Travis Gonzales v. Carmax Auto Superstores, LLC

FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

TRAVIS Z. GONZALES, an No. 14-56842
individual,
Plaintiff-Appellant,
D.C. No.
v. 8:13-cv-01391-CJC-
RNB
CARMAX AUTO
SUPERSTORES, LLC, a
Virginia Limited Liability
Company; SANTANDER
CONSUMER USA, INC., an
Illinois Corporation; SAFECO
INSURANCE COMPANY OF
AMERICA, a New Hampshire
Corporation,
Defendants-Appellees.
2 GONZALES V. CARMAX

TRAVIS Z. GONZALES, an No. 14-56305
individual,
Plaintiff-Appellee, D.C. No.
8:13-cv-01391-CJC-
v. RNB

CARMAX AUTO
SUPERSTORES, LLC, a OPINION
Virginia Limited Liability
Company; SANTANDER
CONSUMER USA, INC., an
Illinois Corporation; SAFECO
INSURANCE COMPANY OF
AMERICA, a New Hampshire
Corporation,
Defendants-Appellants.

Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding

Argued and Submitted August 2, 2016
Pasadena, California

Filed October 20, 2016

Before: Stephen Reinhardt, Alex Kozinski, and
Kim McLane Wardlaw, Circuit Judges.

Opinion by Judge Reinhardt
 GONZALES V. CARMAX 3

SUMMARY*

California Law

The panel reversed the district court’s summary judgment
in favor of CarMax Auto Superstores, LLC, and remanded
with instructions to enter summary judgment for Travis
Gonzales on his Consumer Legal Remedies Act and Unfair
Competition Law claims, based on CarMax’s alleged
violations of California Vehicle Code section 11713.18(a)(6),
which requires a car dealer to provide consumers with a
“completed inspection report” prior to the sale of any
“certified” used vehicle.

The panel held that the district court properly exercised
diversity-based subject matter jurisdiction over the case. The
panel held that the district court did not err in finding that the
jurisdictional amount-in-controversy requirement was
satisfied where the potential cost of complying with
injunctive relief was considered along with Gonzales’s claims
for compensatory damages and punitive damages.

Interpreting the requirements of Cal. Veh. Code
§ 11713.18(a)(6), the panel held that a report that fails to
indicate the results of an inspection in a manner that conveys
the condition of individual car components to a buyer is not
a “completed inspection report” under California law. The
panel concluded that CarMax’s generic list of car parts
inspected failed to inform consumers of the material results
of the inspection.

*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 GONZALES V. CARMAX

COUNSEL

Hallen D. Rosner (argued), Rosner, Barry & Babbitt, LLP,
San Diego, California, for Plaintiff-Appellant/Cross-
Appellee.

Kurt A. Schlichter (argued), Steven C. Shonack, Jamie L.
Keeton, Schlichter & Shonack, LLP, El Segundo, California,
for Defendants-Appellees/Cross-Appellants.

OPINION

REINHARDT, Circuit Judge:

Travis Z. Gonzales sued CarMax Auto Superstores, LLC
(“CarMax”), a used car retailer, after experiencing problems
with a vehicle he purchased at one of its lots. Gonzales
alleged violations of four California consumer protection
laws: (1) the Consumer Legal Remedies Act (“CLRA”); (2)
the Song-Beverly Consumer Warranty Act (“Song-Beverly”);
(3) common law fraud and deceit; and (4) the Unfair
Competition Law (“UCL”). Gonzales’s claims under the
CLRA and UCL were both based on CarMax’s alleged
violation of California Vehicle Code section 11713.18(a)(6),
which requires a car dealer to provide consumers with a
“completed inspection report” prior to the sale of any
“certified” vehicle. The district court dismissed Gonzales’s
fraud and Song-Beverly claims and granted CarMax
summary judgment on his CLRA and UCL claims.

