ARIZONA SUPREME COURT RULES IN TWO AUTOMOBILE WARRANTY CASES

Although not related to family law, the following article may be interesting to anyone who has bought or leased a car that didn't turn out to work so well.... The script got a little fussy so you'll see some bold, some normal text.

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ARIZONA SUPREME COURT RULES IN TWO
AUTOMOBILE WARRANTY CASES

By Carrie Wilcox, Esq.*

Summary: The Arizona Supreme Court deals with automobile warranties, service contracts and lemon law issues in recent legal decisions.

The Arizona Supreme Court recently decided two cases involving motor vehicle warranty issues. In the first, Parrot v. DaimlerChrysler Corporation, 130 P.3d 530; 473 Ariz. Adv. Rep. 32, the questions revolved around an automobile lease situation, the Arizona Lemon law and the Magnuson-Moss Warranty Act. The second case, Johnson v. Earnhardt's Gilbert Dodge, Inc., 132 P.3d 825; 476 Ariz. Adv. Rep. 33, also involved the Magnuson-Moss Warranty Act as well as a service contract issue.

A. Parrot v. DaimlerChrysler (full text of case available at http://www.wilcoxlegal.com)

In denying Mr. Parrot relief under both the Magnuson-Moss Warranty Act (hereinafter the “Warranty Act”) and the Arizona Motor Vehicle Warranties Act (commonly referred to as Arizona’s Lemon Law), the Arizona Supreme Court wrestled with two primary issues, including whether Mr. Parrot was a consumer as defined by the Warranty Act and whether the limited relief available to consumers under Arizona’s Lemon Law was available to him. In overturning the Arizona Court of Appeals decision that favored Mr. Parrot, the Arizona Supreme Court ruled that neither the federal Warranty Act nor the state Lemon Law allowed Mr. Parrot the relief he sought.

1. Magnuson-Moss Warranty Act ((15 U.S.C. §§ 2301-2312)

Unfortunately for Mr. Parrot, the Arizona Supreme Court found that Mr. Parrot was not a consumer under the Warranty Act because Mr. Parrot’s lessee status prevented him from qualifying as a consumer for purposes of applying the Warranty Act to his vehicle dispute. No qualifying sale to him was made and that meant the Warranty Act did not provide him relief. Upon disposing of the Warranty Act claims brought by Mr. Parrot, the court turned to the Arizona Lemon Law.

2. Arizona Motor Vehicle Warranties Act

As it did with its analysis under the Warranty Act, the Arizona Supreme Court decided against Mr. Parrot essentially because of his status as a lessee and not an owner. Although the court noted that the definition of consumer under the Lemon Law was different than under the Warranty Act, the court decided against Mr. Parrot on other grounds.

Under the Arizona Lemon Law, two remedies are available: (a) a consumer may return the vehicle to the manufacturer, or (b) the consumer may have the vehicle replaced. However, the court noted that these remedies only apply if the consumer is the owner of the vehicle. Mr. Parrot leased the vehicle and did not own it; therefore, the Lemon Law provided him no relief.

B. Johnson v. Earnhardt’s Gilbert Dodge (full text of case available at http://www.wilcoxlegal.com)

One month after the Parrot case, above, the Arizona Supreme Court ruled on another case involving the Magnuson-Moss Warranty Act, DaimlerChrysler and an allegedly malfunctioning automobile. However, in this case, the car was purchased, not leased, as it was in Parrot. In addition, although the vehicle purchased was a Kia, Ms. Johnson purchased a service contract from DaimlerChrysler for the vehicle through the Chrysler dealership from which she bought the car. The Arizona Supreme Court reviewed the case after the trial court granted Earnhardt’s Motion for Summary Judgment and the Arizona Court of Appeals reversed the trial court in favor of Johnson. Two key issues were presented to the Arizona Supreme Court.

1. Service Contract

The Arizona Supreme Court examined the issue of whether Earnhardt had entered into a service contract with Ms. Johnson or if the service contract was only with DaimlerChrysler since they were the entity that provided the service contract.

The court found that the circumstances surrounding the service contract were ambiguous and that a grant of summary judgment was inappropriate on that basis. Some of the ambiguous facts included that Earnhardt, the dealer, had sold the contract and was to provide repair services under the contract as signed by the dealership. In addition, simply put, the language of the contract itself was confusing and conflicting as were the statements of the witnesses. For example, the language of the contract variously states that DaimlerChrysler is the responsible party but also that Earnhardt had responsibility under the contract, too, while Ms. Johnson stated in her affidavit that she was told it was a joint warranty agreement with the dealership and DaimlerChrysler being responsible. The dealership, on the other hand, denied it was a party to the service contract. The conflict facts meant that the case had to be remanded to the trial court to determine whether Earnhardt was a party to the service contract.

2. Magnuson-Moss Warranty Act (15 U.S.C. §§ 2301-2312)

After concluding that the evidence surrounding the service contract created a question of fact allowing that issue to survive summary judgment, the Arizona Supreme Court next turned to the issue of whether the service contract was a warranty as defined by the Warranty Act. Although the Arizona Court of Appeals concluded that the service contract was such a warranty, the Supreme Court disagreed reasoning that the separate consideration paid for the service contract means that the service contract cannot also be a written warranty under the definition contained within the Warranty Act.

