Gorman v. Saf-T-Mate, Inc.

• Decision Date: 14 May 1981
• Docket Number: Civ. No. F 80-147.
• Parties: Todd GORMAN, a minor child, by his next friends, Franklin Gorman and Carol Gorman; and Franklin Gorman and Carol Gorman, individually and in their own right, Plaintiffs, v. SAF-T-MATE, INC., a Michigan Corporation, and North Harbor, Inc., an Indiana Corporation d/b/a North Harbor Marine, Defendants.
• Court: U.S. District Court — Northern District of Indiana

513 F. Supp. 1028

Todd GORMAN, a minor child, by his next friends, Franklin Gorman and Carol Gorman; and Franklin Gorman and Carol Gorman, individually and in their own right, Plaintiffs, v. SAF-T-MATE, INC., a Michigan Corporation, and North Harbor, Inc., an Indiana Corporation d/b/a North Harbor Marine, Defendants.

Civ. No. F 80-147.

United States District Court, N. D. Indiana, Fort Wayne Division.

May 14, 1981.

William F. McNagny and James P. Fenton, Fort Wayne, Ind., J. Daniel Brinkerhoff, Garrett, Ind., Gerald M. McNerny, Butler, Ind., for plaintiffs.

William E. Borror, Fort Wayne, Ind., for North Harbor, Inc.

Milford M. Miller, Fort Wayne, Ind., for Saf-T-Mate, Inc.

MEMORANDUM OF DECISION AND ORDER

ESCHBACH, Chief Judge.

This cause is before the court on the September 12, 1980 motion to dismiss filed by defendant Saf-T-Mate, Inc. The motion challenges plaintiffs' complaint on a variety of grounds. One of those challenges raises the question whether the private cause of action created by the Magnuson-Moss Warranty Act (Warranty Act), 15 U.S.C. § 2301 et seq., for breach of consumer product warranties includes damage claims for personal injury. This court concludes that the cause of action created by the federal statute does not, with certain exceptions, extend so far. For the reasons set forth below, the instant motion will be granted in part and denied in part and plaintiffs' claims against defendant North Harbor, Inc., will be dismissed unless the plaintiff is able to amend the complaint consistent with this opinion.

In this action, plaintiffs Todd Gorman, a minor child, and his parents seek to recover at least $750,000 in compensatory damages, together with punitive damages for personal injuries which Todd allegedly sustained as a result of a misadventure involving a motorboat manufactured by the defendant Saf-T-Mate and sold to the Gormans by the defendant North Harbor. Saf-T-Mate is a Michigan corporation with headquarters in Cadillac, Michigan, and North Harbor is an Indiana corporation with headquarters in Fort Wayne, Indiana; plaintiffs are citizens of Indiana.

There are five counts in the complaint. Count I alleges breach of express and implied warranties of merchantability and fitness for ordinary use with regard to the motorboat. Count II sounds in strict liability in tort. Count III alleges negligent design and manufacture. Count IV alleges breach of warranty of fitness for a particular purpose. Count V alleges defendants misrepresented the fitness of the boat.

Plaintiffs seek to maintain jurisdiction on the basis of diversity of citizenship and also on the basis of § 110(d) of the Warranty Act, 15 U.S.C. § 2310(d). Saf-T-Mate's motion to dismiss raises the following issues: (1) whether the Warranty Act affords a basis for the recovery of personal injury damages; (2) whether plaintiffs may recover attorney fees under the Warranty Act; (3) whether the allegations in the complaint are insufficient to support the prayers for punitive damages; (4) whether the count alleging misrepresentation fails to state a claim upon which relief can be granted; and (5) whether the implied warranty claims must be dismissed as duplicative of the strict products liability claims.

I. MAGNUSON-MOSS CAUSES OF ACTION

Since there is no diversity of citizenship among plaintiffs and the retailer defendant, North Harbor, because all are citizens of Indiana, plaintiffs' claims against North Harbor must be dismissed unless the Magnuson-Moss Act affords an alternative jurisdictional basis for one or more of those claims. On August 8, 1980, North Harbor filed a motion to dismiss addressed to the obvious lack of diversity of citizenship among plaintiffs and North Harbor. That motion did not address the allegations of jurisdiction under the Magnuson-Moss Act and was, therefore, denied. In the instant motion, the other defendant, Saf-T-Mate, argues that the Warranty Act does not create a federal cause of action allowing plaintiffs to sue for personal injury damages. Although Saf-T-Mate proffers this argument on its own behalf, dismissal of the Warranty Act claims would not require a complete dismissal as to Saf-T-Mate, given the apparent alternative jurisdictional basis of diversity of citizenship for at least some of plaintiffs' claims against Saf-T-Mate. However, jurisdiction as to the Indiana defendant, North Harbor, does turn on whether plaintiffs have stated any claims under the Act.

