Curl v. Volkswagen of Am., Inc., 2006-0115.

Citation114 Ohio St.3d 266,871 N.E.2d 1141,2007 Ohio 3609
Decision Date18 July 2007
Docket NumberNo. 2006-0115.,2006-0115.
PartiesCURL, Appellee, v. VOLKSWAGEN OF AMERICA, INC., Appellant.
CourtUnited States State Supreme Court of Ohio

Kehoe & Associates, L.L.C., Robert D. Kehoe, and J. Brian Kenney, Cleveland, for appellant.

O'DONNELL, J.

{¶ 1} Two questions of law are presented to this court for resolution on this appeal: one, does Ohio law require privity of contract between parties in order to recover on a claim for breach of an implied warranty pursuant to the federal Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, Section 2301 et seq., Title 15, U.S.Code; and two, as a matter of law, what constitutes a new motor vehicle, as that term is used in R.C. 1345.71 et seq., Ohio's Nonconforming New Motor Vehicle Law, also known as the Lemon Law.

{¶ 2} In the matter before us, Volkswagen of America, Inc., an automobile manufacturer, appeals from a decision of the Trumbull County Court of Appeals, which affirmed the trial court's order granting summary judgment in favor of David Curl, the purchaser of a 2002 Volkswagen Beetle, and held that Volkswagen breached its implied warranty of merchantability and violated Ohio's Lemon Law. For the reasons that follow, we reverse that decision.

{¶ 3} As the court of appeals reflected in its opinion, Stadium Lincoln-Mercury, d.b.a. Stadium Volkswagen ("Stadium") and located in Youngstown, Ohio, purchased a 2002 Volkswagen Beetle from Volkswagen of America and placed it into service as part of its rental fleet on July 31, 2001. See Curl v. Volkswagen of America, Inc., Trumbull App. No. 2004-T-0112, 2005-Ohio-6420, 2005 WL 3274992, at ¶ 3.

{¶ 4} Thereafter, on March 12, 2002, Volkswagen issued a recall notice for certain vehicles, including the 2002 model-year Beetle, to repair or replace wiring that posed a risk of fire in the antilock braking systems. Stadium, however, never performed the recall service work on the 2002 Beetle in its rental fleet.

{¶ 5} On June 24, 2002, Stadium sold the Beetle to David Curl for $17,000. The purchase agreement disclosed that the car had been used as a rental vehicle and that it registered 10,435 miles on the odometer. On August 19, 2002, after driving it for 4,149 miles, Curl had the Beetle towed to Stadium because the engine would start but not stay running and because smoke was emanating from it. At that time, the dealership provided Curl with a substitute vehicle. The dealership's service technicians ultimately discovered that wiring in the antilock braking system melted and burned, and as a result, they repaired the vehicle pursuant to its express warranty. Stadium made the vehicle available to Curl on November 12, 2002, 84 days after he brought the car in for repairs.

{¶ 6} On December 12, 2002, Curl sued Volkswagen in the Trumbull County Court of Common Pleas and raised three claims: first, breach of a written warranty, pursuant to the federal Magnuson-Moss Warranty Act; second, breach of an implied warranty of merchantability, also pursuant to the Magnuson-Moss Warranty Act; and, third, violation of the Ohio Lemon Law.

{¶ 7} Curl and Volkswagen filed cross-motions for partial summary judgment with respect to the implied warranty and Lemon Law claims, and the trial court granted partial summary judgment in favor of Curl on both issues. Specifically, the court ruled that, notwithstanding a lack of contractual privity between Volkswagen and Curl, Volkswagen had violated its implied warranty of merchantability pursuant to the Magnuson-Moss Warranty Act and had breached its duty, pursuant to the Lemon Law, to conform the vehicle to its express warranty. Consequently, in accordance with the remedies provided in R.C. 1345.71 et seq., the trial court ordered Volkswagen to retake possession of the vehicle, refund Curl's payments on the vehicle, and pay off any automobile loan. The court also scheduled a hearing to determine damages and granted leave to Curl to seek attorney fees and costs. Curl and Volkswagen then agreed to dismiss the express warranty claim, and the trial court determined, pursuant to Civ.R. 54(B) that no just reason existed to delay appeal from its order granting summary judgment.

{¶ 8} Volkswagen appealed to the Trumbull County Court of Appeals, contending that lack of privity precluded the breach of implied warranty claim and further contending that the 2002 Beetle was not a new motor vehicle and, therefore, not subject to the protections of the Lemon Law. Curl responded that privity is not required for a breach of implied warranty claim pursuant to Magnuson-Moss Warranty Act and that the Lemon Law applied to his vehicle because he had reported the nonconformity within one year of the date that he took delivery of the vehicle.

