Arbitration plays an important role in lemon law cases, and the question of whether and when to arbitrate is an important one. To make an informed decision, you first need to know how the arbitration process works.
What is lemon law arbitration?
The federal lemon law (the Magnusson-Moss Warranty Act) states that a manufacturer may require a consumer to go to arbitration prior to filing a lawsuit, provided the arbitration program meets certain qualifications and the warranty properly describes the procedure.
The California lemon law (the Song Beverly Consumer Warranty Act) cites the same federal qualifying standards for arbitration, and makes prior participation a requirement to asserting the lemon law presumption under the Tanner Consumer Protection Act, which makes cases harder for manufacturers to defend. The California law also creates a second avenue to a civil penalty if the manufacturer fails to comply with the Tanner Consumer Protection Act.
Lemon law arbitration is binding on the manufacturer but not on the consumer, meaning the manufacturer cannot reject the decision, but the consumer can choose to reject it and proceed to a lawsuit. The process is paid for by the manufacturer and is free to the consumer.
The arbitration process is designed to provide a method of resolving lemon law claims that is quicker than litigation and doesn’t require a lemon car lawyer or other attorneys. Consumers and manufacturers may choose to be represented by attorneys if they wish. However, arbitration providers generally do not award attorney’s fees.
Fairness in Arbitration
The opinion of our firm is that arbitration is typically biased in favor of the manufacturer. For example, when David Goldsmith, the founder of our firm, defended automobile manufacturers in BBB Auto Line arbitrations for more than a decade, he never lost an arbitration. Many of those cases nonetheless went on to settle, meaning that a win for the manufacturer didn’t mean the cases were lacking merit.
The use of the presumption makes a lemon law case easier to prove. Combined with the additional threat of civil penalty, it also provides more incentive for manufacturers to settle. Lemon law arbitration is quicker than litigation and may be necessary to avoid losing your lemon law case by motion if you rely on the federal law, such as in the case where the vehicle was purchased outside the state of California.
Furthermore, as we’ll discuss in a separate blog post, there is a clearer rule, favoring consumers, on the issue of negative equity deductions in arbitration than there may currently be in case law governing litigation of this issue.
Put simply, it is our opinion that the same case that often loses at arbitration would win if it went to trial. Furthermore, the arbitration decision becomes admissible evidence, meaning a bad decision in an unfair tribunal may be used against the you later.
Also, since no attorney’s fees are awarded, you are left to either (a) go to battle in an unfair forum against manufacturers who pay for and help establish the program and have experience with perhaps hundreds or thousands of arbitrations, without the assistance of counsel, or to (b) allocate a portion of your award to your lemon car lawyer. This is not necessary with a litigated claim.
Every case is unique. There are some cases in which arbitration is necessary, or is the wisest legal and/or practical choice you can make. In other cases, arbitration may disadvantage and/or delay your best claim. We recommend relying on the advice of an experienced lemon car lawyer before deciding to arbitrate your claim. Our firm can offer you free advice on this subject, which may help you even in the event that you decide to pursue your claim without a lawyer. Contact us today for a free evaluation.
There are two major arbitration providers that serve the majority of the automakers: the Better Business Bureau (BBB) Autoline Program. This is the largest provider. It works for the following manufacturers:
|Acura (2012 model year or earlier)||Aston Martin Lagonda of North America, Inc.||Audi of America, Inc.|
|Bentley Motors, Inc.||BMW of North America, LLC||Buick|
|Saturn||Ferrari North America, Inc.||Ford Motor Company LLC|
|Lincoln Motor Company||Jaguar USA||Land Rover USA|
|Kia Motors America, Inc.||Hyundai Motor America, Inc.||Genesis Motors America|
|Automobili Lamborghini America, LLC||Lotus Cars USA, Inc.||Maserati North America, Inc.|
|Mazda Motor of America, Inc.||Mercedes Benz USA LLC||Nissan North America, Inc.|
|Infiniti USA||Volkswagen Group of America, Inc.|
Another large lemon law arbitration provider is the California Dispute Settlement Program (CDSP). It works for the following manufacturers:
|Toyota Motor North America, Inc.||Scion||Tesla Motors|
|Fiat North America (FCA US LLC)||Jeep||Chrysler|
Finally, there is the Consumer Arbitration Program (CAP-Motors). This program works for Porsche Cars North America. For more information about how these programs work and whether lemon law arbitration is a good option for your case, call Goldsmith West today at 310-200-6705, or fill out our contact form. We look forward to assisting you.
