Motor Vehicle Mfrs. Ass'n of US, Inc. v. Abrams

Decision Date28 October 1988
Docket NumberNO. 86 CIV 9592 (LBS).,86 CIV 9592 (LBS).
Citation697 F. Supp. 726
PartiesMOTOR VEHICLE MANUFACTURERS ASSOCIATION OF the UNITED STATES, INC. and Automobile Importers of America, Inc., Plaintiffs, v. Robert ABRAMS, Attorney General of the State of New York, Defendant.
CourtU.S. District Court — Southern District of New York


Hughes Hubbard & Reed, New York City and Philip A. Lacovara, William R. Stein, Edward J. Rubenstein, Washington, D.C., for plaintiffs.

William H. Crabtree, Detroit, Mich., for Motor Vehicle Mfrs. Ass'n of the U.S., Inc.

Charles H. Lockwood, II, Detroit, Mich., John T. Whatley, for Auto. Importers of America, Inc.

Robert Abrams, Atty. Gen. of State of N.Y., New York City, John W. Corwin, Jane M. Azia, Sara Nathan, Mary Hilgeman, Asst. Attys. Gen., for defendant.


SAND, District Judge.


The Motor Vehicles Manufacturers Association and the Automobile Importers of America here challenge several provisions of the New York State "Lemon Law", N.Y. General Business Law ("G.B.L.") § 198-a (McKinney 1988), alleging that under the Supremacy Clause they are pre-empted by the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act, §§ 101 et seq., codified at 15 U.S.C. §§ 2301 et seq. (1982), and the regulations promulgated thereunder by the Federal Trade Commission ("F.T.C." or "Commission"), at 16 C.F.R. § 703 (1988). The matter is before us on a motion for partial summary judgment brought by the Plaintiffs and a motion to dismiss brought by the Defendant Attorney General.

The Lemon Law was originally enacted in 1983 (Ch. 444, L.1983), and was amended in 1986 (Ch. 799, L.1986) to include provisions regulating dispute resolution mechanisms voluntarily established by automobile manufacturers. It is these amendments that are at issue here. We have previously determined in this same case that a 1987 amendment to the Lemon Law was invalid under the First and Fourteenth Amendments as a prior restraint on speech. See 684 F.Supp. 804 (S.D.N.Y.1988). Pending further submissions from the parties, we do not here decide the Plaintiffs' challenge under the Commerce Clause to still other provisions of the Lemon Law.

Neither the Lemon Law nor the Magnuson-Moss Act purports to require manufacturers to establish dispute resolution mechanisms. Rather, they both require a manufacturer who chooses to establish a mechanism to ensure that the mechanism meets certain criteria.

A mechanism that fails to comply with the Lemon Law would be unlawful in New York. G.B.L. § 198-a(g). If a mechanism fails to meet the federal standards, however, it is not unlawful under federal law. A mechanism that fails to comply with Magnuson-Moss simply cannot be incorporated into the written warranty, and the manufacturer cannot make the use of it a prerequisite to the consumer's right to bring a civil suit under the Act. See 15 U.S.C. §§ 2310(a)(2) and (3); 16 C.F.R. §§ 703.2(a) and (b)(3); F.T.C. Statement of Basis and Purpose (for Rule on Informal Dispute Settlement Mechanisms, 16 C.F.R. § 703), 40 Fed.Reg. 60,190, 60,191 (1975).


The Plaintiffs challenge the following specific provisions of the New York State Lemon Law:

1) a requirement that mechanisms allow oral hearings if the consumer so requests (G.B.L. § 198-a(m)(1)(i)). The F.T.C. regulations permit mechanisms to allow an oral presentation only if both warrantor and consumer expressly agree to the presentation (16 C.F.R. § 703.5(f)(1)).

2) a requirement making the arbitrator's decision binding on the manufacturer, while it is not binding upon the consumer (G.B.L. § 198-a(h)). The F.T.C. regulations provide that mechanism decisions are nonbinding, and require only that the warrantor act in good faith in deciding whether and to what extent it will abide by a mechanism decision (16 C.F.R. §§ 703.2(g), 703.5(j)).

3) a requirement that the arbitrators participating in such mechanisms be trained in arbitration and be familiar with the provisions of the New York State Lemon Law (G.B.L. § 198-a(m)(1)(i)). The F.T.C. regulations require only that the mechanism be competently staffed so as to ensure the fair and expeditious resolution of disputes (16 C.F.R. § 703.3(a)).

4) additional recordkeeping requirements beyond those that would satisfy Magnuson-Moss (G.B.L. § 198-a(m)(3)). Compare the F.T.C. recordkeeping requirements at 16 C.F.R. § 703.6.

