The Citadel Of Privity, DD 12/07

Defense Digest

The National

A citadel is a stronghold, a bastion that commands a city. In the law, a citadel is a tenet that justly provides a potentially culpable party with immunity from legal liability.

In June 1960, Dean William Prosser wrote his notable article titled "The Assault Upon the Citadel" in which he discussed how the doctrine of privity of contract provided immunity to the manufacturers of defective products. See, William L. Prosser, The Assault Upon the Citadel (Strict Liability to the Consumer), 50 Minn. L. Rev. 791, 791-93 (1966). He told "the tale of the storming of the heights of negligence" and the "assault upon the citadel of privity."

Although the citadel of privity eventually crumbled with the rise of strict products liability statutes, the fortress remains a stronghold in the battlefield of Magnuson-Moss Warranty Act ("MMWA") litigation in Ohio. See, 15 U.S.C. § 2301 et seq. In Curl v. Volkswagen of American, Inc. (2007) 114 Ohio St.3d 266, the Ohio Supreme Court required privity of contract before a purchaser of an automobile could prevail in a contract claim for breach of implied warranty of merchantability under MMWA.

The MMWA provides a cause of action to an injured consumer when a warrantor fails to comply with a written or implied warranty. 15 U.S.C. § 2310(d)(1). In 1975, Congress enacted the MMWA to prevent manufacturers and suppliers from drafting grossly unfair consumer warranties and service contracts and for failing to live up to their obligations. Although the Act covers consumer products broadly, the statute was enacted to focus particularly on the automobile industry.

In December 2002, David Curl sought recourse under the MMWA against Volkswagen, the manufacturer of his 2002 Volkswagen Beetle. The event began when the dealership acquired the Beetle from the manufacturer and used it as a rental car. While the Beetle was still in the possession of the dealership, Volkswagen issued a recall notice for the particular Beetle to repair and replace a portion of the wiring linked to the antilock braking system. The dealership, however, did not complete the recall work. In late Spring 2002, Mr. Curl purchased the Beetle from the dealership. After Mr. Curl drove the Beetle about 4,000 miles, the car began having mechanical problems. Mr. Curl eventually towed the Beetle to the dealership for repairs. The dealership technicians discovered several wiring problems, which it repaired pursuant to an express warranty. After having possession of the Beetle for over two-and-a-half months, the dealership finally returned the car to Mr. Curl.

Mr. Curl sued Volkswagen in Ohio state court, alleging claims of breach of a written warranty pursuant to the MMWA; breach of an implied warranty of merchantability under the MMWA; and a violation of the Ohio Lemon Law.

Pre-trial, Volkswagen filed a partial summary judgment on the issue of implied warranty. Volkswagen argued that it could not be liable for a breach of implied warranty of merchantability under the MMWA because it did not have privity of contract with the purchaser. Mr. Curl also filed a dispositive motion asking for judgment in his favor. The trial court granted Mr. Curl's motion. Volkswagen appealed the trial court's decision. The intermediate court of appeals affirmed the lower court's ruling that privity was not required in a MMWA claim for breach of implied warranty. Volkswagen petitioned to the Ohio Supreme Court, which granted discretionary review to determine "whether an automobile purchaser may assert a claim for breach of implied warranty of merchantability, pursuant to the Magnuson-Moss Warranty Act, against a manufacturer with whom the purchaser is not in privity." Curl, 114 Ohio St.3d at 268.

The Court recognized that a consumer can bring a cause of action for damages under the MMWA when a supplier, warrantor, or service contractor fails to comply with its obligations under a written warranty, implied warranty, or service contract. The Court also recognized that an implied warranty is defined by state law. The linchpin of the Court's decision is its analysis of the privity of contract requirement to maintain a breach of implied warranty claim under Ohio law. The Court concluded that "longstanding Ohio jurisprudence provides that purchasers of automobiles may assert a contract claim for breach of implied warranty only against parties with whom they are in privity." Accordingly, since the MMWA looks to state law for implied warranty actions, the Court found that this tenet applied equally to actions brought by consumers under the MMWA.

In the end, the Ohio Supreme Court found that Curl was not in privity with Volkswagen and reversed the trial court's decision. It refused Curl's argument that the relationship between the dealership and Volkswagen established privity under the principles of agency law. Relying on the fact that the dealership purchased the Beetle for use as a rental car, and then subsequently sold it, the Court found that the principles of agency did not create the requisite privity. This aspect of the Curl case arguably limits the Court's ruling to situations in which the dealership purchases an automobile for its own use before selling it to a consumer. In direct sales scenarios, an argument may still exist that privity is established under principles of agency. Therefore, the implied warranty skirmish between the consumer and the manufacturer will focus on the relationship between the dealership and the manufacturer, but not on the requirement of privity; for in Ohio, the "Citadel of Privity" remains a fortress on the battleground of the MMWA.

* Marty, an associate in our Akron, Ohio, office, is a member of our Casualty Practice Group and can be reached at (330) 255-0041 or mhsitler@mdwcg.com.