We all participate in the marketplace. And warranty law impacts virtually every sale and purchase made, in-store or on-line. So whether you are a seller of goods and services or a consumer, there is value to be had in understanding warranty law concepts and the policies they serve.
This being the case, the DrivingValue team shall present a series of “Warranty 101” posts that explore, examine, and and explain warranty concepts we encounter in our day-to-day transactions and the terms used to express them. Our goal is to present the material in posts that while short and easy-to-read, still provide accurate and useful information.
We hope you enjoy and find value in our efforts and we invite you to let us know how we’re doing.
The District Court for New Jersey has denied microwave distributor Electrolux Home Products, Inc.’s arguments that plaintiff’s breach of implied warranty and Magnuson-Moss Warranty Act claims are time barred.
In Gorczynski v. Electrolux Home Prods.,
the plaintiff brought claims stemming from an alleged defect in stainless steel
microwave handles manufactured and distributed by the defendants, claiming these
handles become excessively hot when a consumer cooks on an active stovetop
below the over-the-range microwaves.
sought to dismiss these claims under a number of theories, but the court
rejected all of them.
is the court’s treatment of Defendant Electrolux’s argument that plaintiff’s breach
of the implied warranty of merchantability and Magnuson-Moss Warranty Act
claims were time barred. Included in the
last page of the subject microwaves’ user manuals, Electrolux included a statement
that any claims based on the implied warranty of merchantability are limited to
one year. And as required by regulations
promulgated under the Magnuson-Moss Act, the manual went on to state that some
jurisdictions do not allow a limitation on the duration of implied warranties,
so the limitation may not apply to a given consumer. This additional language is crucial, but not
in the way the court seems to believe.
Circuit has ruled that any reduction in the duration of the statute of limitations
for breach of implied warranty must be conspicuous, defined as “so written that
a reasonable person against whom it is to operate ought to have noticed it.” See
Gladden v. Cadillac Motor Car Div., 83 N.J.
320, 331 (N.J. 1980). However,
where such limitation is not conveyed in “clear an understandable language[,]”
they are “generally regarded as improper or invalid[.]” Id. at 335. Here, it is the federally mandated language that the court
finds offensive and prevented the defendant from prevailing in its arguments. Because the written warranty points out that
a consumer may have other rights that
vary from state to state, the court found an average consumer not fully versed
in the specific limitations on a state-by-state basis is likely to be confused.
Accordingly, the court found it would
not be clear and conspicuous to a consumer whether the limitation applied to
him, and defendant’s motion to find plaintiff’s breach of warranty claim time
barred was denied. Because plaintiff’s Magnuson-Moss
Warranty Act claims are coextensive with the underlying state warranty claim, the
court likewise allowed these claims to proceed.
conclusion here runs contrary to 16 C.F.R. §701.3(a), the
Federal Trade Commission regulation that requires consumer product warrantors to
make detailed disclosures of information necessary to allow consumers to
understand written warranties—specifically §701.3(a)(7), which requires any
limitation on the duration of an implied warranty to include the language: “Some
States do not allow limitations on how long an implied warranty lasts, so the
above limitation may not apply to you.”
How can the
same statement both be legally required as necessary for consumers to understand
written warranties, and at the same time lead the court to find it likely to mislead
or confuse customers? The court may not
have perceived this seeming disconnect, but if it did, it made no effort to make
sense of it. One potential explanation is that the court took issue not with
the language notifying consumers of varying state law, but with the year-long limitation
itself, which was written with finality: “Claims…are limited to one year or the
shortest period allowed by law.” But the
Uniform Commercial Code’s statute of limitations, which applies to Magnuson-Moss
claims, permits a warrantor reducing the time for filing a breach of warranty
claim from four years to “not less than one year.” The court also looked
askance at the defendant’s statement that “[t]his written warranty gives you specific
legal rights. You may also have other rights
that vary from state to state.” This,
too, is a federally mandated statement; it must appear in all consumer product
warranties. The court’s lack of awareness of federal warranty requirements leaves
manufacturers with uncertainty as to how to proceed in drafting future disclaimers,
at least when their products are distributed in New Jersey.
also rejected defendant’s argument that plaintiff’s claims would be subsumed
under the New Jersey Products Liability Act; the court set this argument aside
by observing that the plain language of the Act limits its application to situations
where a product causes damage or harm to something other than the product itself. N.J.S.A.
