Liberty Lincoln-Mercury, Inc. v. Ford Motor Co.

Decision Date28 May 1998
Docket NumberCivil Action No. 96-6037(MTB).
Citation8 F.Supp.2d 450
CourtU.S. District Court — District of New Jersey

Eric Lewis Chase, Bressler, Amery & Ross, Morristown, NJ, Norman I. Klein, Carlet, Garrison & Klein, Clifton, NJ, for Plaintiff.

Dennis Richard La Fiura, Pitney, Hardin, Kipp & Szuch, Morristown, NJ, for Defendant.


BARRY, District Judge.

This matter comes before the court upon the motion of plaintiff Liberty Lincoln-Mercury, Inc. ("Liberty") for summary judgment pursuant to Fed.R.Civ.P. 56(a) and the cross-motion of defendant Ford Motor Company ("Ford") for summary judgment pursuant to Fed.R.Civ.P. 56(b). The court has reviewed the submissions of the parties without oral argument pursuant to Fed.R.Civ.P. 78. For the reasons discussed below, plaintiff's motion will be denied and defendant's cross-motion will be granted.

In this, the third round in a series of lawsuits involving these parties, Liberty asks this court to further test the boundaries of N.J.S.A. 56:10-15 (the "Automobile Warranty Reimbursement Act" or the "Act"), which regulates the amount of reimbursement an automobile manufacturer must pay its dealers for repairs made pursuant to the manufacturer's warranty, and under which Liberty was granted relief by this court approximately two years ago.1 In this round, however, rather than seeking redress under the statute with respect to repairs made pursuant to Ford's new car "warranty," Liberty asks the court to apply the same statutory framework to repairs made pursuant to Ford's "extended service plan contracts," otherwise known as "ESPs."

The competing motions raise one core issue: whether Ford's ESPs should be considered "warranties" as that term is used in N.J.S.A. 56:10-15. If so, argues Liberty, Ford's refusal to pay ESP claims at retail violates the warranty reimbursement and prohibited practices provisions of the Act. If not, argues Ford, the provisions of the parties' Sales and Service Agreements — and lower reimbursement rates — control. Because this issue is narrowly focused and the facts surrounding the matter have, in large part, already been set forth by this court in Liberty Lincoln-Mercury, Inc. v. Ford Motor Company, 923 F.Supp. 665 (D.N.J.1996), aff'd in part, rev'd and vacated in part on other grounds, 134 F.3d 557 (3d Cir.1998), the court's discussion of the facts herein will be brief and limited to the issue at hand.


Ford manufactures motor vehicles, including Lincoln and Mercury vehicles, which are sold to a nationwide network of authorized dealers, including Liberty. Amended Complaint at ¶¶ 10, 12. The parties' relationship is governed by a Lincoln Sales and Service Agreement and a Mercury Sales and Service Agreement (collectively the "Sales and Service Agreements"). Id. at ¶ 13; Certification of Robert X. Robertazzi ("Robertazzi Cert."), Exhibits A-C. Each new vehicle Ford sells to its dealers for resale to consumers carries with it a standard written Ford new vehicle limited warranty, Affidavit of Bruce L. Ayres ("Ayres Aff.") at ¶ 2, which contains a bumper to bumper warranty, as well as separate warranties covering items such as safety restraints, corrosion, federal emissions control systems, and noise emissions (collectively the "limited warranty"). See Ford's 1996-Model Warranty Informational Booklet annexed to id., Exhibit A.

The bumper to bumper warranty provides that "[a]uthorized Ford dealers will repair, replace or adjust all parts of your vehicle (except tires) that are defective in factory-supplied materials or workmanship for 3 years or 36,000 miles (whichever occurs first)." Id., Exhibit A at 5. The safety restraints and corrosion warranties provide similar language, albeit with varying warranty lives. Id., Exhibit A at 6. The emissions defect warranty also provides similar protection, but adds the following language:

Ford warrants that your vehicle or engine:

• is designed, built, and equipped to conform, at the time it is sold, with the emissions regulations of the U.S. Environmental Protection Agency (EPA), and

• is free from defects in factory-supplied materials and workmanship which could cause it to fail to conform with applicable EPA regulations.

Id., Exhibit A at 12.

Because the cost of the limited warranty is built into each new vehicle sales transaction between Ford and the dealer and between the dealer and the end consumer, id. at ¶ 2, the consumer does not pay any additional consideration for the limited warranty. Neither dealers (from Ford) nor consumers (from dealers) can purchase new vehicles without the limited warranty. Id. at ¶ 3.

In addition to the limited warranty, Ford offers several versions of ESPs, which provide additional repair cost protection during the lifetime of the ESP contract. Id. at ¶ 20; Certification of Eric L. Chase, Exhibit E. In this regard, Ford's 1996-Model Warranty Informational Booklet provides as follows:

You can get additional protection for your new car or light truck by buying a Ford Extended Service Plan (Ford ESP). Ford ESP is an optional service contract, backed and administered by Ford. Ford ESP provides repair cost protection after the Bumper to Bumper Warranty expires and other benefits during the warranty, such as rental reimbursement and certain covered maintenance and wear items.

