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City-to-City Auto Sales, LLC v. Harris, Record No. 0728-22-2 (Va. Ct. App. Aug. 29, 2023)

Case Briefs

September 5, 2023

By: Juli M. Porto

Virginia Appellate Law Blog

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When is it too late to arbitrate?

Facts. Ronald Harris went to City-to-City Auto Sales to buy a “reliable” truck for his new car hauling business. City-to-city’s sole owner and sales manager Omar White recommended a truck to Harris, telling Harris that he would get a “diagnostic done on the engine and transmission.” White falsely told Harris that the diagnostic indicated an issue with the AC, but that the truck had no other mechanical issues. Believing this to be true, Harris bought the truck for $43,000. The sales contract included an arbitration provision.

Harris quickly began having trouble with the truck, including issues with wheel alignment, suspension, emission system, and dirty fluids. Within a month, the engine failed. By this time, the warranty had expired. So, Harris filed a complaint alleging fraud in the transaction against City-to-City and White.

When defendants failed to file a timely answer, Harris moved for default judgment. At the hearing on the motion, counsel for defendants asked for leave to file a late answer because service on City-to-City was defective and neither defendant received notice of the motion for default judgment. The trial court rejected the request and entered default judgment, setting the case for trial on damages only. Within twenty-one days, Defendants filed a motion to set aside the default judgment and compel arbitration based on the sales contract, which the trial court again rejected.

The jury returned a verdict for $33,000 in compensatory damages and $50,000 in punitive damages, and the trial court granted Harris’ motion for attorney fees.


Issues. (1) Whether defendants waived their right to arbitrate both liability and damages. (2) Whether compensatory damages were excessive. (3) Whether punitive damages were warranted.


Holdings. (1) Yes. The record established an implied waiver, and “once the right to arbitration is waived without a specific reservation of the right in regard to ancillary issues such as damages, it is waived for the entire case.” (2) No. They were supported by direct and indirect losses due to the faulty truck. (3) Yes. The evidence showed that defendants’ misconduct was malicious or wanton.


Notes. (1) Generally, a waiver is a voluntary abandonment of a known legal right or “the intentional doing of an act inconsistent with claiming it.” A right can be waived implicitly “by conduct inconsistent with the assertion of that right.” Here, City-to-City and White appeared with counsel at a hearing with a proposed answer to the complaint. They did not request arbitration at that time, much less mention the arbitration provision. Instead, they “acquiesced to and participated in court proceedings,” demonstrating their intent not to arbitrate.

(2) The evidence of damages included (i) direct losses due to purchase of the truck as well as towing and repair costs, which totaled just under $16,000, and (ii) indirect losses due to Harris’ lost business revenue because of the faulty truck, which totaled just over $64,000.

(3) Defendants represented that, other than the AC, the truck had a clean diagnostic. Yet, the truck had such severe problems that it failed within a month of purchase. These facts support the inference that either defendants did not complete the diagnostic, or they did but knew it was not clean. Either way, the defendants fraudulently sold him the truck.


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