Opinion
CV-17-6013046-S
01-17-2019
Tessa A. JACQUES v. A BETTER WAY WHOLESALE AUTOS, INC., et al
UNPUBLISHED OPINION
OPINION
Farley, J.
In this case the court must decide whether the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. § 2301 et seq., preempts breach of warranty claims against the assignee of a retail installment sales contract notwithstanding the imposition of such liability by General Statutes § 52-572g. The court concludes that the MMWA does not preclude liability under § 52-572g.
PROCEDURAL AND FACTUAL BACKGROUND
The plaintiff, Tessa S. Jacques, commenced this action against the defendants, A better Way Wholesale Autos, Inc. ("ABW") and Wells Fargo Bank, on October 3, 2017. The plaintiff’s third revised complaint alleges the following facts. On or about October 2, 2016, the plaintiff entered into a retail installment sales contract with ABW for the purchase of a 2016 Chevrolet Malibu. ABW subsequently assigned the contract to Wells Fargo. Prior to the purchase of the vehicle, ABW told the plaintiff that the car had never been in an accident and that it was "100 percent fine." ABW told the plaintiff the car had been inspected by a certified mechanic and that it was still subject to the General Motors factory warranty. ABW also provided a written warranty that the car would be mechanically operational and sound for the lesser of 60 days or 3, 000 miles. In fact, the Malibu had previously been involved in an accident or an event that caused significant structural damage that had not been properly repaired, rendering the car unsafe to drive. The plaintiff was unaware of the problem until April 2017 when the car suffered damage to its cooling system as a result of the structural deficiencies and prior improper repair. General Motors refused warranty coverage because the damage was the result of defective prior repairs to the vehicle. ABW also refused to make repairs to the vehicle.
The six-count third revised complaint asserts three causes of action against both of the defendants, alleging breach of written warranty, breach of the implied warranty of merchantability and unfair trade practices. The second and fourth counts respectively allege breach of written warranty and breach of implied warranty against Wells Fargo as the assignee or holder of the contract pursuant to the contract terms, which incorporate the Federal Trade Commission’s "holder rule, " and also pursuant to General Statutes § 52-572g. The plaintiff does not allege that Wells Fargo itself made any warranty to her and does not claim that Wells Fargo is liable to her based on anything other than the warranties made by ABW. The complaint also alleges that the Malibu is a "consumer product" under the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301(6)(a) ("MMWA") and that ABW’s warranty constitutes a written warranty under the MMWA. Wells Fargo claims counts two and four are legally insufficient because the MMWA prohibits derivative breach of warranty claims against contract assignees.
The FTC’s "holder rule" is set forth in 16 C.F.R. § 433.2, which states in pertinent part as follows:
In connection with any sale or lease of goods or services to consumers, in or affecting commerce as "commerce" is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a seller, directly or indirectly, to:
(a) Take or receive a consumer credit contract which fails to contain the following provision in at least ten point, bold face, type: NOTICE ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
§ 52-572g provides in pertinent part:
(a) Any holder in due course of a promissory note, contract or other instrument, other than an instrument issued in connection with a credit card transaction, evidencing an indebtedness, signed or executed by a buyer in connection with a credit transaction covering consumer goods, as defined in section 42a-9-102 or for consumer services rendered, shall be subject to all of the claims and defenses which the buyer has against the seller arising out of the transaction or against the person or persons providing the services, limited to the amount of indebtedness then outstanding in connection with the credit transaction, provided the buyer shall have made a prior written demand on the seller with respect to the transaction.