Lemon Law Buyback Information
When you owe more in finance (whether for a purchase or lease) than your vehicle is worth, you are said to be “upside down.” Another way to describe this surplus debt is “negative equity.”
Sometimes, negative equity is created at the time the new car is purchased or leased. This generally happens when you trade in a car you are upside down on for a new one. The surplus debt is rolled into the finance of the new car.
For instance, let’s say you have a car that’s worth $15K but still has a remaining loan of $20K. You are $5K upside down. Then, let’s say you trade the car in on a new car you are purchasing for $25K. The $5K negative equity will be added to the purchase, so you are effectively securing a $30K loan with a $25K asset.
Negative equity is controversial because cars are depreciating assets by themselves. Starting upside down in a transaction is a good way to stay upside down for a long time, while you are making payments.
The significance of negative equity on a lemon law buyback
If you have a qualifying California lemon law claim, the manufacturer must repurchase or replace your vehicle (minus a value offset for miles driven before the problems started).
In the case of a lemon law repurchase, the amount of the refund is equal to the “actual price paid or payable by the buyer,” which includes the down payment and monthly payments, along with registration charges and other costs listed on the purchase or lease agreement.
Whether the negative equity counts as part of the price “paid or payable” for the car is a heated topic of debate between consumer lawyers and manufacturer defense attorneys. The consumer lawyers argue the debt is part of the price paid to purchase the vehicle. After all, there is no way for the consumer to get the trade-in vehicle back, and it’s not his or her fault that the car is a lemon and may end up on the receiving end of a lemon law buyback.
The defense attorneys argue that there should be a deduction for the debt carried over from the previously traded-in car, because paying off two cars due to one lemon would be a “windfall” — an unearned reward.
Which way is more ethical?
This answer to this question is important. If a deduction is taken for negative equity, the amount of reimbursement for payments made by the consumer will be reduced, eliminated, or — in extreme cases — reversed, so that the consumer actually owes the manufacturer money after the car is “bought back” in a lemon law repurchase.
Taking our example of the $30K debt owed on a $25k car, if the consumer has made $1,000 in payments at the time of a lemon law buyback, he or she will actually have to pay the manufacturer $4,000 to take back the car. For many cash strapped consumers, this outcome is not feasible. The lemon law repurchase itself becomes prohibitive.
This issue can be very confusing. Goldsmith West has found that many consumers are not even aware that they have financed negative equity, let alone that they may be asked to pay the manufacturer money for it, despite having a strong lemon law claim may end in a lemon law buyback.
What the Law Says About Negative Equity
At the time of this writing, there is no California case law that is controlling on this subject. Case law is generally created when a case is appealed, and it is likely that neither the consumer attorneys nor the defense attorneys have found the right case, or want to put the issue before the court at the risk of creating unfavorable law.
However, the California Department of Consumer Affairs (DCA) has a longstanding rule that no deduction should be taken by the manufacturer for negative equity. While this may not control courts, the rule should be enforced in lemon law arbitrations, as DCA audits them for compliance. In one of its recent “Lemon Law Aid for Consumers” pamphlets, DCA described this rule’s effect in no uncertain terms:
- If the arbitrator decision awards you a replacement or refund of your vehicle, the manufacturer is prohibited from deducting for negative equity. Negative equity is not an allowable deduction in State-certified arbitration programs. When an award is made, it is the responsibility of both the State-certified arbitration program and the manufacturer to ensure the consumer is made whole.
- Negative equity is also referred to as being “upside-down” in your car loan. In other words, if you owe more money on your car loan than the car is worth, the manufacturer may not deduct that amount. Therefore, when the arbitration program receives and reviews the repurchase and replacement amounts (calculation worksheets) provided by the manufacturer, it is the program’s duty to notify the manufacturer of unallowable deductions, such as negative equity. This deduction must be corrected and returned to the consumer.
Negative Equity Solutions
While the question of how to treat negative equity in the case of a lemon law buyback is difficult, there may be an easier answer in the case of a replacement. It is possible to do a trade by “collateral swap.” In a collateral swap, the loan schedule, current balance, and payment amount stays the same. The only thing that changes is one car (the lemon) is removed as collateral to secure the loan, and is replaced by another car (the replacement vehicle). The consumer is arguably returned to the position that he or she bargained for, with a new car and the same loan terms.
Many lemon law settlements that involve negative equity result in some kind of compromise on the issue. Converting the value of the settlement into a “cash-and-keep” deal is one way to do this; unfortunately, it often leaves the consumer to continue driving the lemon. It also avoids the manufacturer’s requirement to title brand the vehicle as a lemon.
