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Skelton v. General Motors Corp.

UNITED STATES COURT OF APPEALS, SEVENTH CIRCUIT


decided: September 28, 1981.

ARLIE GLEN SKELTON, JR., ET AL., PLAINTIFFS-APPELLEES,
v.
GENERAL MOTORS CORPORATION, DEFENDANT-APPELLANT .

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 79-C-1243, James B. Moran, Judge .

Before Swygert, Senior Circuit Judge, and Wood and Cudahy, Circuit Judges.

Author: Cudahy

Section 110(d) of Title I of the Magnuson-Moss Warranty-Federal Trade Commission Improvements Act ("Magnuson-Moss" or the "Act") creates a federal private cause of action for consumers damaged by the failure of a warrantor "to comply with any obligation under ... a written warranty." 15 U.S.C. § 2310(d)(1) (1976). The issue on this interlocutory appeal is whether a "written warranty" actionable under § 110(d) is limited to the particular promises, undertakings or affirmations of fact expressly defined as "written warranties" by Congress in the Act. The district court held that § 110(d) provides a federal cause of action not merely for breach of a "written warranty" as defined in the Act but also for breach of "all written promises presented in connection with the sale of a formally warranted product." 500 F. Supp. 1181, 1190 (N.D.Ill.1980). We reverse.

I.

Plaintiffs, purchasers of automobiles manufactured by defendant General Motors Corporation ("GM"), brought this action as a nationwide class action on behalf of all purchasers of GM automobiles manufactured from 1976 through 1979. In Count I of their amended complaint, plaintiffs allege that GM, through its "brochures, manuals, consumer advertising and other forms of communications to the public generally and to members of plaintiffs' class specifically," warranted and represented that 1976 through 1979 GM automobiles contained THM 350 (M38) transmissions, or "transmissions of similar quality and performance.... and that (such transmissions) would meet a specified level of performance." Plaintiffs charge in Count I that, contrary to these warranties and representations, GM substituted inferior THM 200 (M29) transmissions for THM 350 (M38) transmissions in GM automobiles manufactured from 1976 through 1979. This undisclosed substitution is alleged to constitute a violation of written and implied warranties under § 110(d) of Magnuson-Moss. In Count II, plaintiffs claim that the substitution is actionable as a "deceptive warranty" under § 110(c)(2) of the Act, 15 U.S.C. § 2310(c)(2) (1976).

General Motors moved to dismiss both counts of plaintiffs' complaint for failure to state a claim upon which relief could be granted. On October 1, 1980, the district court granted this motion with respect to the "implied warranty" portion of Count I and the "deceptive warranty" claim in Count II, but denied GM's motion to dismiss the "written warranty" claim in Count I. 500 F. Supp. 1181 (N.D.Ill.1980). GM's interlocutory appeal from the district court's refusal to dismiss the "written warranty" claim was certified by the district court on October 31, 1980 and accepted by this court on December 4, 1980. Plaintiffs did not take timely interlocutory appeals from the district court's determinations against them with respect to the "implied warranty" and "deceptive warranty" claims.*fn1

II.

Magnuson-Moss is, in the main, a remedial statute designed to protect consumers from deceptive warranty practices. Its draftsmen believed that consumer product warranties often were too complex to be understood, too varied to allow meaningful comparisons and too restricted to provide meaningful warranty protection. See S.Rep.No.93-151, 93d Cong., 1st Sess. 6-8 (1973); H.R.Rep.No.93-1107, 93d Cong., 2d Sess. 22-29, reprinted in (1974) U.S.Code Cong. & Ad.News 7702, 7705-11.*fn2 The Act's draftsmen sought to remedy these perceived ills by imposing extensive disclosure requirements and minimum content standards on particular types of written consumer product warranties. And, to promote enforcement of these warranties, the draftsmen devised a detailed remedial apparatus, which includes optional informal dispute settlement procedures as well as private and governmental judicial actions.

Although Magnuson-Moss does not require any manufacturer or seller to extend a warranty with its product,*fn3 any "written warranty" offered with a consumer product is subject to the Act's regulatory requirements. The term "written warranty" is defined "for purposes of (the Act)" in § 101(6) which reads:

(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.

