Wednesday, November 12, 2014

Sixth Circuit Court of Appeals Hands Down Ruling with Wide Ranging Effect

Only one judge dissented on the grounds that manufactured and modular housing are two different things. Here is the whole story and a link to court documents from an article in the ACC.

This is one more reason to attend this month's Builder Breakfast where the guest speaker will be Steve Snyder, an attorney versed in all things modular. CLICK HERE for more info.

Manufactured homes too permanent to be consumer product, 
Sixth Circuit says

A split Sixth Circuit Court of Appeals panel has determined that a pre-made home is not a consumer product within the meaning of the Magnuson-Moss Warranty Act (MMWA) in a case brought against a manufactured house installer that allegedly failed to adjust the house to the plaintiffs’ satisfaction. Bennett v. CMH Homes, Inc., No. 13-5423 (6th Cir., order entered October 30, 2014). A dissenting judge drew upon the distinction between mobile homes and modular homes, finding that the MMWA applies to the former but not the latter.

In 2004, the plaintiff couple purchased a “2180-square-foot, ‘triple-wide’ manufactured home” from CMH Homes, which delivered the house in three pieces the following year and assembled it on their property. The couple noticed that the house was not level before closing the sale, and CMH promised to make the repair. After several inspection and repair attempts, the company was unable to level the house to the couple’s satisfaction. They sued and prevailed in a bench trial but appealed the nearly $40,000 damages award to the Sixth Circuit.

At the outset, the majority assessed whether it had subject-matter jurisdiction, because “[w]hether plaintiffs’ home is a ‘consumer product’ appears at first to be both a jurisdictional question and a merits question.” Applying Gentek Bldg. Prods., Inc. v. Sherwin-Williams Co., 491 F.3d 320 (6th Cir. 2007) (when a question of “subject-matter jurisdiction also implicates an element of the cause of action, then the district court should ‘find that jurisdiction exists and deal with the objection as a direct attack on the merits of the plaintiff’s claim’”), the court held that it had jurisdiction.

The court then considered the MMWA’s legislative history, citing a sponsoring senator’s statement that a “house would not fall within the definition of consumer product since a house is not ‘tangible personal property.’” The court also found that the couple’s manufactured house is permanent, “would be taxed as real property and, at 2180 square feet, has the size and appearance of a regular house.” It further consulted the dictionary used during the general era of the law’s enactment and found “consumer” and “consumer goods” definitions which “describe products that are expendable or meant to be replaced periodically—not a permanent dwelling.” Dismissing the federal claim, the court then remanded the case for the district court to determine whether it would consider the couple’s state law claims under supplemental jurisdiction.

The dissenting jurist contended that a manufactured home falls within the definition of consumer product under the MMWA, because a “manufactured home” is now the accepted term for what were once called “mobile homes” before the negative connotations associated with that term caused a name change in federal housing laws, Tennessee law and the manufactured-home industry’s own labels. She distinguished them from a modular home, which is “largely manufactured somewhere away from the eventual home site and brought to the local home site for installation,” and stick-built homes, which “are built using traditional construction techniques, largely on the final home site” and fall outside the MMWA’s purview. 

According to the dissent, the U.S. Federal Trade Commission (FTC), which administers the MMWA, and the Department of Housing and Urban Development (HUD) “have concluded that manufactured (or mobile) homes are consumer products for the purposes of the Act,” but “found no MMWA coverage for modular homes” in a 1977 advisory opinion. She also asserted that “the structure of the MMWA definition further supports the FTC’s and HUD’s interpretation.” The MMWA covers fixtures like furnaces and garbage disposals, she stated, so whether they are permanently installed “does not resolve the question of whether that product is a ‘consumer product’ under the MMWA.”

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