The key issue before us is whether a report that fails to
indicate the results of an inspection in a manner that conveys
the condition of individual car components to a buyer is a
 GONZALES V. CARMAX 5

“completed inspection report” under California law. Because
we conclude that it is not, we reverse the district court’s
decision to grant summary judgment to CarMax on
Gonzales’s CLRA and UCL claims.1

Factual and Procedural Background

Gonzales purchased a 2007 Infiniti G35 from CarMax’s
Costa Mesa sales lot. Gonzales alleges that he was drawn to
CarMax after hearing radio and online advertisements
regarding the benefits of purchasing a “certified” vehicle that
had passed CarMax’s rigorous “125-point” certification
inspection. Gonzales further alleges that he would have paid
less, or possibly not even purchased the car, had it not been
a “certified” vehicle.

According to Gonzales, it is CarMax’s policy to simply
provide purchasers of used vehicles with a pre-printed
“CarMax Quality Inspected Certificate” (“CQI Certificate”)
listing vehicle components that were inspected. Gonzales
received two versions of the CQI Certificate: a one-sided CQI
Certificate provided to him prior to sale, and a two-sided CQI

1
Gonzales sued Santander Consumer USA, Inc. (“Santander”) as the
assignee of the purchase agreement for the vehicle. He also asserted a
separate cause of action against Safeco Insurance Company of America
(“Safeco”), as CarMax’s bond holder, under California Vehicle Code
section 11711, a fraud provision. The parties do not dispute that Santander
and Safeco are liable only to the extent that CarMax is.

Finally, the district court denied CarMax’s motion under California
Civil Code section 1780(e) for attorney’s fees as the prevailing party on
Gonzales’s CLRA claim. Because we reverse the district court’s grant of
summary judgment to CarMax on the CLRA claim, CarMax is no longer
a prevailing party under § 1780(e) and therefore has no claim for
attorney’s fees.
6 GONZALES V. CARMAX

Certificate, which was placed in the glove compartment
before he took possession of the car. In addition to the two
CQI Certificates that CarMax provides to purchasers of used
vehicles, CarMax also uses a third document known as the
“CQI/VQI Checklist.” This is a checklist which contains 236
points of inspection and is filled out by a technician during
the inspection process. The CQI/VQI Checklist, unlike the
CQI Certificates, indicates the condition of each individual
component inspected. Rather than provide the CQI/VQI
Checklist to consumers, CarMax destroys the document after
the inspection results are entered into its electronic system,
and no copy of the Checklist is retained.

Shortly after purchasing the Infiniti, Gonzales
experienced some difficulty with the car. He contended that
the brake pads needed replacing, there was a clicking noise
coming from the engine, and the windows malfunctioned.
Additionally, the check-engine light illuminated routinely,
there were problems with the transmission, the clicking noise
from the engine persisted, and other warning lights on the
dashboard illuminated “in clusters.”

Gonzales filed suit in California state court alleging that
CarMax violated California consumer protection laws by
selling him a lemon and falsely claiming that the car was
certified. Gonzales’s central argument is that CarMax
violated California law by failing to provide him with a
“completed inspection report” prior to the sale of the
“certified” vehicle.

CarMax timely filed a notice of removal pursuant to 28
U.S.C. § 1441(b) claiming diversity jurisdiction. A week after
removal, CarMax filed a motion to dismiss the first amended
complaint, as well as a motion to strike Gonzales’s punitive
 GONZALES V. CARMAX 7

damages claim. The following month, while the motion to
dismiss the first amended complaint was pending, the district
judge issued an order to show cause regarding subject matter
jurisdiction, noting that he had “serious doubts” whether the
case met the amount-in-controversy requirement. After the
parties responded to the order to show cause, the district
judge found that CarMax had shown by a preponderance of
the evidence that the amount in controversy was over $75,000
and thus the action was properly removable.

The district court then granted CarMax’s motion to
dismiss on all claims except for Gonzales’s CLRA and UCL
claims. Following discovery, CarMax filed a motion for
summary judgment on Gonzales’s CLRA and UCL claims.
The district court granted the motiom, holding that there was
no material legal difference between the one-sided form and
the two-sided form, and that both forms were legally
sufficient. Gonzales appeals the district court's dismissal and
summary judgment orders. We consider only the latter here.
We dispose of the other claims in a memorandum disposition
filed concurrently.

