Lemon Law does not apply to Illinois purchase

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A recent decision by U.S. District Court Judge William C. Griesbach addresses a host of issues that can arise when a Lemon Law case is, or is arguably, subject to diversity jurisdiction in federal court.

First, a vehicle that is purchased out of state is not subject to Wisconsin’s Lemon Law.

Second, a federal court may entertain a claim under the Magnuson-Moss Warranty Act, even if there is no valid claim under the Lemon Law.

Finally, under Wisconsin law, privity of contract must exist between a manufacturer and a consumer to create an implied warranty.

Wisconsin residents Lawrence and Carol Lamont bought a new Winnebago recreational vehicle (RV) from Crystal Valley RV, a motor home dealership in Illinois. They made an initial $1,000 deposit over the phone with a credit card, but picked up the RV and paid the balance in Illinois.

The Lamonts experienced a number of problems with the RV, and demanded that Winnebago Industries give them a different one, pursuant to Wisconsin’s Lemon Law, sec. 218.0171.

When Winnebago refused to do so, the Lamonts filed suit in state court, alleging that Winnebago violated the Lemon Law and the Magnuson-Moss Warranty Act.

Winnebago removed the case to federal court, which granted summary judgment in favor of Winnebago on the Lemon Law claim, but not the Magnuson-Moss claim.

Lemon Law

The court first held that Wisconsin’s Lemon Law was not applicable because the RV was purchased in Illinois.

The Lamonts argued that, by making a down payment via credit card over the telephone from their home in Wisconsin, they purchased the RV in Wisconsin.

However, the court disagreed, because the dealer never came to Wisconsin. Because the Lamonts went to Illinois to pay the balance and take delivery, the court concluded the purchase occurred there.

Accordingly, the court granted summary judgment to Winnebago on the state Lemon Law claim.

Magnuson-Moss

The court then held that it had jurisdiction over the Magnuson-Moss warranty claim.

A claim under the Act can be brought in federal court if the damages exceed $50,000.

In Schimmer v. Jaguar Cars, Inc., 384 F.3d 402 (7th Cir. 2004), the Seventh Circuit held that the jurisdictional limit was not met, even though the plaintiff was seeking a refund of the price he paid for a car (almost $70,000). The Seventh Circuit concluded that the actual damages (the price paid less the value of the defective car) were less than $50,000.

In the case at bar, Judge Griesbach acknowledged that the same was probably true of the defective RV. Nevertheless, he exercised jurisdiction, because the record did not reveal the RV’s present value.

Judge Griesbach also concluded that the interests of efficiency and economy of resources warranted exercising jurisdiction.

Implied Warranty

Turning to the merits, the court concluded that there was no implied warranty of merchantability between Winnebago and the Lamonts.

While some states have judicially imposed such a warranty between manufacturers and the ultimate consumers, the court found Wisconsin has not done so. Absent any privity of contract between Winnebago and the Lamonts, the court held that no implied warranty existed.

However, the court concluded there was a jury question whether the Lamonts were covered by an express limited warranty on Winnebago’s part.

The RV came with a warranty from Winnebago for 12 months or 15,000 miles, whichever occurred first. However, it excluded certain items from coverage, including the chassis.

The court acknowledged that most of the Lamonts’ complaints concern the chassis, but, based on the record, it could not conclude that this was true as to all of the defects alleged.

Accordingly, the court denied summary judgment on the claim alleging that Winnebago failed to meet its obligations under the written warranty.

Analysis

Griesbach’s conclusion that there must be privity between a consumer and a manufacturer to bring an implied warranty claim under Magnuson-Moss is interesting, because, if such a rule exists, it seems to be commonly disregarded.

The court acknowledged that the Wisconsin Supreme Court case of Mayberry v. Volkswagen of America, Inc., 2005 WI 13, 278 Wis.2d 39, 692 N.W.2d 226, involved just such a claim.

Griesbach wrote, "Although the Court in Mayberry addressed the measure of damages for breach of an implied warranty of merchantability that was alleged to have arisen under similar circumstances, the decision contains no discussion as to whether and how such a warranty arose in the first place. Apparently, the issue had never been raised. The Lamonts have pointed to no Wisconsin case that abolishes the requirement of privity of contract for implied warranty claims."

However, Mayberry is not the only such case.

In Peterson v. Volkswagen of America., Inc., 2005 WI 61, 281 Wis.2d 39, 697 N.W.2d 61, the buyer also brought implied warranty claims against a manufacturer, despite the absence of privity. Yet, that was never raised as an issue in that case either.

The same is true of a much older, unpublished opinion from the Wisconsin Court of Appeals, Schrimpf v. General Motors, 107 Wis.2d 739, 321 N.W.2d 364 (Table) 1982 WL 171949 (Wis.App., Mar. 10, 1982).

It may be the case that privity is still essential for a valid implied warranty claim under Wisconsin law. However, it appears that the rule may be observed more in the breach than in the observance.