DISCUSSION
"The purpose of a motion to strike is to contest ... the legal sufficiency of the allegations of any complaint ... to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). "A motion to strike admits all facts well pleaded; it does not admit legal conclusions or the truth or accuracy of opinions stated in the pleadings." (Emphasis in original; internal quotation marks omitted.) Faulkner v. United Technologies Corp., 240 Conn. 576, 588, 693 A.2d 293 (1997). "A motion to strike is properly granted if the complaint alleges mere conclusions of law that are unsupported by the facts alleged." (Internal quotation marks omitted.) Santorso v. Bristol Hospital, 308 Conn. 338, 349, 63 A.3d 940 (2013). "The modem trend, which is followed in Connecticut, is to construe pleadings broadly and-realistically, rather than narrowly and technically.... Although essential allegations may not be supplied by conjecture or remote implication ... the complaint must be read in its entirety in such a way as to give effect to the pleading with reference to the general theory upon which it proceeded.... As long as the pleadings provide sufficient notice of the facts claimed and the issues to be tried and do not surprise or prejudice the opposing party, we will not conclude that the complaint is insufficient." (Internal quotation marks omitted.) J.D.C. Enterprises, Inc. v. Sarjac Partners, LLC, 164 Conn.App. 508, 512-13, 137 A.3d 894, cert. denied, 321 Conn. 913, 136 A.3d 1274 (2016).
The defendant argues that the second and fourth counts of the plaintiff’s third revised complaint should be stricken because the MMWA prohibits the imposition of derivative liability on the assignee of a retail installment sales contract and because the MMWA preempts the Connecticut holder rule set forth in § 52-572g. 15 U.S.C. § 2310(f) states: "For purposes of this section, only the warrantor actually making a written affirmation of fact, promise, or undertaking shall be deemed to have created a written warranty, and any rights arising thereunder may be enforced under this section only against such warrantor and no other person." Wells Fargo argues not only that this provision precludes consumers’ pursuit of MMWA remedies against derivatively liable assignees, it argues that this provision prohibits all liability for breach of warranty on the part of an assignee whose alleged liability is derivative, under the MMWA or otherwise.
The plaintiff argues that notwithstanding 15 U.S.C. § 2310(f), she may pursue Wells Fargo to recover all remedies she has against ABW, including her claim for costs and attorney’s fees under 15 U.S.C. § 2310(d)(2), because of the FTC holder rule and because of the holder rule set forth in General Statutes § 52-572g. She argues that by including the holder rule notice in the contract, as required by the regulation, the contract itself affords her access to the MMWA remedies. Further, she argues that § 52-572g does so as well. Alternatively, the plaintiff argues that even if 15 U.S.C. § 2310(f) precludes her access to MMWA remedies, it does not foreclose any other claim or remedy she may have under state law. The court agrees with the plaintiff’s alternative argument.
The MMWA does not create a basis for liability in addition to the plaintiff’s state law claims; it provides consumers with access to federal court on breach of warranty claims and also allows them to recover attorney’s fees if they prevail on those claims "unless the court in its discretion shall determine that such an award of attorneys’ fees would be inappropriate." 15 U.S.C.A. § 2310(d)(2). See McLeod v. A Better Way Wholesale Autos, Inc., 177 Conn.App. 423, 444, 172 A.3d 802 (2017); Alexis v. PMM Enterprises LLC, United States District Court, Docket No. 3:17-cv-1622 (MPS) (D. Conn. October 29, 201, 8) ("The federal MMWA does not create a separate cause of action, but allows a plaintiff who is successful on a state-law breach of warranty claim to recover attorneys’ fees and costs.").