Discussion

I. Standards of Review

We review de novo a district court’s determination that
diversity jurisdiction exists, but review any factual
determinations necessary to establish diversity jurisdiction for
clear error. Kroske v. U.S. Bank Corp., 432 F.3d 976, 979–
80 (9th Cir. 2005).

An order granting summary judgment is reviewed de
novo. “We must determine, viewing the evidence in the light
8 GONZALES V. CARMAX

most favorable to the non-moving party, whether there are
any genuine issues of material fact and whether the district
court correctly applied the relevant law.” Ventura Packers,
Inc. v. F/V JEANINE KATHLEEN, 305 F.3d 913, 916 (9th
Cir. 2002).

II. Subject Matter Jurisdiction

Gonzales contends that the district judge erred in
exercising diversity-based subject matter jurisdiction over
this case. We conclude that he did not.

A defendant generally may remove any action filed in
state court if a federal district court would have had original
jurisdiction. 28 U.S.C. § 1441(a). To establish original
jurisdiction based on diversity of parties, the amount in
controversy must “exceed[] the sum or value of $75,000,
exclusive of interest and costs.” 28 U.S.C. § 1332(a). We
have defined the amount in controversy as the “amount at
stake in the underlying litigation,” Theis Research, Inc. v.
Brown & Bain, 400 F.3d 659, 662 (9th Cir. 2005); this
includes any result of the litigation, excluding interests and
costs, that “entail[s] a payment” by the defendant.
Guglielmino v. McKee Foods Corp., 506 F.3d 696, 701 (9th
Cir. 2007). This amount includes, inter alia, damages
(compensatory, punitive, or otherwise) and the cost of
complying with an injunction, as well as attorneys’ fees
awarded under fee shifting statutes. Chabner v. United of
Omaha Life Ins. Co., 225 F.3d 1042, 1046 n.3 (9th Cir. 2000).

In this case, when the potential cost of complying with
injunctive relief is considered along with Gonzales’s claims
for compensatory damages and punitive damages, the district
 GONZALES V. CARMAX 9

court did not err in finding that the jurisdictional amount-in-
controversy requirement was satisfied.2

III. Consumer Legal Remedies Act and Unfair
Competition Law Claims

Section 11713.18 of the California Vehicle Code prohibits
a car dealer from either advertising for sale or selling a used
vehicle as “certified” under nine circumstances, including if:

Prior to sale, the dealer fails to provide the
buyer with a completed inspection report
indicating all the components inspected.

Cal. Veh. Code § 11713.18(a)(6). The statute further
provides that a violation of any of these provisions is
actionable under the CLRA, the UCL, false advertising
statutes, or any other applicable state or federal law. Cal. Veh.
Code § 11713.18(b).

2
It remains an open question whether attorney’s fees that are
anticipated but unaccrued at the time of removal or filing in federal court,
such as those at issue in this case, may be included in the amount-in-
controversy. Other circuits and the district courts in this circuit are divided
on the issue. Compare Gardynski-Leschuck v. Ford Motor Co., 142 F.3d
955, 958 (7th Cir. 1998) (holding that the inclusion of anticipated but
unaccrued fees that “have not been and may never be incurred” are not “in
controversy” between the parties because they are too uncertain given that
litigation can end through settlement at any time), with Miera v. Dairyland
Ins. Co., 143 F.3d 1337, 1340 (10th Cir. 1998) (concluding, without
extensive discussion, that estimated attorney’s fees are included). Because
we conclude that the amount in controversy requirement is satisfied here
regardless of whether anticipated but unaccrued attorney’s fees are
considered in the calculation, we do not include the fees in our
calculations and do not resolve this open question here.
10 GONZALES V. CARMAX

Here, the alleged failure to provide a completed
inspection report underlies Gonzales’s CLRA and UCL
claims. Gonzales contends that CarMax failed to provide a
“completed inspection report” before selling him a “certified”
vehicle. We must decide whether the CQI certificates that
CarMax provides to consumers satisfy the requirements of
§ 11713.18(a)(6). We hold they do not, because the CQI
certificates fail to provide the actual results of the inspection
for the individual components, thus rendering the inspection
reports incomplete.