You can buy Ford ESP from any participating Ford Motor Company dealer. Ford ESP is the only extended service program with the Ford name on it and the only service contract backed by Ford Motor Company.

* * * * * *

When you buy Ford ESP, you receive peace of mind protection throughout the United States and Canada by a network of more than 5,100 participating Ford Motor Company dealers.

Id., Exhibit A at 25.

Ford sells ESPs to its participating dealers and the dealers, in turn, offer the ESPs for sale to owners of new and used Ford, Lincoln, and Mercury vehicles. Id. at ¶ 12. Ford's dealer prices range from just under $100 to over $2000, depending upon which ESP version is chosen. Id. at ¶ 13. Ford provides each dealer with manufacturer's suggested retail prices for the ESPs, which range from about $200 to over $3,500. Id. at ¶ 13. While dealers typically are not obligated to sell ESPs, approximately 80% choose to do so. Id. at ¶ 14. Dealers are also permitted to sell extended service contracts that compete with Ford's ESPs, and over 60% sell some form of competing service contract. Id. at ¶ 15. Additionally, although even Liberty concedes that ESPs typically represent optional and separate contracts offered at an additional cost, Plaintiff's Brief in Support of Motion for Summary Judgment at 6, it appears that at least one dealer occasionally absorbs the cost of ESPs at the time of the original new car transaction as an incentive to new car buyers. See Certification of Genevieve K. LaRobardier, Exhibit A; see also March 16, 1998 Letter from Defendant's Counsel.

When a dealer repairs a component covered by an ESP, it is reimbursed by Ford at a prescribed labor rate multiplied by the applicable Ford Service Time Standard for the repair involved. Ayres Aff. at ¶ 26. Dealers are also reimbursed for parts supplied in performing ESP-covered repairs according to formulae that provide for reimbursement at predetermined markups over dealer cost, depending upon the model year of the vehicle. Id.; Robertazzi Cert. at ¶ 11; Certification of Kurt R. Olcheski at ¶ 4. As discussed in Liberty Lincoln-Mercury, Inc. v. Ford Motor Company, 923 F.Supp. at 666-69, this framework was also used by Ford to determine reimbursement rates for repairs made pursuant to its limited warranty until this court found that the framework, and its accompanying surcharge scheme, violated N.J.S.A. 56:10-15. Id. at 668-69. The crux of this lawsuit is whether Ford's ESPs are subject to the same statutory requirements, a dispute that, given the difference in reimbursement rates, is more than merely academic.


In construing a New Jersey statute, the court's fundamental task is to effectuate the intent of the legislature in light of the language used and the objectives sought to be achieved. Lesniak v. Budzash, 133 N.J. 1, 8, 626 A.2d 1073 (1993) (citations omitted); State v. Maguire, 84 N.J. 508, 514, 423 A.2d 294 (1980). "[T]he first step is [to examine] the provisions of the [statute] to ascertain whether they are expressed in plain language that ... clearly and unambiguously yields only one interpretation." Richard's Auto City, Inc. v. Director, Div. of Taxation, 140 N.J. 523, 531, 659 A.2d 1360 (1995) (citations omitted); see also Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U.S. 827, 835, 110 S.Ct. 1570, 108 L.Ed.2d 842, (1990). If so, the unambiguous words used in the statute will carry their ordinary and well-understood meanings unless the statute "explicitly indicate[s]" that the words are to carry "special meanings." State v. Mortimer, 135 N.J. 517, 532, 641 A.2d 257 (1994), cert. denied, Mortimer v. New Jersey, 513 U.S. 970, 115 S.Ct. 440, 130 L.Ed.2d 351 (1994) (citations omitted); State v. Afanador, 134 N.J. 162, 171, 631 A.2d 946 (1993) (citations omitted). In any event, the court need not resort to materials outside the text of the statute unless the statute is unclear or ambiguous. State v. Sutton, 132 N.J. 471, 479, 625 A.2d 1132 (1993); State v. Butler, 89 N.J. 220, 226, 445 A.2d 399 (1982); see also Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992).

That having been said, the Act provides as follows:

If any motor vehicle franchise shall require or permit motor vehicle franchisees to perform services or provide parts in satisfaction of a warranty issued by the motor vehicle franchisor: (a) The motor vehicle franchisor shall reimburse each motor vehicle franchisee for such services as are rendered and for such parts as are supplied, in an amount equal to the prevailing retail price charged...

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1 cases
  • Liberty Lincoln-Mercury, Inc. v. Ford Motor Co.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • March 17, 1999
    ...exercise of statutory construction can [Ford's ESPs] ... fall within the purview of the [FPA]." Liberty Lincoln-Mercury, Inc. v. Ford Motor Co., 8 F.Supp.2d 450, 457 (D.N.J.1998) (Liberty III ). We reject the district court's characterization of Ford's ESPS. This Court concludes an ESP cont......

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