Thus, the Arizona Supreme Court remanded the Johnson case back to the trial court for further proceedings consistent with its reasoning.

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*Attorney Carrie M. Wilcox is the sole shareholder of Wilcox Legal Group, P.C., a multi-dimensional law firm with offices in Arizona and California. She is a graduate of Arizona State College of Law where she was a Note and Comment Editor for the Arizona State University Law Journal and former intern for the Honorable Rudolph Gerber, Arizona Court of Appeals. Ms. Wilcox is admitted to practice in the Arizona state courts and federal district court. Ms. Wilcox practices in the areas of business formation and creditor rights/debt collection. She also has wide-ranging experience in civil litigation, including employment law, family law, personal injury and business representation.

Ms. Wilcox is a member of the Association of Trial Lawyers of America (ATLA), the Maricopa County Bar Associations, State Bar of Arizona, Arizona Women Lawyers and American Bar Association.

Ms. Wilcox is also a former instructor at the Arizona Paralegal Training Institute, where she lectured on various subjects including business formation and litigation, employment law and dissolution of marriage. She has also co-chaired seminars for other attorneys on divorce procedure on behalf of the Lorman Institute.

APPENDIX

1. Arizona Statutes

A.R.S. §44-1261. Definitions; exemptions

A. In this article, unless the context otherwise requires:

1. "Consumer" means the purchaser, other than for purposes of resale, of a motor vehicle, any person to whom the motor vehicle is transferred during the duration of an express warranty applicable to the motor vehicle or any other person entitled by the terms of the warranty to enforce the obligations of the warranty.

2. "Motor vehicle" means a self-propelled vehicle designated primarily for the transportation of persons or property over the public highways.

3. "Used motor vehicle" means a motor vehicle that has been sold, bargained, exchanged or given away or the title to which has been transferred from the person who first acquired the vehicle from the manufacturer, importer or dealer or agent of the manufacturer or importer and that has been placed in bona fide consumer use.

4. "Used motor vehicle dealer" means a person or business that sells or offers for sale a used motor vehicle after selling or offering for sale four or more used motor vehicles in the previous twelve months but does not include a bank or financial institution, an insurance company, a business selling a used motor vehicle to an employee of that business, a lessor selling a leased vehicle by or to the lessee of that vehicle or to an employee of the lessee of that vehicle or a person who buys, sells, exchanges or offers or attempts to negotiate a sale of or exchange an interest in a classic car as defined in section 28-2483 or a historic vehicle as defined in section 28-2484.

B. If the motor vehicle is a motor home, the provisions of this article shall apply to the self-propelled vehicle and chassis but not to those portions of the vehicle designed, used or maintained primarily as a mobile dwelling, office or commercial space.

C. The provisions of this article do not apply to a sale of a motor vehicle to a purchaser for the purpose of resale for profit or to a motor vehicle with a declared gross weight over ten thousand pounds or that is sold at a public auction.

A.R.S. §44-1262. New motor vehicle; repair during express warranty or two years or twenty-four thousand miles

A. If a new motor vehicle does not conform to all applicable express warranties:

1. A consumer shall report the nonconformity to the manufacturer, its agent or its authorized dealer or issuer of a warranty during the shorter of the following:

(a) The term of the express warranty.

(b) The period of two years or twenty-four thousand miles following the date of original delivery of the motor vehicle to the consumer, whichever is earlier.

2. The manufacturer, its agent or its authorized dealer or the issuer of a warranty shall make those repairs that are necessary to conform the motor vehicle to such express warranties, even if the repairs are made after the expiration of the term or two year period or twenty-four thousand mile limit.

B. This section does not limit in any way the remedies available to a consumer under a new motor vehicle warranty that extends beyond the limits prescribed in this section.

A.R.S. §44-1263. Inability to conform motor vehicle to express warranty; replacement of vehicle or refund of monies; affirmative defenses; tax refund

A. If the manufacturer, its agents or its authorized dealers are unable to conform the motor vehicle to any applicable express warranty by repairing or correcting any defect or condition which substantially impairs the use and value of the motor vehicle to the consumer after a reasonable number of attempts, the manufacturer shall replace the motor vehicle with a new motor vehicle or accept return of the motor vehicle from the consumer and refund to the consumer the full purchase price, including all collateral charges, less a reasonable allowance for the consumer's use of the vehicle. The manufacturer shall make refunds to the consumer and lienholder, if any, as their interests appear. A reasonable allowance for use is that amount directly attributable to use by the consumer before his first written report of the nonconformity to the manufacturer, agent or dealer and during any subsequent period when the vehicle is not out of service by reason of repair.