Because this case was removed to federal court under
diversity jurisdiction, California law applies. St. Paul Fire &
Marine Ins. Co. v. Weiner, 606 F.2d 864, 867 (9th Cir. 1979).
When a state’s highest court has not yet ruled on an issue, we
must reasonably determine the result that the highest state
court would reach if it were deciding the case. Med. Lab.
Mgmt. Consultants v. Am. Broad. Companies, Inc., 306 F.3d
806, 812 (9th Cir. 2002). In doing so, we may look to
decisions from state appellate courts for guidance.
Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th
Cir.1986), modified on other grounds, 810 F.2d 1517 (9th
Cir. 1987). In the present case, however, there are currently
no published opinions from any California appellate courts
interpreting section 117.1318(a)(6).3 Even so, we are not

3
On August 10, 2016, during the pendency of this appeal, the
California Supreme Court ordered depublication of a decision by the
California Court of Appeal for the Fourth District in Brooks v. CarMax
Auto Superstores California, LLC, 201 Cal. Rptr. 3d 138 (Ct. App. 2016).
In an opinion certified for partial publication in relevant part, the Brooks
court had held that CarMax’s CQI certificate was a “completed inspection
report” under section 11713.18(a)(6). See id. at 144. That opinion may no
longer be cited as precedent pursuant to Rule 8.1115 of the California
Rules of Court.
 GONZALES V. CARMAX 11

precluded from affording relief even when the state Supreme
Court and state legislature fail to provide a clear rule. Air-
Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176, 186 (9th
Cir. 1989).

When addressing questions of statutory interpretation
under California law, we “[must] ascertain the intent of the
Legislature so as to effectuate the purpose of the law.” People
v. Coronado, 906 P.2d 1232, 1234 (Cal. 1995) (internal
cquotation marks and citation omitted) (alteration in original).
The California Supreme Court first looks to the language of
the statute, giving effect to the words’ plain meaning; “[i]f the
language is unambiguous, the plain meaning controls.”
Voices of the Wetlands v. State Water Res. Control Bd., 52
Cal 4th 499, 519 (2011).

A statute’s plain meaning, however, cannot be determined
without reference to the context in which the words are used.
See Prof’l Engineers in California Gov’t v. Brown, 177 Cal.
Rptr. 3d 567, 572 (Ct. App. 2014). Consequently, when
California courts construe the plain meaning of statutory
language, they consider whether the statute contains a term of
art with a specific legal or technical meaning. See In re
Marriage of Davis, 352 P.3d 401, 404 (Cal. 2015) (“In
considering whether this statute has a plain meaning, we
recognize that the phrase ‘living separate and apart’ is a term
of art.”) (internal quotation marks and citations omitted); Tex.
Commerce Bank v. Garamendi, 14 Cal. Rptr. 2d 854, 863 (Ct.
App. 1992) (“[W]ords employed in a statute dealing with
legal or commercial matters are presumed to be used in their
established legal or technical meanings unless otherwise
clearly indicated by the statute.”); see also Ruiz v. Podolsky,
50 Cal. 4th 838, 850 n.3 (2010) (“[W]hen the Legislature uses
a term of art, a court construing that use must assume that the
12 GONZALES V. CARMAX

Legislature was aware of the ramifications of its choice of
language.”); Prof’l Eng’rs in Cal. Gov’t v. Brown, 177 Cal.
Rptr. 3d at 572.

