2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-2-2012

Sharon McGarvey v. Penske Auto Group

Precedential or Non-Precedential: Non-Precedential

Docket No. 11-2085

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2012

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 2012 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Recommended Citation

"Sharon McGarvey v. Penske Auto Group" (2012). 2012 Decisions. Paper 768.

http://digitalcommons.law.villanova.edu/thirdcircuit_2012/768
NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 11-2085

____________

SHARON MCGARVEY; BRYAN BECHTEL;

KATIE MCGARVEY, on behalf of themselves

and all others similarly situated,

 Appellants

v.

PENSKE AUTO GROUP, INC.; UNITED AUTOCARE PRODUCTS, INC.;

UNITED AUTOCARE, INC.; INNOVATIVE AFTERMARKET SYSTEMS, L.P.

____________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 1-08-cv-05610)

District Judge: Honorable Jerome B. Simandle

____________

Argued May 15, 2012

Before: SMITH, FISHER and GARTH, Circuit Judges.

(Filed: July 2, 2012 )

Leonard W. Aragon

Robert B. Carey

Hagens Berman Sobol Shaprio

11 West Jefferson Street, Suite 1000

Phoenix, AZ 85003

Patrick Howard

Charles J. Kocher

Simon B. Paris (Argued)

Saltz, Mongeluzzi, Barrett & Bendesky

1650 Market Street

One Liberty Place, 52nd Floor
2

Philadelphia, PA 19103

Counsel for Appellants

Daniel E. Brewer

Drinker, Biddle & Reath

18th & Cherry Streets

One Logan Square, Suite 2000

Philadelphia, PA 19103

Mary E. Kohart (Argued)

Elliott Greenleaf & Siedzikowski, P.C.

925 Harvest Drive

Suite 300, Union Meeting Corporate Center V

Blue Bell, PA 19422

Aimee L. Kumer

Elliott Greenleaf & Siedzikowski, P.C.

50 South 16th Street

Suite 2960, Two Liberty Place

Philadelphia, PA 19103

Counsel for Penske Auto Group,

United Autocare Products, Inc.

and United Autocare, Inc.

Douglas A. Albritton

Reed Smith

10 South Wacker Drive, 40th Floor

Chicago, IL 60606

John J. Hare (Argued)

Keith D. Heinold

Kevin M. McKeon

Marshall, Dennehey, Warner, Coleman & Goggin

1845 Walnut Street

Philadelphia, PA 19103

Counsel for Innovative Aftermarket

Systems LP

____________

OPINION OF THE COURT

____________
3

FISHER, Circuit Judge.

Sharon McGarvey, Katie McGarvey, and Bryan Bechtel (collectively, “Plaintiffs”) 

appeal both the District Court’s dismissal of their First Amended Complaint for failure to 

state a claim as well as its denial of their motion for leave to amend. Plaintiffs filed a 

putative class action in the U.S. District Court for the District of New Jersey against 

Penske Auto Group, Inc. (“PAG”), United Autocare Products, Inc. (“UAP”), United 

Autocare, Inc. (“UA”),1

I.

and Innovative Aftermarket Systems (“IAS”) (collectively, 

“Defendants”), alleging the Defendants created a tying arrangement that violated federal 

and state laws. For the reasons stated below, we will affirm the District Court’s order.

We write principally for the parties, who are familiar with the factual context and 

legal history of this case. Therefore, we will set forth only those facts necessary to our 

analysis.

This case involves the sale of the Ibex Anti-Theft Etch System (“Ibex System”) to 

purchasers of automobiles. The Ibex System was manufactured by IAS, distributed to 

dealerships by UAP and UA, and sold by automobile dealerships owned by PAG. The 

Ibex was comprised of two components. First, the Ibex included an Etch Code, which 

was a unique serial number, placed onto the primary windows of the vehicle, that was 

 1 Defendants submit that the party’s correct name is United Autocare, LLC, not 

United Autocare, Inc. as named in the caption.
4

registered for later searches if necessary. Because a vehicle’s glass is one of the most 

valuable items for a thief to remove from a stolen vehicle for resale, the Etch Code was 

designed to help deter theft by making the glass unmarketable. Second, the Ibex included 

a Limited Warranty, which provided a credit reimbursement in the amount of $2,500, 

$5,000, or $7,500 if the consumer purchased a replacement vehicle after the original 

vehicle was stolen. The Limited Warranty contract reads, in pertinent part:

“In the event the Ibex Anti-Theft Etch System fails to prevent the Vehicle 

specified in this Limited Warranty from being stolen within the Warranty 

Period, and such failure results in the Customer’s primary insurance 

company declaring the Vehicle a Total Loss as a direct result of theft, we 

will provide the customer with a replacement vehicle, by issuing at the 

dealership listed in this Warranty, a credit in the name of the Customer (up 

to ___ $2,500 or ___$5,000 or ___$7,500 check one) to be applied towards 

the purchase of the replacement vehicle.

