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Ryan v. American Honda Motor Corp.

March 30, 2005


On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-4374-01.

Before Judges Stern, Coburn and Wecker.

The opinion of the court was delivered by: Wecker, J.A.D.


Argued November 3, 2004

The primary issue raised by this appeal is whether the Magnuson-Moss Warranty Federal Trade Commission Improvement Act, 15 U.S.C.A. §2301-2312 (the Magnuson-Moss Act), allows a cause of action for breach of warranty to a lessee of a new car, or only to a purchaser. We hold that a lessee is a"consumer," entitled to the protection of the Magnuson-Moss Act. We therefore reverse the summary judgment dismissing plaintiff's complaint and the separate order granting sanctions in favor of defendant.


These are the relevant facts and the procedural history. On March 2, 1999, plaintiff, Christopher Ryan, entered into a closed-end vehicle lease with Burns Honda, an authorized dealer and repair facility for defendant, American Honda Motor Corporation. American Honda Finance Corporation administered the lease. The new, 1999 Honda Passport leased by Ryan came with a three-year/36,000 mile manufacturer's new vehicle limited warranty, as well as several parts and equipment warranties. The lease agreement included two particularly relevant provisions in its"vehicle warranties" section: (1)"If the Vehicle is new, it is covered by the Manufacturer's New Vehicle Warranty," and (2)"Lessor assigns to me all of its rights in the above specified warranties."

After driving the vehicle for approximately 22,000 miles in the first fifteen months of the lease term, Ryan encountered engine problems. The car was towed to Burns Honda, where Ryan was told that the vehicle's engine problems were due to external damage or tampering, and therefore were not covered by the manufacturer's warranty. Ryan was not told at that time that the warranty did not apply because he had leased rather than purchased the vehicle. According to Ryan, Burns told him to file an insurance casualty claim, which he did, and his insurer authorized repairs at a cost of $8,236.99, plus car rental fees of $533.94. Ryan received the repair costs from his insurer (less the $2,000 deductible under the policy), and his rental fees were paid by the insurer as well. Burns performed the authorized repairs, but Ryan continued to have problems with the vehicle and claimed that the repairs were not effective.

On July 6, 2001, Ryan filed a three-count complaint against American Honda, seeking damages under the New Jersey Lemon Law, N.J.S.A. 56:12-29 to -49 (Count I); the Magnuson-Moss Act, 15 U.S.C.A. §§ 2301 to 2312 (Count II); and the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (Count III).*fn1 After filing its answer and affirmative defenses, American Honda sent Ryan a"safe harbor letter" pursuant to Rule 1:4-8 on April 15, 2002. The letter warned Ryan that his previous insurance claim was inconsistent with his present complaint, which was therefore without merit, and that if he did not withdraw his complaint within twenty-eight days, American Honda would seek sanctions for maintaining a frivolous lawsuit. Ryan did not withdraw his complaint, and in August 2002, American Honda filed a motion for summary judgment on all counts,*fn2 as well as a separate motion for sanctions pursuant to Rule 1:4-8.

On September 27, 2002, Ryan was permitted to withdraw his Lemon Law claim without prejudice, after conceding that discovery"confirmed that a'Lemon-Law' claim was not viable in the instant case." The reported problems with Ryan's vehicle unquestionably fell beyond the 18,000 miles specified in the Lemon Law. N.J.S.A. 56:12-31. The Law Division judge granted Honda's motion for summary judgment, dismissing Ryan's counts seeking damages under the Magnuson-Moss and Consumer Fraud Acts.

On the same date, a second Law Division judge granted Honda's motion for sanctions and subsequently awarded defendant $8,605.80 in counsel fees and costs, with little explanation:"Under the facts of the case I think that in this case the defendant is entitled to counsel fees and I will award the same once I receive your certification."*fn3 Ryan moved for reconsideration of the summary judgment as well as the order for sanctions. The first judge declined to reconsider his decision that the Magnuson-Moss Act did not apply to leased vehicles. The same judge briefly reinstated the Consumer Fraud claim, but it was dismissed shortly thereafter by the second judge. (Pa551). The second judge also found"no reason to reconsider [his] previous order [for sanctions]."


The Magnuson-Moss Act provides that"a consumer who is damaged by the failure of a... warrantor... to comply with any obligation under... a written warranty [or] implied warranty... may bring suit for damages and other legal and equitable relief" in any competent state or federal court. 15 U.S.C.A. § 2310(d)(1). The Act requires a supplier who chooses to issue an optional written warranty to clearly disclose its terms and conditions, 15 U.S.C.A. § 2302(a), and to provide the promised repairs within a reasonable time and without charge, or replace the car or refund the charges. 15 U.S.C.A. § 2304(a)(1)(4). The Act also provides for an award of attorney's fees to a successful claimant. 15 U.S.C.A. § 2310(d)(2).

Central to this case is the Act's definition of a consumer:

The term"consumer" means a buyer (other than for purposes of resale) of any consumer product, 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 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).*fn4 [15 U.S.C.A. § 2301(3).]

The Act thus provides three alternative definitions, or ...

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