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MMWA Case Analysis

By: dmc-admin//June 1, 2005//

MMWA Case Analysis

By: dmc-admin//June 1, 2005//

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The decision raises three questions: are all lessees of automobiles "consumers" under the MMWA?; does it make a difference if the lessee leases the vehicle directly from a dealership rather than from a bank that purchases the vehicle from the dealership?; and does it make a difference if the defendant can rebut the plaintiff’s allegations that the warranty began with sale to the third party bank, rather than with transfer to the lessee?

In a footnote, the court cautioned against reading its decision too broadly: "We emphasize that we do not hold that all lessees may proceed under the MMWA or that Peterson is a category two or category three consumer. We merely hold that Peterson alleged sufficient facts in her complaint to survive Volkswagen’s motion to dismiss. Peterson has alleged sufficient facts to meet the statutory definition of a category two and category three consumer. On remand, the parties should be accorded the full opportunity to conduct discovery and present motions for summary judgment if the evidence produced during discovery demonstrates there are no disputed issues of fact."

Nevertheless, it would appear that all automobile lessees could enforce the MMWA, as category three consumers. The Seventh Circuit’s decision in Voelker v. Porsche Cars North America, Inc., 353 F.3d 516 (7th Cir. 2003), is instructive in this regard.

In Voelker, the plaintiff leased the vehicle directly from the dealership, and for this reason, the court held that he was not a category-two consumer. The manufacturer sold the vehicle to the dealership for purposes of resale. Thus, there was no sale "for purposes other than resale" of the product, and Voelker was not a category-two consumer. Voelker, 353 F.3d at 524-525.

Nevertheless, the court summarily found that Voelker was a category-three consumer: "we ask whether he is ‘any other person who is entitled by the terms of such warranty (or service contract) or under applicable State law to enforce against the warrantor (or service contractor) the obligations of the warranty (or service contract).’ [The dealership], as the defendants assert, assigned to Voelker ‘all its rights under the Porsche Limited Warranty.’ Under the state law of Illinois, as an assignee of that warranty, a lessee like Voelker was entitled to enforce the rights arising from the warranty. Therefore, Voelker qualifies as a category three consumer (cites omitted)."

The Supreme Court in the case at bar was equally summary in its category three discussion: "Peterson alleged that the Bank assigned her its rights in Volkswagen’s warranty. She also alleged that she furnished the vehicle to authorized Volkswagen dealers for repairs on numerous occasions for several different problems and that Volkswagen ‘allowed [her] to enforce its written warranty’ and said repairs were ‘covered by [the] written warranty.’ Thus, even though we do not have the warranty before us, Volkswagen cannot seriously argue (at this stage in the proceedings) that Peterson was not entitled to enforce its warranty."

It is difficult to fathom an automobile lease containing a written warranty about which these same statements could not be made. Substituting Wisconsin for Illinois law would not make a difference. And even if there weren’t numerous repairs made pursuant to the warranty, it seems improbable that the manufacturer could seriously argue (whether at the pleading stage, summary judgment stage, or trial stage of the proceedings) that the lessee was not entitled to enforce the warranty under state law.

To prevail, the defendant would presumably have to present credible evidence that, even though the dealership leases cars with warranties every day, it either doesn’t service those vehicles when brought in for repair pursuant to those warranties, or it only does so out of the goodness of its heart, rather than because the warranties it issues requires it to. No one would believe such evidence.

In DiCintio v. DaimlerChrysler Corp., 768 N.E.2d 1121, 1127 (N.Y.2002), the court held that a lessee who leased directly from the dealership was not a category-three consumer because, "the ‘warranty’ must be a written or implied warranty as defined, and, as such, must arise in connection with a sale."

However, there is no reason to suspect that such an argument would be accepted by the Wisconsin Supreme Court, even if faced with a direct lease from the dealer to the lessee. As in the case at bar, all the evidence would certainly show that the dealership routinely makes repairs pursuant to its warranties; thus, as in the case at bar, the manufacturer could not "seriously argue … that [the lessee] was not entitled to enforce its warranty."

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Similarly, even if a defendant could show that the warranty does not take effect until transfer to the lessee, rather than at the time of sale to the third party bank, that would not affect category- three analysis. On the contrary, such evidence would only buttress the lessee’s argument that he is a person entitled to enforce the warranty.

Accordingly, notwithstanding the court’s language that its decision does not hold per se that all automobile leases are subject to the MMWA, the practical effect of the decision is that they are.

The only feasible way that a defendant could avoid this conclusion is to successfully argue that, vis-à-vis a particular lease, the MMWA is ambiguous, even though the court held Peterson is unambiguously within the definition of "consumer."

If a defendant
can get a court to find that the statute is ambiguous in any given case, legislative history suggests that the MMWA was not intended by Congress to apply to any leases. See DiCintio, 768 N.E.2d at 1125-1126.

– David Ziemer

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David Ziemer can be reached by email.

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