B. It is an affirmative defense to any claim under this article that either:

1. An alleged nonconformity does not substantially impair the use and market value of the motor vehicle.

2. A nonconformity is the result of abuse, neglect or unauthorized modifications or alterations of the motor vehicle.

C. In the case of taxes paid pursuant to title 42, chapter 5, if the manufacturer:

1. Accepts return of a motor vehicle from a consumer without replacing the motor vehicle, the manufacturer shall refund the amount of tax attributed to the sale of the vehicle to that consumer.

2. Replaces a motor vehicle with a new motor vehicle of lesser value, the manufacturer shall refund the difference between the original amount of tax attributed to the sale of that vehicle and the amount of tax attributed to the sale of the replacement vehicle, excluding the value of the motor vehicle being replaced.

3. Replaces a motor vehicle with a new motor vehicle of greater value, the manufacturer shall calculate the gross proceeds of sales pursuant to section 42-5001, paragraph 6.

D. Pursuant to section 42-1118, subsection F, the manufacturer may apply to the department of revenue for a refund for the amount of tax that the manufacturer properly refunds to the consumer.

A.R.S. §44-1264. Reasonable number of attempts to conform motor vehicle to express warranty; presumption

A. It is presumed that a reasonable number of attempts have been undertaken to conform a motor vehicle to the applicable express warranties if either:

1. The same nonconformity has been subject to repair four or more times by the manufacturer or its agents or authorized dealers during the shorter of the express warranty term or the period of two years or twenty-four thousand miles following the date of original delivery of the motor vehicle to the consumer, whichever is earlier, but the nonconformity continues to exist.

2. The motor vehicle is out of service by reason of repair for a cumulative total of thirty or more calendar days during the shorter of the express warranty term or the two year period or twenty-four thousand miles, whichever is earlier.

B. The term of an express warranty, the two year period and the thirty day period are extended by any period of time during which repair services are not available to the consumer because of any war, invasion, strike, fire, flood or other natural disaster.

C. The presumption prescribed in this section does not apply against a manufacturer unless the manufacturer has received prior direct written notification from or on behalf of the consumer of the alleged defect and has had an opportunity to cure the alleged defect.

A.R.S. §44-1265. Nonlimitation of rights; refund or replacement not required if certain procedures not followed; attorney fees

A. If a manufacturer has established or participates in an informal dispute settlement procedure which complies in all respects with 16 code of federal regulations part 703, section 44-1263 relating to refunds or replacement does not apply to any consumer who has not first resorted to such a procedure.

B. A consumer shall begin an action under this article within six months following the earlier of expiration of the express warranty term or two years or twenty-four thousand miles following the date of original delivery of the motor vehicle to the consumer, whichever is earlier. If a consumer prevails in an action under this article, the court shall award the consumer reasonable costs and attorney fees.

A.R.S. §44-1266. Notice to dealers and prospective purchasers

A. A manufacturer who has been ordered by judgment or decree to replace or repurchase or who has replaced or repurchased a motor vehicle pursuant to this article or the repair or replace laws of another state shall, before offering the motor vehicle for resale, attach to the motor vehicle written notification indicating the motor vehicle has been replaced or repurchased. A consumer has a cause of action against any person who removes the written notification from the motor vehicle, except as provided in subsection B of this section.

B. A motor vehicle dealer, broker, wholesale motor vehicle dealer or wholesale motor vehicle auction dealer as defined in section 28-4301 who offers for sale a motor vehicle that has been replaced or repurchased pursuant to this article or the repair or replace laws of another state shall provide the purchaser with the manufacturer's written notification indicating that the motor vehicle has been replaced or repurchased before completion of the sale.

C. It shall constitute an affirmative defense in an action brought pursuant to subsection A of this section against a motor vehicle dealer or an agent of a motor vehicle dealer that the notification described in subsection A of this section was removed by someone other than the dealer or agent without the knowledge of the dealer or agent.

A.R.S. §44-1267. Used motor vehicles; title; implied warranty of merchantability disclaimer; waiver; burden of proof; remedies

A. Before the seller attempts to sell a used motor vehicle the seller shall possess the title to the used motor vehicle and the title shall be in the seller's name.

B. Except as provided in subsection I of this section and in addition to the requirements of section 28-4412, a used motor vehicle dealer shall not exclude, modify or disclaim the implied warranty of merchantability prescribed in section 47-2314 or limit the remedies for a breach of that warranty, except as otherwise provided in this section, before midnight of the fifteenth calendar day after delivery of a used motor vehicle or until a used motor vehicle is driven five hundred miles after delivery, whichever is earlier. In calculating time under this subsection, a day on which the warranty is breached is excluded and all subsequent days in which the motor vehicle fails to conform with the implied warranty of merchantability are also excluded. In calculating distance under this subsection, the miles driven to obtain or in connection with the repair, servicing or testing of the motor vehicle that fails to conform with the implied warranty of merchantability are excluded. An attempt to exclude, modify or disclaim the implied warranty of merchantability or to limit the remedies for a breach of that warranty, except as otherwise provided in this section, in violation of this subsection renders a purchase agreement voidable at the option of the purchaser.