Another solution is to pursue arbitration instead of litigation, because the DCA rule should be controlling in arbitration. We’ve already detailed how arbitration appears to be biased against the consumer, but this may in fact be the best reason to choose to arbitrate a lemon law case.
However, despite the clear DCA rule prohibiting negative equity deductions, our experience is that the two major private arbitration providers — the Better Business Bureau (BBB) Auto Line Program and the California Dispute Settlement Program (CSDP) — may be passive aggressive when it comes to negative equity. By failing to adequately explain the rule to their arbitrators or in published rules for consumers, they create a situation that may confuse consumers or their own individual arbitrators. Indeed, DCA audits of arbitration providers have found this to be the case in the past, with respect to certain manufacturers.
Negative equity can be confusing, and where it exists, it is often a central issue to a lemon law case. It must be considered in the overall strategy of how to proceed in a case. Be sure you understand this issue — or have experienced lemon law counsel who understands it — before you decide how to approach your lemon law claim. For more information on negative equity in lemon law buyback cases, contact Goldsmith West today for a free consultation.
Auto Recalls and Lemon Vehicles
We get many questions — and, understandably, some confusion — from potential clients regarding how recalls affect a lemon vehicle claim. Let’s examine the issue.
First things first: What is a “recall”? In the context of vehicles, a recall is an initiative to remedy an anticipated problem, usually safety-related, before the problem causes damage (hopefully). Recalls are regulated by the National Highway Traffic Safety Administration (NHTSA). They may be initiated voluntarily by the manufacturer or by order of the NHTSA. Recalls usually consist of a modification or replacement of a particular part or component of the vehicle. However, in some cases, they apply to the whole vehicle.
Usually, consumers are notified by the manufacturer about the need for a recall by mail, and authorized dealerships are instructed to check for open recalls whenever a vehicle comes in for service. The urgency level can vary. In some instances, manufacturers and dealerships are absolutely prohibited from releasing a vehicle to a consumer before the recall is complete, due to safety concerns.
Do recalls count as repair attempts for lemon vehicles?
A lemon vehicle generally qualifies for repurchase or replacement under lemon law rules after there has been an unreasonable number of repair attempts for a substantial issue that is covered by warranty, or if the problem with the vehicle renders it unfit for the ordinary uses of a consumer automobile. Do recalls count?
This is a complicated question, and the answer may depend on the facts of your case. Manufacturers might argue that a recall is a proactive measure demonstrating that they are taking responsibility in advance, and that it should not count toward a lemon law analysis. On the other hand, a consumer may feel fear about learning of an unrepaired safety issue and annoyance at the time and inconvenience of having to bring the vehicle in immediately.
There should be little debate that a recall service visit counts in the lemon law analysis if the consumer has experienced the issue(s) the recall is intended to cure. What might require more complex legal argument is the situation in which a single recall arguably devalues the vehicle, or where a multitude of recalls on a single vehicle calls into question the vehicle’s use, value or safety, or fitness for use, as would be expected of an ordinary consumer automobile.
Lemon Law Rules and Single Recalls
Let’s look at the effect of a single recall. Recently, our firm handled a case involving the SC147 Recall in a 2014 Kia Optima. This recall is due to metal fragments that were deposited in the vehicle’s crankshaft during the machining process and could cause engine failure. The recall repairs consist of replacing the engine long block assembly in affected vehicles. Needing a new engine is bad enough on its own, but this created a situation where dealerships had to perform serial engine replacements, sometimes with lengthy delays.
In our case, the dealership actually damaged our client’s lemon vehicle in the course of performing the recall repair. There were other repair attempts in this case, but even if there had not been, it is arguable that lemon law liability was created under breach of implied warranty based on this single repair need, which the dealer could not meet due to a defect in material and workmanship, resulting in potential lemon vehicle claims.
Lemon Law Rules and a Multitude of Recalls
What about the scenario in which a consumer has to deal with a large number of safety recalls? There have been individual lemon vehicles with as many as 20-30 recalls. Depending on the nature of the particular recalls and their relationship to each other (e.g., Do multiple recalls affect the same system in the car?) and, most importantly, the effect of the recalls on the particular consumer’s experience, it is possible that a multitude of recall repairs could create a lemon vehicle scenario.
