RSD LEASING, INC. v. NAVISTAR INT’L CORP.
22-282-cv
United States Court of Appeals, Second Circuit
Decided: August 30, 2023
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2022
Argued: June 28, 2023 Decided: August 30, 2023
Docket No. 22-282-cv
RSD LEASING, INC.,
Plaintiff-Appellant,
— v. —
NAVISTAR INTERNATIONAL CORP., NAVISTAR, INC.,
Defendants-Appellees.
Before:
LYNCH, LOHIER, and BIANCO, Circuit Judges.
MICHAEL F. HANLEY (Paul J. Perkins,
JEFFREY S. PATTERSON, Hartline Barger LLP, Dallas, TX (Angela S. Gordon, Jacob L. Ramsey, Luke C. Spencer, Hartline Barger LLP, Dallas, TX; Richard J. Windish, Doreen F. Connor, Primmer
GERARD E. LYNCH, Circuit Judge:
Plaintiff-Appellant RSD Leasing Inc. (“RSD”), a company that leases trucks to other commercial entities intending to resell them at the end of the lease
differentiate between “sale” and “lease” in part through reference to the transfer of title or ownership.13
If left to our own devices, we would predict with some confidence that the
Vermont
who, in the regular course of its business, does not itself retain possession of a vehicle but instead transfers possession (even without title) to others is functionally more similar to a sales dealership than to, for example, a florist who purchases a vehicle to deliver floral arrangements. Ultimately, because we refer the broader question of RSD’s “consumer” status to the Vermont Supreme Court, we need not conclusively decide this narrower issue. Instead, since the parties’ alternative arguments present even closer questions, we deem it prudent to address those questions and, in the end, because they themselves require certification, to leave this question for the Vermont Supreme Court as well.
B. Does a Lease Fall within the “Use/Benefit/Operation” Clause?
We thus turn to our second inquiry: whether a purchaser’s subsequent
lease of a purchased good triggers the “for the use or benefit of the [purchaser’s]
business or in connection with the operation of the [purchaser’s] business”
language in
We begin by acknowledging the considerable breadth of that language. Read in its most expansive light, it is difficult to imagine what goods a business could possibly purchase that it would not “use” in some way, or to speculate why a business would make any purchase that it did not expect to “benefit” from. And
even if, under the principle of noscitur a sociis, see Yates v. United States, 574 U.S. 528, 543 (2015) (“[A] word is known by the company it keeps . . . .”), we were tempted to tether those two broader nouns to the arguably narrower noun, “operation,” we would still be compelled to read that term in light of the open-ended “in connection with” that precedes it, which is a phrase that the Supreme Court has “often recognized . . . can bear a broad interpretation,” Mont v. United States, 139 S. Ct. 1826, 1832 (2019) (internal quotation marks omitted).
But we need not stretch our imaginations to explore the hypothetical limits of the “use/benefit/operation” clause. The record makes it perfectly clear that RSD did, in at least some sense, use – that is, “put into action or service”14 – the Subject Trucks in connection with its rental operations15 by leasing them out to other
businesses, and that it literally benefitted –
On that question, we are largely on our own; there is vanishingly little Vermont caselaw that addresses whether leasing a purchased good to a third party falls within the “use/benefit/operation” clause. The best the parties are able
efforts to market that output (e.g., using a truck to ship inventory). But even
giving “operation” that narrower, Navistar-friendly meaning, we think it difficult
to argue that a business’s output does not, at least in the broadest sense,
“connect[]” to the internal, intermediate actions that facilitate that output.
to muster (or that we have found) is a single Vermont trial court decision from 2005 that arguably speaks to the issue, albeit inconclusively. That case, Coughlin v. T.N. Associates, No. 248-11-02LECV, 2005 WL 5872183 (Vt. Super. Ct. Jan. 5, 2005), aff’d on other grounds, No. 2005-195, 2006 WL 5866290, at *4 (Vt. May 2006) (declining to “reach the question of whether [buyers] are ‘consumers’ under the [VCPA]”). The court awarded summary judgment to the sellers, holding that the buyers “d[id] not meet the definition of ‘consumer’” for purposes of that transaction. Id.
