Skelton v. General Motors Corp.

• Decision Date: 01 October 1980
• Docket Number: No. 79 C 1243.,79 C 1243.
• Citation: 500 F. Supp. 1181
• Parties: Arlie Glen SKELTON, Jr., C. G. Haskins, Eugene C. Coleman et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Illinois

500 F. Supp. 1181

Arlie Glen SKELTON, Jr., C. G. Haskins, Eugene C. Coleman et al., Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.

No. 79 C 1243.

United States District Court, N. D. Illinois, E. D.

October 1, 1980.

COPYRIGHT MATERIAL OMITTED

Charles A. Boyle, William J. Harte, Abraham N. Goldman, Francis E. Goodman, Chicago, Ill., for plaintiffs.

William R. Jentes, Steven J. Harper, Thomas A. Gottschalk, Stephen C. Neal, Garrett B. Johnson, John T. Hickey, Jr., of Kirkland & Ellis, Chicago, Ill., for defendant.

MEMORANDUM AND ORDER

MORAN, District Judge.

Plaintiffs, purchasers of General Motors Corporation (GM) automobiles, seek relief under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (Magnuson-Moss Act or Act), 15 U.S.C. § 2301 et seq., because of the alleged undisclosed substitution of THM 200 (M29) transmissions for THM 350 (M38) transmissions in various 1976 through 1979 models of GM automobiles. Plaintiffs claim that the THM 200 transmission is inferior to the THM 350 and that the substitution has caused violations of written warranty, implied warranty and deceptive warranty provisions of the Act. GM has moved to dismiss the second amended complaint for failure to state a claim upon which relief can be granted.¹

The complaint alleges that GM has disseminated "brochures, manuals, consumer advertising and other forms of communications" which "expressly represented and warranted" that certain GM automobiles contained "THM 350 ... transmissions, or transmissions of similar quality and performance ... and that they would meet a specified level of performance." Through such communications, GM "implied, warranted and represented" that those models contained such transmissions. Plaintiffs in Count I charge violation of the written warranty and, apparently, implied warranty provisions of the Magnuson-Moss Act. In Count II, plaintiffs claim that the substitution is actionable as a deceptive warranty within the meaning of § 110(c)(2) of the Act, 15 U.S.C. § 2310(c)(2).

The court concludes that there is no private right of action under § 110(c)(2) and that the complaint does not state a claim for breach of an implied warranty. Count I, however, liberally construed, does state a claim for violation of written warranties under § 110(d) of the Act. Federal jurisdiction requires a sales transaction which includes a written warranty within the express statutory terms, but the representations made to purchasers in conjunction with such a warranty are actionable under federal law. The reach of federal law is not to representations made in the market generally but to representations made to purchasers of consumer goods in conjunction with a sales transaction of which the furnishing of a written warranty, as statutorily defined, is an integral part. Accordingly, the motion is denied as to Count I, and Count II is dismissed.

A literal reading of the Magnuson-Moss Act is only a departure point for giving meaningful content to the statute which has been variously described as "disappointing",² "opaque",³ and a product of "poor drafting".⁴ A review of the legislative history gives but limited solace. That review is the legal equivalent of an archeological dig. Various consumer warranty bills were pending before the House and Senate for four years, during which each body defined, discarded, reintroduced and redefined concepts which in some fashion or another are related to the enacted legislation. Some provisions in the Act are vestigial reminders of concepts buried but not totally forgotten during the on-going legislative process. Both proponents and opponents of an expansive interpretation have cited compelling, to them, legislative history only dimly related to the language which finally emerged as law.

