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The Magnuson-Moss Act provides a consumer with a private cause of
action against a dealer that fails to comply with the Act or the terms of any
written warranty and implied warranty. The Act also permits the trial court to award
attorney’s fees and costs to the plaintiff. The award of attorney’s fees does not need to be
proportionate to any award of damages.
An example of how this can penalize the dealer occurred in a case in Illinois. It involved an alleged breach of
warranty in a used car transaction. The dealer sold the customer a used Honda for $22,995 in 2004 and provided
an express limited warranty which covered the engine, transmission, and drive axle for three months or 3,000
miles. The warranty stated the dealer would pay 100% of the labor costs and 100% of the cost of any parts
covered by the warranty which failed during the warranty period.
About 10 days after the purchase, the car experienced engine problems and the consumer towed the car to
the dealer. The dealer broke down the engine and told the consumer the warranty would not cover the repairs
because the damage resulted from driver abuse. The dealer billed the customer $888 for towing and diagnosis
of the engine problem.
The plaintiff hired a lawyer who filed a breach of warranty action against the dealer in 2005. But when a crucial
witness could not appear for trial, the Court dismissed the case in 2006 for failure to prosecute. The consumer
re-filed in 2008 alleging breach of warranty under the Magnuson-Moss Warranty Act and under Illinois law for
fraud and a violation of the Illinois Consumer Fraud Act.
The case went to trial in January 2011. The plaintiff testified he had another dealership repair the car for $3,961
and then sold it in 2007 for approximately $12,000. His expert testified that a latent timing defect in the engine
likely caused the damage and nothing the plaintiff did could have caused or contributed to the damage. The
expert testified that the vehicle was defective and unmerchantable at the time of sale and that the dealer
breached its warranty. He further testified that the value of the vehicle was $11,497, well under the $22,995
that the plaintiff had paid for it. A previous judge in the case had prevented the dealership from calling any
expert witnesses due to a waiver by the dealer’s first lawyer.
The jury predictably entered a verdict for the plaintiff in the amount of $11,480, plus $25,000 in punitive
damages for common law fraud. The trial court judge reduced the punitive damages to $4,000 in actual
damages.
The trial court also held a hearing on plaintiff’s request for attorney’s fees in both the 2005 and 2008 cases.
The court ruled that all the work was done from the same set of facts and awarded the plaintiff $72,113.75 in
attorney’s fees and $2,763.91 in costs for a total of almost $75,000.When the dealer challenged that award, the
Court added another $6,175 in attorney’s fees making the case worth $11,000 or so in actual damages, $4,000
in punitive damages, plus $81,000 in attorney’s fees. Remember this is only the plaintiff’s attorney’s fees. The
dealer probably incurred a similar amount of attorney’s fees in defending this case.
On appeal, the court threw out the award of punitive damages finding no common law fraud nor any violation
of the Illinois Consumer Fraud Act since plaintiff’s expert testified that the cause of the engine failure was a
latent defect unknown to the dealer. However the appellate court left intact the jury’s verdict of $11,480 (being
the difference between the sale price of the vehicle and the approximate value as testified by the plaintiff’s