Carmax’s “Limitation of Warranties” in Contract Fails to Get Case Tossed

Carmax paper license plateTAMMY GUTIERREZ v. CARMAX AUTO SUPERSTORES
CALIFORNIA

In this case, Plaintiff Tammy Gutierrez sued defendant CarMax Auto Superstores California,
LLC (CarMax) alleging breaches of express and implied warranties, intentional and negligent misrepresentation, breach of contract, unfair competition under Business and Professions Code section 17200 (UCL), and a violation of the Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.). CarMax demurred to Gutierrez’s third amended complaint and the trial court sustained the demurrer without leave to amend. Gutierrez appealed, contending her allegations about an undisclosed safety recall adequately stated causes of action for breach of an implied warranty of merchantability and violations of the UCL and CLRA.

On May 6, 2013, Gutierrez purchased a 2008 Hyundai Elantra from defendant
CarMax at its dealership in Bakersfield. The vehicle came with a 30-day limited
warranty. The vehicle’s purchase agreement stated:

The CarMax Warranty Brochure contains the details of the Limited Warranty.

“LIMITATION OF WARRANTIES: CARMAX MAKES NO EXPRESS WARRANTIES UNLESS SEPARATELY SET FORTH IN WRITING. ANY AND ALL IMPLIED WARRANTIES APPLICABLE TO THE PRODUCTS SOLD HEREUNDER, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE LIMITED TO THE DURATION OF THE WRITTEN LIMITED WARRANTY GIVEN BY CARMAX, IF ANY.”

Before Gutierrez purchased the vehicle, she was advised by CarMax sales staff
that the Hyundai was in excellent condition because it had passed a rigorous 125-point
quality inspection. Gutierrez also received a document with the heading “CQI CarMax”
that stated: “This vehicle has passed the rigorous CarMax 125-Point Quality Inspection”
and listed the 125 points.

The following sentence appeared at the top of the document:

“Your signed CQI certificate can be found in your vehicle’s glove compartment.”

At the time of the sale, the Hyundai was subject to a national recall relating to the
stop lamp switch, which Gutierrez alleges was a critical safety-related component of the
vehicle’s braking system that materially affects a person’s ability to operate the vehicle
safely. She further alleges it is unsafe to operate a vehicle with a defective stop lamp
switch, but has not alleged the switch on her vehicle malfunctioned or was actually
defective.

The Court held:

“On the question whether Gutierrez pleaded sufficient facts to establish CarMax
had a duty to disclose the safety recall, we conclude her allegations are sufficient.
Gutierrez contends the duty to disclose existed because CarMax (1) had actual knowledge of the recall before the sale of the vehicle and (2) made partial representations about the vehicle that were misleading because the existence of the recall, a material fact, had not been disclosed. We conclude her allegations are sufficient to establish for pleading purposes the existence of the safety recall was a material fact and, by reasonable inference, the existence of CarMax’s knowledge of the recall before the sale. As the stop lamp switch is related to the vehicle’s braking and lighting systems, Gutierrez’s allegations about the rigorous inspection of the vehicle’s braking and lighting systems, and its misleading character in the absence of a disclosure about the safety recall, are sufficient to plead the remaining factual element of a duty to disclose. Therefore, we conclude she has alleged sufficient facts to state a claim for a deceptive practice actionable under the CLRA.”

The Court went on to hold:

“Gutierrez also has stated a cause of action under the UCL. We conclude the
violation of the CLRA serves as the predicate violation of law necessary to establish the
unlawful practice variety of unfair competition that is actionable under the UCL.”

So, despite the “Limitation of Warranties” in Carmax’s contract, the court found that the plaintiff had stated a cause of action for her seventh (UCL) and eighth (CLRA) causes of action and reversed the trial court’s dismissal of her case for those two causes of action.  The plaintiff lives to fight another day and Carmax may just face a jury regarding its business practices.

Eric Papp, Esq.

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