The customer is obliged to utilize the total benefit provided to replace the 

Vehicle specified in the Warranty and the replacement Vehicle must be of 

equal or greater value than the original purchase price paid for the covered 

Vehicle.”

In November 2008, Plaintiffs filed a putative class action in the U.S. District Court 

for the District of New Jersey, alleging that Defendants violated the Magnuson-Moss 

Warranty Act (“MMWA”), 15 U.S.C. § 2302(c), the New Jersey Truth-in-Consumer 

Contract, Warranty, and Notice Act (“NJTCCA”), N.J. Stat. Ann. § 56:12-15, New Jersey 

common law, and the New Jersey Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8-

2. On June 29, 2009, the District Court dismissed the Plaintiffs’ MMWA claim on the 

ground that they failed to allege actual damages as required under the statute. McGarvey 

v. Penske Auto. Grp., Inc. (McGarvey I), 639 F. Supp. 2d 450, 457 (D.N.J. 2009), vacated 
5

in part by McGarvey v. Penske Auto. Grp., Inc. (McGarvey II), No. 08-5610, 2010 WL 

1379967, at *2 (D.N.J. Mar. 29, 2010). 2

 But the District Court held that Plaintiffs 

sufficiently stated a NJTCCA claim, even in the absence of actual damages, because they 

were able to show that the Limited Warranty violated a clearly established legal right 

under the MMWA. Id. at 458.

3

 Specifically, the Court found that the Ibex System’s 

tying of the warranty benefit, i.e., credit reimbursement, to a consumer’s purchase of a 

replacement vehicle at a particular dealership violated a consumer’s clearly established 

legal right under the MMWA to be free from warranties that are conditioned on the 

consumer’s use of a specific article or service. Id. at 463. 4

 2 The District Court held that the statute required a showing of actual damages 

based on a reading of the following provision: “a consumer who is damaged by the

failure of a supplier, warrantor, or service contractor to comply with any obligation under 

this chapter . . . may bring suit for damages and other legal and equitable relief[.]” 15 

U.S.C. § 2310(d)(1) (emphasis added). This portion of the District Court’s opinion was 

not subsequently vacated.

 In addition, the Court held 

that Plaintiffs stated a claim for unjust enrichment under New Jersey common law but 

failed to state a claim under the CFA. Id. at 465-66.

3 The NJTCCA prohibits sellers from offering any written consumer warranty that 

“includes a provision that violates any clearly established legal right . . . as established by 

State or Federal law at the time the offer is made[.]” N.J. Stat. Ann. § 56:12-15.

4 Under the MMWA, “[n]o warrantor of a consumer product may condition his 

written or implied warranty of such product on the consumer's using, in connection with 

such product, any article or service (other than article or service provided without charge 

under the terms of the warranty) which is identified by brand, trade, or corporate 

name[.]” 15 U.S.C. § 2302(c).
6

After McGarvey I, Plaintiffs filed their First Amended Complaint, maintaining the 

NJTCCA and common law unjust enrichment claims, while adding a claim for a 

declaratory judgment that the Limited Warranty contracts were void and unenforceable. 

Next, Defendants filed a motion for reconsideration of the District Court’s June 29, 2009 

order. On reconsideration, the District Court held that, contrary to its earlier holding, 

Plaintiffs did not allege sufficient facts to show that the Limited Warranty violated 

consumers’ clearly established right under § 2302(c) of the MMWA and thus failed to 

state a claim under the NJTCCA. McGarvey II, 2010 WL 1379967, at *6-9.

