Long-Term Leases and Your Warranty Rights

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Long-Term Leases and Your Warranty Rights

By Jaime E. Suarez

In 1975, Congress enacted the Magnuson-Moss Warranty Act (MMWA) to enhance the enforceability of warranties on consumer products and protect the “ultimate user of the product.”1 The Magnuson-Moss Warranty Act authorizes a lawsuit for damages and other equitable relief by “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.”2 The Magnuson-Moss Warranty Act 's definition of “consumer” is critical in that only a person or entity defined as a consumer may bring a cause of action under the Act.
To qualify as a consumer who may file suit under the Act, a person must come within one of the three alternative categories of consumer:

The term “consumer” means

[Category One] a buyer (other than for purposes of resale) of any consumer product,
[Category Two] 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
[Category Three] 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).3
An individual qualifies as a consumer under the MMWA if he or she meets any of these three definitions.4
In April 2007, the Florida Supreme Court further defined a Floridian’s rights under the Magnuson-Moss Warranty Act.5
In that case, Jennifer Cerasani acquired a new Honda Civic through a long-term lease and began to have problems with the car.6 She took the car to a Honda dealership for repairs several times but remained dissatisfied with the results. Cerasani eventually filed suit against the manufacturer, American Honda, under the Magnuson-Moss Warranty Act. She alleged one count of breach of written warranty and one count of breach of implied warranty. The trial court dismissed the complaint on grounds that the provisions of the MMWA covering a “written warranty” as defined in the Act do not apply to persons who lease rather than purchase vehicles, and that Cerasani was not in privity of contract with Honda as required under Florida law for an implied warranty claim.7
On appeal, Florida’s Second District Court of Appeal reversed the dismissal of Cerasani's claim based on Honda's express new-car warranty. The Second District Court of Appeal concluded that Cerasani's complaint should not have been dismissed because the court agreed that Cerasani's assertions that the warranty was part of the basis of the bargain in the sale of the car to the lessor, “Honda Leasing,” and that the sale was for purposes other than resale were sufficient to allege a “written warranty” as defined by the MMWA.8
The Second District Court of Appeal also ruled that Cerasani satisfied the second and third of the three alternative definitions of “consumer” under the MMWA because she was a person to whom the car was “transferred during the duration” of a written warranty and because she was entitled under the terms of the warranty to enforce the warranty, as reflected by Honda's willingness to provide repair service.9
This decision however conflicted with Florida’s First District Court of Appeal’s decision involving a lease of a motor vehicle from a dealership which then assigned its interest in the lease to a finance company.10 There, the First District Court of Appeal ruled that “there must be an identifiable purchase and sale before the provisions of the Magnuson-Moss Act apply.”11

The Florida Supreme Court’s Analysis – Florida’s Lemon Law

The Florida Supreme Court began by discussing Florida's Lemon Law, which is contained in chapter 681, Florida Statutes (2006). Florida’s Lemon Law entitles lessees to enforce the obligations of automobile warranties.12 For example:
• Florida Statute Section 681.103 imposes a duty on the manufacturer (or its authorized service agent) to conform a vehicle to the warranty if the nonconformity is reported by the “consumer” within the “Lemon Law rights period.”
• Florida Statute Section 681.102(4) includes lessees within its definition of “consumer.”
• Florida Statute Section 681.104(2)(b) provides that when a vehicle does not conform to the manufacturer's warranty, “[t]he lessee shall receive the lessee cost and the lessor shall receive the lease price less the lessee cost.”
• Florida Statute Section 681.112(1) authorizes a consumer to file suit to recover damages caused by a violation of the Lemon Law.
• Florida Statute Section 681.112(3) specifies that other rights and remedies are not foreclosed by chapter 681.
Therefore, the Florida Supreme Court concluded that Florida’s Lemon Law qualifies lessees for Category Three consumer status under the Magnuson-Moss Warranty Act,13 because Category Three provides that a person may be a consumer if entitled to enforce the warranty either by the terms of the warranty or under applicable state law.14