C. For the purposes of this section, the implied warranty of merchantability is met if the motor vehicle functions in a safe condition as provided in title 28, chapter 3, article 16 and is substantially free of any defect that significantly limits the use of the motor vehicle for the ordinary purpose of transportation on any public highway. The implied warranty of merchantability expires at midnight of the fifteenth calendar day after delivery of a used motor vehicle or when a used motor vehicle has been driven five hundred miles after delivery, whichever is earlier. In calculating time under this subsection, a day on which the warranty is breached is excluded and all subsequent days in which the motor vehicle fails to conform with the implied warranty of merchantability are also excluded. In calculating distance under this subsection, the miles driven to obtain or in connection with the repair, servicing or testing of the motor vehicle that fails to conform with the implied warranty of merchantability are excluded.

D. The implied warranty of merchantability described in this section does not extend to damage that occurs after the sale of the motor vehicle and that is the result of any abuse, misuse, neglect, failure to perform regular maintenance or to maintain adequate oil, coolant or other required fluid or lubricant or off road use, racing or towing.

E. If the implied warranty of merchantability described in this section is breached, the purchaser shall give reasonable notice to the seller. Before the purchaser exercises any other remedies under title 47, chapter 2, the seller shall have a reasonable opportunity to repair the vehicle. The purchaser shall pay one-half of the cost of the first two repairs necessary to bring the vehicle in compliance with the warranty. The purchaser's payments are limited to a maximum payment of twenty-five dollars for each repair.

2. Magnuson-Moss Warranty Act (15 U.S.C. 15 U.S.C. §§ 2301-2312)

§ 2301. Definitions

For the purposes of this chapter:

(1) The term “consumer product” means any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed).

(2) The term “Commission” means the Federal Trade Commission.

(3) The term “consumer” means a buyer (other than for purposes of resale) of any consumer product, any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product, and any other person who is entitled by the terms of such warranty (or service contract) or under applicable State law to enforce against the warrantor (or service contractor) the obligations of the warranty (or service contract).

(4) The term “supplier” means any person engaged in the business of making a consumer product directly or indirectly available to consumers.

(5) The term “warrantor” means any supplier or other person who gives or offers to give a written warranty or who is or may be obligated under an implied warranty.

(6) The term “written warranty” means—

(A) any written affirmation of fact or written promise made in connection with the sale of a consumer product by a supplier to a buyer which relates to the nature of the material or workmanship and affirms or promises that such material or workmanship is defect free or will meet a specified level of performance over a specified period of time, or

(B) any undertaking in writing in connection with the sale by a supplier of a consumer product to refund, repair, replace, or take other remedial action with respect to such product in the event that such product fails to meet the specifications set forth in the undertaking,

which written affirmation, promise, or undertaking becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of such product.

(7) The term “implied warranty” means an implied warranty arising under State law (as modified by sections 2308 and 2304 (a) of this title) in connection with the sale by a supplier of a consumer product.

(8) The term “service contract” means a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair (or both) of a consumer product.

(9) The term “reasonable and necessary maintenance” consists of those operations

(A) which the consumer reasonably can be expected to perform or have performed and

(B) which are necessary to keep any consumer product performing its intended function and operating at a reasonable level of performance.

(10) The term “remedy” means whichever of the following actions the warrantor elects:

(A) repair,

(B) replacement, or

(C) refund;

except that the warrantor may not elect refund unless (i) the warrantor is unable to provide replacement and repair is not commercially practicable or cannot be timely made, or (ii) the consumer is willing to accept such refund.

(11) The term “replacement” means furnishing a new consumer product which is identical or reasonably equivalent to the warranted consumer product.

(12) The term “refund” means refunding the actual purchase price (less reasonable depreciation based on actual use where permitted by rules of the Commission).

(13) The term “distributed in commerce” means sold in commerce, introduced or delivered for introduction into commerce, or held for sale or distribution after introduction into commerce.

(14) The term “commerce” means trade, traffic, commerce, or transportation—

(A) between a place in a State and any place outside thereof, or

(B) which affects trade, traffic, commerce, or transportation described in subparagraph (A).

(15) The term “State” means a State, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, the Canal Zone, or American Samoa. The term “State law” includes a law of the United States applicable only to the District of Columbia or only to a territory or possession of the United States; and the term “Federal law” excludes any State law.

§ 2302. Rules governing contents of warranties

(a) Full and conspicuous disclosure of terms and conditions; additional requirements for contents

In order to improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products, any warrantor warranting a consumer product to a consumer by means of a written warranty shall, to the extent required by rules of the Commission, fully and conspicuously disclose in simple and readily understood language the terms and conditions of such warranty. Such rules may require inclusion in the written warranty of any of the following items among others:

(1) The clear identification of the names and addresses of the warrantors.

(2) The identity of the party or parties to whom the warranty is extended.

(3) The products or parts covered.

(4) A statement of what the warrantor will do in the event of a defect, malfunction, or failure to conform with such written warranty—at whose expense—and for what period of time.

(5) A statement of what the consumer must do and expenses he must bear.

(6) Exceptions and exclusions from the terms of the warranty.

(7) The step-by-step procedure which the consumer should take in order to obtain performance of any obligation under the warranty, including the identification of any person or class of persons authorized to perform the obligations set forth in the warranty.