2A:58C1(b)(3). As the plaintiff only alleged the defect in the microwave
handle damaged the usefulness and value of the microwave itself, the court found
the Act explicitly excluded plaintiff’s claims from its coverage.
The court likewise
rejected defendant’s argument – that plaintiff failed to state a claim under
the New Jersey Consumer Fraud Act – finding plaintiff adequately alleged (1)
unlawful conduct; (2) an ascertainable loss; and (3) a causal relationship
between the conduct and that loss. See
International Union of Operating Engineers Local No. 68 Welfare Fund v. Merck
& Co., 929 A.2d 1076 (N.J. 2007). Though defendants argued plaintiff failed to meet
the heightened specificity requirements of Federal Rule of Civil Procedure
9(b) in bringing a claim founded on fraud or misrepresentation, the court opined
that because plaintiff premised at least part of defendants’ alleged consumer fraud
violation on an affirmative misrepresentation that the microwaves were suitable
for over-the-range use, plaintiff sufficiently alleged the falsity of this representation.
In a recent webinar my Segal McCambridge colleague, Dan Ahasay, and I covered three key litigation topics: telling your client’s story to the jury, understanding and applying the federal rule of evidence governing the use of expert witness testimony at trial, and defending against a trial tactic claimed to spur jurors to think with their “reptile” brain. While we couched our discussed in the context of products liability litigation, the thoughts and insights shared apply to just about any case. You can access the presentation materials here.
New Frontiers for Extended Warranties by Aleem Lakhani is a must read for warranty industry professionals. In the article, Aleem examines the impact disruptive technologies and changing consumer expectations are having on warranty, extended warranty and service contract operations. He analyzes the contours of the present day warranty marketplace, the digital transformation of how business is done in the space, and what this transformation means for key stakeholders. Aleem observes that “[t]he primary challenge [disruptive technologies present] relates to how to harness the data to make intelligent use of it in a timely manner for relevant partners in the warranty value chain ecosystem,” and predicts that “[t]hose that take bold steps today will benefit from first-mover advantage, increased market share, and will establish trust, loyalty and confidence about their commitment to innovation with partners, including the expectation of today’s and tomorrow’s customers.”
Aleem, the EVP at AmTrust North America, Specialty Risk Division, is a warranty industry veteran and thought leader. He also serves as on the Board of Directors for the Global Warranty and Service Contract Association. (Full disclosure: I am presently serving as GWSCA president.)
Courts across the country disagree about parties’ ability to contract around the UCC’s warranty remedy and damages provisions; the Seventh Circuit just ruled that Wisconsin’s limitations on UCC §2-719 remain in place, despite national trends in the opposite direction.
Service contracts can be powerful tools for increasing revenue and customer loyalty. If you sell a product, you have almost certainly considered what type of warranty to offer. But, have you also thought about whether to also give customers the option of purchasing an additional service contract? Here are five things to consider:
How should damages be measured in an action for breach of repair-and-replacement warranty? And what elements of damages should available? I recently ran across a piece I wrote addressing these questions in 2005. Remarkably – or, perhaps, not so remarkably given the pace at which the law evolves – it remains relevant; so I thought I’d put it out there for comment. Continue reading →
For centuries, warranty law has been a back and forth between policies benefiting sellers and those protecting buyers. Current warranty law is a reflection of this. To better navigate today’s policies, an understanding of how history has dealt with warranty regulation is crucial. Continue reading →