The exact basis for that conclusion, however, is not entirely clear. Navistar characterizes the Coughlin court as holding that the buyers “were not ‘consumers’ under the Act because they purchased a condominium for the purpose of putting the property into a rental program.” Appellees’ Br. 15. To be sure, in its single paragraph of analysis, the court did remark that
[u]nder the Act, “consumer” means “any person who purchases, leases, contracts for, or otherwise agrees to pay a consideration for goods or services not for resale in the ordinary course of his or her trade or business but for his or her use or benefit or the use or benefit of a member
of his or her household.” Both the [buyers] have indicated during pre-trial deposition testimony that the purchase of the condominium was a business venture to place the condominium into the rental program at [the resort].
Id. (emphasis in original), quoting
But, conspicuously, that passage also invokes only the older half of the VCPA’s definition of “consumer,” which extends the Act’s protection to purchases for personal “household” use. It makes no reference to the post-1997 “business”-inclusive additions that all agree control here. The Coughlin court in fact expressly caveated that while the post-1997 definition “also includes ‘a person who purchases . . . in connection with the operation of his or her business,’” that provision was not implicated because the Coughlin buyers (1) had merely “contemplated” (and never actually “established”) a business entity, and (2) had never argued in court that the post-1997 additions applied to them. Id. at *1 n.2. With those two asterisks, the court determined that the buyers “planned to purchase the condominium primarily as a for-profit business venture, and therefore cannot be found to be consumers under the Act.” Id. at *1.
For that reason, Coughlin can also be read as holding that the buyers effectively slipped through a crack between the pre- and post-1997 statutes: they did not qualify as “consumers” under the surviving pre-1997 language because they did not intend to buy the condominium for their own personal household use, and they did not qualify under the post-1997 additions because, in the Coughlin court’s estimation, they were not a formal “business,”18 and in any case had forfeited any argument based on that portion of the Act. As a result, the sole Vermont decision – a non-binding trial-level decision at that, see Khan v. Yale Univ., 27 F.4th 805, 825 (2d Cir. 2022) – that could arguably help us locate the precise bounds of the “use/benefit/operation” clause in this context does little to aid in that endeavor.
There is some federal district court authority in the neighborhood as well. For example, in One Source Env’t, LLC v. M + W Zander, Inc., the court initially
granted summary judgment to the defendant manufacturer of 18 component filter
fan units purchased by the plaintiff, who used those components to manufacture
ten mobile clean air units, five of which it then sold to customers.
No. 2:12-CV-145, 2015 WL 7428572, at *11-12 (D. Vt. Nov. 20, 2015). That was
sufficient to convince the court that the plaintiff had “primarily utilized the
[components] to manufacture products for sale” and therefore was “not a
consumer within the meaning of the Act.” Id. Later, however, the court granted a
motion for partial reconsideration after the plaintiff submitted an affidavit
clarifying how it used the remaining five mobile clean air units that it had not
sold: (1) it “leased the units to at least five different businesses for a weekly rental
fee of approximately $800 per unit,” and (2) it “regularly used the [clean air units]
for clean manufacturing at its own facility.” One Source Env’t, LLC v. M + W
Zander, Inc., 2015 WL 7737991, at *2 (D. Vt. Dec. 1, 2015). “Based on [that]
clarification,” the court held, the plaintiff had “presented sufficient evidence
indicating that it acted as a ‘consumer.’” Id. Although the One Source court did
not specify whether it was basing that conclusion on the plaintiff’s
using a purchased good for essentially anything other than a literal resale qualifies the purchaser as a “consumer.”