5) a clause requiring that manufacturers' mechanisms comply with the federal regulations, and thereby suggesting that the State of New York might have enforcement powers with respect to the federal regulations (G.B.L. § 198-a(m)(1)(ii)). Federal law makes compliance optional (15 U.S.C. § 2310(a)(2) and (3); 16 C.F.R. § 703.2(a)) and vests in the F.T.C. enforcement authority over any mechanism to which a written warranty requires a consumer to resort (15 U.S.C. § 2310(a)(4) and (c)).

6) a requirement that a notice detailing the consumer's rights and responsibilities under state law, entitled "New Car Lemon Law Bill of Rights," be provided to consumers and arbitrators (G.B.L. § 198-a(m)(2)). Magnuson-Moss regulates written information provided to consumers relating to written warranties but not made part of a written warranty (15 U.S.C. § 2302(b)(1)(B)).

The state requirements enumerated above do not appear draconian. The state has made a policy decision that these measures would have a salutory effect upon the conduct of consumer dispute resolution, and perhaps they would. However, the question we must address is whether these measures can coexist with the policy determinations made and the measures enacted by Congress and the F.T.C.


"In determining whether a state statute is pre-empted by federal law and therefore invalid under the Supremacy Clause of the Constitution, our sole task is to ascertain the intent of Congress." California Federal Savings and Loan Ass'n v. Guerra, 479 U.S. 272, 107 S.Ct. 683, 689, 93 L.Ed.2d 613 (1987) (citing Shaw v. Delta Airlines, Inc., 463 U.S. 85, 95, 103 S.Ct. 2890, 2898, 77 L.Ed.2d 490 (1983) and Malone v. White Motor Corp., 435 U.S. 497, 504, 98 S.Ct. 1185, 1190, 55 L.Ed.2d 443 (1978)). Pre-emption "is not to be lightly presumed." California Fed. S. & L. v. Guerra, 107 S.Ct. at 689 (citing Maryland v. Louisiana, 451 U.S. 725, 746, 101 S.Ct. 2114, 2128, 68 L.Ed.2d 576 (1981)). Particularly when Congress legislates in a field traditionally occupied by the states, "we start with the assumption that the historic police powers of the States were not to be superseded by federal law and regulations unless that was the clear and manifest purpose of Congress." Pacific Gas & Electric Co. v. Energy Resources Comm'n, 461 U.S. 190, 206, 103 S.Ct. 1713, 1723, 75 L.Ed.2d 752 (1983) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)). Because consumer protection and warranty law is a field traditionally occupied by the states, which Congress entered only in 1975 with the passage of Magnuson-Moss (Chrysler Corp. v. Texas Motor Vehicle Comm'n, 755 F.2d 1192, 1205 (5th Cir.1985)), compelling evidence of an intention to pre-empt is required in this area. See Environmental Encapsulating Corp. v. City of New York, 855 F.2d 48, 58 (2d Cir.1988).

There are three well-established situations in which a court should find a state statute to have been pre-empted. The first arises when Congress has expressly stated its intention that state law be pre-empted. Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977). Absent express pre-emption, implied pre-emption is found where the scheme of federal regulation is so comprehensive that it is reasonable to infer that Congress intended to occupy the field, and that it "left no room" for supplementary state regulation (Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)). Even where Congress has not completely displaced state regulation in a certain field, state law is pre-empted to the extent it actually conflicts with federal law, either because "compliance with both federal and state regulations is a physical impossibility" (Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963)), or because the state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress" (Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941)). See California Fed. S. & L. v. Guerra, 107 S.Ct. at 689; Michigan Canners & Freezers Ass'n, Inc. v. Agricultural Marketing & Bargaining Bd., 467 U.S. 461, 469, 104 S.Ct. 2518, 2522, 81 L.Ed.2d 399 (1984); Fidelity Federal Savings & Loan Ass'n v. De la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982).

"Federal regulations have no less pre-emptive effect than federal statutes." Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. at 153, 102 S.Ct. at 3022; see Environmental Encapsulating v. City, supra, at 53. Where Congress has directed an agency to exercise discretion in fulfilling congressional policy, and where the agency thereupon promulgates regulations intended to pre-empt state law, the agency's decision to pre-empt will be upheld as long as it "represents a reasonable accommodation of conflicting policies that were committed to the agency's care by the statute ... unless it appears from the statute or its legislative history that the accommodation is not one that Congress would have sanctioned." Fidelity Fed. S. & L. v. De la Cuesta, 458 U.S. at 154, 102 S.Ct. at 3023 (quoting United States v. Shimer, 367 U.S. 374, 383, 81 S.Ct. 1554, 1560, 6 L.Ed.2d 908 (1961)); see Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 699-700, 104 S.Ct. 2694, 2700, 81 L.Ed.2d 580 (1984). The mere fact that a federal agency has promulgated comprehensive regulations in a field is not sufficient to pre-empt...

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