748 F.2d 1058 (5th Cir. 1984), 83-1467, Boelens v. Redman Homes, Inc.

Docket Nº:83-1467, 83-1821, 83-1867 and 84-1019.
Citation:748 F.2d 1058
Party Name:Sue BOELENS, Individually and as Next Friend of Julie Boelens and Jennifer Boelens, Plaintiff-Appellee, v. REDMAN HOMES, INC. & Republic Homes of Texas, Inc., Defendants-Appellants. Sue BOELENS, Individually and as next friend of Julie Boelens and Jennifer Boelens, Plaintiff-Appellant Cross-Appellee, v. REDMAN HOMES, INC., Defendant-Appellee Cross-
Case Date:December 20, 1984
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 1058

748 F.2d 1058 (5th Cir. 1984)

Sue BOELENS, Individually and as Next Friend of Julie

Boelens and Jennifer Boelens, Plaintiff-Appellee,

v.

REDMAN HOMES, INC. & Republic Homes of Texas, Inc.,

Defendants-Appellants.

Sue BOELENS, Individually and as next friend of Julie

Boelens and Jennifer Boelens, Plaintiff-Appellant

Cross-Appellee,

v.

REDMAN HOMES, INC., Defendant-Appellee Cross-Appellant,

and

Republic Homes of Texas, Inc., Defendant-Appellee.

Nos. 83-1467, 83-1821, 83-1867 and 84-1019.

United States Court of Appeals, Fifth Circuit

December 20, 1984

Page 1059

Camp, Jones, O'Neill & Hall, John P. Camp, Daniel L. Bates, Fort Worth, Tex., for Redman.

Hughes & Hill, H. Robert Powell, Clifton T. Hutchinson, Dallas, Tex., for Republic.

Vickery & Webb, Arnold Anderson Vickery, Elizabeth Kilbride, Houston, Tex., for Boelens.

Appeals from the United States District Court for the Northern District of Texas.

Page 1060

Before WISDOM, RANDALL, and JOLLY, Circuit Judges.

WISDOM, Senior Circuit Judge:

This appeal presents the question whether a personal injury claim based on breach of warranty on a consumer product is cognizable under the Magnuson-Moss Warranty Act, 15 U.S.C. Secs. 2301-2312 (1982). The plaintiffs filed suit under the Magnuson-Moss Warranty Act (MMWA) and the Texas Deceptive Trade Practices Act, alleging that they sustained personal injuries and other incidental damages from exposure to formaldehyde fumes within a mobile home manufactured by one defendant and sold by another defendant. The district court ruled that state law determines both the type and the amount of damages that are recoverable under the MMWA. Because Texas law allows the recovery of damages for a personal injury caused by a breach of an implied warranty, the court held that such a claim could be brought in federal court under the MMWA. The jury returned a verdict for the plaintiffs. We hold that personal injury claims arising from breach of warranty are not cognizable under the MMWA. Accordingly, we vacate the judgment and remand with instructions to dismiss the case for lack of subject matter jurisdiction.

I.

FACTS

The plaintiffs, Sue Boelens and her minor daughters Jennifer Renea and Juli Marie, purchased a mobile home in March 1980 that was sold by the defendant Republic Homes of Texas, Inc. and manufactured by the defendant Redman Homes, Inc. It was assembled from wood products that contained urea formaldehyde resin as a bonding agent. The United States Department of Housing and Urban Development inspected and certified the home. The seller did not tell Mrs. Boelens that the home contained formaldehyde. While living in the home in Scurry, Texas, from April to September 1980, the plaintiffs experienced various physical problems and noticed an unpleasant odor. Toward the end of the summer of 1980, Juli was hospitalized and diagnosed as having viral hepatitis. Five months later, after learning that Juli had been exposed to formaldehyde in her home, Juli's physician changed his final diagnosis to chemical hepatitis caused by exposure to formaldehyde fumes.

The plaintiffs filed suit, alleging that they sustained personal injuries and incidental economic damages, 1 predicating jurisdiction upon the MMWA, 15 U.S.C. Secs. 2301-2312 (1982), and 28 U.S.C. Sec. 1331 (1982). The plaintiffs added pendent claims for strict products liability, negligent failure to warn of a health hazard, breach of express and implied warranties under the Texas Uniform Commercial Code, and violation of the Texas Deceptive Trade Practices Act (DTPA), Tex.Bus. & Comm.Code Ann. Secs. 17.41-17.63 (Vernon Supp.1984). The plaintiffs also sought common law punitive

Page 1061

damages and treble damages under the DTPA.