Other district judges in this Circuit, meanwhile, have split on that question when faced with scenarios distinguishable both from one another and, certainly, from the facts presented in this case. Compare MyWebGrocer, Inc. v. Adlife Mktg. & Commc’ns Co., 383 F. Supp. 3d 307, 312-13 (D. Vt. 2019) (holding that a website developer was a “consumer” for purposes of the VCPA because by “mak[ing] use of the [stock] photos it licenses in the operation of its business by placing these photos on customers’ websites,” the plaintiff had purchased them “for the use or benefit of its business”), with Sergeants Benevolent Ass’n Health & Welfare Fund v. Actavis, plc, No. 15-CV-6549 (CM), 2018 WL 7197233, at *52 (S.D.N.Y. Dec. 26, 2018) (holding that a plaintiff health fund “cannot state a claim under [the VCPA] by alleging that it reimbursed for [an Alzheimer’s drug] on behalf of its insured members” because “[t]he language of the statute clearly restricts the term ‘consumer’ to end users of the product”).
In any event, while we appreciate those judges’ thoughtful insights, they are themselves simply doing their best to predict how the Vermont Supreme Court would construe the VCPA and, thus, even if their decisions suggested a
stronger consensus among federal district judges, we would be reluctant to rely upon them alone.
In the absence of any determinative judicial authority, the district court in this case instead relied on the legislative history to the 1997 amendment. It assigned dispositive weight to two statements in particular. The first passage, a single line of legislative testimony from an attorney in Vermont’s Consumer Fraud Division, urged that the 1997 amendment would “allow small businesses who are victimized when they purchase something that is not going to be resold in their business, but they purchase something for their own use in their business, they can bring a consumer fraud act [claim].” App’x 191. Putting aside for a moment the proper weight to afford such testimony, that statement does little more than echo the statute’s textual distinction between “use” and “resale” without offering any additional insight into the meaning of those terms.19
In the second passage, a state representative speaking in support of the amendment explained:
[The Amendment] merely expands a portion of this statute to address the issue of – the issue of fraud when it comes to small businesses. This is often found in cases where people are promised certain services over the phone to enhance their business. This has nothing to do with the final output of the
business. It has everything to do with making services within the business itself behave more efficiently. So over the phone somebody is promised something to enhance the business, ah, making it the advertising on paperbacks outside, and then people pay for the service, never – the service is never delivered.
Id. at 183-84 (emphasis added). The district court characterized that statement as highlighting “the distinction between goods purchased for resale and those intended for use in the business.” RSD, 2021 WL 6802994, at *3.
We agree that it does indeed suggest a narrower, Navistar-friendly reading of the “use/benefit/operation” clause, seemingly distinguishing between purchases aimed at boosting a business’s operational efficiency and purchases aimed at, or flowing directly into, the business’s output itself. One could
cautioned against giving authoritative weight to a single passage of legislative history that is in no way anchored in the text of the statute” (internal quotation marks omitted)).
plausibly extrapolate from that statement that the Legislature may have intended for the Act to cover, for example, trucks that a purchaser intends to use to ship the goods it markets to end users, but not trucks that are themselves marketed to end users, whether by sale, lease, or short-term rental.
We, again, discern some intrinsic appeal in that distinction as a matter of policy. But set against unmistakably broad statutory language that does not explicitly draw the same line, and without any clear judicial support for that view, we are reluctant to give decisive weight to one, or even two, isolated, and somewhat vague, legislative soundbites when predicting how the Vermont Supreme Court would rule. At the same time, that legislative history, together with one of the plausible implications of Coughlin, is enough to dissuade us from blindly adhering to the most expansive possible reading of the “use/benefit/ operation” language. Consequently, we cannot confidently predict whether the Vermont Supreme Court would hold that the intent to lease a purchased good does or does not fall within the “use/ benefit/operation” clause.
C. When Is a Purchase “For Resale” under the Act?
We therefore proceed to the next potentially dispositive inquiry: whether, and to what extent, a purchaser who intends to eventually resell the good in
question has purchased that good “for resale.”
