Car lessee can proceed with Magnuson-Moss claim for breach of written warranty

Law Reporter, Mar 2004

Voelker v. Porsche Cars N. Am., Inc., _____ E3d _____, No. 03-1444, 2003 WL 22930364 (7th Cir. Dec. 12, 2003).

The Seventh Circuit Court of Appeals held that a lessee who is assigned a limited warranty by an automobile manufacturer can proceed with a breach of written warranty claim under the federal consumer warranty law.

Here, Voelker leased a Porsche from a dealership. The lease agreement provided that only Porsche parts could be used for repairs. The car was damaged in a collision. Voelker took the car to the dealership, but it stayed there for months because the parts were unavailable, and he finally stopped making payments. When the Porsche financial office tried to force Voelker to surrender the car for auction, he filed suit in Illinois state court, alleging state and federal law violations. Defendant had the case removed to federal court, and the trial court dismissed all of the federal claims and remanded to state court.

Reversing in part, the appellate court determined the Magnuson-Moss Act, 15 U.S.C. §§ 2301 and 2310, is applicable. Under the act, a "consumer" can bring an action against a supplier, warrantor, or service contractor for failure to comply with the warranty. The statute provides three categories of consumers: (1) a buyer, other than for the purposes of resale; (2) any person who receives transfer of a product while an implied or written warranty is in effect; and (3) any person who is entitled under the warranty or by state law to enforce the warranty.

Rejecting plaintiff's argument that he is a consumer under all three categories, the court held that lessees can only be consumers under the third category. A lessee is not a buyer because there is no exchange of title, and the transfer does not occur during an active warranty because the warranty does not go into effect until after the car is leased. However, under state law, a lessee is an assignee of the warranty with enforcement rights and thus, can be considered a consumer. Moreover, plaintiff can make a claim for breach of written warranty because state law permits him to enforce the warranty that was assigned to him as a lessee.

Regarding plaintiff's claim for breach of implied warranty under the act, the court affirmed the trial court, holding that both the act and state law require privity of contract before a consumer can sue. Plaintiff failed to prove privity, the court said, because the agreement between plaintiff and the dealer conspicuously stated that the dealership made no express or implied warranty regarding the leased vehicle. The court also affirmed the trial court's dismissal of plaintiff's other state claims for failure to state a cause of action.

Accordingly, the court remanded for trial.

Plaintiff's Counsel

William N. Howard, Chicago, Ill.

Robert J. Hall, Chicago, Ill.