
"Plaintiff nevertheless argues that the repair records alone are sufficient for the jury to determine the diminished value. Plaintiff relies upon Smith v. Chrysler Motor Corp., No. 89-2898 (E.D. Penn., May 15, 1990), in which the court held that the jury was competent to make a determination of the difference in value of the vehicle in question although no actual repair receipts existed and the vehicle still was not repaired completely. The Smith court found that the jury had before it sufficient evidence, including the cost of the vehicle when it was purchased, the number of times plaintiff returned to the dealership for repairs and the performance of the car with respect to its unreliability.

"Here, a jury would not be able to determine the diminution in value of plaintiff's vehicle based on the repair receipts alone because the warranty covered the costs of repair and there was no value given to illustrate the costs to repair the vehicle, which also was noted in Smith. See Smith, slip op. at 6 (stating that 'the difficulty [of adding the cost of seven repairs made to the subject vehicle] is that the repairs were covered by the Chrysler warranty, and thus not actually incurred by plaintiff').

"Smith is inapplicable because, there, 'there was evidence to suggest that the car was never properly repaired by Chrysler' and that 'the vehicle remains on plaintiff's property in an apparently inoperable state.'

"In this case, defendant repaired plaintiff's vehicle, and the vehicle remained in an operable state, as evidenced by the fact that it was driven 90,000 miles by the commencement of trial. Again, plaintiff has not provided evidence of damages.

"Plaintiff also contends that the Circuit Court erred by finding that plaintiff was unable to recover incidental and consequential damages without proving actual damages. Plaintiff, however, provided no evidence of incidental and consequential damages, other than testifying that because of the problems with the fuel gauge, he was unable to drive the vehicle to Florida or New York as planned. Record evidence shows that plaintiff was provided with loaner transportation on some occasions while his vehicle was repaired.

"Because plaintiff failed to provide evidence of incidental and consequential damages, the Circuit Court properly granted defendant's directed verdict motion."

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