Here, we have the benefit of some more concrete guidance. In Poulin v. Ford Motor Co., the Vermont Supreme Court was asked to decide whether a plaintiff who had purchased a purportedly “limited-production model” of a Ford Mustang on the assurance that it would “increase in value” was a “consumer” under the VCPA. 147 Vt. 120, 120 (1986). Although Poulin was decided before the 1997 amendment, like this case, it turned in relevant part on whether the plaintiff had purchased the good in question “to resell in the ordinary course of his business” or for his own “use or benefit.” Id. at 123 (internal quotation marks omitted). The defendant car dealers in Poulin insisted that the plaintiff was not a “consumer” because he had purchased the car “as an investment, and because he stated [that] he bought and sold cars.” Id. The court disagreed, emphasizing that the plaintiff’s “expectation that the car would appreciate in value does not prohibit him from being a consumer,” and concluding from two pieces of testimony – (1) that the plaintiff had “bought the car for his personal benefit” and (2) that although he had in the past “sold cars bought as investments, he was not a used car dealer” – were sufficient to permit a jury to “conclude that he was a ‘consumer’ under the Act.” Id.
Poulin therefore offers only limited insight into the key question here. It is not difficult to imagine the Vermont Supreme Court gleaning from Poulin a general rule that when a purchaser intends to do something with a purchased good before reselling, the purchase is not “for resale” under the VCPA. But it is no more difficult to imagine the Vermont Supreme Court distinguishing Poulin-like purchasers who might resell the purchased good at some point in the future, or who have occasionally resold similar purchased goods in the past, from RSD-
like purchasers who, at the time of purchase, affirmatively intend to resell the purchased good at a specific time (or subject to a specific condition) in the foreseeable future.20
Both options strike us as plausible, and we have no clear basis to confidently predict which the Vermont Supreme Court would prefer.
D. What If Both Clauses Are Implicated?
That brings us to the final point of inquiry: whether courts should affix the “consumer” label to a business that, under the latter reading of Poulin, purchases a good “for resale” in the future, but in the meantime, intends to do something
with the purchased good that satisfies the “use/benefit/operation” clause. In other words, if a purchaser of goods “for the use or benefit of” and/or “in connection with the operation of” its business is a “consumer,” but a purchaser of goods “for resale” is not, then what are we to make of a business that is both? Neither the plain text of the statute, nor any other Vermont authority, sheds light on that question.
One way to reconcile the two clauses would be to interpret “for resale” as
referring to purchases intended only for resale, and not for “use or benefit of” or
“in connection with the operation of” a business. Under that reading, assuming a
purchase with the intent to lease satisfies the “use/benefit/operation” clause, a
purchaser in RSD’s position would qualify as a “consumer” regardless of
whether it intends to
But it is no less plausible to interpret “not for resale” as a trump card, compelling a purchasing business that intends to resell to forfeit its “consumer” status regardless of what it intends to do with the purchased good prior to resale. That latter interpretation would of course cry out for some limiting principle; if the VCPA is, as the Vermont Supreme Court has instructed, to be “construed
liberally,” Elkins, 174 Vt. at 331 (internal quotation marks omitted), it cannot be reasonable to infer that the Legislature intended to extend the Act’s protections only to purchasers who intend to hold onto their purchased goods forever.
Consider, for example, a law firm that purchases computers to use for legal research and document production, regularly replaces that equipment to take advantage of advancing technology, but hopes to recoup some modest value from the old machines at the end of their useful life by selling them rather than simply giving (or throwing) them away. It seems unlikely that the Vermont Legislature would have intended for that final, marginal afterthought to negate the firm’s primary motivation for purchasing the computers.