In response to McGarvey II, Plaintiffs filed a motion for leave to file a Second 

Amended Complaint. McGarvey v. Penske Auto. Grp., Inc. (McGarvey III), No. 08-

5610, 2011 WL 1325210, at *3 (D.N.J. Mar. 31, 2011). The District Court denied the 

motion on the basis that any amendment would be futile and could not state a claim under 

the NJTCCA, the Declaratory Judgment Act, or the common law theory of unjust 

enrichment. Id. at 1. The District Court then granted the Defendants’ motion to dismiss 

the First Amended Complaint. Id. Plaintiffs filed a timely appeal.

II.

The District Court had subject matter jurisdiction under 28 U.S.C. § 1332(d). We 

have appellate jurisdiction under 28 U.S.C. § 1291.

“[W]e review de novo a district court’s grant of a motion to dismiss for failure to 

state a claim under Federal Rule of Civil Procedure 12(b)(6).” Ballentine v. United 

States, 486 F.3d 806, 808 (3d Cir. 2007) (citation omitted). At this stage, we must accept 
7

all factual allegations as true and construe the complaint in the light most favorable to the 

plaintiff. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (citation 

omitted).

We review the District Court’s denial of a party’s request for leave to file an 

amended complaint for abuse of discretion. Toll Bros., Inc. v. Twp. of Readington, 555 

F.3d 131, 137 (3d Cir. 2009) (citation omitted). “Under Federal Rule of Civil Procedure 

15(a), leave to amend should be freely given when justice so requires[.]” Id. at 144 n.10 

(internal quotation marks omitted). But a district court may deny the motion if the 

amendment would be futile. Phillips, 515 F.3d at 228 (citation omitted).

III.

A.

The NJTCCA prohibits sellers from offering any written consumer warranty that 

“includes a provision that violates any clearly established legal right . . . as established by 

State or Federal law at the time the offer is made[.]” N.J. Stat. Ann. § 56:12-15. 

Plaintiffs contend that the Defendants violated the NJTCCA by offering the Limited 

Warranty, which contains tie-in provisions that violate their clearly established legal right 

under the MMWA. We disagree because Plaintiffs’ right in question was not clearly 

established at the time the Limited Warranty was offered.

When interpreting the NJTCCA, we “construe the statute as we believe the New 

Jersey Supreme Court would construe it.” Liberty Lincoln-Mercury, Inc. v. Ford Motor 

Co., 676 F.3d 318, 323 (3d Cir. 2012). We first look to the language of the statute, and if 
8

the statute is clear and unambiguous on its face, then we enforce the statute as written. 

See id. at 323-24 (citation omitted). “If the language of the statute is ambiguous, courts 

may look to the statute’s history, policy, purpose, and other extrinsic aids to ascertain 

statutory intent.” Id. at 324. Here, the term “clearly established legal right” is not clear 

and unambiguous. The phrase does not indicate in what circumstances a consumer’s 

legal right is established, nor does it define what it means for the right to be clearly

established. Nothing in the NJTCCA defines this term or aids in giving it meaning. 

Thus, we look to extrinsic aides, like the statute’s legislative history and State case law, 

which lead us to conclude that the consumers’ legal right in this case was not “clearly 

established” under the NJTCCA. Even without defining the specific definition of 

“clearly established legal right,” we are convinced that whether the Limited Warranty 

violates the MMWA, and consequently whether consumers had a right to be free from 

warranties like the Limited Warranty, is significantly less clear compared to the 

violations of rights that were previously found to be sufficient to state a NJTCCA claim.

First, the Assembly Statement in support of the NJTCCA’s passage lists 

provisions that the Legislature considered to “clearly violate the rights of consumers.” 

Statement, Bill No. A1660, 1981 N.J. Laws, Chapter 454, Assembly No. 1660, page 2-3
9

(“Assembly Statement”). 5

Next, the two cases in which the New Jersey Superior Court held that the plaintiffs 

sufficiently stated a NJTCCA claim also involved alleged wrongdoing that fell squarely 

within prohibited conduct under state or federal law. In Bosland v. Warnock Dodge, Inc., 

 At the time the NJTCCA was first introduced on May 1, 

1980, these listed provisions, including a consumer’s complete waiver of damages 

resulting from a seller’s liability, infringed on rights that had been long-recognized in 

common law. See, e.g., Bisso v. Inland Waterways Corp., 349 U.S. 85, 115 (1955) 

(acknowledging “a longstanding admiralty rule, based on public policy, [that] 

invalidat[es] contracts releasing towers from all liability for their negligence.”); 

Northwest Airlines, Inc. v. Alaska Airlines, Inc., 351 F.2d 253, 256 (9th Cir. 1965), cert. 

denied, 383 U.S. 936 (1966) (holding indemnity contract provision relieving party of any 

damages, even in the case of its own negligence, to be unenforceable because it would be 

contrary to public policy).