The defendants filed cross-claims for contribution and indemnity against various suppliers of the component parts used in the assembly of the mobile home. One of the third party defendants, Manville Forest Products Corp., filed a motion to dismiss on the ground that the MMWA provides only for the recovery of economic damages and not for the recovery of personal injury damages. Because the plaintiffs in their complaint had asked for economic damages of less than $50,000--the amount-in-controversy requirement of the MMWA--Manville argued that the court should dismiss for lack of subject matter jurisdiction. The court denied Manville's motion in an order concluding that the MMWA federalizes state warranty law and that the plaintiffs' claim under Texas law for personal injury damages for breach of warranty was therefore properly before the court. The district court subsequently approved settlement agreements with some of the third party defendant suppliers, and, over the objections of the defendants, severed the cross-claims and third-party claims against the suppliers.

The case was tried before a jury in April 1983. The jury found that the mobile home was unfit for human habitation and that both of the defendants knowingly violated the DTPA and were grossly negligent in their failure to warn of the formaldehyde fumes in the mobile homes. The jury found actual damages of $178,903.80 and assessed $112,500 in common law punitive damages and $93,750 in discretionary damages under the DTPA. The district court entered judgment for the actual and punitive damages, then later granted a motion for JNOV with respect to $20,000 of future medical expenses. The district court also awarded $236,854.94 to the plaintiffs for attorneys fees, costs, and expenses, and amended the judgment to allow the defendants a $120,000 credit against actual damages on account of the plaintiffs' pretrial settlements with third party suppliers of components for the mobile home. This appeal followed.

II.

A CLAIM FOR PERSONAL INJURY DAMAGES FOR BREACH OF WARRANTY

IS NOT COGNIZABLE UNDER THE MMWA

  1. Overview of the MMWA

    The Magnuson-Moss Warranty Act 2 was Congress's first comprehensive attempt to deal at the federal level with problems of consumer warranties. 3 "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). As Judge Jesse E. Eschbach put it, "One of the prime concerns addressed in the Act was the warranty wherein the large print giveth but the small print taketh away." Gorman v. Saf-T-Mate, Inc., N.D.Ind.1981, 513 F.Supp. 1028, 1035. The Act creates minimum disclosure standards for written consumer product warranties and defines minimum content standards for such warranties. The Act does not require that a seller give a warranty on a consumer product, but if a warranty is given, it must comply with the terms of the Act.

    A written warranty for a consumer product costing more than ten dollars is subject to the following substantive obligations of the Act. The warranty must be "clearly and conspicuously" designated as a "full"

    Page 1062

    or a "limited" warranty. 15 U.S.C. Sec. 2303 (1982). A "full" warranty must comply with certain minimum standards:

    1. The party obligated under a full warranty must remedy defective products without charge. Id. Sec. 2304(a)(1).

    2. No limitation may be imposed on the duration of any state law implied warranty on the product. Id. Sec. 2304(a)(2).

    3. The warrantor may not exclude or limit consequential damages for breach of any written or implied warranty on the product, unless such exclusion or limitation conspicuously appears on the face of the warranty. Id. Sec. 2304(a)(3).

    4. If the product or a component thereof is defective after a reasonable number of attempts by the warrantor to remedy the defects, the warrantor must permit the consumer to elect either a refund or replacement without charge of the product. Id. Sec. 2304(a)(4).

    Although "limited" warranties are not subject to these standards, the Act does provide that the terms of a limited warranty may limit the duration of implied warranties only to the duration of the written warranty, and such limitation must be "conscionable" and "set forth in clear and unmistakable language and prominently displayed on the face of the warranty." Id. Sec. 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. Sec. 2302(a). 4

    The MMWA confers both public and private enforcement powers. The Federal Trade Commission or the Attorney General may sue to restrain any warrantor from making a deceptive warranty or from violating the Act. Id. Sec. 2310(c). The FTC may treat a violation of the Act as an unfair or deceptive trade practice under the Federal Trade Commission Act, 15 U.S.C. Sec. 45(a)(1) (1982). 15 U.S.C. Sec. 2310(b) (1982). The private enforcement rights conferred by the MMWA are perhaps the most far-reaching aspects of the statute. 5 The scope of those rights is at issue in this case. We now turn to that issue.

  2. The Scope of Private Enforcement Rights Under the MMWA

    The provisions of the MMWA that create a private cause of action permit a "consumer" 6 to sue a warrantor for (1) a violation

    Page 1063

    of the substantive provisions of the Act, or (2) breach of a written or implied warranty. Specifically, in Sec. 2310 the Act provides:

    (d)(1) Subject to subsection (a)(3) 7 and (e) of this section, a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service...

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