General Motors Corp. v. Abrams
| Decision Date | 18 January 1989 |
| Docket Number | No. 86 Civ. 9193 (CSH).,86 Civ. 9193 (CSH). |
| Citation | 703 F. Supp. 1103 |
| Parties | GENERAL MOTORS CORPORATION, Plaintiff, v. Robert ABRAMS, Attorney General of the State of New York, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Weil, Gotshal & Manges, New York City, for plaintiff; Richard J. Davis, Carl J. Munson, Jonathan M. Polk, Francis H. Dunne, David A. Collins, George Velez, of counsel.
Robert Abrams, Atty. Gen., State of N.Y., New York City, for defendant; Peter Bienstock, Asst. Atty. Gen., In Charge John W. Corwin, Stephen Mindell, Doris Ling, Mary M. Gundrum, Asst. Attys. Gen., of counsel.
Defendant's motion to dismiss the complaint and plaintiff's cross-motion for summary judgment raise the issues of (1) whether a Federal Trade Commission consent order can ever preempt state legislation; and (2) if it can, whether a particular consent order negotiated by the Commission and plaintiff preempts New York's "Lemon Law."
The Federal Trade Commission (FTC) was established by Congress in 1914 as an independent agency of the federal government. The FTC is empowered and directed by Congress to prevent, among other things, "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce" by persons, partnerships or corporations. 15 U.S.C. § 45(a)(1). Congress authorized the FTC, when the latter had reason to believe that such prohibited acts were occurring, to "issue and serve upon such person, partnership, or corporation a complaint stating its charges in that respect and containing a notice of a hearing ..." § 45(b). The statute further authorizes the FTC, after the hearing, to issue cease and desist orders. Ibid. The FTC is further authorized to compromise litigation it initiates by the entry of consent orders. See, e.g., Russo v. Texaco, Inc., 630 F.Supp. 682, 684-85 (E.D.N.Y.), aff'd., 808 F.2d 221 (2d Cir.1986).
In 1980 the FTC issued a complaint against plaintiff General Motors Corporation (GM), charging that it failed to notify consumers about serious problems, or "defects," in certain cars and light trucks GM manufactured. General Motors Corp., 102 F.T.C. 1741. The complaint alleged three specific defects in the powertrain components of a large number of GM vehicles. Before trial, counsel for GM and the FTC negotiated a proposed consent agreement and order, which the FTC preliminarily approved and published for public comment. 48 Fed.Reg. 20730 (1983). After reviewing the public comments, which included written and oral objections of numerous states attorney general (including New York's) that the order gave insufficient protection to consumers, the FTC approved and issued the order on November 16, 1983. 102 F.T.C. 1749. Section IV of the consent order requires GM to "implement a nation-wide third-party arbitration program to settle complaints of individual owners relating to powertrain components." Id. at 1761.
GM implemented that arbitration program. In September 1986 Daniel Oliver, the FTC's chairman, was able to announce that over the first twenty months of the program, more than 100,000 consumers received in excess of $40 million in awards and 97 percent of those completing the program received an award. GM says in its motion papers, without contradiction, that over $3,000,000 of this amount went to New York residents. Affidavit of Francis H. Dunne at ¶ 12. Chairman Oliver went on to say that Oliver September 1986 statement, attached as Ex. 5 to Dunne affidavit.
In 1983, the New York legislature enacted its "Lemon Law," codified as § 198-a of the state's General Business Law (GBL). The 1983 Lemon Law created for the first time in New York a statutory warranty. Car manufacturers were required to repair free of charge any new car which did not conform to all of the manufacturer's express warranties for a statutorily specified period of time: the earlier of the first 18,000 miles of operation, or two years from delivery. § 198-a(b). If the manufacturer, its agents or authorized dealers could not repair any defect or condition "which substantially impairs the value of the motor vehicle to the consumer after a reasonable number of attempts," the car was branded beyond hope of redemption a "lemon," and the manufacturer required to give the purchaser, at the latter's option, a full refund or a new car. § 198-a(c). A "reasonable number of attempts" was defined by the statute as four attempts, or if the car was out of service for repairs for a cumulated total of 30 or more days. § 198-a(d). Car purchasers were granted a private right of action to seek Lemon Law remedies in court, § 198-a(j); however, before going to court, purchasers were required to resort to a manufacturers arbitration program if the manufacturer had one, and if that program was in compliance with federal regulations promulgated pursuant to the federal Magnuson-Moss warranty—Federal Trade Commission Improvement Act, §§ 101 et seq., codified at 15 U.S.C. §§ 2301 et seq. (1982).
