Hyundai Motor America, Inc. v. Goodin

Rule of Law:

A consumer may sue a manufacturer for economic loss based on breach of the implied warranty of merchantability, even if the consumer purchased the product from an intermediary in the distribution chain, because Indiana law does not require vertical privity for such claims in the context of consumer goods.

Facts:

• On November 18, 2000, Sandra Goodin test drove a new Hyundai Sonata at AutoChoice Hyundai and experienced a "shimmy, shake, pulsating type feel" when applying the brakes.
• The AutoChoice salesperson attributed the brake issue to flat spots on the tires and offered to rotate and inspect them, after which Goodin purchased the Sonata for $22,710.00.
• Hyundai provided three limited warranties, including a 5-year/60,000-mile "bumper to bumper" warranty covering defective components originally manufactured or installed by Hyundai.
• Over the next several months, Goodin repeatedly took the car to Hyundai dealerships (AutoChoice and Bales Auto Mall) for persistent brake vibrations and noises, undergoing multiple repairs including machining rotors and strut assembly work.
• In October 2001, Goodin's attorney sent a letter to Hyundai Motor America, giving notice of her complaint and requesting a refund of the purchase price.
• In April 2002, an independent inspector, William Jones, noted the odometer read 57,918 miles and found "severe brake pulsation on normal stops," concluding the vehicle was "defective and unmerchantable at the time of manufacture."
• Three weeks later, after the 5-year/60,000-mile warranty had expired, Goodin’s husband, Steven Hicks, replaced the original rotors with new ones from a NAPA distributor, which he reported improved the pulsation from "very bad" to "mild."
• In October 2002, Steven Heiss, Hyundai’s District Parts and Service Manager, inspected Goodin's Sonata (at 77,600 miles), did not observe brake problems during his test drive but noted the rotors were out of standard and identified a failed left rear wheel bearing as a serious warranty-covered problem.

Procedural Posture:

• On November 13, 2001, Sandra Goodin filed a complaint against Hyundai Motor America, Inc. in Vanderburgh Superior Court (trial court/court of first instance) alleging claims under the Magnuson-Moss Warranty Act for breach of express warranty, breach of implied warranty, and revocation of acceptance.
• Following a two-day trial, the jury was instructed on all claims without a privity requirement for implied warranties, over Hyundai's objection.
• The jury returned a verdict for Hyundai on the express warranty claim but found in favor of Sandra Goodin on her claim for breach of implied warranty of merchantability, assessing $3,000.00 in damages.
• Goodin's counsel was later awarded attorney's fees of $19,237.50 pursuant to the Magnuson-Moss Warranty Act.
• Hyundai orally moved to set aside the verdict as contrary to law, arguing a lack of vertical privity with Goodin.
• The trial court initially denied Hyundai's motion, but the following day set aside the verdict, holding that lack of privity precluded Goodin's cause of action for breach of implied warranty.
• Goodin then moved to reinstate the verdict, which the trial court granted after briefing and oral argument, on the ground that Hyundai was estopped from asserting lack of privity.
• Hyundai (appellant) appealed the trial court's decision to the Indiana Court of Appeals, arguing that it was not estopped from asserting a defense of lack of privity and that lack of vertical privity barred Goodin's (appellee) recovery for breach of implied warranty.
• The Indiana Court of Appeals reversed the trial court, agreeing with Hyundai on both points, holding that Hyundai was not estopped and that privity was lacking, thereby precluding Goodin's claim, citing a prior Indiana Supreme Court footnote.
• Sandra Goodin (appellee) filed a petition to transfer the case to the Indiana Supreme Court (highest court), which was granted.