District Court Dismisses Warranty Claims Based on Defects That Manifest Outside the Limited Warranty
US District Judge Dickinson Debevoise recently wrote an opinion that is a good reminder of the scope and breadth of warranty law. See Alban v. BMW of North Am., L.L.C., 2011 WL 900114 (D.N.J. Mar. 15, 2011). In Alban, plaintiff alleged that his car developed a "burnt crayon" smell outside of the warranty period. He pointed to two of BMW's own internal Technical Service Bulletins ("TSBs") that acknowledged the potential for the condition to occur and attributed the smell to degradation of either the rear parcel shelf insulation or the sound insulating mat under the rear parcel shelf. Both TSBs noted that replacement of the relevant part would be covered under the terms of the BMW New Vehicle Limited Warranty.
The limited warranty ran for 48 months or 50,000 miles, whichever occurs first. It also provided that "THE DURATION OF ANY IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY, IS LIMITED TO THE DURATION OF THE EXPRESS WARRANTIES HEREIN."
BMW refused to fix plaintiff's auto, so naturally he brought a class action, asserting claims of breach of express and implied warranties, breach of the Magnuson-Moss Warranty Act, breach of the covenant of good faith and fair dealing, breach of New Jersey's Consumer Fraud Act, and unjust enrichment. Last Fall, the court issued an opinion dismissing plaintiff's unjust enrichment claim with prejudice and the rest of the claims without prejudice. The court noted that the warranty and MMWA claims were barred by the statute of limitations, and instructed plaintiff that if he was going to plead unconscionability of the warranty limitations or fraud, he needed to plead with particularity what BMW knew and when it knew it, so that he could prove that all cars of his model were defective, that the company knew the parts were certain to fail, and that the limitation in the warranty was an intentional effort to avoid the cost of repairing the defect. Id. at *5.
Plaintiff filed another complaint asserting the same causes of action, and in support thereof pled that BMW had knowledge of the potential for the smell to develop (relying on certain documents), it knew the smell would not develop until after the warranty period had passed, it concealed that information and thus prevented plaintiff from bargaining for a warranty that would cover the defect, and there was a disparity of bargaining power between plaintiff and BMW. Id. at 6.
Judge Debevoise's opinion reminds us that a limited warranty is just that -- limited -- and you are not entitled to expect a product to function without problem or defect outside of the warranty period:
However, in its prior opinion, the Court rejected the argument that, even though a defect does not manifest until after the expiration of a warranty agreement, a plaintiff can nonetheless maintain breach of warranty claims by alleging that the manufacturer knew about the defect at the time of purchase. Indeed, the Court found that "the general rule, stated in Duesquesne, prohibiting breach of warranty actions premised on defects that did not arise until after the warranty expired applies to Plaintiff's claims regardless of his assertion that BMW knew that his vehicle was defective before the time-limit took effect. Therefore, by extension, Mr. Alban's allegations that BMW knew that the sound insulation in his vehicle would fail after the expiration of the warranty agreement do not indicate that the time and mileage limitation clause was unconscionable.
Moreover, Mr. Alban's bare-bones allegations that he had "no meaningful choice in determining" the time and mileage limitation, and that "a gross disparity in bargaining power existed between" him and BMW, are "no more than conclusions [that] are not entitled to the assumption of truth." Iqbal, 129 S. Ct. at 1950.
Id. at *9 (citations omitted).
The court also dismissed the NJCFA claim, observing that where an allegedly defective product was covered by a limited warranty and the alleged defect has manifested outside of the warranty period, the plaintiff must allege that the defendant knew with certainty that the product would fail outside the warranty period in order to maintain an NJCFA claim. Plaintiff could not. Id. at *10.
The court also had some useful instruction regarding TSBs:
Finally, as a practical matter, the Court is hesitant to view technical service bulletins, or similar advisories, as potential admissions of fraudulent concealment of a defect. Such advisories are generally the result of consumer complaints that cause a manufacturer to investigate, diagnose, and remedy a defect in one of its products. Accepting these advisories as a basis for consumer fraud claims may discourage manufacturers from responding to their customers in the first place.
Id. at *12.
