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08/21/97 PAUL PERONA v. VOLKSWAGEN AMERICA

August 21, 1997

PAUL PERONA, MR. LEASING, INC., EDWARD ZUREK, ROBERT C. IZENSTARK, GERALDINE STUMP, SILVERMAN & MAILMAN, P.C., LYNN GARBER, RAYMOND LORAN, DONALD S. MAWLER, ISADOR WEISENFELNER, NASSAU-SUFFOLK FROZEN FOOD CORP., AND JEROME D. O'CONNELL, PLAINTIFFS-APPELLANTS,
v.
VOLKSWAGEN OF AMERICA, INC., AUDI AG, VOLKSWAGEN AG, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. Honorable Walter Bieschke, Judge Presiding.

Released for Publication October 9, 1997.

The Honorable Justice Cerda delivered the opinion of the court. Greiman, J., and Gallagher, J., concur.

The opinion of the court was delivered by: Cerda

The Honorable Justice CERDA delivered the opinion of the court:

On remand from the Illinois Supreme Court.

This appeal arises from a class action of plaintiffs who purchased Audi 5000 automobiles during model years 1983 through 1987. Defendants are Volkswagen of America, Inc., the importer and distributor of Audis in the United States, Audi A.G., the Audi manufacturer, and Volkswagen A.G., the parent corporation of Audi A.G. and Volkswagen of America. The claims arose out of alleged unintended acceleration of the Audi 5000 automobiles.

The trial court dismissed the fifth amended complaint for failure to allege specific defects under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act)(815 ILCS 505/2 (West 1992))) and failure to allege proper notice on its Uniform Commercial Code (U.C.C.) warranty claims (810 ILCS 5/2-313, 2-314 (West 1992))) and Magnuson-Moss Warranty Act (Magnuson-Moss) claims (15 U.S.C. par. 2301 et seq.).

On appeal, this court reversed the dismissal of the fifth amended complaint and remanded the matter to the trial court for further proceedings. Perona v. Volkswagen of America, 276 Ill. App. 3d 609, 658 N.E.2d 1349, 213 Ill. Dec. 328 (1995). Defendants filed a Petition for Leave to Appeal with the Illinois Supreme Court. During the pendency of the Petition for Leave to Appeal, our supreme court issued an opinion in Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 675 N.E.2d 584, 221 Ill. Dec. 389 (1996), then vacated Perona, 276 Ill. App. 3d 609, 213 Ill. Dec. 328, 658 N.E.2d 1349 and remanded it to this court for reconsideration in light of its Connick opinion. For the following reasons, we affirm the trial court's dismissal of the U.C.C. and Magnuson-Moss claims and reverse the trial court's dismissal of the Consumer Fraud Act claims.

In March 1987, three groups of plaintiffs filed class action lawsuits. The cases were later consolidated, and a consolidated complaint, filed on October 1, 1987, was brought on behalf of a class of all persons who purchased or leased 1983 through 1986 model Audi 5000 automobiles.

On May 5, 1988, the parties executed a settlement agreement subject to court approval. The trial court preliminarily approved the settlement agreement on May 19, 1988, and certified the class for purposes of settlement only.

On July 19, 1988, the case was transferred to another trial judge, who on August 11, 1988, vacated the court order approving the settlement. Subsequently, plaintiffs filed third and fourth amended consolidated class action complaints, which added model years 1978-1982 and a subclass, which was comprised of individuals who had allegedly experienced actual incidents of unintended acceleration. Ultimately, the third and fourth amended complaints were dismissed.

On March 4, 1992, a fifth amended complaint was filed by 12 plaintiffs purporting to represent a class of all purchasers and lessees of Audi 5000 automobiles, model years 1983 through 1986, and a subclass of persons whose automobiles allegedly experienced an incident of unintended acceleration. The facts alleged in the complaint are that during the 1980's, owners of 1983 through 1986 automatic transmission Audi 5000 automobiles experienced incidents where their automobiles accelerated from a stopped position to full throttle at times when the automobile was at a standstill or the driver had his or her foot on the brake pedal. At least 2,000 incidents of unintended acceleration occurred, resulting in at least 513 accidents, 271 injuries, and five deaths.