With these principles of California law in mind, we first
turn to the plain meaning of the statutory language. Section
11713.18(a)(6) requires sellers of used cars to provide buyers
with a completed inspection report. The statute does not
define the term “inspection report,” but in the automobile
industry, “inspection report” is a term of art with an
established technical meaning. Consequently, we must
assume that the Legislature was aware of the meaning of
“inspection report” and intended this meaning to control. Cf.
Prof’l Eng’rs in Cal. Gov’t v. Brown, 177 Cal. Rptr. 3d at 572
(explaining that the term “‘personal services’ has an accepted
meaning in the context of budget legislation” and construing
the term in accordance with that accepted meaning).

In the automobile industry, an “inspection report” is
understood to mean a report that lists the components
inspected, with a space corresponding to each component in
which the inspector designates whether or not that component
is functional. A “completed inspection report” is one in which
those spaces have been appropriately marked so as to indicate
the result of the inspection. Examples of automobile
“inspection reports” abound in statutes, regulations, and
everyday usage in the context of the industry. For example,
this technical understanding of the term is reflected in Form
 GONZALES V. CARMAX 13

OL 221A, the safety inspection report utilized by the
California DMV for instructional vehicles,4 and in the
“Vehicle Inspection Report” form5 used by the California
Department of Transportation (“CalTrans”) under its
“Enhanced Mobility of Seniors and Individuals with
Disabilities Program.”6 Similarly, California Department of
Highway Patrol Regulations and Federal Motor Carrier
Safety Administration Regulations both demonstrate that
“inspection report” is a technical term that means a list of
components specifying whether the components are
operational: both sets of regulations require “vehicle
inspection reports” to “list any defect or deficiency
discovered by or reported to the driver.” See C.F.R.
§ 396.11(a)(2)(i); Cal. Code Regs. tit. 13, § 1215(b)(1)(B),
(e).

Finally, while § 11713.18 itself does not define
“inspection report,” the statutes of other states demonstrate
that this term is consistently understood to bear a technical

4
See Cal Dep’t of Motor Vehicles, Safety Inspection Report, Vehicle
Used for Instruction, OL 221A (2007), https://www.dmv.ca.gov/portal/
wcm/connect/ea268eba-b3ed-44f3-965a-190e62aa9dcd/ol221a.pdf?MO
D=AJPERES.
5
See Fed. Transit Admin., Vehicle Inspection Report (2008),
http://dot.ca.gov/hq/MassTrans/Docs-Pdfs/5310/5310-AgcyMon.doc.
6
Pursuant to 49 U.S.C. § 5310, states receive formula funding “for
the purpose of assisting private nonprofit groups in meeting the
transportation needs of older adults and people with disabilities when the
transportation service provided is unavailable, insufficient, or
inappropriate to meeting these needs.” See Enhanced Mobility of Seniors
& Individuals with Disabilities – Section 5310, Fed. Transit Admin.,
https://www.transit.dot.gov/funding/grants/enhanced-mobility-seniors-
individuals-disabilities-section-5310 (last visited Oct. 5, 2016).
14 GONZALES V. CARMAX

meaning in the automobile industry, and that under this
technical understanding, an inspection report must contain
component-specific results. In Illinois, for example, a
“vehicle inspection report” must contain a “component reject
area” where an inspector can “[m]ark the appropriate
bubble(s) for any defects found on the vehicle during the
safety test.” Ill. Adm. Code tit. 92, § 451.150(k)(14)(A); see
also N.J. Admin. Code § 13:20–43.9(a)(13) (requiring motor
vehicle inspection report to include “pass/fail result of
applicable visual inspections”); Ariz. Admin. Code
§ R18-2-1011 (requiring a “uniquely numbered vehicle
inspection report” that contains, among other things, “repair
requirements; final test results; [and] repairs performed”).7

The term “inspection report” in § 11713.18(a)(6) thus has
a technical, industry-specific meaning. It requires commercial
sellers of used cars to provide a form indicating the specific
results of the inspection for the individual components
inspected. The statute also requires that this “inspection
report” be “completed,” and an inspection report, under the
technical meaning accorded that term across the automobile
industry, is not completed without an indication of the
pass/fail result with respect to each component.

