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November 17, 2016 by Joseph J. DePalmaDownload PDF

Buyer Beware! Express Limited Warranties May Be More Limited Than You ThinkJoseph J. DePalma

You hear about a terrific consumer product being sold by the best company. You are assured that the product will last because it is backed up by a 20 year limited warranty against materials and workmanship. Lo and behold, after you have properly used the product for a month, it falls apart. It is, in fact, a terrible product. (Hey, I know good words.)

You hire a lawyer, who engages an expensive expert to establish that the product was designed improperly. Your lawyer informs you that the expert report discloses that the product contains a design defect that caused damage to your product. Counting your dollars in anticipation of a quick and easy recovery under your express warranty, you hear about a fantastic private university that will teach you all the secrets to doubling your money with some nifty real estate maneuvering. Tuition, though expensive, will be easily covered by your certain litigation victory. Even though you’ve heard awful things about the university and read briefs filed in a pending class action that the school is the worst, you are nonetheless tempted to enroll.

Not so fast. Depending on where you live, you may not have an express warranty case at all.

A written warranty providing remedies for “defects in materials and workmanship” may not warrant against defects in design. Some courts have ruled that this distinction matters. In Voelker v. Porsche Cars N. Am., a 2003 case, the Seventh Circuit took aim at this kind of warranty, expressing a rule of law disavowed in other jurisdictions.

The plaintiff in Voelker asserted claims against Porsche under the Illinois Uniform Commercial Code because his air bag failed to deploy after his car was broad-sided. Evidence plaintiff mustered to support his design defect theory included that certain model year Porsches had too few crash sensors and had trigger points set too low to the ground to deploy side air bags. Even so, the Seventh Circuit concluded that the warranty in question (defects in materials or workmanship) did not contractually bind Porsche to provide a remedy for defects in design.¹

If Mr. Voelker had been fortunate enough to reside in California, New York or Nebraska, he would have fared much better. In Koulajian v Trek Bicycle Corp, a 1992 case out of the Southern District of New York, the plaintiff sued after his quick release tire released all too quickly, ruining his bike and causing him to suffer a concussion. Trek had warranted his bike against defects in materials and workmanship.

Koulajian declined to adopt the manufacturing/design defect distinction advanced by Trek. The court reasoned that the reference to “workmanship” in Trek’s warranty could refer both to the bike’s designs and to the implementation of those designs in its manufacturing processes. The court held that “[a]bsent binding authority limiting an express ‘workmanship’ warranty to manufacturing defects alone, we do not find…that such warranty language cannot apply to design defects.”

A 2008 District of Nebraska decision reached a similar result. In In re Saturn L-Series Timing Chain Products Liab. Litig., the court found that a defect related to materials and workmanship and a defect related to design are “substantially the same.” The court recognized that, by nature, design is integrated into the manufacturing process itself. The court stated that “it would be absurd to interpret [the warranty] as not covering any defect in ‘materials and workmanship’ if the defect could simultaneously be attributable to a design implemented by the company in the manufacturing of the car.”

In Stearns v. Select Comfort Retail Corp., a 2012 decision from the Northern District of California, the court noted that the defendant had argued persuasively that the term “workmanship” is broad and includes the quality and skill that is part of the design process. (For reasons beyond the scope of this post, the plaintiffs argued for a narrow construction of “workmanship” in order to avoid a statute of limitations issue.) The Stearns court cited both the Trek and Saturn cases with approval.

Many states have yet to weigh in on whether warranties regarding materials and workmanship cover design defects. If the distinction does not make sense to you, let’s stick together and make express warranties great again!
¹This case and others like it can be readily distinguished in a number of ways. For example, is there other language in the warranty illuminating the intent of the parties; is there a custom and practice whereby the manufacturer nonetheless processed warranty claims based on design defects; did the manufacturer know of the defect before marketing the product. The list can go on.