Florida’s Lemon Law - Warranties

Furthermore, Florida's Lemon Law includes the following definition of a warranty enforceable under chapter 681:
“Warranty” means any written warranty issued by the manufacturer, or any affirmation of fact or promise made by the manufacturer, excluding statements made by the dealer, in connection with the sale of a motor vehicle to a consumer which relates to the nature of the material or workmanship and affirms or promises that such material or workmanship is free of defects or will meet a specified level of performance.15
Therefore, this language defines warranty as either “any written warranty,” without further qualification, or “any affirmation of fact or promise” made in connection with the sale of a motor vehicle.
Under this construction, the Florida Supreme Court stated that “a sale is unnecessary to trigger
the protections of the Lemon Law under a written warranty.”16

The Florida Supreme Court further stated that:

The allegations in Cerasani's complaint are sufficient to make her a Category Three consumer entitled to enforce Honda's new motor vehicle warranty under state law. She alleged that Honda supplied the warranty to the lessor, who then assigned it to Cerasani, and that she submitted the car to the dealer at least seven times in an unsuccessful attempt to have defects covered by the warranty remedied. Therefore, she meets the criteria for a consumer entitled to bring suit for damages under the MMWA.17

Conclusion

The Florida Supreme Court concluded that a motor vehicle lessee who is entitled to enforce the terms of a warranty under Florida’s Lemon Law (Florida Statutes chapter 681), is also entitled to file suit under the Magnuson-Moss Warranty Act.18 Their rationale is that a lessee with a cause of action under Florida’s Lemon Law qualifies as a Category Three consumer (of the Magnuson-Moss Warranty Act), who is "entitled ... under applicable State law to enforce against the warrantor ... the obligations of the warranty."19
1 See American Honda Motor Co., Inc. v. Cerasani, --- So.2d ----, 2007 WL 1074922, *2 (Fla. 2007) (citing Cerasani v. American Honda Motor Co., 916 So.2d 843, 845 (Fla. 2d DCA 2005) and O'Connor v. BMW of N. Am., LLC, 905 So.2d 235 (Fla. 2d DCA 2005)).
2 Id., (quoting 15 U.S.C. § 2310(d)(1) (2000)).
3 Id., (quoting 15 U.S.C. § 2301(3) (2000)).
4 Id., (citing Ryan v. Am. Honda Motor Co., 896 A.2d 454, 456 (N.J. 2006)).
5 See American Honda Motor Co., Inc. v. Cerasani, --- So.2d ----, 2007 WL 1074922 (Fla. 2007).
6 This is a recitation of the facts outlined in American Honda Motor Co., Inc. v. Cerasani, --- So.2d ----, 2007 WL 1074922, *1-2 (Fla. 2007).
7 Id.
8 See American Honda Motor Co., Inc. v. Cerasani, supra at *1.
9 See Id. (citing Cerasani, 916 So.2d at 846-47).
10 See American Honda Motor Co., Inc. v. Cerasani, supra at *2 (citing Sellers v. Frank Griffin AMC Jeep, Inc., 526 So.2d 147 (Fla. 1st DCA 1988)).
11 See Id. (citing Sellers v. Frank Griffin AMC Jeep, Inc., 526 So.2d at 156).
12 See, e.g., BMW of N. Am., Inc. v. Singh, 664 So.2d 266 (Fla. 5th DCA 1995) (applying chapter 681 to claim by automobile lessee).
13 See 15 U.S.C. § 2301(3).
14 See American Honda Motor Co., Inc. v. Cerasani, supra at *3.
15 Id., (quoting § 681.102(23), Fla. Stat. (2006)) (emphasis added).
16 Id., (citing § 681.102(4), (9), (11)-(13), Fla. Stat. (2006) (including lessee within definition of “consumer” and providing definitions of “lease price,” “lessee,” “lessee cost,” and “lessor”); § 681 .104(2)(b), Fla. Stat. (2006) (providing that in the case of vehicles that do not conform to the manufacturer's warranty after a reasonable number of repair attempts, “[t]he lessee shall receive the lessee cost and the lessor shall receive the lease price less the lessee cost”)).
17 See American Honda Motor Co., Inc. v. Cerasani, supra at *6.
18 See Id.
19 See Id., (quoting 15 U.S.C. § 2301(3)).