(8) Information respecting the availability of any informal dispute settlement procedure offered by the warrantor and a recital, where the warranty so provides, that the purchaser may be required to resort to such procedure before pursuing any legal remedies in the courts.

(9) A brief, general description of the legal remedies available to the consumer.

(10) The time at which the warrantor will perform any obligations under the warranty.

(11) The period of time within which, after notice of a defect, malfunction, or failure to conform with the warranty, the warrantor will perform any obligations under the warranty.

(12) The characteristics or properties of the products, or parts thereof, that are not covered by the warranty.

(13) The elements of the warranty in words or phrases which would not mislead a reasonable, average consumer as to the nature or scope of the warranty.

(b) Availability of terms to consumer; manner and form for presentation and display of information; duration; extension of period for written warranty or service contract

(1)

(A) The Commission shall prescribe rules requiring that the terms of any written warranty on a consumer product be made available to the consumer (or prospective consumer) prior to the sale of the product to him.

(B) The Commission may prescribe rules for determining the manner and form in which information with respect to any written warranty of a consumer product shall be clearly and conspicuously presented or displayed so as not to mislead the reasonable, average consumer, when such information is contained in advertising, labeling, point-of-sale material, or other representations in writing.

(2) Nothing in this chapter (other than paragraph (3) of this subsection) shall be deemed to authorize the Commission to prescribe the duration of written warranties given or to require that a consumer product or any of its components be warranted.

(3) The Commission may prescribe rules for extending the period of time a written warranty or service contract is in effect to correspond with any period of time in excess of a reasonable period (not less than 10 days) during which the consumer is deprived of the use of such consumer product by reason of failure of the product to conform with the written warranty or by reason of the failure of the warrantor (or service contractor) to carry out such warranty (or service contract) within the period specified in the warranty (or service contract).

(c) Prohibition on conditions for written or implied warranty; waiver by Commission

No warrantor of a consumer product may condition his written or implied warranty of such product on the consumer’s using, in connection with such product, any article or service (other than article or service provided without charge under the terms of the warranty) which is identified by brand, trade, or corporate name; except that the prohibition of this subsection may be waived by the Commission if—

(1) the warrantor satisfies the Commission that the warranted product will function properly only if the article or service so identified is used in connection with the warranted product, and

(2) the Commission finds that such a waiver is in the public interest.

The Commission shall identify in the Federal Register, and permit public comment on, all applications for waiver of the prohibition of this subsection, and shall publish in the Federal Register its disposition of any such application, including the reasons therefor.

(d) Incorporation by reference of detailed substantive warranty provisions

The Commission may by rule devise detailed substantive warranty provisions which warrantors may incorporate by reference in their warranties.

(e) Applicability to consumer products costing more than $5

The provisions of this section apply only to warranties which pertain to consumer products actually costing the consumer more than $5.

§ 2303. Designation of written warranties

(a) Full (statement of duration) or limited warranty

Any warrantor warranting a consumer product by means of a written warranty shall clearly and conspicuously designate such warranty in the following manner, unless exempted from doing so by the Commission pursuant to subsection (c) of this section:

(1) If the written warranty meets the Federal minimum standards for warranty set forth in section 2304 of this title, then it shall be conspicuously designated a “full (statement of duration) warranty”.

(2) If the written warranty does not meet the Federal minimum standards for warranty set forth in section 2304 of this title, then it shall be conspicuously designated a “limited warranty”.

(b) Applicability of requirements, standards, etc., to representations or statements of customer satisfaction

This section and sections 2302 and 2304 of this title shall not apply to statements or representations which are similar to expressions of general policy concerning customer satisfaction and which are not subject to any specific limitations.

(c) Exemptions by Commission

In addition to exercising the authority pertaining to disclosure granted in section 2302 of this title, the Commission may by rule determine when a written warranty does not have to be designated either “full (statement of duration)” or “limited” in accordance with this section.

(d) Applicability to consumer products costing more than $10 and not designated as full warranties

The provisions of subsections (a) and (c) of this section apply only to warranties which pertain to consumer products actually costing the consumer more than $10 and which are not designated “full (statement of duration) warranties”.

§ 2304. Federal minimum standards for warranties

(a) Remedies under written warranty; duration of implied warranty; exclusion or limitation on consequential damages for breach of written or implied warranty; election of refund or replacement

In order for a warrantor warranting a consumer product by means of a written warranty to meet the Federal minimum standards for warranty—

(1) such warrantor must as a minimum remedy such consumer product within a reasonable time and without charge, in the case of a defect, malfunction, or failure to conform with such written warranty;

(2) notwithstanding section 2308 (b) of this title, such warrantor may not impose any limitation on the duration of any implied warranty on the product;

(3) such warrantor may not exclude or limit consequential damages for breach of any written or implied warranty on such product, unless such exclusion or limitation conspicuously appears on the face of the warranty; and

(4) if the product (or a component part thereof) contains a defect or malfunction after a reasonable number of attempts by the warrantor to remedy defects or malfunctions in such product, such warrantor must permit the consumer to elect either a refund for, or replacement without charge of, such product or part (as the case may be). The Commission may by rule specify for purposes of this paragraph, what constitutes a reasonable number of attempts to remedy particular kinds of defects or malfunctions under different circumstances. If the warrantor replaces a component part of a consumer product, such replacement shall include installing the part in the product without charge.