15 U.S.C. § 2301(6) (1976).

Sections 102 through 109 of the Act set forth the content and disclosure rules applicable to all "written warranties." Section 102 provides that "any warrantor warranting a consumer product to a consumer by means of a written warranty shall, to the extent required by the rules of the (Federal Trade) Commission, fully and conspicuously disclose in simple and readily understood language the terms and conditions of such warranty." 15 U.S.C. § 2302(a) (1976). Pursuant to this provision, the FTC has, by regulation, required that warrantors made detailed disclosures of information necessary to allow consumers to understand and enforce written warranties.*fn4 The FTC regulations also require, pursuant to § 102(b), that sellers of consumer products with written warranties make available to the consumer the text of such warranties prior to sale. 16 C.F.R. § 702.3 (1980).

Under § 103, warrantors must conspicuously designate written warranties as either "full" or "limited." If a warranty is designated as "full," § 104 provides that the warrantor must (1) remedy defects or malfunctions without charge and within a reasonable period of time; (2) make no limitation on the duration of any implied warranty on the product; (3) provide for no exclusion of limitation of consequential damages unless conspicuously stated, and (4) refund or replace the product if, after a reasonable number of attempted repairs, the supplier fails to remedy defects or malfunctions. 15 U.S.C. § 2304 (1976).

An additional obligation placed on suppliers extending written warranties is found in § 108, which provides that such suppliers may not disclaim, modify or limit the duration of implied warranties to a period shorter than the "duration of a written warranty of reasonable duration." 15 U.S.C. § 2308 (1976).*fn5

Section 110(d) creates a private cause of action for breach of "written warranty," subject to the requirements that: (1) the consumer must have an individual claim of at least $25; (2) the total amount in controversy must equal or exceed $50,000; and (3) if brought as a class action, the complaint must name at least one hundred plaintiffs. 15 U.S.C. § 2310(d)(3) (1976).*fn6 Section 110 also makes any failure to comply with the requirements of the Act a violation of § 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. § 45(a)(1) (1976)), and empowers the FTC and the Attorney General to seek injunctive relief against (1) failure to comply with any obligation under the Act, and (2) written warranties which may be "deceptive" to a reasonable individual. 15 U.S.C. § 2310(c) (1976).

III.

The scope of the private action for breach of "written warranty" created by § 110(d) is the issue presented to us for resolution.*fn7 Section 110(d) provides in part that:

(A) consumer who is damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under this title, or a written warranty, implied warranty, or service contract, may bring suit for damages and other legal and equitable relief (in any state court of competent jurisdiction or in an appropriate federal district court).

15 U.S.C. § 2310(d)(1) (1976).

The district court properly rejected plaintiffs' argument that the Act's draftsmen intended in § 110(d) to create a federal private cause of action for breach of all written express warranties.*fn8 None of the legislative history offered by plaintiffs in this record provides the clear evidence of Congressional intent necessary to overcome the "familiar principle governing the interpretation of statutes ... that if a statutory definition of a word is given, that definition must prevail, regardless of what other meaning may be attributable to the word." Evans v. Int'l Typographical Union, 76 F. Supp. 881, 887 (S.D.Ind.1948).*fn9 Indeed, we are less than confident that it is possible to distill any unambiguous Congressional intent from the Act's legislative history. As the district court noted:

(A review of the Act's legislative history) is the legal equivalent of an archaeological dig. Various consumer warranty bills were pending before the House and Senate for four years, during which each body defined, discarded, reintroduced and redefined concepts which in some fashion or another are related to the enacted legislation. Some provisions of the Act are vestigial reminders of concepts buried but not totally forgotten during the on-going legislative process. Both proponents and opponents of an expansive interpretation have cited compelling, to them, legislative history only dimly related to the language which finally emerged as law.