To require only an unmarked list of components would
disregard the requirements of an “inspection report” and
render the word “completed” superfluous. Under California

7
That “inspection report” is a technical term of art with an industry-
specific meaning is further supported by the fact that Lexus, Honda,
General Motors, Ford, Audi, and BMW all provide inspection reports on
which the inspector marks whether each individual component inspected
operates satisfactorily. This list of manufacturers is intended to be
illustrative and by no means exhaustive.
 GONZALES V. CARMAX 15

law, “significance should be given to every word, phrase,
sentence and part of an act.” Moyer v. Workmen’s Comp.
Appeals Bd., 514 P.2d 1224, 1229 (Cal. 1973) (in bank)
(internal quotation marks and citation omitted). A
construction that would make some words surplusage is to be
avoided and words must be viewed in context, keeping in
mind the nature and obvious purpose of the statute. Id.

The purpose, history, and public policy of the statute
further support our interpretation of “completed inspection
report.” See Imperial Merch. Servs., Inc. v. Hunt, 212 P.3d
736, 740 (Cal. 2009) (“If the statutory language permits more
than one reasonable interpretation, courts may consider other
aids, such as the statute’s purpose, legislative history, and
public policy.” (internal quotation marks and citation
omitted)).

Section 11713.18(a)(6) is part of a remedial statute that
must be construed liberally in favor of the class whom it was
passed to protect. See Cal. Assn. of Health Facilities v. Dep’t
of Health Servs., 940 P.2d 323, 329 (Cal. 1997). The
California Legislature enacted the section in 2005 as part of
California’s “Car Buyer’s Bill of Rights,” which, according
to the author of the bill, aimed to “strengthen the protections
afforded [to] California car buyers by improving laws
regarding the sales, marketing, and financing of new and
used vehicles.” Assembly Judiciary Comm., 2005–2006
Session, Analysis of AB-68 5 (March 1, 2005).8 Prior to the
enactment of this bill, there was no legal standard for use of

8
When California courts analyze legislative history, the materials
they consider “can include bill analyses prepared by staff for legislative
committees considering passage of the legislation in question.” People v.
Taylor, 68 Cal. Rptr. 3d 682, 685 (Ct. App. 2007).
16 GONZALES V. CARMAX

the term “certified,” despite the growing trend for dealers to
“certify” used cars. Senate Judiciary Comm., 2005–2006
Session, Analysis of AB-68 5 (June 14, 2005). This bill
aimed to “provide[] some assurances to consumers that they
are getting what they bargained for,” especially given that
cars are a “big[] ticket item” and “scams involving auto sales
can have a devastating impact on a family’s budget and
ability to function productively in society.” Assembly
Judiciary Comm., 2005–2006 Session, Analysis of AB-68
5–7 (March 1, 2005) (quoting Consumers for Auto Reliability
and Safety (CARS), the sponsor of the bill). The Legislature
expressed concerns that “business practices engaged in by the
automobile industry in general and automobile dealers in
particular . . . discourage price transparency, limit consumer
choice and take advantage of consumer ignorance.” Senate
Judiciary Comm., 2005–2006 Session, Analysis of AB-68 2
(June 14, 2005). The Car Buyer’s Bill of Rights contained a
number of provisions, including a limitation on dealer
commissions for arranging financing, a requirement
mandating additional disclosures concerning a buyer’s credit
score, and, most important for the purposes of this appeal, an
inspection report that provides information to the prospective
buyer of a “certified” vehicle. Id. at 1.