(b) Duties and conditions imposed on consumer by warrantor

(1) In fulfilling the duties under subsection (a) of this section respecting a written warranty, the warrantor shall not impose any duty other than notification upon any consumer as a condition of securing remedy of any consumer product which malfunctions, is defective, or does not conform to the written warranty, unless the warrantor has demonstrated in a rulemaking proceeding, or can demonstrate in an administrative or judicial enforcement proceeding (including private enforcement), or in an informal dispute settlement proceeding, that such a duty is reasonable.

(2) Notwithstanding paragraph (1), a warrantor may require, as a condition to replacement of, or refund for, any consumer product under subsection (a) of this section, that such consumer product shall be made available to the warrantor free and clear of liens and other encumbrances, except as otherwise provided by rule or order of the Commission in cases in which such a requirement would not be practicable.

(3) The Commission may, by rule define in detail the duties set forth in subsection (a) of this section and the applicability of such duties to warrantors of different categories of consumer products with “full (statement of duration)” warranties.

(4) The duties under subsection (a) of this section extend from the warrantor to each person who is a consumer with respect to the consumer product.

(c) Waiver of standards

The performance of the duties under subsection (a) of this section shall not be required of the warrantor if he can show that the defect, malfunction, or failure of any warranted consumer product to conform with a written warranty, was caused by damage (not resulting from defect or malfunction) while in the possession of the consumer, or unreasonable use (including failure to provide reasonable and necessary maintenance).

(d) Remedy without charge

For purposes of this section and of section 2302 (c) of this title, the term “without charge” means that the warrantor may not assess the consumer for any costs the warrantor or his representatives incur in connection with the required remedy of a warranted consumer product. An obligation under subsection (a)(1)(A) of this section to remedy without charge does not necessarily require the warrantor to compensate the consumer for incidental expenses; however, if any incidental expenses are incurred because the remedy is not made within a reasonable time or because the warrantor imposed an unreasonable duty upon the consumer as a condition of securing remedy, then the consumer shall be entitled to recover reasonable incidental expenses which are so incurred in any action against the warrantor.

(e) Incorporation of standards to products designated with full warranty for purposes of judicial actions

If a supplier designates a warranty applicable to a consumer product as a “full (statement of duration)” warranty, then the warranty on such product shall, for purposes of any action under section 2310 (d) of this title or under any State law, be deemed to incorporate at least the minimum requirements of this section and rules prescribed under this section.

§ 2305. Full and limited warranting of a consumer product

Nothing in this chapter shall prohibit the selling of a consumer product which has both full and limited warranties if such warranties are clearly and conspicuously differentiated.

§ 2306. Service contracts; rules for full, clear and conspicuous disclosure of terms and conditions; addition to or in lieu of written warranty

(a) The Commission may prescribe by rule the manner and form in which the terms and conditions of service contracts shall be fully, clearly, and conspicuously disclosed.

(b) Nothing in this chapter shall be construed to prevent a supplier or warrantor from entering into a service contract with the consumer in addition to or in lieu of a written warranty if such contract fully, clearly, and conspicuously discloses its terms and conditions in simple and readily understood language.

§ 2307. Designation of representatives by warrantor to perform duties under written or implied warranty

Nothing in this chapter shall be construed to prevent any warrantor from designating representatives to perform duties under the written or implied warranty: Provided, That such warrantor shall make reasonable arrangements for compensation of such designated representatives, but no such designation shall relieve the warrantor of his direct responsibilities to the consumer or make the representative a cowarrantor.

§ 2308. Implied warranties

(a) Restrictions on disclaimers or modifications

No supplier may disclaim or modify (except as provided in subsection (b) of this section) any implied warranty to a consumer with respect to such consumer product if

(1) such supplier makes any written warranty to the consumer with respect to such consumer Product, or

(2) at the time of sale, or within 90 days thereafter, such supplier enters into a service contract with the consumer which applies to such consumer product.

(b) Limitation on duration

For purposes of this chapter (other than section 2304 (a)(2) of this title), implied warranties may be limited in duration to the duration of a written warranty of reasonable duration, if such limitation is conscionable and is set forth in clear and unmistakable language and prominently displayed on the face of the warranty.

(c) Effectiveness of disclaimers, modifications, or limitations

A disclaimer, modification, or limitation made in violation of this section shall be ineffective for purposes of this chapter and State law.

§ 2309. Procedures applicable to promulgation of rules by Commission

(a) Oral presentation

Any rule prescribed under this chapter shall be prescribed in accordance with section 553 of title 5; except that the Commission shall give interested persons an opportunity for oral presentations of data, views, and arguments, in addition to written submissions. A transcript shall be kept of any oral presentation. Any such rule shall be subject to judicial review under section 57a (e) of this title in the same manner as rules prescribed under section 57a (a)(1)(B) of this title, except that section 57a (e)(3)(B) of this title shall not apply.

