Carlson v. General Motors Corp.

883 F.2d 287, 11 U.C.C. Rep. Serv. 2d (West) 14, 1989 U.S. App. LEXIS 12454, 1989 WL 95395
CourtCourt of Appeals for the Fourth Circuit
DecidedAugust 22, 1989
DocketNo. 88-2168
StatusPublished
Cited by77 cases

This text of 883 F.2d 287 (Carlson v. General Motors Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Carlson v. General Motors Corp., 883 F.2d 287, 11 U.C.C. Rep. Serv. 2d (West) 14, 1989 U.S. App. LEXIS 12454, 1989 WL 95395 (4th Cir. 1989).

Opinion

PHILLIPS, Circuit Judge:

This case involves alleged defects in 5.1-liter diesel automobile engines manufactured by the defendant-appellee, the General Motors Corporation (GM), in model years 1981 through 1985. In a seventy-four page amended complaint filed on behalf of 183 named claimants and a prospective class of “similarly situated” car owners1 — all of whom at one time purchased GM products equipped with diesel engines — plaintiffs charged that the engines were inherently defective and subject to frequent breakdowns, necessitating extensive and expensive repairs. Plaintiffs claimed, moreover, that GM’s failure to correct these defects constituted a breach of the implied warranty of merchantability on the engines, hence a remediable violation of the Magnuson-Moss Warranty Act (the Act).2

In response to Rule 12(b)(6) motions filed by the defendant, the district court dismissed the claims of 130 of the named plaintiffs. At the same time, it denied plaintiffs’ motion to amend the complaint and name additional claimants.3 This appeal followed4 and required us to decide: (1) whether GM diesel car owners who did not themselves encounter engine difficulties are nevertheless entitled to maintain actions for the recovery of “lost resale value”; and (2) whether the district court erred by dismissing the separate claims of some plaintiffs that GM’s durational limitations on any and all implied warranties of merchantability were “unreasonable” and “unconscionable.” Because we agree with the district court that the implied warranty of merchantability does not encompass claims for “lost resale value,” we affirm its dismissal of those plaintiffs who alleged damages attributable only to the “poor reputation” of GM’s diesel products. We also hold, however, that the district court erred by dismissing the “unconscionability” claims of other plaintiffs solely on the basis of the pleadings. We therefore reverse as to those claims and remand them for further proceedings.

I

For present purposes, we treat the named plaintiffs in this case as falling into three separate categories: (1) those who alleged that they encountered significant mechanical difficulties with the diesel engines in their GM cars before the applicable written warranties had expired; (2) those who alleged that they encountered engine problems only after all express warranties had expired; and (3) those who did not specifically allege that their diesel vehicles were defective, but instead only that the “poor reputation” of GM’s diesel products resulted in compensable losses of “resale value.” In a single order, the district court dismissed all named plaintiffs in the latter two categories. Because it did so for conceptually distinct reasons, however, we set [290]*290out separately the salient facts underlying the claims of each group.

A. Plaintiffs Claiming that GM’s “Du-rational Limitations” on the Operation of Implied Warranties Were Unreasonable and Unconscionable.

Included in the first group are those plaintiffs who challenge GM’s attempt to impose “durational limitations” on any and all implied warranties covering the diesel-equipped vehicles that are the subject of this dispute.

GM’s express warranties on the diesel engines it manufactured in the 1981 and 1982 model years expired by their terms after 24 months or 24,000 miles. For model years 1983 through 1985, all express warranties on the engines expired after 36 months or 50,000 miles. Critical for present purposes, however, is that the warranty documents provided to purchasers of diesel-equipped GM vehicles included provisions purporting also to limit the operation of any implied warranties to the periods covered by the express guarantees.

Of the 183 plaintiffs named in the amended complaint, 107 alleged that they had first encountered substantial difficulties with their diesel cars only after all applicable express warranties had expired — hence after the purportedly “simultaneous” expiration of any implied warranties. Plaintiffs sought to avoid the obvious difficulties associated with GM’s written disclaimers, however, by alleging further that the underlying “durational limitations” on the operation of any implied warranties were, as a matter of law, both “unreasonable” and “unconscionable”— hence “ineffective” under § 2308 of the Act:

§ 2308. Implied warranties.
(a)No supplier may disclaim or modify {except as provided in subsection (b) of this section) any implied warranty to a consumer with respect to [a] consumer product if (1) such supplier makes any written warranty to the consumer with respect to such consumer product, or (2) at the time of sale, or within 90 days thereafter, such supplier enters into a service contract with the consumer which applies to such consumer product.
(b) For purposes of this chapter ..., implied warranties may be limited in duration to the duration of a written warranty of reasonable duration, if such limitation is conscionable and is set forth in clear and unmistakable language and prominently displayed on the face of the warranty.
(c) A disclaimer, modification, or limitation made in violation of this section shall be ineffective for purposes of this chapter and State law.

15 U.S.C. § 2308 (emphasis supplied). In response to GM’s Rule 12(b)(6) motion to dismiss, however, the district court held that the implied warranty disclaimers were indeed both “reasonable” and “conscionable.” Rejecting plaintiffs’ claim that “the warranty limitations were unconscionable and of unreasonably limited] duration because GM knew when it sold the ears that the diesel engines were defective,” the court reasoned as follows:

A durational limitation on an implied warranty can mean only that the manufacturer warrants that the car is fit for ordinary purposes only for the duration of that warranty. In other words, the limitation can mean only that the unmer-chantability must manifest itself in some manner during the period of the warranty in order for the purchaser to have a cause of action.
If the court accepted plaintiffs’ argument, a plaintiff would need only to show that a manufacturer knew that a product would fail some time after the expiration of the implied warranty in order to recover for unmerchantability.... [T]his showing would rarely be difficult, and, thus, the time/mileage limitation on the warranty which Congress expressly permits would be rendered meaningless.
Turning to the specific limitations periods in this case, the court has no problem concluding that the time and mileage limits are reasonable and not unconscionable. In a class action differing from this case only in the model years of the cars involved, a United States Magistrate [291]*291found a one-year/12,000 mile warranty limitation reasonable. Kaplan v. General Motors Corp., No. 81-CV-1252 (E.D.N.Y.1983). The warranties in the instant case last longer than those found reasonable in the Kaplan case, and this court finds that the limitations are both reasonable and conscionable.

Carlson v. General Motors Corp., No. 2:86-2674-1, slip op. at 13-14 (D.S.C. April 4, 1988).

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Bluebook (online)
883 F.2d 287, 11 U.C.C. Rep. Serv. 2d (West) 14, 1989 U.S. App. LEXIS 12454, 1989 WL 95395, Counsel Stack Legal Research, https://law.counselstack.com/opinion/carlson-v-general-motors-corp-ca4-1989.