 5 “Examples of such provisions are those that deceptively claim that a seller or 

lessor is not responsible for any damages caused to a consumer, even when such damages 

are the result of the seller’s or lessor’s negligence. These provisions provide that the 

consumer assumes all risks and responsibilities, and even agrees to defend, indemnify 

and hold harmless the seller from all liability. Other provisions claim that a lessor has the 

right to cancel the consumer contract without cause and to repossess its rental equipment 

from the consumer’s premises without liability for trespass. Still other provisions 

arbitrarily assert the consumer cannot cancel the contract for any cause without punitive 

forfeiture of deposits and payment of unfounded damages. Also, the consumer’s rights to 

due process is often denied by deceptive provisions by which he allegedly waives his 

right to receive legal notices, waives process of law in the repossession of merchandise 

and waives his rights to retain certain property exempted by State or Federal law from a 

creditor’s reach.” Statement, Bill No. A1660, 1981 N.J. Laws, Chapter 454, Assembly 

No. 1660, page 2-3.
10

the complaint alleged that the seller failed to itemize a documentary service fee that was 

included in the vehicle registration fee, when the state automotive sales practices 

regulation explicitly deemed it “‘unlawful’” to “‘charg[e] . . . a consumer monies, or any 

other thing of value, in exchange for the performance of any documentary service without 

first itemizing the actual documentary services which is being performed[.]’” 933 A.2d 

942, 945-46 (N.J. Super. Ct. App. 2007) (quoting N.J. Admin. Code § 13:45A26B.2(a)(2)(i)). In United Consumer Financial Services Company v. Carbo, form 

contracts provided by a finance company to vacuum cleaner distributors allowed sellers 

to charge a fee of $20 if a check was returned for any reason, when the Retail Installment 

Sales Act only authorized a fee “‘if a check of the buyer is returned to the holder 

uncollected due to insufficient funds in the buyer’s account.’” 982 A.2d 7, 22 (N.J. 

Super. Ct. App. 2007) (citing N.J. Stat. Ann. § 17:16C-42(e)).

In contrast, whether the Limited Warranty violates a consumer’s legal right under 

§ 2302(c) of the MMWA is significantly less clear. The critical language in the MMWA 

states that a warrantor shall not condition its warranty “on the consumer’s using, in 

connection with such product, any article or service (other than article or service provided 

without charge under the terms of the warranty) which is identified by brand, trade, or 

corporate name.” 15 U.S.C. § 2302(c). But the statute fails to define what it means to 

use an article or service “in connection with such product” or specify whether “using in 

connection with” applies to parts or services that the consumer must pay for in the 

process of redeeming the warranty benefits, which is at issue here.
11

Other sources that typically aid in interpreting the statute are equally unhelpful. 

The MMWA’s legislative history and Federal Trade Commission (“FTC”) Guidelines 

suggest that the MMWA prohibits tying arrangements for articles or services that are 

unrelated to redeeming the warranty benefit.6

Although both parties rely heavily on the FTC’s Opinion Letter to support their 

respective positions, the Letter ultimately fails to indicate whether the Limited Warranty 

violates a consumer’s legal right under § 2302(c) of the MMWA. The FTC’s position is 

 However, as in cases like this one where 

the condition applies to parts or services that the consumer must pay for in the process of 

redeeming the warranty benefit, it is unclear whether the prohibition of tying 

arrangements applies. According to the FTC Guidelines, when a warranty covers only 

the replacement of parts but not the labor charges to install those parts, § 2302(c) 

prohibits warrantors from specifying the service or labor consumers must use to install 

the replacement parts. 16 C.F.R. § 700.10(b). However, the FTC’s subsequent Opinion 

Letter suggests that in certain cases where the warrantor pays a portion of the labor cost 

under the warranty, it may specify the labor service to be used. Donald S. Clark, Federal 

Trade Commission, Nat’l Indep. Auto. Dealers Assoc. Response Letter (Dec. 31, 2002) 

(“Opinion Letter”).

