Magnuson-Moss Warranty Act Applies to Limited Warranties in Sale of Luxury Super Yacht; Seller Prohibited from Disclaiming Implied Warranties

Magnuson-Moss Warranty Act Applies to Limited Warranties in Sale of Luxury Super Yacht; Seller Prohibited from Disclaiming Implied Warranties

By: Alex Lair

 Global Quest, LLC v. Horizon Yachts, Inc., No. 15-10713, 2017 U.S. App. LEXIS 3372 *; 849 F.3d 1022 (11th Cir. 2017).This dispute arises out of the sale of a 105-foot luxury super-yacht named “Starlight.” The defendant, Horizon Yacht Co., Ltd. (“Horizon”), manufactured this super-yacht along with its wholly-owned subsidiary Premier Yacht Co., Ltd; both of which are Taiwanese corporations. Acting as an agent for Horizon, a seller in the United States contracted with plaintiff, Global Quest, LLC, for the sale of “Starlight” for $6,835,000. The original contract contained troubling language for the buyer in that the buyer purchased the vessel “as is,” and the seller disclaimed any and all warranties. However, the contract was subsequently amended to include a “limited express warranty,” which covered certain design defects for up to one year. As part of its complaint, plaintiff claims that the defendant made certain representations about the vessel that were ultimately untrue. Specifically, that the yacht was MCA LY2 compliant and built to DNV standards.After receiving possession of “Starlight” and discovering these defects, plaintiff filed suit against the three defendants, bringing ten claims against each defendant, including: fraud in the inducement, breach of the implied warranties of merchantability and usage of trade, breach of the implied warranty of fitness for a particular purpose, breach of a pre-purchase express oral warranty, breach of a post-purchase express oral warranty, breach of the implied warranty of workmanlike performance, and breach of the express written limited warranty.  Seller counterclaimed to foreclose on the promissory note. Thereafter, the district court granted summary judgment in favor of the defendant on all but the breach of express warranty claims and also, granted defendant’s counter-claim.On review, the Eleventh Circuit handled each claim in-turn. On the fraudulent inducement claim, the court reversed and found that the district court did not apply correct Florida law as determined by the Florida Supreme Court. The district court believed that the plaintiff could not rely on any oral representations made by the seller before completion of the contract, when the wording of the contract contradicted the earlier representations made. However, the Eleventh Circuit relied on the Florida Supreme Court’s determination in Oceanic Villas that an “as is” clause cannot preclude a claim for fraud. Additionally, the court went on to find that there were genuine issues of material fact and evidence sufficient to survive summary judgment as to all four elements of the claim of fraudulent inducement.For the breach of implied warranties claims, the district court found in favor of the defendants on summary judgment because the contract stated a disclaimer of all implied warranties, and the Magnuson-Moss Warranty Act (“MMWA”) does not cover implied warranties. The Eleventh Circuit again found to the contrary. The court determined that the MMWA does indeed apply to limited warranties under section 2308(a), which prohibits sellers from disclaiming implied warranties when either a full or limited warranty is provided by the seller, and it was in this case. Additionally, on a separate privity of contract issue, the court found that defendants did have privity of contract by extending the limited express warranty to the plaintiff.Finally, on the breach of express limited warranty claims, the district court granted summary judgment in favor of the seller, Horizon Yachts, Inc., but not as to the other two defendants because the court determined that the Seller never extended a limited warranty to the plaintiff. The Eleventh Circuit again disagreed and found that there were genuine issues of material fact as to whether an express warranty was incorporated into the contract. Ultimately, the Eleventh circuit reversed the district court as to the counts discussed, but affirmed the judgments of the remaining counts.