The complaint further alleges that these incidents were caused by defects in the design or manufacture of Audi 5000 automobiles manufactured and sold during the model years 1983 through 1986. The alleged defects include the lever and cable system linking the transmission shift lever, the brake and gas pedal placement and separation, the cruise control system, and the shift lock system.

Audi sent recall letters to its customers in April 1982, September 1983, and January 1987, recalling the Audi 5000 automobiles for repair, advising the owners of the problem, and instructing the drivers on certain vehicle safety procedures. Audi denied any mechanical or design defects. Its position was that driver error was responsible for the incidents of unintended acceleration. In addition, Audi released two press releases regarding the unintended accelerations.

Plaintiffs further allege that defendants' proposed modifications are inadequate because Audi 5000 automobiles that have already been modified have continued to experience instances of sudden and unintended acceleration. As a result of the continuing alleged defects, plaintiffs claim that their Audi 5000s have lost their resale value. For that reason, plaintiffs are claiming damages in the amount of the full cost of their Audi 5000 automobiles. If the problem is eventually remedied, plaintiffs claim damages in the amount of the diminution of the resale value.

Plaintiffs' first assertion is that their U.C.C. warranty claims should not have been dismissed for failure to give notice. Because defendants were aware of the problem, sent notices and recall letters to its customers, issued press releases, and entered into a proposed national class settlement agreement in relation to claims of unintended acceleration, plaintiffs claim that the March 3, 1987, filing of their lawsuit was appropriate notice of their complaints.

In Connick, the defendant automobile manufacturer argued that the plaintiffs could not recover for a breach of warranty under the U.C.C. because the complaint did not adequately allege that they had notified the manufacturer of the breach, as required by article II, section 2--607, of the Uniform Commercial Code (810 ILCS 5/2--607(3)(a)(West 1994)). Connick, 174 Ill. 2d at 491-92. The plaintiffs responded that they were excused from giving direct notice of breach of warranty because the manufacturer had actual knowledge of the breach and because notice was given by the filing of the plaintiffs' complaint. Connick, 174 Ill. 2d at 492. Those same arguments are made by the parties in this case.

Section 2-607(3)(a) of the Uniform Commercial Code provides that a "buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy." 810 ILCS 5/2-607(3)(a) (West 1992). The purpose of the notice is to allow the defendant an opportunity to gather evidence, investigate facts, and negotiate a possible settlement. Goldstein v. G. D. Searle & Company, 62 Ill. App. 3d 344, 350, 378 N.E.2d 1083, 19 Ill. Dec. 208 (1978). However, direct notice to the seller is not required when (1) the seller has actual knowledge of the defect of the particular product; or (2) the seller is deemed to have been reasonably notified by the filing of the buyer's complaint. Connick, 174 Ill. 2d at 492.

We first consider plaintiffs' argument that they were excused from giving direct notice of the breach of warranty because Audi had actual knowledge of the Audi 5000's alleged safety risks. In their complaint, plaintiffs alleged that defendants had actual knowledge of the defect and attached several recall notices and two press releases issued by Audi addressing the excessive unintended accelerations.

A federally mandated recall notice does not fulfill the U.C.C.'s notice requirement. A manufacturer recall does not admit a defect in a particular product, but refers to the possibility of a defect in a class of products. Bagel v. American Honda Motor Co., 132 Ill. App. 3d 82, 88, 477 N.E.2d 54, 87 Ill. Dec. 453 (1985). Furthermore, the taking of precautions against the future, such as issuance of recall letters, cannot be construed as an admission of responsibility for the past. Chase v. General Motors ...


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