 6 For example, an automobile manufacturer may not require the consumer to 

regularly use a certain brand of motor oil as a condition of redeeming warranty repairs. 

See H.R. Rep. 93-1107 (1974). Nor can a manufacturer require the use of specific repair 

services for non-warranty maintenance as a condition of redeeming warranty repairs. 16 

C.F.R. § 700.10(c).
12

that in the case of 50/50 warranties, where a warrantor pays 50% of the labor cost and 

50% of the cost for parts with respect to covered repairs, warrantors are permitted to 

specify the labor service to be used. A tie-in provision in such cases does not violate the 

MMWA because the warranted repair work cannot be severed into the part that the 

warrantor can perform and the part that another repair shop can perform. Thus, the 

warranting dealer, who pays a proportion of the repair costs, “has a direct interest in 

providing the warranty service for which it is partly financially responsible.” Id. The 

Limited Warranty here is similar in that the warrantor shares in the cost of the 

consumers’ replacement vehicle and thus arguably has an interest in specifying the 

conditions of the consumers’ purchase. However, unlike the warrantor’s 50% payment of 

the repair cost under the 50/50 warranty, the warrantor’s payment of the credit 

reimbursement here is a pre-determined, fixed amount that could remain unaffected by, 

and is potentially severable from, the purchase of the replacement vehicle.

In the end, our analysis demonstrates that whether the Limited Warranty violates a 

consumer’s right under § 2302(c) of the MMWA is significantly less clear than the 

violations of long-established common law listed in the Assembly Statement as well as 

the violations of law found sufficient to state a NJTCCA claim in Bosland and United 

Consumer Financial Services Company. Regardless of what the New Jersey Legislature 

specifically intended “clearly established legal right” to mean, it was not intended to 

include the types of right at issue here, where the violation of the right is unclear. 

Therefore, we hold that the consumers’ right to be free from warranties like the Limited 
13

Warranty was not clearly established under the MMWA.7

 Accordingly, the District 

Court did not err in dismissing Plaintiffs’ NJTCCA claim. For the same reason, any 

amendment to the complaint would have been futile in establishing the claim, so the 

District Court did not abuse its discretion in denying the Plaintiffs’ motion for leave to 

amend.8

B.

In the District Court, Plaintiffs sought a declaratory judgment voiding the Limited 

Warranty contract and submitted an unjust enrichment claim under New Jersey common 

law, arguing that the Defendants should return to the Plaintiffs the value paid for the Ibex 

System. Plaintiffs presumably sought the declaratory judgment voiding the contract 

because their unjust enrichment claim cannot stand as long as the parties’ relationship is 

governed by an existing contract. Kas Oriental Rugs, Inc. v. Ellman, 926 A.2d 387, 392 

 7 We decline to define the precise contours of the term “clearly established legal 

right” because principles of comity counsel us to refrain from leading the state courts in 

the interpretation of state law when it is unnecessary to the resolution of the matter before 

us. See Manning v. Princeton Consumer Discount Co., 380 F. Supp. 116, 120 (E.D. Pa. 

1974).

8 Even if we were to hold that the Limited Warranty violated the MMWA, this 

would only indicate that the consumers had a legal right to be free from such warranties. 

It would not necessarily mean that the right was clearly established under the MMWA. 

Interpreting the NJTCCA to apply equally to violations of a legal right and violations of a 

clearly established legal right would fail to give the phrase “clearly established” any 

meaning and render it superfluous. See Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501

U.S. 104, 112 (1991) (Courts should construe statutes “so as to avoid rendering 

superfluous” any statutory language.). Thus, Plaintiffs must show something more than a 

post hoc judicial recognition of their right in order to prove that the right was clearly 

established. Their failure to do so would also lead us to reject their NJTCCA claim.
14

(N.J. Super. Ct. App. 2007). Because we hold that the Limited Warranty did not violate 

the consumer’s clearly established legal right under the MMWA and thus, did not violate 

the NJTCCA, see supra Part III.A., Plaintiffs were not entitled to a declaratory judgment 

voiding the Limited Warranty contract. And without a declaratory judgment voiding the 

contract, Plaintiffs’ unjust enrichment claim must also necessarily fail. Therefore, the 

District Court properly dismissed both claims and did not abuse its discretion in denying 

the motion for leave to amend.

IV.

For the reasons set forth above, we will affirm the District Court’s order.