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Mekertichian v. Mercedes-Benz U.S.A.

March 31, 2004

EDMOND MEKERTICHIAN, PLAINTIFF-APPELLEE,
v.
MERCEDES-BENZ U.S.A., L.L.C., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. No. 01 L 14575 Honorable Paddy H. McNamara, Judge Presiding.

The opinion of the court was delivered by: Justice Gordon

UNPUBLISHED

Plaintiff, Edmond Mekertichian, brought the instant cause of action against defendant, Mercedes-Benz U.S.A., for breach of express and implied warranties under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act (the Act or Magnuson-Moss) (15 U.S.C. §2301 et seq. (1994)). Defendant moved for partial summary judgment regarding plaintiff's claim for breach of implied warranty of merchantability, alleging there was no privity between plaintiff and defendant. The circuit court denied the motion and defendant now appeals. We affirm the denial of the motion for summary judgment.

BACKGROUND

On November 27, 1999, plaintiff purchased a new 2000 Mercedes-Benz S500V from Autohaus on Edens, Inc., *fn1 in Northbrook, Illinois. Defendant, the manufacturer, provided a 48-month or 50,000-mile limited written warranty with the new automobile. The warranty provided that any authorized dealership would make repairs or replacements necessary to correct defects in material or workmanship during the warranty period.

Following the purchase, plaintiff began experiencing problems with the vehicle and, on several occasions, took it to Autohaus for repairs. However, plaintiff claimed that Autohaus was unable to repair the vehicle, and he attempted to revoke his acceptance of the vehicle. Defendant refused plaintiff's revocation. Plaintiff subsequently filed a complaint against defendant for breach of written and implied warranties under Magnuson-Moss. Claiming a lack of vertical privity between the parties, defendant filed a motion for partial summary judgment regarding plaintiff's claim for breach of implied warranty of merchantability. Defendant argued that because plaintiff did not purchase the vehicle directly from defendant, no vertical privity existed and the breach of implied warranty claim could not be maintained. The trial court denied the motion, but certified the question as to whether such privity is required pursuant to Supreme Court Rule 308 (155 Ill. 2d R. 308).

Defendant thereupon filed in this court an application for leave to appeal under Rule 308, which we denied. Following a supervisory order from our supreme court, we vacated our order denying leave to appeal and now consider defendant's interlocutory appeal. For the following reasons, we affirm the denial of defendant's motion for partial summary judgment.

ANALYSIS

Summary judgment is properly granted where the pleadings, depositions, admissions and affidavits show there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2002). In considering a motion for summary judgment, the motion and supporting documents must be viewed in a light most favorable to the nonmoving party. Happel v. Wal-Mart Stores, Inc., 199 Ill. 2d 179, 186, 766 N.E. 2d 1118, 1123 (2002). The granting or denial of a motion for summary judgment is reviewed de novo. Happel, 199 Ill. 2d at 185, 766 N.E. 2d at 1123.

The instant appeal was brought following the denial of defendant's motion for partial summary judgment. In its motion, defendant alleged, as it does before this court in its appeal, that an action for breach of an implied warranty of merchantability could not be maintained against it as the manufacturer. It argues that because it did not sell the vehicle in question to plaintiff, there was no vertical privity between it and plaintiff, a required element under Illinois law when seeking recovery for the breach of an implied warranty. Plaintiff responds that the action is proper because our supreme court has determined on two occasions, in Szajna v. General Motors Corp., 115 Ill. 2d 294, 503 N.E.2d 760 (1986), and Rothe v. Maloney Cadillac, Inc., 119 Ill. 2d 288, 518 N.E.2d 1028 (1988), that Magnuson-Moss expands our state law to provide for vertical privity where a manufacturer provides a written warranty to a consumer. As shall be discussed below, we find that we are bound by the doctrine of stare decisis to follow our supreme court's determination in Szajna and Rothe.

Under the Magnuson-Moss Warranty Act "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 sue for damages or other equitable relief, and, where a plaintiff prevails, for attorney fees and costs. 15 U.S.C. §§2310(d)(1), (d)(2) (1994). With respect to actions predicated on the breach of an implied warranty of merchantability, which is at issue here, the Act provides that such actions may arise only under state law. 15 U.S.C. §2301(7) (1994). The Act does not provide an independent avenue through which implied warranty actions may be filed. See Abraham v. Volkswagen of America, Inc., 795 F.2d 238, 247-49 (2d Cir. 1986). Accordingly, under the terms of the Act itself, any action for breach of implied warranty is governed and limited by state law (except to the extent that state law might be modified by section 2308, dealing with disclaimers of implied warranties, and section 2304(a), dealing with attempts to restrict the duration of an implied warranty, neither of which is at issue here). See 15 U.S.C. §2301(7) (1994).