Nevertheless, there are any number of plausible limiting principles that could avoid that counterintuitive result – for example, excluding from the VCPA any purchasers who affirmatively intend to resell within a known number of years, or upon the discharging of a condition (such as the termination of a lease) that is known at the time of purchase, or hinging VCPA protection on whether the resale is incidental or central to a purchaser’s business model.
Although those latter readings would represent somewhat less “liberal” constructions of the VCPA than the former, it is not clear to us that they would
frustrate the “remedy [or] purposes intended” by the Vermont Legislature. Id. (internal quotation marks omitted). That intent is, of course, precisely what we are endeavoring to gauge in the first place, and left once again with multiple plausible, divergent interpretations, we find ourselves without any clear basis to confidently predict what intent the Vermont Supreme Court would ascribe to its Legislature.
III. Certification
When asked to decide questions of state law, “[i]n the absence of authoritative law from the state’s highest court, we must either (1) predict how the [state’s highest court] would resolve the state law question, or, if state law is so uncertain that we can make no reasonable prediction, (2) certify the question to the [state’s highest court] for a definitive resolution.” DiBella v. Hopkins, 403 F.3d 102, 111 (2d Cir. 2005). Here, facing an ambiguous statutory text and scant Vermont judicial authority to inform any such prediction, we must entertain the prospect of certification.21
(“If state law permits, the court may certify a question of state law to that state‘s highest court.”). So too are the parties; although neither side has affirmatively asked us for certification, both indicated at oral argument that they did not object to it, and Navistar presented certification as an alternative to outright dismissal in its summary judgment briefing before the district court, “acknowledg[ing] that there is no Vermont state case directly holding that a lessor of automobiles is excluded under the Act for claims arising from such leased automobiles.” Navistar Mot. 22, Dkt. No. 48. In any event, “we are empowered to [certify questions] nostra sponte.” CIT Bank N.A. v. Schiffman, 948 F.3d 529, 537 (2d Cir. 2020) (internal quotation marks omitted).
would almost certainly resolve this dispute in its entirety – at the very least, the portion of the dispute currently before us, which may in turn be dispositive of the entire litigation.
Turning to the second factor, Vermont surely has a significant interest in determining for itself who is entitled to the benefit of statutory consumer protections under its own law. See Barenboim v. Starbucks Corp., 698 F.3d 104, 117 (2d Cir. 2013) (explaining that the second factor weighs in favor of certification where a case “present[s] important issues of [state] law and policy”).22 Tellingly, the parties devote significant energy to various public policy arguments that they contend should influence our interpretation of the Act. Those include whether the Act’s protections should extend beyond “small businesses,” Appellees’ Br. 23-24, or beyond especially vulnerable or “unsophisticated” parties, id. at 22-23, or beyond those protections available to businesses in other states, see Appellant’s Br. 14-15. To the extent any of those considerations have an interpretive role to
play here, all are best left to Vermont to decide for itself. See, e.g., Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 148 (2d Cir. 2009) (certifying question, reasoning that “whether and to what extent courts should impose strict liability on sellers of used equipment like [defendant] depends on the weighing of various policy considerations, which is best accomplished by the [state’s highest court]”).
CONCLUSION
Thus, for the foregoing reasons, we reserve decision and CERTIFY to the Vermont Supreme Court the following question:
Does a business that purchases goods intending first to lease those goods to end users and then to resell them at the termination of the lease term qualify as a ‘consumer’ under the VCPA?
“As is our practice, we do not intend to limit the scope” of the Vermont Supreme
Court’s analysis through our formulation of the certified question or through our
own analysis of the various interpretive
certificate, together with a complete set of briefs, appendices, and the record filed in this case by the parties. This panel retains jurisdiction for purposes of resolving this appeal after the disposition of the certification by the Vermont Supreme Court.
CERTIFICATE
The foregoing question is hereby certified to the Vermont Supreme Court pursuant to Vt. R. App. 14(a) and 2d Cir. R. 27.2(a), as ordered by the United States Court of Appeals for the Second Circuit.