Upon initial examination, the complaint in this case might appear to satisfy the requirements for federal court jurisdiction under the Act. The amount in controversy is alleged to be in excess of $50,000, and the plaintiffs' injuries allegedly arise out of breach of warranties pertaining to a consumer product. The pertinent issue, however, is whether the Act creates a remedy for personal injury claims which happen to be susceptible of being alternatively stated in breach of warranty or in strict products liability in tort.

If such personal injury claims are cognizable under the Act, numerous products liability actions which historically have been confined largely to the state courts could be brought in federal court regardless of the locus of citizenship of the parties. This would be a major expansion of the jurisdiction of the federal district courts. Unless the authors of federal legislation clearly convey their meaning, there is a presumption against construing a statute so as to significantly change the federal-state jurisdictional balance. United States v. Bass, 404 U.S. 336, 349, 92 S.Ct. 515, 523, 30 L.Ed.2d 488 (1971); Apex Hosiery v. Leader, 310 U.S. 469, 513, 60 S.Ct. 982, 1002, 84 L.Ed. 1311 (1940). This rule of interpretation calls for a very thorough examination of the statute.

That task, however, poses a very considerable challenge:

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", "opaque", and a product of "poor drafting". 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.

Skelton v. General Motors Corp., 500 F.Supp. 1181, 1184 (N.D.Ill.1980) (footnotes omitted).

The Warranty Act, 15 U.S.C. §§ 2301 to 2312, applies principally to products which sell at retail for more than five dollars and are accompanied by written warranties. The Act does not require written warranties, but if they are given the Act imposes a wide variety of requirements upon the form and content of such warranties. Written warranties for consumer products costing more than ten dollars must be prominently designated as "full" or "limited" warranties. 15 U.S.C. § 2303. A "full" warranty must comply with a list of minimum standards. The party obligated under a full warranty must remedy defective products without charge. Id. § 2304(a)(1). Any disclaimer of liability for consequential damages must be conspicuous, id. § 2304(a)(3), and state-law implied warranty liability may not be limited or disclaimed. Id. § 2304(a)(2). Although "limited" warranties are not subject to these standards, the Act does provide that the terms of a limited warranty shall not disclaim implied warranty liability for the "duration" of the limited warranty. Id. § 2308. Finally, subject to rules promulgated by the Federal Trade Commission, both full and limited warranties must "fully and conspicuously disclose in simple and readily understood language their terms and conditions...." Id. § 2302(a). These warranty obligations imposed by the Warranty Act are hereinafter alternatively referred to as the Act's "form and content standards" or "substantive obligations."

"The draftsmen believed that warranties on consumer products often were too complex to be understood, too varied for consumers to make intelligent market comparisons, and too restrictive for meaningful warranty protection." Schroeder, Private Actions under the Magnuson-Moss Warranty Act, 66 Calif.L.Rev. 1, 2 (1978). Taken as a whole, the Act is concerned primarily with eliminating deceptive warranty practices.

To that end, the "form and content" standards are subject to judicial enforcement. The Justice Department, the Federal Trade Commission and individual consumers are all authorized by separate provisions of the Act to sue to enforce the substantive obligations under the Act. 15 U.S.C. §§ 2310(c) and (d). Section 2310(d)'s private cause of action for individual consumers, however, covers more than just the "form and content" provisions of the Act; it also permits consumers to sue for breach of written or implied warranties pertaining to consumer products.¹

The cause of action provision of the Warranty Act refers to three categories of claims: breach of the substantive obligations of the Act, breach of written warranty, and breach of implied warranty.² "The term `implied warranty' means an implied warranty arising under State law...." Id. § 2301(7). Therefore, while this is in large part a federal statutory cause of action, to the extent that it adopts or incorporates state law as the source of liability for implied warranty claims,³ it also operates as a hybrid state-federal cause of action.

The private cause of action created by the Act may be asserted in state court and, with certain significant limitations, in federal court. Section 2310(d)(1)(A)⁴ affords access to...