Despite the fact that the MMWA is not an independent source of warranty liability, Wells Fargo maintains that it preempts warranty claims against assignees who are not alleged to have directly breached a warranty themselves. Wells Fargo relies principally upon Pierre v. Planet Automotive, Inc., 193 F.Supp.3d 157 (E.D.N.Y. 2016) and Angelillo v. Harte Nissan, Inc., United States District Court, Docket No. 3:09-cv-1313 (WWE) (D. Conn. February 17, 2010) in support of its position that § 2310(f) precludes the plaintiff’s breach of warranty claims against it. Wells Fargo, however, stretches the holdings in those cases too far. Pierre and Angelillo do not hold that consumers are precluded from the pursuit of any remedy against an assignee based on an original contractor’s breach of warranty. They do hold that the FTC’s holder rule, 16 C.F.R. § 433.2(a), must yield to the statute’s prohibition on assignee liability under the MMWA. The court in Pierre concluded that "based on the text of the MMWA and the general principle that a regulation cannot override the plain language of a statute, the MMWA prohibits assignee liability." Pierre v. Planet Automotive, Inc., supra, 193 F.Supp.3d 175. See also King v. A Better Way Wholesale Autos, Inc., United States District Court, Docket No. 3:17-cv-885 (AWT) (D. Conn. September 10, 2018) and Owens v. Tranex Credit Corporation, United States District Court, Docket No. IP 96-1272-C-G/T (S.D. Indiana August 11, 1998). The court agrees with the courts in Pierre, King and Owens that § 2310(f) forecloses the pursuit of MMWA remedies against an assignee who is not the subject of a direct claim for breach of warranty. Wells Fargo, however, argues that the MMWA’s prohibition of liability against assignees constitutes a general "prohibition against bringing a breach of warranty claim against a party that is not a warrantor." In other words, Wells Fargo maintains that the MMWA preempts state law on the derivative liability of an assignee for a breach of warranty claim. The court disagrees.
Generally speaking the MMWA does not preempt state law on breach of warranty claims. Gentek Building Products, Inc. v. Sherwin-Williams Co., 491 F.3d 320, 328 (6th Cir. 2007); Automobile Importers of America, Inc. v. State of Minnesota, 871 F.2d 717 (8th Cir. 1989); Chrysler Corporation v. Texas Motor Vehicle Comm., 755 F.2d 1192, 1206 (5th Cir. 1985); In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106, 1141 (7th Cir. 1979). Wells Fargo has cited no case supporting its view that the MMWA specifically preempts state law on assignee liability. Even the cases relied upon by Wells Fargo recognize that the prohibition on assignee liability under MMWA does not prevent the imposition of assignee liability under state law. In Pierre, for example, even though the court granted summary judgment in favor of the assignee under the MMWA, it denied summary judgment on the plaintiff’s fraud and false advertising claims based on New York state law, including the holder rule included in the New York Motor Vehicle Retail Installment Sales Act, N.Y. Pers. Prop. Law § 302(9). In Owens, despite the preclusion of assignee liability under the MMWA, the plaintiffs’ claims against the assignee under state statutes and particularly a claim for breach of an implied warranty of merchantability were nevertheless viable.
The conclusion that the MMWA does not preempt state law on assignee liability flows directly from the language of the statute itself, which provides that the prohibition against assignee liability is "[f]or purposes of this section." 15 U.S.C. § 2310(f). The MMWA is not the basis for the plaintiff’s claims against Wells Fargo, except to the extent that she seeks costs and "attorney’s fees pursuant to MMWA" in her prayers for relief associated with the second and fourth counts. See Alexis v. PMM Enterprises LLC, supra. While the plaintiff’s prayers for relief may be stricken based on § 2310(f), the second and fourth counts may not be stricken because assignee or holder liability is authorized by General Statutes § 52-572g "limited to the amount of indebtedness." See Tirado v. Ofstein, Superior Court, judicial district of Hartford, Docket No. HHD-CV-05-4014648-S (Bentivegna, J. March 14, 2008). In Tirado, the court imposed breach of warranty liability upon an assignee and held the plaintiff was not liable to the assignee for her indebtedness under a retail installment sales contract for the purchase of a vehicle. The plaintiff here seeks the same relief under the second and fourth counts and the MMWA does not preempt that relief.
CONCLUSION
The motion to strike is granted to the extent that it challenges the plaintiff’s prayers for the award of attorney’s fees pursuant to the MMWA under counts two and four. The motion is otherwise denied.