Recalls Involving Third Parties
A good example of this scenario is the recent Takata airbag recall. Takata is a third party producer of airbags that were installed in various models across the industry, and which have been recalled due to the possibility of exploding upon deployment, possibly causing death. Due to the large number of vehicles affected, there has been a shortage of airbags needed to perform the recall.
As a case in point, a friend of our firm contacted us when trading in a Volkswagen Passat for a new one. The dealer offered a trade-in value at the time of the new car sale, and then called back and lowered it by several thousand dollars due to the fact that (a) the car had Takata airbags and (b) there was a backlog in performing the recall. We were surprised by this blatant admission of the effect on value (as a result of the safety concern) by the very dealer who would likely have had the responsibility of performing the recall, and possibly have a glut of lemon vehicles on its hands
This scenario potentially creates liability from a number of different angles, including lemon law rules and the consumer legal remedies act against the dealer, as well as Takata (who is probably not solvent), as well as possibly other parties. Fortunately, we were able to help our friend resolve her issue.
The biggest misconceptions we see about recalls is that a recall or a number of recalls by itself creates a lemon vehicle based on lemon law rules. While this may be intuitive, lemon law analysis depends on the experiences of the consumer. It may require complex application of the law to the facts of a case to make this connection.
If you need help determining how recalls affect your potential lemon vehicle case, contact Goldsmith West today to schedule a free consultation.
Mileage Offset Lemon Law
When we explain to our prospective and actual clients that the threshold remedy in a lemon law case is a “buyback”, we are often asked what the term “buyback” means. In most cases, the buyback process essentially consists of the following:
- You give the car back to the manufacturer.
- The manufacturer pays off any loan on the car and takes the car title.
- The manufacturer reimburses you for the monies you actually paid: down payment, monthly payments, collateral charges such as tax, title tag, etc.
- The manufacturer receives an offset to the reimbursement amount for mileage driven before the problem started.
The logic behind item #4, mileage offset in lemon law, is that a consumer should pay depreciation for the reasonable use he or she was able to get out of the vehicle before the problem started. When a manufacturer has already conceded to a buyback, the amount of this calculation often moves to center stage as the main topic of negotiation. California’s mileage offset lemon law provides the following formula for calculation of the mileage offset in the text of the statute:
|# of miles driven
“Paid & Payable”
|= Deduction Amount|
The first topic of this debate is the number of miles to use as the numerator in the fraction. This often boils down to legal and factual argument about which repair visit in the repair history counts as the first repair for the purposes of the lemon law issue. Manufacturers often make arguments that early repairs aren’t linked or don’t count in the mileage offset lemon law analysis, so this can actually be a complicated negotiation.
Even more complicated is arguing about how to calculate the mileage offset for lemon law in the case of leased vehicles. The statute uses the term “actual purchase price paid and payable” to define both the base amount of reimbursement before deduction, and to apply the above formula toward in calculating the offset (See California Civil Code §§1793.2(d)(2)(B) and 1793.2(d)(2)(C)).
It is well established that California lemon law applies to leases as well as purchases. But what is the actual purchase price in the case of a lease? To explain how opinions can differ, we can point to a recent lemon law settlement we handled involving a major automobile manufacturer.
Settling a Leased Car Claim
The manufacturer agreed to buy the car back following our demand, leaving the issue of the mileage offset for negotiation. There was no dispute in this case about the mileage at the first repair attempt. However, without initially showing its math, the manufacturer provided a reimbursement figure which was substantially lower than our calculation.
When pressed to explain, the manufacturer admitted that it defined “paid and payable” to mean the amount of lease payments for base reimbursement (i.e. California Civil Code §1793.2(d)(2)(B)), but defined the exact same words, “paid and payable”, to mean the agreed upon value of the car at lease inception for purposes of calculating the mileage offset.
This can be confusing. To explain in simpler terms, the manufacturer defined the same words to mean a smaller number for purposes of reimbursement, and a larger number for purposes of the deduction from that reimbursement.
The manufacturer didn’t fully explain its logic or reference legal points or authorities that bolstered its position, only telling us that it was taking a “consistent” position with respect to its calculation. What “consistent” means is unclear, but it presumably means that these are the terms that manufacturer offers other customers from whom they buy back leased vehicles in lemon law settlement cases.
The Manufacturer Increased the Settlement Value
In the end, we successfully persuaded the manufacturer to raise its lemon law settlement amount for our client. But this is just one example of how the intricacies of lemon law cases can be more complicated than it seems they should.
If you need legal advice on mileage offset in lemon law for leased vehicles, contact Goldsmith West for a free consultation. We offer years of experience in state and federal lemon law.
