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The Magnuson-Moss Warranty Act: A Recent Split of Opinions Regarding Protection of Lessees

BY Adam J. Schlagman
June 29, 2006

In recent months, a number of leasing-related issues have arisen with respect to motor vehicle finance transactions. Specifically, the matter of vicarious liability for lessors still appears to be an active and openly debated concern, despite Congress' attempt to pre-empt various troublesome state laws. In addition, other motor vehicle finance issues, such as certain sublease arrangements, insurance issues, and compliance with the International Fuel Tax Agreement, have all become topics of discussion in this leasing sector. In the last few months, however, another auto leasing issue has quietly joined the ranks: whether a motor vehicle lessee may invoke the provisions of a manufacturer's warranty under the Magnuson-Moss Warranty Federal Trade Commission Improvement Act. The answer to this question has been complicated by the recent decisions of two state supreme courts (New Jersey and Arizona), which have come down on opposite sides of this issue within weeks of each other.

In Ryan v. American Honda Motor Co., N.J., No. A-16 (Feb. 27, 2006), the New Jersey Supreme Court ruled that an individual who leases an automobile from a dealership is a 'consumer' as defined by the Magnuson-Moss Warranty Act. Conversely, in Parrot v. Daimler Chrysler, No. CV-05-0104-PR (March 15, 2006), the Arizona Supreme Court held that the lessee could not sue under Magnuson-Moss because he did not qualify as a consumer under the Act. The true dividing point in these two cases, however, did not revolve around whether the lessee was a 'consumer' under the Act, but rather whether there was a qualifying sale in the first instance.

In order to qualify as a 'consumer' under the Magnuson-Moss Act, a plaintiff must fall within one of three definitions: 1) 'a buyer (other than for purposes of resale) of any consumer product'; 2) 'any person to whom such product is transferred during the duration of an implied or written warranty (or service contract) applicable to the product'; or 3) '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).' 15 U.S.C.A. '2301(3).

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