A principal purpose of the Car Buyer’s Bill of Rights was
to promote transparency in the sale of vehicles, especially
those marketed as “certified.” An interpretation of section
11713.18(a)(6) that recognized CarMax’s CQI Certificates,
which are devoid of any information about the condition of
the individual components inspected, as “completed
inspection reports” would undermine rather than foster the
statute’s goal of promoting transparency in used car sales.
 GONZALES V. CARMAX 17

When viewed in this context, the statute requires dealers
to provide consumers with information about the results of
the inspection for each particular component. Sellers cannot
merely list components that have been inspected (as
CarMax’s CQI certificate does), thereby leaving the
consumer ignorant as to whether the various components
satisfactorily passed the inspection. When section
11713.18(a)(6) requires dealers to provide a “completed
inspection report,” it guarantees consumers the right to know
whether the individual components of a car have been found
functional as the result of an inspection. Completed
inspection reports, as that term is understood in the industry
and in light of the statute’s purpose, require the provision of
that information.

CarMax’s certificates do not provide any of the necessary
information about the status of the individual components
inspected under its “rigorous CarMax 125-point Quality
Inspection.” CarMax’s CQI certificates merely guarantee that
the vehicle’s overall condition satisfied its certification
program and list the components inspected under that
program. After receiving this certificate, the consumer knows
neither the condition of the individual components nor which,
or how many, components must pass the test before a vehicle
is “certified.” In fact, the consumer knows nothing specific
about the status of the vehicle as a whole or of the individual
components because he does not know what the standards are
for satisfying the CarMax certification program.9 The vehicle

9
Each individual retailer of “certified” vehicles follows its own
individual “certification program”; there is no uniform substantive legal
standard governing these certification programs. As the California Motor
Car Dealers Association (CMCDA), an association consisting of
“franchised new car dealers,” explained in a hearing before the Assembly
18 GONZALES V. CARMAX

may have passed inspection, but do the brake lines function
properly? The consumer does not know what it means to
“pass” CarMax’s inspection: are all of the inspected
components fully functional, or just a mere majority (or
fewer) of the components inspected? Which components
must be satisfactory, if any, before the car is deemed
certified? Under CarMax’s certification program, the
consumer remains uninformed, and the consumer-protection
and transparency-promoting purposes of the statute remain
unfulfilled.10

Committee on the Judiciary, the certified used car programs offered by its
members are “‘factory certified programs,’ i.e. the certification standards
and requirements are set by their franchisors.” Assem. Com. on Judiciary,
Analysis of Assem. Bill No. 68 (2005-2006 Reg. Sess.) Mar. 1, 2005, p.
7. Consequently, “one manufacturer/franchisor’s certified used car
program may differ from another,” although “they all have common
eligibility elements.” Id.
10
Gonzales also argues that the CQI certificate is incomplete for
another reason, found on the face of the certificate itself, which states:
“We check over 125 points including (but not limited to)” those listed on
the CQI certificate. In reality, CarMax inspects over 200 points during its
vehicle inspections, during which a technician completes a form called the
CQI/VQI Checklist. Unlike the CQI certificate, the CQI/VQI certificate
does seem to “indicate all the components inspected.” See Cal. Veh. Code
§11713.18(a)(6) (emphasis added).

CarMax argues that “components” is not defined under section
11713.18(a)(6) and that “components” has a technical meaning, which
corresponds to the subheadings on the CQI certificates (such as “engine,”
brake system,” and “lighting system”). Under CarMax’s definition of
“components,” the “lighting system” is a component, but the “brake
lights” are not. We need not reach the issue of whether the CQI
certificates in fact indicate all components inspected, as we hold these
certificates are legally insufficient on other grounds.
 GONZALES V. CARMAX 19

CarMax relies heavily on the statute’s drafting history to
argue that the Legislature did not intend to require car dealers
to provide more than just a list of components inspected. It
cites the deletion of a clause that initially appeared at the
end of section 11713.18(a)(6). CarMax’s argument is
unpersuasive because the statutory revision did not relate to
and had no effect upon the meaning of the words “completed
inspection report.” To the contrary, the deletion served an
entirely different purpose: it dropped from the statute a
substantive requirement while leaving unaffected the
requirement relating to disclosure of information.

The statute originally stated:

Prior to sale, the dealer provides the buyer
with a completed inspection report indicating
all the components inspected pursuant to the
vehicle certification program and certifies that
all of the inspected components meet the
express written standards of the vehicle
certification program.