500 F. Supp. at 1184.

In support of their argument that § 110(d) created a federal private cause of action for breach of all written express warranties, plaintiffs rely heavily on the fact that the version of § 110 passed by the Senate and submitted to Conference had both defined "express warranty" and created a cause of action for breach of any express or implied warranty.*fn10 But the Conference rejected the Senate approach, and the version of § 110 enacted into law was adopted substantially verbatim from the House bill, which had neither defined "express warranty" nor provided a cause of action for its breach.*fn11 The House version of the Act created instead a cause of action for failure to comply with "any obligation under (the Act), or under a warranty or service contract (as defined in section 10(10) and (11))."*fn12 The Conference Committee modified this language by substituting for the word "warranty," the term "written warranty," which the Conference Committee had newly defined in § 101(6).*fn13

It is also significant to note that the limitations imposed on federal jurisdiction by the Senate version of § 110, which plaintiffs view as expansive, were actually stricter than those imposed by the House bill. The Senate bill did not create a cause of action cognizable in federal court for breach of express warranties; instead, it apparently operated only to provide for recovery of attorneys' fees by consumers who prevailed in actions for breach of express warranties in state court. And, because it incorporated the $10,000 amount in controversy requirement of 28 U.S.C. § 1331 (1976), few, if any, actions could have been brought in federal court under the Senate version of the Act.*fn14 As the Report of the Senate Committee on Commerce explained:

Subsection (b) authorizes any "consumer" ... to sue for breach of warranty or service contract in an appropriate district court, but any such suit shall be subject to the jurisdictional requirements of section 1331 of title 28 of the United States Code. In effect, this means a person or at this time a class of persons must show individual damages of ten thousand dollars or more in order to bring suit in a Federal court.

But any "consumer' damaged by the failure of a supplier to comply with any obligations assumed under an express or implied warranty or service contract subject to this title i. e., a warranty in writing, a service contract in writing, an express warranty ... or implied warranties may sue in any State or District of Columbia court of competent jurisdiction. Thus, for the most part, the Federal rights created by title I of this bill will be enforced in State rather than Federal courts.

S.Rep.No.93-151, 93rd Cong., 1st Sess. 23 (1973).*fn15 Thus, although the Senate bill defined "express warranty" and in some manner created a federal claim for breach of such warranties, it limited the jurisdiction of federal courts to actions alleging breach of "written warranties," as that term was defined in § 101 of the Act.

Therefore, in arguing that § 110(d) provides consumers with a claim actionable in federal court for breach of any written express warranty, plaintiffs argue for a construction of § 110(d) that was not contemplated by either the House or the Senate.*fn16 It is inconceivable that, by deleting any reference to "express warranty" from the Act, and by providing instead a cause of action for breach of "written warranty" (which the Conference Committee had newly defined in § 101(6)), the Committee could have meant to create a private remedy actionable in federal court for breach of all written express warranties, when neither the Senate nor the House had so provided.*fn17

In sum, there is simply no substantial evidence in the legislative history that Congress intended to create a broad federal cause of action for breach of written express warranties. Rather, it appears that the draftsmen of § 110(d) intended to adopt the House approach, which was to create a federal private cause of action for consumers injured by the violation of (1) any obligation under the Act, (2) any warranty subject to the extensive regulatory requirements of the Act, or (3) any implied warranty the deceptive and unconscionable limitation of which was a major focus of the Act's regulatory provisions.

IV.

Although the district court properly declined to adopt plaintiffs' interpretation of § 110(d), it also rejected GM's argument that the only written warranties actionable under § 110(d) are those promises, representations or undertakings defined as "written warranties" in § 101(6). In its view:

Congress ... indicated that although the Magnuson-Moss Act only regulates transactions involving written warranties as the term is narrowly defined in § 101(6), once a consumer is involved in such a transaction there is a policy of providing federal remedies beyond the four corners of the formal warranty.

500 F. Supp. at 1191. Thus, the district court concluded that, whenever a manufacturer elects to extend a "written warranty" to a consumer, "(o)ther written promises presented in connection with the same transaction should also be enforceable as part of the "written warranty.' " 500 F. Supp. at 1190.