We expect auto manufacturers to have customers’ best interest at heart — and In most cases, they do. However, as the following automaker news reports show, some auto manufacturers occasionally throw ethics aside and engage in practices that are simply unfair to consumers.
Ferrari Odometer Roll Back
A salesman at a Ferrari dealership claims he was fired for whistleblowing about a tool that allowed Ferrari dealership employees to roll back odometers with the help of Ferrari North America.
An odometer roll back could result in hundreds of thousands of dollars of falsely inflated value in a single Ferrari. It’s the worst piece of automaker news to hit Ferrari in a long time.
Whether or not Ferrari knowingly had a role in odometer fraud affecting its customers, the company appears to have reacted immediately to the negative publicity by issuing an internal memo which indicates it knew odometer fraud was possible.
Odometer fraud carries criminal and civil penalties, in addition to any actual damages suffered by ferrari consumers.
Ferrari North America public relations issued a statement saying, “Resetting an odometer to zero in case of a malfunction of the odometer when the pre-repair mileage is unknown is consistent with the federal odometer law.”
That may be true, but the Federal Odometer Act (49 United States Code Chapter 327) requires a notice attached to the door frame when the odometer is reset. It will be interesting to see whether the roll backs Ferrari was involved with were properly disclosed.
GM Ignition Switch Scandal
General Motors is set to pay over $6 million dollars to settle attorney general charges in the State of Arizona due to faulty ignition switch technology that the company hid from consumers. Apparently, General Motors hid the issue for years before recalling Buick, Cadillac, Chevrolet, Pontiac, GMC, and Saturn models, for which there were reports of hundreds of injuries and deaths.
According to a news release that announced the settlement, “Certain employees of GM and General Motors Corporation knew as early as 2004 that the ignition switch posed a safety defect because it could cause airbag non-deployment.”
Tesla Quality Control Issues
A Tesla worker claims the company consciously sold lemon vehicles. While we respect what Tesla is supposed to stand for, there is too much information about Tesla’s product quality problems to ignore — and where there’s smoke, as the old saying goes, there is fire.
From bad paint jobs that don’t withstand the elements to power steering rack failures, Tesla has been the subject of various pieces of troublesome automaker news. We can only hope the issues stem from the automaker being relatively new to the market, and that the company will work out the technological problems with its cars in the near future.
Volkswagen Diesel Debate
Even after years of opposition, Volkswagen remains an automaker that stills see diesel propulsion fuel systems as a viable way to power its cars. However, according to a recent report, the rubber isn’t exactly meeting the road.
According to The Truth About Cars (TTAC), “Despite a multi-billion-dollar emissions scandal, a massive corporate black eye, and all signs pointing towards a future devoid of diesel passenger cars, Volkswagen Group… isn’t willing to let go of the past.”
Volkswagen’s situation goes to show the power of fuel efficiency and emissions in the goals automakers set today, as well as the traps they sometimes set for themselves in doing so. Volkswagen’s dedication to diesel isn’t the worst piece of automaker news in this list. However, going forward, it looks like bad news for consumers, the environment, and the company itself.
Aston Martin Roll Away
A single Aston Martin Recall affected a larger number of vehicles that Aston Martin sold last year. The recall was a serious one, as it involves a risk of the cars rolling away when left with the transmission in “Park.”
According to a report from The Drive, “The recall includes 3,493 DB9, DBS, Rapide, Virage and Vanquish cars built between 2009 to 2016 for transmission problems that can cause the transmission park pawl not to engage. This means that if the transmission is in park and the parking brake isn’t on, the car could still roll away.”
Contact Us Today
Goldsmith West passionately represents consumers in lemon car cases. If your vehicle has a safety defect or a persistent defect of any kind, you may have a lemon on your hands. For more information about lemon models from the manufacturers discussed above and others, please call us today at 310.200.6705, or send us an email through our contact form.
Lemon Law Attorney Fees
At Goldsmith West, we make it clear that we will evaluate your case for free and not charge you lemon law attorney fees if we accept the case. Consumers may understandably wonder how this can be. While we have described the concept of fee-shifting in our FAQ section, we feel it is worth providing more detail about lemon lawyer cost in consumer claims.
In the American law system, each party generally pays its own legal fees. When a plaintiff’s attorney takes a case without an upfront charge, it is often said that the attorney is taking the case “on contingency.” This usually means that the attorney recognizes a proper claim, and is willing to take the case without guarantee of payment in exchange for the rights to a portion of any proceeds from the litigation.
