The Lawletter Vol. 51 No. 5
Charlene Hicks, Senior Attorney
As a society, we are conditioned to think that a settlement agreement definitively and forever resolves a dispute. Certainly the law favors the enforcement of such agreements. Even so, certain limitations or exceptions to this general rule exist. One curb on the enforceability of a settlement agreement is that an auto manufacturer cannot use such a contract to effectively waive or avoid its recall repair obligations imposed by federal law.
The Federal Motor Vehicle Safety Regulations contained in the National Traffic and Motor Vehicle Safety Act set forth the minimum standards required of any vehicle sold in the United States. 49 U.S.C. § 30102(a)(9). If an auto manufacturer identifies a safety defect in a particular type of vehicle, it must notify owners, purchasers, and dealers of the defect. 49 U.S.C. § 30118(c). The statutes then provide that the manufacturer “shall remedy the defect or noncompliance without charge when the vehicle or equipment is presented for remedy.” 49 U.S.C. § 30120(a)(1). If the manufacturer or its agent attempts to repair the vehicle and the repair is inadequate, the manufacturer must replace the vehicle or equipment or refund the purchase price less depreciation to the buyer. 49 U.S.C. § 30120(c)(1). These obligations are mandatory. Winzler v. Toyota Motor Sales U.S.A., Inc., 681 F.3d 1208, 1211 (10th Cir. 2012); Ctr. for Auto Safety & Pub. Citizen, Inc. v. Nat'l Highway Traffic Safety Admin., 452 F.3d 798, 800 (D.C. Cir. 2006); Paccar, Inc. v. Nat'l Highway Traffic Safety Admin., 573 F.2d 632, 644 (9th Cir. 1978), cert. denied, 439 U.S. 862, 99 S. Ct. 184 (1978); McCarthy v. Toyota Motor Corp., No. 8:18-cv-00201-JLS-KES, 2018 U.S. Dist. LEXIS 235811, at *15 (C.D. Cal. Sep. 14, 2018).
Although the Act does not provide a private federal cause of action to consumer-buyers, it does not displace state statutory or common-law remedies. 49 U.S.C. § 30103(d), (e). Indeed, the Act “expressly directs private citizens to look to ‘other federal laws of the United States,’ or to their state statutory or common law, when seeking redress for safety-related defects in motor vehicles. See 49 U.S.C. § 30103(d), (e).” Bartholf v. GM, No. 5:18-CV-35-TBR, 2018 U.S. Dist. LEXIS 56663, at *6 (W.D. Ky. Apr. 3, 2018). The “notification and recall provisions” of the Act are “non-exclusive remedies,” and “Congress intended to leave open to consumers State remedies[.]” Chamberlan v. Ford Motor Co., 314 F. Supp. 2d 953, 960 (N.D. Cal. 2004).
Toward this end, courts have recognized that a consumer’s allegation that an auto manufacturer violated the Act is sufficient to state a claim for unlawful trade practices under a state-law consumer protection act or unfair and deceptive trade practices act. See McCarthy, 2018 U.S. Dist. LEXIS 235811, at *16; Chamberlan, 314 F. Supp. 2d at 967. The consumer-buyer may also bring a common-law tort action against the vehicle manufacturer.
The federal recall repair obligations are mandatory and cannot be avoided or waived by the auto manufacturer. 49 U.S.C. § 30120(a)(1) and (c)(1); see Winzler, 681 F.3d at 1211; Ctr. for Auto Safety, 452 F.3d at 800;Paccar, 573 F.2d at 644; McCarthy, 2018 U.S. Dist. LEXIS 235811, at *15. The existence of a settlement agreement between the dealer/repair facility and the buyer concerning the vehicle defects does not alter this conclusion. The settlement agreement cannot nullify the auto manufacturer’s mandatory recall repair obligations under the Act. This is because the duty to complete recall repairs under 49 U.S.C. § 30120 is a non-discretionary federal mandate imposed on auto manufacturers that issue an open safety recall. This recall process is “a statutorily mandated and administratively overseen national recall process” supervised by the National Highway Transportation Safety Administration. Winzler, 681 F.3d at 1212.
Accordingly, an auto manufacturer’s recall repair duties are public law obligations and not merely private rights subject to contract. See id. The auto manufacturer is under an absolute, non-waivable statutory obligation to either remedy the vehicle’s recall defects without charge or refund the purchase price less depreciation to the buyer. 49 U.S.C. § 30120(a)(1), (c)(1); Winzler, 681 F.3d at 1211-12; Ctr. for Auto Safety, 452 F.3d at 801; McCarthy,2018 U.S. Dist. LEXIS 235811 at *15. The auto manufacturer cannot use the settlement agreement to contract away or waive this public law obligation.
