Buyers of “as is” units may attempt to file a claim based on federal or state disclosure requirements if their vehicle suffers a mechanical failure.  
 -  Photo by  Emslichter  via Pixabay

Buyers of “as is” units may attempt to file a claim based on federal or state disclosure requirements if their vehicle suffers a mechanical failure.

Photo by Emslichter via Pixabay

The law in some states permits dealers to sell vehicles “as is,” provided they do so in a certain way. I predict that, in a couple of decades, dealers in all states will be prohibited from doing “as-is” sales. Until that happens, dealers who engage in “as-is” sales should listen up! Here’s why.

Sign Here, Here, and Here

Reinhard Smith bought a used car from Key & V Auto Sales Corp. The car did not have a buyers guide affixed to it. Smith was told that the car had no problems, but that if he experienced any issues, the car had a 90-day warranty.

Smith signed a retail installment contract and a sale agreement. The sale agreement provided that the dealership could repossess the car if the account became delinquent. The sale agreement also provided that the sale was “as is.” Similar “as-is” language was included multiple times on a “non-warranty notice” that Smith also signed.

A week after the purchase, Smith struck a parked van when his car’s steering column became stuck. Key & V Auto refused to help and ended up repossessing the car when Smith defaulted.

Smith sued Key & V Auto and various employees, asserting claims under the Magnuson-Moss Warranty Act (failure to affix a buyers guide and breach of warranty), the Fair Debt Collection Practices Act, and various Pennsylvania laws. The defendants moved to dismiss the complaint, and the federal trial court judge granted the motion, noting that the “troubling allegations surrounding the transaction [and lack of a] legal remedy … underscore why some states, unlike Pennsylvania, forbid the sale of a used car without at least some warranty.”

Insufficient Damages

Plaintiffs can’t bring just any old claim in federal court. In order to avoid having those courts swamped by an ocean of small claims, plaintiffs have to allege a serious dollar amount of damages in certain cases. Those damages are called the “amount in controversy.” The court noted that Smith did not plead sufficient facts to meet the $50,000 amount-in-controversy requirement for jurisdiction over MMWA claims in federal court.

Next, even if Smith had alleged sufficient damages, the court found that the buyers guide and breach of warranty claims would still fail. The court noted that Smith could not allege that Key & V Auto’s failure to affix a buyers guide to his car caused him any damage because there was sufficient evidence that Key & V Auto gave him explicit notice in both the sale agreement and the non-warranty notice that the vehicle was being sold without any warranty.

For the same reason, the court found that Smith’s claim for breach of express and implied warranties failed. The law in many states permits a seller to disclaim warranties provided that it does so clearly and conspicuously. The court noted that Key & V Auto’s written disclaimers were clear and conspicuous and could not be modified by the alleged verbal offer of a 90-day warranty. The court also found no support for Smith’s FDCPA claim where the documents he signed gave Key & V Auto the right to repossess the car for nonpayment.

Next Stop Harrisburg

After all these claims had been disposed of, the plaintiff was left with only state law claims. In those circumstances, federal trial courts, which may but are not required to entertain state law claims, often dismiss the plaintiff’s lawsuit (no sense working when you don’t have to), and that’s what the court did here, declining to exercise jurisdiction over Smith’s state law claims.

Note the “clear and conspicuous” requirement. About eight years ago, I bought a car from a local dealer. When I did so, I actually read through the buyer’s order — both sides, no less. That document contained a warranty disclaimer, but it was part of a longer paragraph, not set apart in any way and in the same color, size and font as the surrounding text. Remembering my Boy Scout training, and trying to be helpful, I suggested to the GM that a court wouldn’t enforce his disclaimer because it wasn’t clear and conspicuous.

A couple of months ago, I bought another car from that same dealer. As I signed on the dotted line, I thought, “This looks familiar. It can’t be the same version of the buyer’s order I signed years ago, with the same ineffective disclaimer language in it, can it?”

You guessed it. Free advice from a lawyer, and the dealership hadn’t taken it.

Thomas B. Hudson Esq. was a founding partner of Hudson Cook LLP and is now of counsel in the firm’s Maryland office. He is the CEO of LLC and is a frequent speaker and writer on a variety of consumer credit topics. Contact him at [email protected] HC No. 4824-0890-6382.1