In Illinois, actions for breach of implied warranty of merchantability are governed by the Uniform Commercial Code (UCC) (810 ILCS 5/2-314) (West 2002). In order for a plaintiff to file a claim for economic damages under the UCC for the breach of an implied warranty, he or she must be in vertical privity of contract with the seller. Rothe, 119 Ill. 2d at 292, 518 N.E.2d at 1029-30; Szajna, 115 Ill. 2d at 311, 503 N.E.2d at 767. This means that "the UCC article II implied warranties give a buyer of goods a potential cause of action only against his immediate seller." Rothe, 119 Ill. 2d at 292, 518 N.E.2d at 1029. Although this vertical privity requirement has been challenged on a number of occasions, our supreme court has consistently declined to abolish the doctrine in cases where purely economic damages are sought. Rothe, 119 Ill. 2d at 292, 518 N.E.2d at 1029-30; Szajna, 115 Ill. 2d at 311, 503 N.E.2d at 767.

Despite this preservation of the privity requirement, the Illinois Supreme Court in Szajna and Rothe found that Magnuson-Moss serves to modify the state law privity requirement in cases filed under the federal Act. Rothe, 119 Ill. 2d at 294, 518 N.E.2d at 1030; Szajna, 115 Ill. 2d at 315-16, 503 N.E.2d at 769. In Szajna, our supreme court held that, because the purpose of Magnuson-Moss is to "furnish[] broad protection to the consumer" and the Act modifies state law in "several" other of its provisions, under the Act where a manufacturer has expressly warranted a product to a consumer, vertical privity will be deemed to exist with respect to that consumer, enabling him to file an action for breach of implied warranty as well. Szajna, 115 Ill. 2d at 315, 503 N.E.2d at 769. The Szajna court stated, "under [the Act] a warrantor, by extending a written warranty to the consumer, establishes privity between the warrantor and the consumer which, though limited in nature, is sufficient to support an implied warranty under *** the UCC." Szajna, 115 Ill. 2d at 315-16, 503 N.E.2d at 769. The same interpretation of Magnuson-Moss was again affirmed by our supreme court in Rothe. Rothe, 119 Ill. 2d at 294-95, 518 N.E.2d at 1030-31. Simultaneously, our supreme court in Szajna and Rothe explicitly declined to relax the privity requirement under similar circumstances under the UCC when Magnuson-Moss was not involved. Therefore, the supreme court determined that under the federal Act only, vertical privity will be deemed to exist in the presence of a written warranty by a manufacturer to the downstream consumer. Szajna, 115 Ill. 2d at 315-16, 503 N.E.2d at 769.

Although there has been no determination on the vertical privity requirement under Magnuson-Moss by the United States Supreme Court, the holding in Szajna and Rothe that under Magnuson-Moss the vertical privity requirement is eliminated has been rejected by a consensus of the federal circuit courts of appeal that have dealt with this question, as well as by the overwhelming majority of federal district court cases. See Walsh v. Ford Motor Co., 807 F.2d 1000, 1014 (D.C. Cir. 1986); Abraham, 795 F.2d at 248-49; Kutzler v. Thor Industries, Inc., No. 03 C 2389 (N.D. Ill. July 14, 2003); Kowalke v. Bernard Chevrolet, Inc., No. 99 C 7980 (N.D. Ill. March 23, 2000); Larry J. Soldinger Associates Ltd. v. Aston Martin Lagonda of North American, Inc., No. 97 C. 7792 (N.D. Ill. September 13, 1999); Skelton v. General Motors Corp., No. 79 C 1243 (N.D. Ill. June 21, 1985). Under the foregoing cases, the federal courts have taken the position that Magnuson-Moss has not by itself relaxed the privity requirement, but that the determination as to whether privity is required must be based entirely on the application of state law. Therefore, because Illinois requires contractual privity as a prerequisite for breach of implied warranty claims under its internal law, there must also be vertical privity in breach of implied warranty claims brought pursuant to Magnuson-Moss in Illinois. Soldinger, No. 97 C. 7792; Kutzler, No. 03 C 2389. Despite three Northern District court decisions to the contrary (see Cohen ...


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