Any consideration of the questions presented must begin, then, with the Supreme Court's admonition that "statutory interpretation requires more than concentration upon isolated words; rather, consideration must be given to the total corpus of pertinent law and the policies that inspired ostensibly inconsistent provisions." Boys Market, Inc. v. Retail Clerks Union, 398 U.S. 235, 250, 90 S.Ct. 1583, 1592, 26 L.Ed.2d 199 (1970).⁵

I. Written Warranties

The genesis of the Act was Congressional concern about the adequacy of warranty protection for automobile purchasers, documented by FTC investigations in 1968 and 1970. See H.Rep. No. 93-1107, reprinted in 1974 U.S.Code Cong. and Admin.News, at pp. 7708-9. The hypothetical consumer had purchased a defective automobile, possessed an impressive warranty document, and had but little hope of real relief. That concern led to a legislative effort to provide meaningful warranty protection for consumers in a mass marketing economy. A consistent concept in the Act and its legislative history, akin to that in the securities laws, is that full disclosure will result in informed choices, or at least that the reach of federal action should mandate full disclosure so as to permit informed choice. See Eddy, Effects of the Magnuson-Moss Act upon Consumer Product Warranties, 55 North Car.L. Rev. 835, 874 (1977). The history of the Act was, if not shaped, profoundly influenced by the inadequacies of the familiar formal consumer warranty, after described as "the paper with the filigree border."⁶

Equally apparent from the Act and its legislative history is the Congressional reluctance to sanction a sweeping preemption of the law of commercial transactions traditionally the preserve of each of the fifty states but in a sense federalized by the widespread enactment of the Uniform Commercial Code. The Magnuson-Moss Act is not a federal "truth in advertising" law. It has as its essential purpose truth in express warranty disclosure, but both in language and legislative history it recognizes that what is in the paper with the filigree border cannot be wholly divorced from what has influenced the consumer in a mass marketing economy. What then is now a federal claim and what is the traditional state lawsuit based upon the Uniform Commercial Code?

The key to understanding the scope and effect of the Magnuson-Moss Act is interpreting the phrase "written warranty", which appears at several different places in the statute with somewhat different meanings. The Act initially defines a written warranty as:

(A) any written affirmation of fact or written promise made in connection with the sale of a consumer product by a supplier to a buyer which relates to the nature of the material or workmanship and affirms or promises that such material or workmanship is defect free or will meet a specified level of performance over a specified period of time, or

(B) any undertaking in writing in connection with the sale by a supplier of a consumer product to refund, repair, replace, or take other remedial action with respect to such product in the event that such product fails to meet the specifications set forth in the undertaking, which written affirmation, promise or undertaking becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of such product.

15 U.S.C. § 2301(6). As with the Uniform Commercial Code,⁷ a written warranty under this definition is a specific type of "affirmation", "promise", or "undertaking", though the Act's definition is substantially narrower than the Code's.

A written description of the size or type of a transmission does not constitute a written warranty as defined by this section. The plaintiffs attempt to fit such a promise under subsection (A) of this section, contending that it "relates to the nature of the material or workmanship and affirms or promises that such material or workmanship ... will meet a specified level of performance." However, the plaintiffs ignore the requirement that the promise of a "specified level of performance" must be "over a specified period of time." To constitute a written warranty under this provision a warranty must be limited in duration; a representation, for example, that a transmission will perform adequately for three years would constitute a written warranty,⁸ but not simply a statement that an automobile contains a certain type of transmission.

The Federal Trade Commission supports this construction:

The Act imposes specified duties and liabilities on suppliers who offer written warranties on consumer products. Certain representations, such as energy efficiency ratings for electrical appliances, care labeling of wearing apparel, and other product information disclosures may be express warranties under the Uniform Commercial Code. However, these disclosures alone are not written warranties under the Act. Section 101(6) provides that a written affirmation of fact or a written promise of a specified level of performance must relate to a specified period of time in order to be considered a `written warranty.' A product information disclosure without a specified time period to which the disclosure relates is therefore not a written warranty.⁹

16 C.F.R. § 700.3 (1980). Therefore, according to both the text of the statute and the interpretation of the agency charged with its enforcement, the plaintiffs assertion that all written representations which would be express warranties under the Uniform Commercial Code constitute written warranties under the Magnuson-Moss Act is mistaken.¹⁰

To the extent that the plaintiffs rely on broad promises or representations distributed to the general public through advertising, the complaint also fails to plead the existence of a written warranty under § 101(6). Several provisions in the Magnuson-Moss Act strongly suggest that descriptions of products contained in general advertising are generally not written warranties within the meaning of § 101(6). Section 103 of the Act, for example, requires that every written warranty conspicuously disclose whether it is "full" or "limited" as those terms are defined by the Act. 15 U.S.C. §...