(b) Warranties and warranty practices involved in sale of used motor vehicles

The Commission shall initiate within one year after January 4, 1975, a rulemaking proceeding dealing with warranties and warranty practices in connection with the sale of used motor vehicles; and, to the extent necessary to supplement the protections offered the consumer by this chapter, shall prescribe rules dealing with such warranties and practices. In prescribing rules under this subsection, the Commission may exercise any authority it may have under this chapter, or other law, and in addition it may require disclosure that a used motor vehicle is sold without any warranty and specify the form and content of such disclosure.

§ 2310. Remedies in consumer disputes

(a) Informal dispute settlement procedures; establishment; rules setting forth minimum requirements; effect of compliance by warrantor; review of informal procedures or implementation by Commission; application to existing informal procedures

(1) Congress hereby declares it to be its policy to encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through informal dispute settlement mechanisms.

(2) The Commission shall prescribe rules setting forth minimum requirements for any informal dispute settlement procedure which is incorporated into the terms of a written warranty to which any provision of this chapter applies. Such rules shall provide for participation in such procedure by independent or governmental entities.

(3) One or more warrantors may establish an informal dispute settlement procedure which meets the requirements of the Commission’s rules under paragraph (2). If—

(A) a warrantor establishes such a procedure,

(B) such procedure, and its implementation, meets the requirements of such rules, and

(C) he incorporates in a written warranty a requirement that the consumer resort to such procedure before pursuing any legal remedy under this section respecting such warranty,

then

(i) the consumer may not commence a civil action (other than a class action) under subsection (d) of this section unless he initially resorts to such procedure; and

(ii) a class of consumers may not proceed in a class action under subsection (d) of this section except to the extent the court determines necessary to establish the representative capacity of the named plaintiffs, unless the named plaintiffs (upon notifying the defendant that they are named plaintiffs in a class action with respect to a warranty obligation) initially resort to such procedure. In the case of such a class action which is brought in a district court of the United States, the representative capacity of the named plaintiffs shall be established in the application of rule 23 of the Federal Rules of Civil Procedure. In any civil action arising out of a warranty obligation and relating to a matter considered in such a procedure, any decision in such procedure shall be admissible in evidence.

(4) The Commission on its own initiative may, or upon written complaint filed by any interested person shall, review the bona fide operation of any dispute settlement procedure resort to which is stated in a written warranty to be a prerequisite to pursuing a legal remedy under this section. If the Commission finds that such procedure or its implementation fails to comply with the requirements of the rules under paragraph (2), the Commission may take appropriate remedial action under any authority it may have under this chapter or any other provision of law.

(5) Until rules under paragraph (2) take effect, this subsection shall not affect the validity of any informal dispute settlement procedure respecting consumer warranties, but in any action under subsection (d) of this section, the court may invalidate any such procedure if it finds that such procedure is unfair.

(b) Prohibited acts

It shall be a violation of section 45 (a)(1) of this title for any person to fail to comply with any requirement imposed on such person by this chapter (or a rule thereunder) or to violate any prohibition contained in this chapter (or a rule thereunder).

(c) Injunction proceedings by Attorney General or Commission for deceptive warranty, noncompliance with requirements, or violating prohibitions; procedures; definitions

(1) The district courts of the United States shall have jurisdiction of any action brought by the Attorney General (in his capacity as such), or by the Commission by any of its attorneys designated by it for such purpose, to restrain

(A) any warrantor from making a deceptive warranty with respect to a consumer product, or

(B) any person from failing to comply with any requirement imposed on such person by or pursuant to this chapter or from violating any prohibition contained in this chapter. Upon proper showing that, weighing the equities and considering the Commission’s or Attorney General’s likelihood of ultimate success, such action would be in the public interest and after notice to the defendant, a temporary restraining order or preliminary injunction may be granted without bond. In the case of an action brought by the Commission, if a complaint under section 45 of this title is not filed within such period (not exceeding 10 days) as may be specified by the court after the issuance of the temporary restraining order or preliminary injunction, the order or injunction shall be dissolved by the court and be of no further force and effect. Any suit shall be brought in the district in which such person resides or transacts business. Whenever it appears to the court that the ends of justice require that other persons should be parties in the action, the court may cause them to be summoned whether or not they reside in the district in which the court is held, and to that end process may be served in any district.

(2) For the purposes of this subsection, the term “deceptive warranty” means

(A) a written warranty which

(i) contains an affirmation, promise, description, or representation which is either false or fraudulent, or which, in light of all of the circumstances, would mislead a reasonable individual exercising due care; or

(ii) fails to contain information which is necessary in light of all of the circumstances, to make the warranty not misleading to a reasonable individual exercising due care; or

(B) a written warranty created by the use of such terms as “guaranty” or “warranty”, if the terms and conditions of such warranty so limit its scope and application as to deceive a reasonable individual.

