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Lysek v. Elmhurst Dodge

September 18, 2001

ELIZABETH LYSEK, PLAINTIFF-APPELLANT,
v.
ELMHURST DODGE, INC., AND CHRYSLER CORPORATION, DEFENDANTS-APPELLEES (OLD KENT BANK, DEFENDANT).
PATRICIA KELLY AND THOMAS KUZMICKI, PLAINTIFFS-APPELLANTS,
v.
HOWARD PONTIAC, INC., AND SMART CHOICE, DEFENDANTS-APPELLEES (FIRST NATIONAL BANK OF ELMHURST, DEFENDANT).
MARTIN CORTEZ, PLAINTIFF-APPELLANT,
v.
JERRY BIGGERS CHEVROLET, INC., AND ITT COMMERCIAL FINANCE CORPORATION, DEFENDANTS-APPELLEES (FIRST CHICAGO BANK, DEFENDANT).



Appeal from the Circuit Court of Du Page County. No. 98--L--59, No. 99--L--103, No. 99--L--699 Honorable Hollis L. Webster, Judge, Presiding.

The opinion of the court was delivered by: Justice Byrne

As amended November 1, 2001.

UNPUBLISHED

Modified Upon Denial of Rehearing

This interlocutory appeal arises from three separate lawsuits in the circuit court of Du Page County. Plaintiffs seek review of orders dismissing claims under the Magnuson-Moss Warranty Federal Trade Commission Improvement Act (the Magnuson-Moss Act) (15 U.S.C.A. §2301 et seq. (West 1998)) for the breach of motor vehicle service contracts. We reverse the dismissal orders and remand the causes for further proceedings.

The three cases involve similar fact patterns which may be briefly summarized. In each case, the plaintiff (or plaintiffs) purchased a new or used motor vehicle from a Chicago area dealer along with a service contract under which the dealer and another entity promised to perform specified repair or maintenance services. After experiencing problems with their vehicles, the plaintiffs filed multiple-count complaints seeking relief under various legal theories. Each complaint included a single count alleging a breach of the service contract and seeking damages and other relief (including attorney fees) under section 110(d) of the Magnuson-Moss Act (15 U.S.C.A. §2310(d) (West 1998)). In cause No. 98--L--59, plaintiff, Elizabeth Lysek, sought recovery from defendants, Elmhurst Dodge, Inc. (Elmhurst Dodge), and Chrysler Corporation (Chrysler) for the failure to perform their duties under the service contract she purchased for her 1995 Dodge van. In cause No. 99- -L--103, plaintiffs, Patricia Kelly and Thomas Kuzmicki, sought recovery from defendant Howard Pontiac, Inc. (Howard), and National Warranty Insurance Risk Retention Group (National Warranty) which was misnamed Smart Choice for the breach of duties under the service contract on their 1995 Chevrolet Blazer. In both cases, the alleged breaches consisted of the failure to satisfactorily repair certain defects in accordance with the terms of the service contract. In cause No. 99--L-- 699, plaintiff, Martin Cortez, sought recovery from defendants, Jerry Biggers Chevrolet, Inc. (Biggers), and ITT Commercial Finance Corporation (ITT), alleging that they breached the service contract on his 1994 Oldsmobile Achieva by improperly charging him for engine repairs covered by the contract and refusing to return the vehicle until the charges were paid.

The trial court dismissed the breach-of-service-contract claims, concluding that the Magnuson-Moss Act does not create a statutory cause of action for simple contract claims. Pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308), the trial court expressly found that the dismissal orders involved a question of law as to which there is a substantial ground for difference of opinion and that immediate appeals from the orders may materially advance the ultimate termination of the litigation. The trial court identified the pertinent question of law as follows: "[w]hether the Federal Trade Commission's failure to promulgate rules and regulations for service contracts under the [Magnuson Moss Act] prohibits actions for breach of a service contract thereunder and limits a consumer's remedy for breach of service contract to state law." In addition, the trial court ordered the cases consolidated for purposes of appeal only. We allowed plaintiffs' joint application for leave to appeal pursuant to Rule 308. Plaintiffs have submitted a joint brief on appeal, as have defendants Elmhurst Dodge, Howard, and Biggers (the dealers). Defendant National Warranty has adopted the dealers' appellate brief. Defendants Chrysler and ITT have filed separate briefs.

The Magnuson-Moss Act was designed to protect consumers from deceptive warranty practices by establishing standards for the form and content of written warranties. See Skelton v. General Motors Corp., 660 F.2d 311, 313 (7th Cir. 1981). The terms "written warranty" and "service contract" are both defined in the statute (15 U.S.C.A. §§2301(6),(8) (West 1998)) and the Federal Trade Commission is empowered to issue rules governing, among other things, the disclosure of the terms and conditions of written warranties and service contracts (15 U.S.C.A. §§2302(a), 2306(a) (West 1998)). At present, the Federal Trade Commission has not issued any rules governing service contracts. The statute classifies written warranties as either "full" warranties or "limited" warranties, depending on whether their terms and conditions meet or exceed specified federal minimum standards. 15 U.S.C.A. §§2303, 2304 (West 1998). A warranty designated a full warranty is deemed to incorporate the federal minimum standards under section 104 of the Magnuson-Moss Act and rules prescribed under that section. 15 U.S.C.A. §2304(e) (West 1998). Where (1) a written warranty is given or (2) a service contract is entered into at the time of the sale of a product, or 90 days thereafter, implied warranties arising under state law may not be disclaimed, although they may be limited in duration unless a full warranty has been given. 15 U.S.C.A. §§2304(a)(2), 2308 (West 1998).

The United States Attorney General or the Federal Trade Commission may seek injunctive relief in federal court restraining the use of deceptive warranties or other violations of the statute. 15 U.S.C.A. §2310(c) (West 1998). In addition, the statute permits aggrieved consumers to bring suit in state court. 15 U.S.C.A. §2310(d)(1)(A) (West 1998). Private lawsuits may also be prosecuted in federal court where a special amount-in-controversy requirement is satisfied. 15 U.S.C.A. §§2310(d)(1)(B),(d)(3) (West 1998). The court may award attorney fees and expenses to consumers who prevail in Magnuson-Moss Act lawsuits in state or federal court. 15 U.S.C.A. §2310(d)(2) (West 1998).

The issue in this case hinges on the meaning of section 110(d)(1) of the Magnuson-Moss Act, which provides, in pertinent part:

"[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, may bring suit for damages and other legal and equitable relief--

(A) in any court of competent jurisdiction in any State or the District of Columbia; or

(B) in an appropriate district court of the United States, subject to paragraph (3) of this subsection." (Emphasis added.) 15 U.S.C.A. §2310(d)(1) (West 1998).

The trial court apparently concluded that section 110(d) applies only to claims based on violations of specific requirements of the Magnuson-Moss Act or corresponding Federal Trade Commission rules. The court reasoned that the examination of the Magnuson-Moss Act in its entirety revealed that Congress did not intend to provide consumers of service contracts with a general breach-of-contract remedy. Plaintiffs argue that the cause of action under section 110(d) is not limited to violations of specific statutory requirements or Federal Trade Commission rules. The dealers respond that the trial court's interpretation of the scope of section 110(d) is consistent with the overall scheme of the statute, which contains detailed provisions concerning the form and content of warranties but lacks specific requirements applicable to service contracts. Chrysler points to the statute's legislative history (see H.R. Rep. No. 93-1107 (1974), reprinted in 1974 U.S.C.C.A.N. 7702) and the Federal Trade Commission's interpretations of the statute (see 16 C.F.R. ยง700.1(a) (2001)) as evidence that Congress was concerned ...


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