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McGarvey v. Penske Automotive Group

June 29, 2009


The opinion of the court was delivered by: Simandle, District Judge



This putative class action centers around the IBEX Anti-Theft Etch System (the "IBEX System"), a product designed to deter automobile theft, which is manufactured and distributed by Defendant Innovative Aftermarket Systems, L.P. ("IAS") and sold by automobile dealerships owned by Defendant Penske Automotive Group, Inc. ("PAG"). Plaintiffs, who purchased IBEX System etches with their automobiles, allege that the limited warranty IAS provides for the IBEX System is unlawful under the Magnuson Moss Warranty Act ("MMWA"), various states' consumer protection laws, and New Jersey common law.

The principal issue presented in this case of first impression is whether Defendants' IBEX System warranty -- which essentially provides a discount credit of $2,500 against the purchase price of a replacement vehicle if the consumer's IBEX-protected vehicle is stolen, provided that the consumer purchases the replacement vehicle from the same dealer at a price at least as great as the stolen vehicle's original purchase price -- violates the MMWA's anti-tying provision in 15 U.S.C. § 2302(c). A second issue is whether the consumer must sustain actual damages to assert a viable claim for violation of the anti-tying provision under the MMWA at 15 U.S.C. § 2310(d)(1) and under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act ("NJTCCA"), N.J.S.A. 56:12-15.

Presently before the Court are Defendants' motions to dismiss [Docket Items 21 and 22] and Plaintiffs' motion for partial summary judgment [Docket Item 19]. For the reasons set forth below, the Court will grant in part and deny in part Defendants' motions to dismiss, and will grant Plaintiffs' motion for partial summary judgment.


A. Facts

Plaintiffs Bryan Bechtel and Katie McGarvey, both New Jersey residents, purchased the IBEX System for $209.00 along with their vehicle from Honda of Turnersville, an automobile dealership owned and operated by Defendant PAG, on June 25, 2005. (Compl. ¶ 11; Paris Cert. Ex. B at 1.) Plaintiff Sharon McGarvey, also a New Jersey resident, purchased the IBEX System for $209.00 along with her vehicle from Honda of Turnersville on June 27, 2005. (Compl. ¶ 10; Paris Cert. Ex. A at 1.)

The IBEX System is a product designed to deter automobile theft. Under the IBEX System, vehicle identification numbers, or "Etch Codes," are permanently etched onto the windows of an automobile using acid that is brushed over stenciled numbers, (Compl. ¶ 17; Hendrix Decl. ¶¶ 4-5); the etching itself is performed by the automobile dealership using materials provided by IAS.*fn1 (Compl. ¶ 1; Hendrix Decl. ¶ 5.) The IBEX System is thought to deter theft by making a stolen automobile traceable using the Etch Code, deterring potential thieves from stripping car parts due to the fact that the glass contains identifying features, and "creating suspicion for a party trying to sell an otherwise-undamaged car that has had all of its etched glass removed and replaced with non-etched glass." (Hendrix Decl. ¶ 4.)

Significantly for purposes of this lawsuit, the IBEX System is sold with a limited warranty (the "Limited Warranty"), under which purchasers can elect to be covered for a period of between two and five years. (Compl. ¶ 19.) Under the terms of the Limited Warranty, if the IBEX System fails to perform its intended function of deterring vehicle theft and the purchaser's vehicle is stolen and not recovered, then IAS would issue a credit of between $2,500.00 and $7,500.00 at the dealership from which the stolen car had been purchased, to be applied toward the consumer's next automobile purchase. (Id. at ¶¶ 19-20.) Specifically, the Limited Warranty provides:

In the event the Ibex Anti-Theft Etch System fails to prevent the Vehicle specified in this Limited Warranty from being stolen within the Warranty Period, and such failure results in the Customer's primary insurance company declaring the Vehicle a Total Loss as a direct result of the theft, we will provide the customer with a replacement vehicle, by issuing at the dealership listed in this Warranty, a credit in the name of the Customer (up to $2,500 or $5,000 or $7,500 check one) to be applied towards the purchase of the replacement vehicle.

The customer is obligated to utilize the total benefit provided to replace the Vehicle specified in the Warranty and the replacement Vehicle must be of equal or greater value than the original purchase price paid for the covered Vehicle. (Compl. ¶ 20; IAS Br. Ex. B at 1) (emphasis omitted).

The warranties purchased by Plaintiffs each specified that "Honda of Turnersville" was the "dealership listed in this Warranty." (Compl. ¶ 23.) For both of the purchases at issue herein, the warranties expressly designated Honda of Turnersville as IAS's "authorized agent" for installing the etch code on the automobiles and selling the IBEX System. (Id. at ¶ 24.) Finally, none of the Plaintiffs in this case alleges that his or her automobile was stolen or otherwise declared to be a total loss pursuant to the Limited Warranty's terms; that is, because Plaintiffs have not had the need to use the warranty, they do not allege that any of the Defendants breached its terms.

B. Procedural History

Plaintiffs commenced this action on behalf of themselves and others similarly situated on November 14, 2008, naming PAG; United Autocare Products, Inc.; United Autocare, Inc.; and IAS as Defendants.*fn2 They allege that Defendants violated section 2302(c) of the MMWA (Count I), the New Jersey Consumer Fraud Act ("CFA"), N.J.S.A. 56:8-1 et seq. (Count II), the consumer protection laws of fifteen additional states*fn3 (Count III), and the New Jersey Truth-In-Consumer Contract, Warranty and Notice Act ("NJTCCA"), N.J.S.A. 56:12-15 (Count VI), and also assert claims for unjust enrichment and rescission (Counts IV and V). Plaintiffs thereafter filed the motion for partial summary judgment presently under consideration [Docket Item 19], in which they seek a determination as a matter of law that the Limited Warranty violates section 2302(c) of the MMWA, after which Defendants filed their respective motions to dismiss [Docket Items 21 and 22].


A. Standard of Review

In its review of Defendants' motions to dismiss, the Court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). "In deciding motions to dismiss pursuant to Rule 12(b)(6), courts generally consider only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim." Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3d Cir. 2004) (citation omitted).

The Court's review of Plaintiffs' motion for partial summary judgment is governed by Rule 56, Fed. R. Civ. P. Summary judgment is appropriate when the materials of record "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.

R. Civ. P. 56(c). In deciding whether there is a disputed issue of material fact, the court must view the evidence in favor of the non-moving party by extending any reasonable favorable inference to that party; in other words, "the nonmoving party's evidence 'is to be believed, and all justifiable inferences are to be drawn in [that party's] favor.'" Hunt v. Cromartie, 526 U.S. 541, 552 (1999) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).

B. Analysis

As the parties recognize, the primary issue to be decided is whether the Limited Warranty creates an unlawful tying arrangement in violation of section 2302(c) of the MMWA.*fn4 As the following discussion makes clear, the Court concludes that this question must be answered in the affirmative. Before it reaches this primary issue, however, the Court explains that while Plaintiffs do not have standing to assert a claim pursuant to the MMWA itself because they have not sustained actual damage, their attack on the allegedly unlawful tying arrangement is viable under the NJTCCA even if Plaintiffs have sustained no actual damage.

1. MMWA Claim -- Failure to Allege Actual Damages Defendants raise a host of arguments targeting Plaintiffs' MMWA claim, attacking both the substance of the claim (a matter the Court addresses infra) and Plaintiffs' standing to assert a claim pursuant to the MMWA. As the Court now explains, it agrees with Defendants that because Plaintiffs have not alleged that they incurred actual damages as a result of ...

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