Janis v. Workhorse Custom Chassis, a consumer product breach of warranty case, is heading to the Illinois Appellate Court. There, the court will examine whether warranty disclaimers in a sales contract prevent a dissatisfied buyer from suing to force the seller to buy back the product – and, more importantly, may rid Illinois jurisprudence of the, shall we say, “curious” Blankenship decision.
The effect of a warranty disclaimer on the availability “buy-back” as a remedy in consumer and commercial warranty litigation is an important issue not just to retailers of motor vehicles and other high-ticket items, but also to the manufacturers who so often indemnify them in warranty-related litigation. Buy-back claims – known in legal parlance as “revocation of acceptance” – expose a seller, manufacturer, or both to substantially higher potential liability when compared to suit claiming only money damages, drive up litigation costs, and sometimes produce large settlements in cases that should have been dismissed as a matter of law. And they can be more difficult to defend, particularly when premised on merchantability issues.
Where a buyer is found to have justifiably revoked her acceptance, the seller (or the manufacturer indemnifying the seller) must buy-back the product. Buy-back generally includes refunding the full purchase price, or close to it, taxes, and associated licensing and other fees, plus reimbursing the buyer for the interest the she paid if the purchase was financed. The price tag to a defendant saddled with this “equitable remedy” can be quite steep where the product returned is a $200,000 motorhome and the litigation was filed two years after purchase and dragged on for several years before the verdict.
At the core of the buy-back problem in Illinois is the Blankenship v. Ford Motor Co. case, decided in 1981. There, the court held that a warranty term disclaiming liability for product quality related issues does not prevent a seller from being required to buy-back a product because of defects in quality. An illogical conclusion and one that effectively rewrote the statutes governing sales transactions by creating a liability not intended by the statute.
In Janis, a RV buyer brought Magnuson-Moss breach of warranty claims against the RV maker, chassis supplier, and selling dealer, and a UCC revocation of acceptance claim only against the dealer. Claims against the RV maker were dismissed because the complained of problem, failure of an allegedly defective fuel rail pulse damper clip, occurred after the period covered by its limited warranty. The chassis maker went to trial and the jury found in its favor on the plaintiff’s implied warranty claim. The appeal arises from a summary judgment in favor of the selling RV dealer on the revocation claim. The trial court ostensibly found that the dealer’s warranty disclaimer precluded plaintiff from revoking acceptance. While this is a legally correct result, it seems directly at odds to the Blankenship case. The trial judge in Janis decided not to follow Blankenship, but to rely instead on a more recent case, Tague v. Autobarn, decided in 2009. In Tague, the court rejected the buy-back remedy because the plaintiff in that case could not prove that there were defects in the car when he bought it. Interestingly, the Tague decision does not even mention the Blankenship decision, even though the plaintiff based arguments on it in his brief.