Background: Interpreting the Song-Beverly Act in Rodriguez v. FCA US LLC
The California Supreme Court recently had the opportunity to interpret the meaning of the phrase "other motor vehicle sold with a manufacturer's new car warranty," which is used in the Song-Beverly Consumer Warranty Act ("SBA"), given conflicting rulings on the issue. (Rodriguez v. FCA US LLC (2024) 17 Cal.5th 189.) Specifically, the Court was tasked with determining as to whether this phrase only applies to new vehicles, or if it also applies to used vehicles that are sold with a balance of an unexpired manufacturer's new car warranty.
This holding may also have implications which make it more challenging for an independent dealership to seek indemnification from the manufacturer in connection with a consumer's SBA claims. Rodriguez also confirmed that implied warranties attached to used vehicles only extend to the time frame for which an express warranty is provided by the dealership, not the unexpired manufacturer's warranty.
Court Limits Coverage to Vehicles Sold With a New Car Warranty
The Court held that "a motor vehicle purchased with an unexpired manufacturer's new car warranty does not qualify as a 'motor vehicle sold with a manufacturer's new car warranty'" under Cal. Civ. Code § 1793.22(e)(2) "unless the new car warranty was issued with the sale." (Rodriguez, 17 Cal.5th at 196.)
The Court reached this conclusion based on section 1793.22(e)(2), its place within the SBA as a whole, and the SBA's legislative history. (Id. at 197.) The statute makes clear that "a dealer-owned vehicle and a 'demonstrator' or other motor vehicle sold with a manufacturer's new car warranty" qualifies as a new vehicle for purposes of the SBA. (Id. at 198.) Rodriguez also notes that these cars are sold with a manufacturer's new car warranty and are not warranted prior to sale, which is why they qualify. (Id. at 198-199.)
The Court further stated that if the Legislature had intended to define "new motor vehicle" to include a category of used cars with unexpired new car warranties, "it would have been done so more clearly and explicitly than tucking it into a reference to demonstrators and dealer-owned vehicles." (Id. at 199.) This holding severely limits the application of these claims as against manufacturers and franchise stores selling new automobiles.
A Used Car's Express Warranty Period Also Limits Its Implied Warranty of Merchantability
In reaching its conclusion, the Court highlighted that the SBA includes a distinct section which addresses used products. Within that discussion, the Court reasoned that the SBA contains provisions which pertain to an express warranty and implied warranties provided at the time of sale of used vehicles. The Court noted that Cal. Civ. Code § 1795.5 "provides for implied warranties of merchantability and fitness by the distributor or retail seller, with those warranties having a shorter duration than the manufacturer's implied warranties for new products." (Id. at 201.)
This confirms that the implied warranty of merchantability's duration only extends to any express warranty provided at the time of sale, and not for the duration of the unexpired manufacturer's new car warranty, which can be much longer than the express warranty provided at the time of sale.
Retail Seller's Right of Indemnity Against Manufacturer
Cal. Civ. Code § 1792 provides that every sale of "consumer goods" sold at retail "shall be accompanied by the manufacturer's and the retail seller's implied warranty that the goods are merchantable. The retail seller shall have a right of indemnity against the manufacturer in the amount of any liability under this section." Section 1791(a) defines consumer goods as "any new product... that is used, bought, or leased for use primarily for personal, family, or household purposes."
Although it is not expressly addressed in Rodriguez, the affect of this holding could be that a retail seller cannot seek indemnity from the manufacturer in connection with the sale of a used vehicle because it is not included in the definition of "consumer goods" nor is it included in the definition of "other motor vehicle sold with a manufacturer's new car warranty."
While there may be other avenues of the ability to seek indemnification, Section 1792 was the most explicit way in which to seek that indemnification. That is now challenged by the holding in Rodriguez.
Key Takeaways for Dealerships and Retail Sellers
While the Rodriguez holding includes some benefits for retail sellers, including confirmation that the duration of an implied warranty of merchantability accompanying a sale only extends to the duration of an express warranty provided at the time of sale, and not the unexpired manufacturer's new car warranty, Rodriguez could provide challenges in seeking indemnification for SBA claims related to the implied warranty of merchantability such that an unaffiliated retail seller may be independently on the hook for those claims.
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