Some laws require the defendant to pay the plaintiff’s lemon law attorney fees if the plaintiff prevails. These rules are known as “fee-shifting” provisions. California’s state lemon law (the Song Beverly Consumer Warranty Act) and the federal Magnusson-Moss Warranty Act, along with various other consumer protection laws, have fee-shifting provisions.
Fee-shifting provisions make it possible for an attorney to take your case on contingency under more favorable terms. Rather than claiming a portion of your proceeds, the attorney on a fee-shifting case can expect a qualified claim to earn a separate right to the payment of lemon law attorney fees.
Despite the fee-shifting provisions in lemon law, some plaintiff’s law firms will claim a portion of the claimant’s recovery — as is standard in non-fee-shifting claims — while also claiming the payment of the claimant’s lemon lawyer cost under the fee-shifting provision.
Consumers should be careful to consider this situation before retaining an attorney, even on a contingency basis. The manner in which an attorney’s fees are structured can have a significant impact on the compensation consumers receive through settlement or in court.
Need Lemon Case Advice?
At Goldsmith West, we evaluate your lemon law case for free. If we accept the case, we don’t charge you attorney’s fees. We have no incentive to encourage you to pursue a claim that isn’t worth your time, because we only receive payment if you make a recovery. If you think there is a possibility that you have a lemon claim, let us help you evaluate it. Schedule a free consultation today.
The Magnusson-Moss Warranty Act is a United States federal law (15 U.S.C. § 2301 et seq.) that governs consumer product warranties. It can be thought of as the “federal lemon law.” Like most state lemon laws, the act provides for relief in the event that a product under warranty is not repaired within a reasonable number of attempts. Also, like most state laws, it provides for the payment of the consumer’s legal fees.
Magnusson-Moss vs. Song Beverly
Claims under the Magnusson-Moss Warranty Act can be brought alongside — or instead of — claims under the relevant state lemon law. Quite often, attorneys plead causes of action (i.e., formal lawsuit allegations) under both laws simultaneously.
The California state lemon law — also known as the Song Beverly Consumer Warranty Act — has more teeth than federal lemon law for the following reasons:
- It allows for a presumption that the vehicle is a lemon, shifting the burden to prove otherwise to the manufacturer or other warrantor;
- It makes available civil penalty damages of up to two times the actual damages;
- It has an undisputed threshold remedy of repurchase or replacement of the vehicle or other product.
Point #1 means that, instead of the consumer having to prove the vehicle is a lemon in court, the manufacturer has the burden of disproving the vehicle is a lemon, so long as certain numbers of repair attempts or time in the shop is available. In practice, if the presumption is clearly available, there will often be a quick settlement.
Point #2 means that the manufacturer is potentially on the hook for a much greater amount of damages. In addition to increasing the value of the case, in practice, the potential of a civil penalty also provides a greater incentive for the manufacturer to settle.
Point #3 is complex. As with Song Beverly, a violation is established under federal lemon law when the product is not repurchased or replaced after a reasonable number of repair opportunities. However, case law says that, in the event of a violation, the measure of damages under Magnusson-Moss should be “diminution in value”, which is the difference in value between the product as sold and the product as warranted. This would theoretically assign a cash value to the defect, rather than simply requiring the warrantor to buy back or replace the product.
To summarize, if both the state law and the federal law are options in a lemon case, the state law will often be preferable because it may be easier to prove a violation, and also because the damages are greater and easier to prove under state law.
Magnusson-Moss also makes it possible for manufacturers to require consumers to (a) make a written notification of a violation and (b) make prior resort to a qualified third party dispute resolution program (usually private arbitration) prior to filing a lemon lawsuit. Lemon law attorneys on both sides should pay attention to these requirements, as they are frequently misunderstood. Under Song Beverly, these are requirements for use of the presumption but not the lemon law itself.
If the Magnusson-Moss Warranty Act has more requirements, may make a lemon case harder to prove, and may provide less in recoverable damages, why would someone file a federal lemon law claim instead of a state lemon law claim?
The answer is that Magnusson-Moss is often broader in application than state lemon law. Because it is a federal law, it does not require purchase in any particular state, whereas case law says that Song Beverly requires delivery in the state of California. Magnusson-Moss is more readily available to used car purchases, and it may be available even after time requirements under certain state lemon laws have elapsed.
Need Lemon Case Advice?
Deciding whether to pursue a lemon claim under state or federal law can be difficult without the help of an attorney. If you think you have a lemon and need advice on which statutes to pursue a case under, the experienced lemon lawyers at Goldsmith West are here to help. Contact us today for a free consultation.
