Thursday, July 26, 2007

Auto Dealer Can Proceed with Consumer Warranty Claim Against Italian Sports Car Maker

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reports.

Automobili Lamborghini S.P.A. has been unable to get a federal district court in Hawaii to dimiss an action filed against it by a Hawaii auto dealership that purchased one of the auto maker’s Murcielago sports cars for more $285,000 back in July 2002. The complaining dealership filed suit in March 2006, alleging that Lamborghini breached the vehicle’s written warranty in violation of the federal Magnuson-Moss Act (MMA) and state law. The dealership contended that the Murcielago had been repaired several times for transmission and drive-train problems.

The court last month rejected the Italian auto maker’s argument that the complaining dealership couldn’t pursue an MMA claim because it wasn’t a consumer within the meaning of the statute.

As explained in the CCH Trade Regulation Reporter, the MMA was enacted in 1975 to provide a federal mechanism for government and private parties to deal with problems arising from consumer product warranties. The main concern of the law is warranties extending to "consumers." A consumer is defined as a buyer of any consumer product (but not a purchaser for resale) or any person receiving such a product during the duration of the warranty or service contract. Also included is any other person who is entitled by the terms of the warranty or service contract or under state law to enforce the obligations of the warranty against the warrantor.

Auto Dealership Could Be "Consumer"

The complaining auto dealership convinced the court that there was a question of fact as to whether it was a “consumer,” within the meaning of the MMA. The dealership could have been a buyer (other than for purposes of resale) of a consumer product.

The fact that the auto dealership paid Hawaii's one-half percent general excise tax rate for wholesalers instead of the four-percent rate for retail purchases was not determinative of whether the vehicle was purchased for resale, in the court’s view. The dealership's owner, a well known figure in the Hawaii car trade, contended that the Murcielago was never placed on the car lot for resale and never was marketed for sale. Instead, it was allegedly purchased with the intent of being driven by dealership owner and was driven only by him, his relatives, and service people. Moreover, the car was either kept at the dealership owner's home or was parked in a storage area in the basement of the dealership and not on display for sale.

As a result, the complaining auto dealer’s breach of express warranty claims based on drivetrain and/or transmission defects and instrument panel gauge defects were permitted to proceed.

The June 28, 2007, decision in Stoebner Motors, Inc. v. Automobili Lamborghini S.P.A., No. 06-00446 JMS/LEK, will appear at 2007-2 CCH Trade Cases ¶75,790.

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