Cal. Assemb. B. No. 68, 2005-06 Regular Session (5/26/2005
draft of bill) (emphasis added).

The language in italics was deleted. The deleted language
would have imposed a substantive obligation on car dealers
to certify that every one of the inspected components of each
of its certified vehicles met the dealer’s certification
standards. This substantive requirement was deleted without
altering the dealer’s obligation to provide a “completed
inspection report” disclosing the results of its inspection with
respect to each component. See Knapp v. CarMax Auto
Superstores Cal., LLC, No. CV 14-0112-BRO (SPx) 2014
20 GONZALES V. CARMAX

U.S. Dist. LEXIS 159722, at *20 (C.D. Cal. July 21, 2014).
Specifically, under the deleted language, a car dealer could
not have sold a “certified” vehicle if any of its components
failed to “meet the express written standards of the vehicle
certification program.” After the deletion of this language,
such a vehicle could be sold as certified, so long as the dealer
complied with the disclosure provision of the statute and
provided the results of the inspection in a “completed
inspection report.” Thus, under the amended version of the
statute, even if some of the various components needed
repair, the dealers were not prohibited from selling the
“certified” vehicle in less-than-perfect condition, so long as
the buyer had been informed of the vehicle’s true condition.

In sum, interpreting the statute to require only that sellers
provide a list of vehicle components inspected, without any
indication of whether the individual components are
functional or defective, contravenes the purpose of the statute
and its plain meaning. CarMax’s generic list of car parts
inspected is not only of little use to a car buyer, but it also
fails to make the car buying process more transparent,
because it fails to inform consumers of the material results of
the inspection.11 Because we hold as a matter of law that
CarMax’s CQI certificates are not “completed inspection
reports,” we reverse the district court’s grant of summary
judgment to CarMax and grant summary judgment to

11
Gonzales also argues that the language “prior to sale” in section
11713.18(a)(6) means that dealers must provide a completed inspection
report before the sales contact is signed. CarMax argues that “prior to
sale” means after the contract is signed and the buyer “has taken physical
possession or delivery of the vehicle.” Because we hold that neither
CarMax’s one-sided CQI certificate nor its two-sided CQI certificate
qualifies as a “completed inspection report,” we need not address the
meaning of “prior to sale.”
 GONZALES V. CARMAX 21

Gonzales on his CLRA and UCL claims. Although Gonzales
did not himself move for summary judgment in the district
court, we may grant summary judgment sua sponte to a non-
moving party if, drawing all inferences in favor of the moving
party, there are no genuine issues of material fact, the moving
party has “be[en] given reasonable notice that the sufficiency
of his or her claim will be in issue,” and the nonmoving party
is entitled to summary judgment as a matter of law. Albino
v. Baca, 747 F.3d 1162, 1176 (9th Cir. 2014) (internal
quotation marks and citation omitted). In the present case,
although CarMax, the moving party, had reasonable notice
that the question of whether the CQI certificates are
“completed inspection reports” would be at issue, it failed to
establish a genuine issue of material fact as to that question:
CarMax’s CQI certificates are facially insufficient as a matter
of law.

Conclusion

The California Legislature adopted the Car Buyer’s Bill
of Rights to protect consumers and to foster transparency in
the sale of motor vehicles. Section 11713.18(a)(6) in
particular exists to ensure that when dealers advertise used
cars as “certified,” they must furnish a “completed inspection
report” regarding all the components inspected, thereby
providing the buyer with specific information about the
condition of each component of his vehicle. If CarMax’s
generic, and ultimately uninformative, list of components
inspected were considered a “completed inspection report,”
section 11713.18(a)(6)’s effectiveness in promoting
transparency in the sale of certified cars would be
substantially diminished. We therefore reverse the district
court’s grant of summary judgment to CarMax and remand
22 GONZALES V. CARMAX

with instructions to enter summary judgment for Gonzales on
his CLRA and UCL claims.

REVERSED AND REMANDED.