Generally speaking, most vehicle lemon law cases hinge on three specific elements:
- There must be a defect covered by warranty.
- The defect must create a substantial impairment of use, value, or safety.
- The defect must have been subject to a reasonable number of repair attempts.
There is case law that says because vehicle lemon law uses the plural term “attempts”, there must be more than one repair attempt. See Silvio v. Ford Motor Company, 109 Cal.App.4th 1205 (2003). This means that, in a breach of express (written) warranty case, the consumer must bring the car to the auto dealer for repair on at least two occasions.
Other than that, there is no set number of “reasonable” repair attempts. What is reasonable depends on legal argument. This is why it’s a good idea to consult a car lemon law attorney before reaching conclusions about your case regarding repair attempts.
Your lawyer may be able to argue that two varying complaints had the same root cause, and thus meet the minimum two repair attempts required by vehicle lemon law. Or, the attorney may be able to argue that an issue that the manufacturer doesn’t consider “substantial” actually has an effect on safety, and so should require fewer repair attempts to qualify the vehicle as a lemon.
The Lemon Law Presumption
Consumers often believe that there are a set number of repair attempts required for a vehicle to be considered a lemon. This error may come from a misunderstanding of the Tanner Consumer Protection Act amendment to the Song Beverly Consumer Warranty Act (the California state lemon law) which provides a legal presumption that a vehicle is a lemon if any of the following exist within the first 18 months / 18,000 odometer miles:
- Two or more repair attempts for a safety defect;
- Four or more repair attempts for a substantial non-safety defect; or
- 30 or more total days out of service by reason of repair.
If any of these requirements are met, it is no longer the consumer’s responsibility to prove the car is lemon. Rather, it becomes the manufacturer’s responsibility to disprove that the automobile is a lemon. This distinction may seem subtle, because the manufacturer can still prove the vehicle is not a lemon. In practice, however, doing so is difficult, and manufacturers often opt to settle rather than fight a solidly presumed car lemon law case.
Presumption is a powerful tool in lemon law, but it has different procedural requirements than non-presumption lemon law, further reinforcing the value of consulting a lemon law attorney.
Exception to the Rule: Implied Warranty Cases
Despite the discussion above, it is possible to have a vehicle lemon law case with fewer than two repair attempts. In fact, it is even possible to have a case with fewer than one repair attempt.
Both state and federal lemon laws can be invoked under breaches of the implied warranty, as well as under express (written) warranties. “Implied” means created by law, though not written down, such as in a warranty manual. It is usually used within the context of “implied warranty of merchantability,” which basically states that a product must be fit for the ordinary purposes for which it is purchased.
Cases where a breach of implied warranty of merchantability may exist, even without repeat repair attempts, would include a catastrophic failure of the vehicle and a series of one-off failures, which — taken together — show evidence that the vehicle was not built to merchantable standards.
To use a real world example, our firm has taken cases based on allegations that a 2012 Toyota Camry was destroyed by a spontaneous fire, that a 2015 Jeep Grand Cherokee rollaway incident was caused by a defective gear selector, and that numerous leaks and failed parts in 2013 – 2016 Chevrolet Cruze vehicles establish that those vehicles were not built and distributed in a merchantable condition.
Need Legal Advice About Repair Attempts?
The number of times a vehicle is repaired for a persistent problem often plays a role in establishing lemon cases. However not all vehicle lemon law cases entail counting up repair attempts. If you need advice about whether repair attempts could be an element in a car lemon law case, contact Goldsmith West for a free consultation. We look forward to providing helpful guidance.
Lemon Law Cases From the Defense’s Perspective
As someone who has worked on lemon law cases in-house for a manufacturer, who worked on them as a defense attorney for a successful law firm, who now works on them as a consumer’s attorney, and having been a disappointed consumer of products myself, I understand the various perspectives on lemon law.
Everyone is an individual, and they have their own opinions. With that said, there are some generalizations about lemon law cases and defective product compensation that emerge, particularly among lawyers who advise manufacturers on defending lemon law cases.
Lemon Law Favors Consumers
Lawyers that defend lemon law claims are in an awkward position. The law is powerfully consumer-oriented. If you have repeat repair attempts for a substantial problem with a vehicle or another costly product that is covered by warranty, it rarely makes sense to litigate. Defense attorneys want to bring their manufacturer clients good news, and if a case is assigned to them for defense, they naturally want to find a way to win it.