The district court's determination that "written warranty" in § 110(d) means something more than it was defined to mean in § 101(6) has two aspects. First, the court found that the "Act itself suggests several different possible meanings of the phrase "written warranty' " and is therefore ambiguous. 500 F. Supp. at 1187. Second, because of this ambiguity, the district court looked to the purposes of the Act, as derived from its legislative history, and concluded that § 110(d) should be construed to provide "a remedy for all written promises presented in connection with the sale of a formally warranted product." 500 F. Supp. at 1190.

We believe that the three ambiguities identified by the district court, which we shall consider individually, are not sufficiently real or substantial to warrant rejection of the definition of "written warranty" provided by Congress in the Act. Moreover, as already discussed, we do not find in the Act's legislative history a clear Congressional intention that the term "written warranty" was meant to have different meanings in different sections of the Act. See Part III, supra. And, if anything is apparent from the statutory scheme, it is the importance of providing a clear, carefully circumscribed meaning to the term "written warranty." See note 7, supra.

One ambiguity in the use of the term "written warranty" which was identified by the district court appears in § 103(b). That subsection provides that the Act's content and disclosure requirements "shall not apply to statements or representations which are similar to expressions of general policy concerning consumer satisfaction and which are not subject to any specific limitations." 15 U.S.C. § 2303(b) (1976). The district court concluded that this provision would be "unnecessary" if the § 101(6) definition was intended to apply throughout the Act, presumably because, in the view of the district court, the generalized representations described in § 103(b) could never fall within the § 101(6) definition and were therefore statements or representations of a sort other than those defined in § 101(6). We cannot accept this supposition, however, because it is possible to construe these generalized representations to fit within the § 101(6) definition in some cases. For example, a written statement that "your money will be refunded if you are not completely satisfied" might be deemed to constitute an "undertaking in writing in connection with the sale by a supplier of a consumer product to refund ... in the event that such product fails to meet the specifications set forth in the undertaking," i. e., complete satisfaction. 15 U.S.C. § 2301(6)(B) (1976). Section 103(b) may quite plausibly have been included in the Act precisely to foreclose such interpretations.*fn18

A second ambiguity identified by the district court concerns § 110(c)(2)(B), which provides that a "deceptive warranty" includes 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." 15 U.S.C. § 2310(c)(2)(B) (1976). The district court concluded that this "apparently" means that "a written warranty can be "created' by the use or misuse of the words "guaranty' or "warranty,' even if the document using these terms does not include representations which constitute warranties under § 101(6)." 500 F. Supp. at 1187-88. Although the district court offers a sensible reading of § 110(c)(2)(B), its interpretation is not by any means required by the language of that section, and the interpretation is without support in the legislative history. The deceptive warranty provision was taken largely verbatim from the House version of the Act, which defined "deceptive warranty" to mean, inter alia, "a warranty (as so defined (in section 101(10)))*fn19 created by the use of such terms as "guaranty' or "warranty' ..." Thus, while the draftsmen's diction may have been suspect (insofar as they used the phrase "created by the use of" instead of "including" or "containing"), it appears most plausible that they intended for the term "deceptive warranty" to mean a written warranty as defined in § 101(6), which contains such terms as "guaranty" or "warranty," if the warranty's terms and conditions "so limit its scope and application as to deceive a reasonable individual." 15 U.S.C. § 2310(d) (1976). See also C. Reitz, Consumer Protection Under the Magnuson-Moss Warranty Act 77 (1978).

The district court also found an inconsistency between the § 101(6) definition of "written warranty" as a particular type of promise, affirmation or undertaking, and § 102, which "authorizes the Federal Trade Commission to promulgate rules requiring "inclusion in the written warranty' of various explanations of the rights of the consumer, including such statements as a "brief, general description of the legal remedies available to the consumer.' " 500 F. Supp. at 1187 (emphasis in original). From this, the district court concluded that "in the written warranty" suggests that "(a) written warranty is not just a particular type of "promise' or "affirmation' but a type of document or written contract as well." Id. In its brief on appeal, GM similarly stated that a " "written warranty' can be both a particular type of written promise or affirmation and the document incorporating it."

