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Reaves v. American Honda Motor Co., Inc.

A-1874-09T2 (N.J. Super. App. Div. 2011) (Unpublished)

CONSUMER FRAUD; AUTOMOBILES; LEMON LAW — A car buyer cannot pursue a common law fraud or Consumer Fraud Act claim against a manufacturer of an automobile based upon an alleged misrepresentation as to gasoline mileage performance if that consumer never communicated with the manufacturer and, further, under federal law, New Jersey’s automobile lemon law is preempted by federal law which states that information contained on the fuel economy sticker does not establish a warranty.

A consumer entered into a three year lease with an authorized automobile dealer for a new automobile. The vehicle had a window sticker indicating that the United States Environmental Protection Agency’s (EPA) fuel economy estimate for the vehicle was 24 miles per gallon (mpg) for city driving, and 34 mpg for highway driving. The sticker also indicated that the actual mileage would vary with options, driving conditions, driving habits, and the vehicle’s condition. The results reported to EPA indicated that the majority of similar vehicles would achieve between 20 and 28 mpg in the city and between 28 and 40 mpg on the highway.

The lease’s terms permitted the consumer to drive the vehicle 36,000 miles during the lease term before incurring an excess mileage charge of $0.15 per mile. After one week of driving, the consumer returned to the dealer to complain that the vehicle was not getting 34 mpg in highway driving. The dealer conducted two fuel consumption tests yielding 21.67 mpg and 22.4 mpg.

After the dealer rejected the consumer’s demand to terminate the lease agreement, she sued the automobile manufacturer, the dealer, and its manager, alleging common law fraud, consumer fraud under the New Jersey Consumer Fraud Act (CFA), and a violation of the New Jersey Lemon Law Act. Of relevance, the consumer testified that, at the time of the lease, the dealer’s salesman had told her the automobile would get 34 mpg for highway driving and 26 mpg in city driving. The automobile manufacturer’s expert opined that the vehicle was operating, as designed, at a highway fuel consumption rate of 39.09 mpg.

The lower court granted summary judgment motions in favor of the dealer, its manager, and the manufacturer dismissing the complaint because it held the consumer had failed to establish her claims. On appeal, the Appellate Division affirmed the dismissal of the complaints, except as to the specific CFA claim against the dealer.

The Court first addressed the claims against the manufacturer, holding that the consumer could not maintain her claim of common law fraud or consumer fraud under the CFA, as she never communicated with the manufacturer before leasing the automobile, and the manufacturer made no misrepresentations to the consumer during her post-lease communications with it. As to any lemon law claim, the Court explained that the lemon law provides remedies to a lessee of a motor vehicle that exhibits a nonconformity, and that in this instance the consumer’s alleged nonconformity referred solely to the federal EPA fuel mileage estimates contained on the affixed sticker. Unfortunately for the consumer, the state lemon law claim was preempted by federal law, and the relevant federal law states that the information contained on a fuel economy sticker does not establish a warranty under federal or state laws. In short, the Court held that the consumer could not pursue a state lemon law claim based on an alleged misrepresentation of the estimated mpg shown on the standard window sticker.

The Court next addressed the claims brought against the dealer and its sales manager, and found the lower court properly dismissed the lemon law claim against both, as New Jersey’s lemon law is not applicable to automobile dealers or their employees. The Court also found the lower court properly dismissed the common law fraud claims against them. The consumer’s contacts with the sales manager arose after she entered into the lease, and so she had not relied on any representations by him in entering the lease, much less any misrepresentations of fact. Additionally, the consumer failed to prove that any representations made by the dealer’s employees prior to entering into the lease were made with knowledge of their falsity, a critical element to prove common law fraud. The consumer failed to file affidavits or certifications stating what misrepresentations of fact were made by the dealer’s employees before she entered the lease agreement.

Even though the Court found the lower court had properly dismissed the CFA claim against the sales manager for the same reasons that the common law fraud claim was dismissed, it reversed the lower court’s dismissal of the CFA claim against the dealer. Under the CFA, an actionable misrepresentation need not be made with knowledge of its falsity, and it need not be relied upon by a consumer. The record contained the consumer’s testimony that the dealer’s employee affirmatively told her the motor vehicle would get 34 mpg in highway driving and 26 mpg in city driving. Additionally, the Court concluded the record contained sufficient evidence that the consumer suffered an ascertainable loss, as required under the CFA, in the way of excess gasoline expenses because of the lower fuel economy.

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