(d) Civil action by consumer for damages, etc.; jurisdiction; recovery of costs and expenses; cognizable claims

(1) Subject to subsections (a)(3) and (e) of this section, a consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this chapter, or under a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief—

(A) in any court of competent jurisdiction in any State or the District of Columbia; or

(B) in an appropriate district court of the United States, subject to paragraph (3) of this subsection.

(2) If a consumer finally prevails in any action brought under paragraph (1) of this subsection, he may be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of cost and expenses (including attorneys’ fees based on actual time expended) determined by the court to have been reasonably incurred by the plaintiff for or in connection with the commencement and prosecution of such action, unless the court in its discretion shall determine that such an award of attorneys’ fees would be inappropriate.

(3) No claim shall be cognizable in a suit brought under paragraph (1)(B) of this subsection—

(A) if the amount in controversy of any individual claim is less than the sum or value of $25;

(B) if the amount in controversy is less than the sum or value of $50,000 (exclusive of interests and costs) computed on the basis of all claims to be determined in this suit; or

(C) if the action is brought as a class action, and the number of named plaintiffs is less than one hundred.

(e) Class actions; conditions; procedures applicable

No action (other than a class action or an action respecting a warranty to which subsection (a)(3) of this section applies) may be brought under subsection (d) of this section for failure to comply with any obligation under any written or implied warranty or service contract, and a class of consumers may not proceed in a class action under such subsection with respect to such a failure except to the extent the court determines necessary to establish the representative capacity of the named plaintiffs, unless the person obligated under the warranty or service contract is afforded a reasonable opportunity to cure such failure to comply. In the case of such a class action (other than a class action respecting a warranty to which subsection (a)(3) of this section applies) brought under subsection (d) of this section for breach of any written or implied warranty or service contract, such reasonable opportunity will be afforded by the named plaintiffs and they shall at that time notify the defendant that they are acting on behalf of the class. In the case of such a class action which is brought in a district court of the United States, the representative capacity of the named plaintiffs shall be established in the application of rule 23 of the Federal Rules of Civil Procedure.

(f) Warrantors subject to enforcement of remedies

For purposes of this section, only the warrantor actually making a written affirmation of fact, promise, or undertaking shall be deemed to have created a written warranty, and any rights arising thereunder may be enforced under this section only against such warrantor and no other person.

§ 2311. Applicability to other laws

(a) Federal Trade Commission Act and Federal Seed Act

(1) Nothing contained in this chapter shall be construed to repeal, invalidate, or supersede the Federal Trade Commission Act [15 U.S.C. 41 et seq.] or any statute defined therein as an Antitrust Act.

(2) Nothing in this chapter shall be construed to repeal, invalidate, or supersede the Federal Seed Act [7 U.S.C. 1551 et seq.] and nothing in this chapter shall apply to seed for planting.

(b) Rights, remedies, and liabilities

(1) Nothing in this chapter shall invalidate or restrict any right or remedy of any consumer under State law or any other Federal law.

(2) Nothing in this chapter (other than sections 2308 and 2304 (a)(2) and (4) of this title) shall

(A) affect the liability of, or impose liability on, any person for personal injury, or

(B) supersede any provision of State law regarding consequential damages for injury to the person or other injury.

(c) State warranty laws

(1) Except as provided in subsection (b) of this section and in paragraph (2) of this subsection, a State requirement—

(A) which relates to labeling or disclosure with respect to written warranties or performance thereunder;

(B) which is within the scope of an applicable requirement of sections 2302, 2303, and 2304 of this title (and rules implementing such sections), and

(C) which is not identical to a requirement of section 2302, 2303, or 2304 of this title (or a rule thereunder),

shall not be applicable to written warranties complying with such sections (or rules thereunder).

(2) If, upon application of an appropriate State agency, the Commission determines (pursuant to rules issued in accordance with section 2309 of this title) that any requirement of such State covering any transaction to which this chapter applies

(A) affords protection to consumers greater than the requirements of this chapter and

(B) does not unduly burden interstate commerce, then such State requirement shall be applicable (notwithstanding the provisions of paragraph (1) of this subsection) to the extent specified in such determination for so long as the State administers and enforces effectively any such greater requirement.

(d) Other Federal warranty laws

This chapter (other than section 2302 (c) of this title) shall be inapplicable to any written warranty the making or content of which is otherwise governed by Federal law. If only a portion of a written warranty is so governed by Federal law, the remaining portion shall be subject to this chapter.

§ 2312. Effective dates

(a) Effective date of chapter

Except as provided in subsection (b) of this section, this chapter shall take effect 6 months after January 4, 1975, but shall not apply to consumer products manufactured prior to such date.

(b) Effective date of section 2302 (a)

Section 2302 (a) of this title shall take effect 6 months after the final publication of rules respecting such section; except that the Commission, for good cause shown, may postpone the applicability of such sections until one year after such final publication in order to permit any designated classes of suppliers to bring their written warranties into compliance with rules promulgated pursuant to this chapter.

(c) Promulgation of rules

The Commission shall promulgate rules for initial implementation of this chapter as soon as possible after January 4, 1975, but in no event later than one year after such date.
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