Class Action Warranty Claim Dismissed, Illustrating Unnecessary Complexity of Warranties

Putative Class Plaintiff Hadassah Shellenberger purchased a Whirlpool dishwasher from Best Buy in April 2020 for around $1100. In May 2020, having received solicitations in the mail, Ms. Shellenberger purchased a three-year Service Plan from AIG WarrantyGuard (AIG). The materials she received summarized the features of the Service Plan as follows:

KitchenAid Service Plan Benefits*

• No Service Fee: No out-of-pocket expenses on covered repairs and replacements.
• Customer Satisfaction: Valuable Protection: U.S. based customer care center.
• 100% parts and labor for covered repairs, where applicable.
• Service by KitchenAid: Only authorized technicians.

Ms. Shellenberger began experiencing problems with her dishwasher in September 2022.  She tried to rely on the Service Plan, but AIG informed her that no in-network repair person was available. Her own efforts to find a local repair person were unsuccessful. Calls to Whirlpool changed nothing. Her dishwasher stopped working in February 2023. Relying on Section 20 of the warranty agreement, AIG exercised its “buy out” option and paid Ms. Shellenberger 75% of her purchase price.

She used the money to buy a new dishwasher, and then she sued both AIG and Whirlpool, alleging breach of Washington’s Consumer Protection Act (the CPA), breach of contract, and breach of the duty of good faith and fair dealing. In Shellenbeger v. AIG WarrantyGuard, Inc., the District Court for the Western District of Washington granted defendants’ motions to dismiss. Sorry, the only version I could find online is behind a paywall.

Interestingly, in an earlier motion to dismiss (this judgement is not behind a paywall), defendants began by challenging Ms. Shellenberger’s Article III standing.  Oooooh, fancy! The argument is basically that Ms. Shellenberger got the benefit of the bargain, because the terms of the warranty were clear and allowed for the buy-out option. The court rejected this argument, because Ms. Shellenberger had also alleged that she was induced by AIG’s misrepresentations to purchase the Service Plan.

Moving on to defendants’ argument that Ms. Shellenberger had failed to state a claim for misrepresentation under the CPA, the Court, in its September 2024 opinion, ably demonstrates the yawning gap between courts’ impressions of reasonable consumers and actual consumers. Ms. Shellenberger read and bought the Service Plan based on the language in block quotes above. In the Court’s view, “even the least sophisticated reader” would have noticed that there was an asterisk — in bold no less — which would have drawn attention to the disclaimer at the bottom of the page. From there, it is no trouble at all, reasons the Court, to read and understand Paragraph 20 of the separate contract detailing the Service Plan. Can someone please inform courts that an asterisk will not lead the typical consumer to read paragraph 20 of a separate document?

The judgment of February 3, 2025 is no better. Among other things, the Court thinks the four bullet points quoted above put consumers on notice of the limitations on its warranty coverage by stating that it applied only to “covered repairs” and saying it will pay 100% of repair costs “where applicable.” This assumes that consumers read warranty information the way a lawyer would. I would rather see language that said something like the following: “Despite all the money you are paying us for this warranty, we actually provide coverage in connection with __% of warranty claims. Either we will not consider your problem to be covered by the warranty or we will exercise our option to pay you 75% of the depreciated value of your appliance rather than cover the cost of repairs.”

The Court similarly found no breach of warranty in Defendants’ conduct. The Court was unmoved by the fact that Ms. Shellenberger first reported a problem with her washing machine in September, and the company took no action until it broke completely in February. The contract, the Court noted, imposes no time frame for repairs. What an absurd thing to note! Good faith and fair dealing, if nothing else, should allow a court to imply a term that repairs would be undertaken within a reasonable time. AIG neither provided timely repairs nor represented that it would ever provide repairs no matter how long Ms. Shellenberger got by with a faulty dishwasher.

More relevantly, the warranty provides that when AIG exercises its buy-out option, that resolves all of its contractual obligations. That’s fine. The warranty says what it says,  but that should be disclosed upfront, right there with the bullet points, not in paragraph 20 of a separate agreement. 

Finally, the Court found no breach of the duty of good faith and fair dealing in AIG’s decision to exercise the buy-out option because no local repair service was available. The Court makes it sound like it was Ms. Shellenberger’s fault. AIG offered to pay for a local repair service if she could find one, but she “gave up” on trying to find one. She tried for a week. I think there is a not-implausible argument for bad faith if AIG knew that no qualified Whirlpool repair people were available in Ms. Shellenberger’s area when they represented (notwithstanding Paragarph 20) that she would have free repairs should her machine malfunction.

In the September 2024 opinion, the complaint was dismissed with leave to amend. In the February 2025 opinion, the District Court did not grant leave to amend, concluding that further amendment would be futile. An appeal to the Ninth Circuit is pending.

Lest you all think that I only listen to the Money Stuff podcast, I would like to take this opportunity to evidence my range by recommending a recent Planet Money podcast, where you can learn about why it is so hard to find someone who can repair your appliances. Some of the problems are structural. Repair workers are highly skilled and thus expensive. Appliances are complex, and repairs take time, which is also money.  Some manufacturers design their products to be difficult to repair, as they make money from sales, not from repairs. Asked by a Planet Money reporter if he could fix his own microwave, the repairman responded, “I wouldn’t even try.” The repair business is now for “high-end appliances,” or for particular customers who are especially attached to their appliances, often because they are just the right size for the space or just the right color.

Seen in this light, it is a bit hard to see Shellenberger as working a significant injustice. Ms. Shellenberger received a payment representing the depreciated value of her dishwasher, so her monetary harm isn’t much, unless she is peeved because the calculation of depreciation should have been adjusted to consider the price of he warranty. The injustice, if there is one, lies in disappointed expectations. Manufacturers and warranters could be more upfront with consumers about the designed obsolescence of consumer goods. Here’s what a a warranty could reasonably say:

• This thing’s gonna break within five years
• We’ll fix for free it if we can, but it’s probably not worth fixing
• Buy this warranty, and we will give you some money that you can use to buy a replacement
• That replacement will also break within five years