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Can Consumers Sue for Breach of Expired Warranties?

March 10, 2014 in  News

This article was first published on Network

Among the typical claims asserted in most consumer product class actions is breach of express warranty.  With a view toward nationwide class certification, many experienced class counsel believe they have their best chance for class certification due to the facial similarity of warranty laws nationwide.  In order to circumvent a time/mileage limitation in the warranty, class counsel often assert that the product “defect” existed at the time of sale, was hidden by the manufacturer and only “discovered” by the consumer after the expiration of the statute of limitations.  To further overcome this warranty-expiration defense, there is often a pleading that any warranty time limitation is unconscionable.

The recent case of McQueen v. BMW of N. Am., LLC, 2014 U.S. Dist. LEXIS 21084 (D.N.J. Feb. 20, 2014), provides an example of the belated defect scenario.  Plaintiff claimed that a transmission defect caused the class vehicles to shift into neutral, rather than park, and to roll away.  Based on the text of the warranty, plaintiff asserted the manufacturer’s “discovery” of a defect operated to negate the time and mileage limitation of the warranty.  Plaintiff argued that, since BMW knew of the defect at the time of sale and did nothing to correct the problem during the warranty period, it breached the warranty.  The McQueen court rejected plaintiff’s interpretation of the warranty and concluded that the warranty benefit was limited to the consumer who must discover a defect and seek warranty service during the specified warranty period.

The general rule is that a plaintiff who has not experienced a problem or defect within the warranty period cannot state a claim for breach of warranty.  The rule was clearly defined by the Second Circuit Court of Appeals in Abraham v. Volkswagen of Am., Inc. , 795 F.2d 238, 250 (2d Cir. 1986):

… [V]irtually all product failures discovered in automobiles after expiration of the warranty can be attributed to a ‘latent defect’ that existed at the time of sale or during the term of the warranty.  All parts will wear out sooner or later and thus have a limited effective life.  Manufacturers always have knowledge regarding the effective life of particular parts and the likelihood of their failing within a particular period of time. Such knowledge is easily demonstrated by the fact that manufacturers must predict rates of failure of particular parts in order to price warranties and thus can always be said to ‘know’ that many parts will fail after the warranty period has expired.  A rule that would make failure of a part actionable based on such ‘knowledge’ would render meaningless time/mileage limitations in warranty coverage.*

Accord, Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 616 (3d Cir. 1995); Brisson v. Ford Motor Co., 602 F. Supp. 2d 1227, 1231—32 (M.D. Fla. Mar. 9, 2009), aff’d in relevant part and vacated on other grounds, 349 Fed. Appx. 433, 434 (11th Cir. 2009).  Without enforcement of this type of contractual limitation, a manufacturer would literally stand in the role of a perpetual insurer of its products.

Recent case law has also rejected the assertion that a defendant’s “knowledge” of a latent defect either at the time of sale or during the warranty period is a basis for allowing the breach of warranty claim to proceed when the defect manifests itself only after the warranty period expired.  Aprigliano v. Am. Honda Motor Co., 2013 U.S. Dist. LEXIS 154539, *23—24 (S.D. Fla. Oct. 28, 2013); McCabe v. Daimler AG, 948 F. Supp. 2d 1347, 1359 (N.D. Ga. 2013).

The plaintiff in McQueen further asserted that the warranty time and mileage limitations were “unconscionable” because of BMW’s alleged knowledge of the defect and its failure to disclose.  This argument had been rejected by the trial court in an earlier opinion and the court rejected plaintiff’s attempt to revisit the issue based on the claim that the cases relied on by the court did not involve design defect claims.

A full discussion of the unconscionability doctrine is beyond the scope of this post.  However, in automotive litigation, many cases have addressed the question of whether time or mileage limitations shock the conscience of the court and have upheld reasonable limitations.  See, e.g., Broe v. Oneonta Sales Co., Inc., 100 Misc. 2d 1099 (N.Y. Sup. Ct. 1978); Bush v. American Motors Sales Corp., 575 F. Supp. 1581 (D. Colo. 1984); Hahn v. Ford Motor Co., Inc., 434 N.E. 2d 943 (Ind. App. 1982); Moore v. Coachmen Indus., Inc., 499 S.E.2d 772 (N.C. App. 1998) (12 month/15,000 mile recreational vehicle warranty held not unconscionable).

In view of the proliferation of consumer product class actions, it is anticipated that legal skirmishes regarding belated defect/breach of warranty claims will continue.