In 1986, the New York legislature amended the state's Lemon Law. One of the 1986 amendments required that if, and only if, a manufacturer offers an arbitration program to New York consumers, that program must include the Lemon Law remedies. That is to say, if an arbitrator determines that a car has a defect which substantially impairs its value, and which has not been repaired after a reasonable number of attempts (statutorily defined), then the purchaser must be offered the option of a full refund or replacement. GBL § 198-a(g), (m)(1)(iii). Other 1986 amendments to the New York Lemon Law required arbitrators to be trained and familiar with the terms of that statute, and permitted consumers to make oral presentations during arbitration, § 198-a(m)(1)(i); required that the arbitration system comply with federal law to the extent federal law applies, § 198-a(m)(1)(ii); required that consumers be provided with a Lemon Law "bill of rights" at the time of arbitration, § 198-a(m)(2); and directed that certain prescribed records be kept by the manufacturer, § 198-a(m)(3).
The 1986 amendments to the New York Lemon Law provide, in § 198-a(g), that "if a manufacturer has established an informal dispute settlement mechanism," then that "mechanism" must provide the Lemon Law remedies, including the purchaser's option of refund or replacement in the event of specified circumstances. As noted, GM was required by the FTC consent order to implement a nationwide arbitration program in respect of the defects addressed by that order. New York is a state of the federal union; and, in obedience to the consent order, GM has implemented the form of arbitration contemplated by the consent order in that state. It necessarily follows, the defendant Attorney General argues, that GM has "established an informal dispute settlement mechanism" in New York within the ambit of the Lemon Law; and consequently GM must comply with that statute, including the 1986 Amendments.
When the Attorney General made his perception manifest, GM commenced this action to declare the Lemon Law preempted as to it by the FTC consent order, and accordingly unenforceable. The Attorney General moves under Rule 12(b)(6), F.R. Civ.P., to dismiss the complaint for failure to state a claim upon which relief can be granted. GM cross-moves for summary judgment granting it the relief demanded in its complaint.
The briefs and affidavits, together with affidavits submitted in respect of GM's summary judgment motion, clearly delineate the two decisive issues. The first is whether a FTC consent order can ever, in any circumstances, preempt state law. The second issue is whether, assuming consent orders may have preemptive power, under the specific facts of this case the order entered by the FTC in 1983 involving GM preempts the 1986 amendments to New York's Lemon Law. The Attorney General contends that consent orders can never preempt state law; but if they could, the consent order at bar does not preempt the statute at bar. GM argues that consent orders can preempt state law, and that this one does so.
It seemed to me useful to invite the FTC to submit a brief amicus curiae on these two questions. That invitation produced two responses. The first is a brief of the FTC as amicus curiae, signed by members of the agency's office of general counsel. That brief argues that FTC consent orders may preempt state law in principle, but that in practice this particular order does not preempt this particular statute.
The Court's invitation also produced a "statement" of FTC Chairman Oliver. Chairman Oliver agrees that FTC consent orders can have preemptive effect upon state laws. In his view, however, the consent order at bar operates to preempt the Lemon Law.
The Attorney General objects to the submission of Chairman Oliver's statement, which in judicial parlance we would call a dissent. The Attorney General says I should not consider the agency chairman's response because it does not speak for the Commission. I do not agree. My invitation to the agency constituted a request by a court (curia) for assistance from a friend (amicus). One cannot have too many friends in this troublous world; and that is true, even if friends may disagree with each other. In this case, two friends in a position to do so undertake to assist the Court. I am grateful for, and will consider, the contributions of both.
The threshold issue is whether an FTC consent order of the sort at bar can ever preempt state law. If it cannot, all other issues become moot.
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General Motors Corp. v. Abrams
...the field," to the exclusion of state regulation, within the narrow context of disputes between GM and its consumers. 703 F.Supp. 1103, 1111 (S.D.N.Y.1989). The district court further held that the Lemon Law conflicts with the arbitral processes mandated by the FTC Order in a manner creatin......