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Wallis v. Ford Motor Co.5/12/2005
The instant appeal involves an issue of first impression. This court is asked to determine whether the circuit court erred in dismissing a class-action fraud and statutory deceptive trade practices lawsuit arising out of the purchase or lease of an allegedly defective vehicle where the only injury complained of is a diminution in value of the vehicle. We hold that the complaint was properly dismissed by the circuit court.
Appellant D.R. "Buddy" Wallis filed a class-action lawsuit against Appellee Ford Motor Company ("Ford") for common-law fraud and deceptive trade practices under the Arkansas Deceptive Trade Practices Act (ADTPA), codified at Ark. Code Ann. ยงยง 4-88-101 et seq (Repl. 2001). In his complaint, Wallis seeks to certify a class consisting of "all persons and entities in the State of Arkansas who now own or lease, or owned or leased, model year 1991 through 2001 Ford Explorer sport utility vehicles ("Explorers") purchased or leased in the State of Arkansas." Specifically, he asserts Ford knowingly concealed the fact that the Explorer had a dangerous design defect that caused it to roll over under normal operations. Wallis also alleges in the complaint that,
[Ford's] cover up of the inherent design problems and resulting accidents, combined with its Explorer brand imaging, led millions of consumers to purchase or lease Ford Explorers at prices far in excess of the values which would have been assigned to such vehicles had these dangers been disclosed. Furthermore, thousands of Arkansas residents still own or lease Explorers, which are of substantially diminished value solely as a result of Ford's fraudulent and deceptive scheme.
Wallis does not allege any personal injury or property damage caused by the design defect, nor does he allege that the Explorer malfunctioned in any way. Instead, his entire damage claim rests on the assertion that the design defect "substantially diminished" the value of the Explorer.
Ford filed a motion to dismiss under Ark. R. Civ. P. 12 (b)(6) for failure to state a claim. The circuit court granted the motion and in its order ruled that Wallis failed to "state a legally cognizable cause of action. Because the court finds that [Wallis] has not experienced a cognizable injury or damages as a result of the alleged defect, he has no cause of action." From that order, Wallis now appeals.
The case has been certified to us by the Arkansas Court of Appeals pursuant to Ark. Sup. Ct. R. 1-2(b)(1), (4) and (6) as a case involving issues of first impression, an issue of significant public interest, and substantial questions of law concerning the interpretation of an act of the General Assembly. In reviewing the circuit court's decision on a motion to dismiss under Ark. R. Civ. P. 12(b)(6), this court treats the facts alleged in the complaint as true and views them in the light most favorable to the party who filed the complaint. Travelers Casualty & Surety Co. of America v. Ark. State Highway Comm'n., 353 Ark. 721, 120 S.W.3d 50 (2003).
The sum and substance of Wallis's argument on appeal is that no case law requires an "injury which fraud plaintiffs must suffer other than the benefit of the bargain-style losses Appellant seeks." He therefore seeks reversal of the circuit court's order, contending that a cognizable injury under a fraud or ADTPA claim can be based solely on a product's diminution in value. We disagree and affirm.
I. Common-Law Fraud
It is a well-settled principle under our case law that damages are an essential element of fraud, and there must be an allegation of sufficient facts to satisfy the damage element or the case is subject to a motion to dismiss. Tyson Fo
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