Yet, they usually have to recommend a settlement — and often a buyback of the problematic product — to the manufacturer. It can be frustrating as a litigator to always feel like you have a losing position and need to recommend that your client makes a maximum settlement offer for defective product compensation.
Sometimes, the defense is left trying to chip away at repurchase settlements, such as by arguing over the appropriate reasonable use deduction (i.e., mileage offset on a vehicle). Rather than winning motions and trials, these attorneys may feel “reduced” to adjusting claims. This can strike a blow at a lawyer’s ego. It’s also a lot less interesting work than going to court.
Additionally, defense lawyers typically get paid based on the time they spend working on a case. Looking over a few repair orders, and then recommending a full repurchase, as outlined in the lemon law, will produce far fewer billable hours than defending a case all the way to trial, which can take a year or more.
Realities of Lemon Case Defense
When you combine these five factors – frustration at feeling you are disappointing your client, the false equation of settlement with “losing”, the ego wrapped up in a lawyer’s self-image, less than satisfying legal work, and the fact that settling may be less lucrative than fighting a case – you have a powerful set of biases that motivate the lawyer to recommend fighting over settling.
People often ask me why defense attorneys fight lemon law cases they won’t win. The five factors above are primary motivators. For consumers, this is ultimately good news. If you have an eligible lemon law claim, there’s a good chance you will receive a favorable outcome.
Contact Us Today
If you need assistance evaluating a potential lemon law claim, our firm is an excellent position to help. Because we once defended manufacturers against lemon law cases, we know how they and their attorneys view the lemon law. Schedule a free case evaluation today to put our expertise to work for your case. We look forward to serving you.
Information Surrounding Lemon Cases
One of the questions we get the most at Goldsmith West, whether from clients or friends and family, is: Who makes the most lemons?
We have been monitoring the lemon cases filed against auto manufacturers in the Central District of the Los Angeles County Superior Court (i.e., the Stanley Mosk Courthouse) for the past year. This is just one courthouse within one county in Los Angeles, though it perhaps may be the largest single courthouse for lemon law litigation in California and the United States. The rankings and numbers listed further below are taken from the data we have collected.
Lemon Cases by Statistics
There are a lot of factors that go into tracking lemon law statistics, and some disclaimers need to be made. These numbers come from litigated lemon cases that have appeared in the Stanley Mosk Courthouse. A portion of these cases may involve issues other than lemon law. However, by and large, they are lemon cases. Furthermore, there is a portion of lemon law cases filed at the courthouse that are omitted from this list, because the first named defendant is a dealership or finance company, not a manufacturer.
Another key factor to consider when reading these statistics is that they are based purely on lemon vehicle lawsuits. They do not factor in lemon law demands where the manufacturer resolved the matter without the need for a lawsuit.
You must consider that a manufacturer may have a relatively high rate of defects but also a customer service process that resolves cases before they become lawsuits. By contrast, a manufacturer may have a relatively low rate of defects for its vehicles, but it may deny and defend against lemon law claims so aggressively that it finds itself in court considerably more often than other manufacturers. However, there is no automotive brand that is completely without defects or lemon law claims.
2017 Lemon Case Statistics
Here is what the information we collected for 2017 shows:
- There were over 3,000 separate lemon law cases, with at least one calendared date at the courthouse in 2017.
- There were over 4,500 total lemon law appearances at the courthouse in 2017
- The top three vehicle brands for lemon law appearances are Ford, General Motors (GM), and Fiat Chrysler Automobiles (FCA). The big three American brands (if Fiat Chrysler can be categorized as one) had the most lemon law case appearances. However, Ford led the way by far.
- Top 3 brands for lemon law appearances, per 2016 market share are BMW, Nissan and Mercedes. When adjusted for market share, these brands stand out as having the highest rate of lemon law case appearances. Many of these vehicles are not 2016 calendar year purchases or 2016 model year; however, market share did not radically change over the several preceding years.
In fair play, it should be noted that some brands have a comparatively low lemon law case appearance rate, relative to volume of vehicles produced. Brands that stand out as having low lemon law case rates are Toyota, Volkswagen Group, and Subaru.
Every vehicle brand has lemons, and every brand has its process for handling them. However, regardless of a manufacturer’s process for handling lemon claims and vehicle lawsuits, it is generally in a consumer’s best interest to consult an experienced lemon law firm before accepting a conclusion for his or her case. If you need help sorting out the facts of a potential lemon case, please contact Goldsmith West today to schedule a free consultation.