The text of a "written warranty" must, in the nature of things, be written on something. And, to this extent, a written warranty as defined in § 101(6) might be described as a written document. But there is nothing in the scheme of the statute to suggest that the Act was intended to apply to any promises, affirmations or undertakings other than those defined as written warranties in § 101(6). And we ought not to take a leap of faith to a documentary definition allegedly suggested by the seemingly inapt phrasing of § 102. As already noted, it is apparent from the statutory scheme that "written warranty" should be accorded a single, precise meaning. Moreover, we are constrained by sensible rules of statutory construction to interpret the phrase "written warranty" in § 102, as in the other sections of the statute, to be consistent with the clear meaning given to it by § 101(6). As stated in United States v. Gertz, 249 F.2d 662, 665 (9th Cir. 1957):

(W)here the same word or phrase is used in different parts of a statute, it will be presumed, in the absence of anything clearly indicating a contrary intent, that the word or phrase is used in the same sense throughout. Under circumstances giving application to this rule, there is a corollary that, where the meaning of the word or phrase in one instance is clear, this meaning will be attached to it elsewhere.

Accord, Hotel Equities Corp. v. Commissioner, 546 F.2d 725, 728 (7th Cir. 1976); Dragstrem v. Obermeyer, 549 F.2d 20, 24 n.4 (7th Cir. 1977). See also Nachman Corp. v. Pension Benefit Guaranty Corp., 592 F.2d 947, 952-53 n.6 (7th Cir. 1979), aff'd, 446 U.S. 359, 100 S. Ct. 1723, 64 L. Ed. 2d 354 (1980).

There is no clear evidence that Congress intended for written warranty in § 102 to mean something different than the definition it ascribed to the term in § 101(6), and we consequently presume that Congress intended for "written warranty" to have the same meaning in both sections. We therefore decline to accept the position that "written warranty" means both a particular class of representations and some undefined "document" containing those representations. It is more appropriate to read the inconsistent phrase "inclusion in the written warranty" (emphasis supplied) to mean "inclusion with the written warranty" or "inclusion in the document containing the written warranty."*fn20

The term "written warranty" serves a central function in the Act of identifying the particular representations that are subject to the Act's disclosure and content requirements. Because of the function it serves, it is important that the term have a single, precise meaning. The § 101(6) definition provides that unambiguous meaning, and that definition is used (all things considered) with commendable aptness by the draftsmen in the forty-odd appearances of the term "written warranty" in every section of the Act. We cannot agree that syntactical slips such as the use of the preposition "in" in § 102, create ambiguities in the statutory scheme of sufficient weight to justify discarding the meticulously worded definition of "written warranty" in § 101(6) in favor of an undefined "document," or "pile of written documents," as urged by the district court. See 500 F. Supp. at 1190.*fn21

V.

In sum, we are constrained to interpret "written warranty" in § 110(d) in accordance with the definition of "written warranty" provided by Congress in § 101(6).

REVERSED.

HARLINGTON WOOD, Jr., Circuit Judge, dissenting.

This is a close case of statutory interpretation, but I respectfully dissent from the majority's conclusion that the Act must be so strictly and rigidly read as to exclude coverage of the alleged transmission substitution by General Motors.

Judge Moran, in the trial court, carefully pondered the arguments and concluded that the act was broader than General Motors argued, but not so broad as plaintiffs' urged.*fn1 I generally agree with his interpretation.

As Judge Moran noted, 500 F. Supp. at 1184, he was not the first one to have some difficulty interpreting the Act. Others before him have characterized it as serving as no exemplar of legislative clarity. I would, therefore, not begin and end by viewing the Act's definition provisions in such isolation as to conclude that the beneficial consumer protection purposes of the Act are thereby completely limited. Were this a criminal statute, I might be bound to resolve the question in favor of General Motors, but it is not.

This Act needs some limited judicial first aid in order to be able to accomplish its remedial purposes.*fn2 Therefore, I would interpret the Act to mean that those written documents of General Motors which made specific representations of substance about the product, not just advertising ballyhoo, and which were introduced by General Motors into the transaction became, as a practical matter, inferentially incorporated into the written warranty. The written warranty would then more fully deserve its gold filigree frame.


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