{¶ 9} The court of appeals affirmed the trial court's order and concluded that Volkswagen, breached its implied warranty of merchantability and violated Ohio's Lemon Law because the vehicle qualified as a new motor vehicle for purposes of R.C. Chapter 1345. Volkswagen appealed those determinations to this court, and we granted discretionary review in order to determine first, whether an automobile purchaser may assert a claim for breach of implied warranty of merchantability, pursuant to the Magnuson-Moss Warranty Act, against a manufacturer with whom the purchaser is not in privity; second, whether, under the Magnuson-Moss Warrant Act, a manufacturer may limit the remedies available for violation of an implied warranty arising from state law; and, third, whether Curl's vehicle qualifies as a new motor vehicle for purposes of the Ohio Lemon Law. We address each issue in turn.

Magnuson-Moss Warranty Act

{¶ 10} Congress enacted the Magnuson-Moss Warranty Act, Section 2301 et seq., Title 15, U.S.Code, in 1975 in response to what it perceived to be widespread misuse by merchants of express warranties and disclaimers. Taylor, Read the Fine Print: Alabama Supreme Court Rules that Binding Arbitration Provisions in Written Warranties are Okay (2001), 2001 J.Disp.Resol. 165, fn. 2. The Act establishes a federal right of action for consumers to enforce written or implied warranties against suppliers, warrantors, or service contractors. Hyundai Motor Am., Inc. v. Goodin (Ind.2005), 822 N.E.2d 947, 951. In addition to these protections, the Act limits the ability of manufacturers to disclaim or modify implied warranties in cases where they have offered express warranty protection. Id. The Act does not, however, establish new implied warranties or otherwise modify the implied warranties existing according to state law. Instead, the Act looks to the governing state law and adopts the implied warranty protections already established.

{¶ 11} Relevant to this case is Section 2310(d)(1), Title 15, U.S.Code, which states that "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 contract, may bring suit for damages and other legal and equitable relief." (Emphasis added.) Section 2301(7) defines "implied warranty" as "an implied warranty arising under State law * * * in connection with the sale by a supplier of a consumer product."

{¶ 12} Because the Act does not alter state law regarding implied warranty claims, nothing in the Act obviates state law privity requirements for these actions, and, where necessary, a party is required to establish privity to maintain a claim. Abraham v. Volkswagen of Am., Inc. (C.A.2, 1986), 795 F.2d 238, 249. Therefore, "whether privity is a prerequisite to a claim for breach of implied warranty under the Magnuson-Moss Act * * * hinges entirely on the applicable state law." Voelker v. Porsche Cars N. Am., Inc. (C.A.7, 2003), 353 F.3d 516, 525; see, also, Gill v. Blue Bird Body Co. (C.A.11, 2005), 147 Fed.Appx. 807; Haugland v. Winnebago Indus. (D.Ariz.2004), 327 F.Supp.2d 1092; Mesa v. BMW of N. Am., L.L.C. (Fla.App. 2005), 904 So.2d 450; Mekertichian v. Mercedes-Benz U.S.A., L.L.C. (2004), 347 Ill.App.3d 828, 283 Ill.Dec. 324, 807 N.E.2d 1165.

{¶ 13} The first issue in this case, therefore, is whether Ohio law requires privity of contract between a consumer and an automobile manufacturer in order for the consumer to maintain an action against the manufacturer for breach of implied warranty.

{¶ 14} Volkswagen contends that automobile purchasers may assert such a claim only against parties with whom they are in privity, i.e., only against those parties immediately connected in the distribution chain. It urges that because it did not sell the vehicle to Curl, no privity of contract exists, which precludes Curl from successfully prosecuting this claim.

{¶ 15} Curl contends that Ohio law does not require privity in this situation, but that to the extent it is required, the dealer from whom he purchased the automobile acted as Volkswagen's agent, establishing the requisite privity.

{¶ 16} This court considered privity of contract in the Ohio Uniform Commercial Code context in United States Fid. & Guar. Co. v. Truck & Concrete Equip. Co. (1970), 21 Ohio St.2d 244, 50 O.O.2d 480, 257 N.E.2d 380, in which Truck and Concrete Equipment Company manufactured and sold a truck to Auto Fleet Lease Company, an agency that leased the truck to Nicholson Concrete and Supply Company. Nicholson insured the truck with United States Fidelity and Guaranty Company ("Fidelity"), but during Nicholson's use of the truck, the concrete mixer fell off the chassis, damaging the chassis and the mixer. Fidelity paid Nicholson, its insured, for the damage and then, as subrogee, filed suit against Truck and Concrete, the manufacturer, alleging that Truck breached its implied warranty of merchantability pursuant to Ohio's Uniform Commercial Code.

{¶ 17} In rejecting Fidelity's claim for...

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