Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: High court refuses to take up yacht purchaser’s Magnuson-Moss Warranty Act claim, (Oct 7, 2013)

By Tobias J. Gillett, J.D., LL.M.

The U.S. Supreme Court has denied a petition for certiorari filed by the purchaser of a yacht seeking review of a decision of the U.S. Court of Appeals in Atlanta holding that an agreement entered into by the manufacturer of the yacht was “for purpose of resale,” and hence that the agreement was not a “written warranty” within the meaning of the Magnuson-Moss Warranty Act (Marlborough Holdings Group, Ltd. v. Azimut-Benetti, SpA, Dkt. No. 12-1427).

The questions presented were whether the yacht purchaser was “a protected consumer under the provisions of the Magnuson-Moss Warranty Act,” and whether the yacht purchaser’s state law breach of warranty cause of action was “a proper claim based on a correct application of federal warranty statutes to state warranty provisions.”

In 1999, Italian yacht manufacturer Azimut-Benetti, SpA (Benetti) damaged the hull of a yacht while it was still under construction. The hull was repaired, and the yacht was sold to United States yacht dealer Richard Bertram Yachts, Inc. (“Bertram”). Benetti disclosed the damage, and agreed to provide a ten-year warranty.

Bertram then sold the yacht to Atlantic Coast Yacht Charters, LLC, which owned the yacht for approximately seven years before selling it to Marlborough Holdings Group, Ltd. Marlborough later discovered a crack in the yacht’s bow, and an inspection following an accident revealed the prior repairs as well as the fact that many of the repairs were failing. Benetti refused to pay to fix the repairs, and Marlborough brought suit against Benetti, Bertram, Atlantic Coast, and other individuals and entities asserting various claims including violations of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and the Magnuson-Moss Warranty Act (MMWA).

The district court granted summary judgment to the defendants on the MMWA and FDUTPA claims, and the Eleventh Circuit affirmed. The appeals court concluded the FDUTPA claims were barred by the relevant statute of limitations, and that the MMWA did not cover the purported warranty provided by Benetti because it was not a “written warranty” within the meaning of the MMWA. The appeals court cited the MMWA’s exemption of a “bargain between a supplier and a buyer for purposes other than resale,” and concluded that, “because the ten-year warranty was part of the basis of a bargain entered into between a supplier and buyer for purpose of resale, it was not a ‘written warranty’ within the meaning of the MMWA.”

In a footnote, the Eleventh Circuit noted that the MMWA defined “three categories of consumers: (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’; and (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),’” and that the yacht purchaser was “a consumer under the first definition.”

Finally, the court held that the purchaser could not enforce the warranty under state law because the “clear terms” of the agreement “did not extend coverage to the first retail purchaser and each subsequent purchaser,” the rights under the warranty had not been assigned, and the purchaser could not enforce the warranty “as a third party because it was, at most, an incidental beneficiary of the agreement, rather than an intended beneficiary.”

In the petition, the yacht purchaser contended that the Eleventh Circuit erred in treating the purchaser as a consumer under the first definition, and that the court should have instead considered the purchaser as a consumer under the third definition. According to the petition, the purchaser’s right to enforce the warranty under state law would render irrelevant the issue of whether the warranty was a “written warranty” for purposes of the MMWA. The purchaser contended that the Eleventh Circuit’s opinion “directly conflict[ed]” with the Seventh Circuit’s opinion in Voelker v. Porsche Cars North America, Inc., 353 F.3d 516 (2003), which held that, because a plaintiff was a “category three consumer” entitled to enforce a warranty under state law, he was a consumer allowed to enforce the warranty under the MMWA, and did not need to “meet the definition of written warranty.”

The yacht purchaser’s complaint had alleged that the yacht warranty was an express warranty as defined by Florida statute, and the petition claimed that the Florida state courts had adopted the holding in Voelker. Further, the petition claimed that the Eleventh Circuit had erred in holding that the purchaser “was, at most, an incidental beneficiary of the agreement” because federal law required the issuer of a warranty “to provide language in that warranty if it intends to limit the persons to whom said warranty applies.” In the absence of such language, the petition contended, the warranty was enforceable by all subsequent purchasers, including the yacht purchaser.

Attorneys: Richard C. Klugh for Marlborough Holdings Group, Ltd.; William T. O’Connell (Goldberg Segalla LLP) for Azimut-Benetti, SpA.

Companies: Marlborough Holdings Group, Ltd.; Azimut-Benetti, SpA; Platinum Yacht Collection No. Two, Inc.

News: ConsumerProtection