Lemon Law Lawyer Blog

A periodic feature of this blog is a summary of the current Monthly Defect Report from The National Highway Traffic Safety Administration. This post will look at the Report for the month of July 2008.

NHTSA is still looking at the engine compartment fire concern in the 2007 Chrysler pacific with the 4.0Lengine. This Engineering Analysis was opened on February 21, 2008.

In March, NHTSA opened an Engineering Analysis on 2005-2006 F-250 and F-350 Super Duty 4.4 vehicles for a “violent front end oscillation.” Many lemon law lawyers report having several F-250 and F-350 cases with engine problems and it will be interesting to see what this EA reveals.

NHTSA is also opened an Engineering Analysis on 2006-2008 Hummer vehicles. The reason for this Engineering Analysis is to determine why there have been non-crash engine compartment fires. This engineering analysis was opened on June 12, 2008.

NHTSA also opened several Preliminary Evaluations. A Preliminary Evaluation is the precursor to the Engineering Analysis and determines whether an Engineering Analysis is begun. Most interesting is a Preliminary Evaluation that was opened on April 28, 2008 for an engine stalling complaint (due to fuel pump failure) in 2007 BMW 335i's. The 335i is a popular vehicle and it will be interesting to know what the Preliminary Evaluation turns up. NHTSA has also opened up a preliminary evaluation on the 2005-2006 Nissan Armada and Titan. This preliminary evaluation will explore engine compartment fires in the Armada and the Titan. It was opened on May 30, 2008.

For those of you who follow the motorhome industry, Country Coach, Inc., a designer and manufacturer of luxury motorhomes has had a Preliminary Evaluation opened on their 2007-2008 Affinity’s. Consumers have reported that the 2007-2008 Affinitiy’s can suffer from loss of power steering assist. This preliminary engineering evaluation was opened on July 24, 2008.

NHTSA also does something called a Recall Query known for short as an “RQ.” An RQ is where NHTSA monitors recalls to ensure that the scope, completion rate, and remedy are adequate. There are currently four Recall Queries open. The 1998-2003 Mercedes M Class power steering hose leak recall, the 2004 Ford Explorer and Mercury Mountaineer lift-gate glass hatch hinge failure, the 2005 - 2007 Bluebird Body Model 450 LXI WanderLodge, and the 2005 Dodge Durango fuel spit back during refueling.

Monthly Defect Investigation Reports are an important function of the National Highway Traffic Safety Administration. That they are so conveniently available on the Web is a boon to consumers.

Two days ago, I posted on the whether the consumer or the manufacturer has the right to choose the remedy under the California Lemon Law (answer: the consumer). But what happens after the manufacturer and the consumer agree “in principle” on the repurchase or replacement? The California Lemon Law states that the repurchase or replacement must happen “promptly.” The word “prompt” is not defined in the statute, but most people would agree that 30 days, i.e., one month, is fair. What often happens, however, is that the manufacturer agrees “in principle” to repurchase or replace the vehicle, but then takes a long time to work out the details of the amounts to be paid or the type of vehicle to be used for the replacement. As a legal matter, a manufacturer who drags its heels in completing an agreed upon repurchase or replacement, can be brought into court and sued over the delay. As a practical matter, the time required to prosecute such a lawsuit might take as long or longer than persistent phone calling and letter writing after the “agreement in principle” is reached. The bottom line? Nail down the exact terms of the repurchase/replacement as soon as you can. If the manufacturer is showing signs of waffling early on, consult with a qualified Lemon Law attorney for alternatives tailored to your specific situation.

Some consumers are successful at pursuing their own lemon law claims by calling or writing the manufacturer directly. I am always glad when I hear that a consumer has tried to resolve the matter before seeking legal representation. That says to me that they tried to be reasonable.

I am always dismayed, however, when I hear stories from consumers about how their request for relief under the lemon law went awry because of misinformed manufacturing representatives. A common misrepresentation is that the lemon law does not apply to used cars (it does, as long as the used car is sold with a warranty). Another misconception is that the lemon law only applies during what is known as the “presumption period.” In California, the presumption period is 18,000 miles or 18 months, whichever comes first. In actuality, the lemon law applies during the life of the warranty - the presumption has to do with who eventually assumes the burden of proof regarding what constitutes a reasonable number of repair attempts - the manufacturer or the consumer.

I have also heard of situations where the manufacturer tries to force a replacement vehicle on the aggrieved consumer. The California lemon law is clear - the consumer may choose between a refund or a replacement. The same rules about mileage off-sets apply, but it is unquestionable that the consumer has the veto power over whether the remedy is a refund or a replacement. I can think of several rationales for this rule, but the most obvious is that the consumer should not be forced to accept a product from a company that the consumer has lost confidence in. So stand your ground if your vehicle qualifies as a “lemon” under California’s lemon law.

Most everyone has heard of “recalls.” Recalls are, generally speaking, warning notices from manufacturers to consumers of a “known defect” in a certain year, make and model of vehicle. Closely related to “recalls” are technical service bulletins, known in the industry as TSBs.

TSBs are documents that manufacturers provide to their dealerships alerting the technicians that certain models may have a tendency to exhibit specific defects. These service bulletins usually recommend a method for repairing the defect. TSBs can be short and simple, or long and quite technically complex.

Lemon law cases can be made stronger by the existence of a TSB that relates directly to defect in question. A solid TSB that is, as we say in the law, “on point” can defeat the following, common types of defenses: 1) the manufacturer or dealer claims that your car is “operating normally” or “within specifications;” 2) the manufacturer or dealer claims that you caused the problem by aggressive driving or after-market modifications; or 3) the manufacturer or dealer claims that they have repaired your car successfully, when it is clear that they haven’t even applied the TSB yet.

In some situations, the dealer will have performed the repairs suggested in a TSB on your vehicle, but the car still acts like a lemon. There are a couple of obvious reasons for this. 1) the dealer may not have performed the TSB correctly; 2) the TSB may not actually be a sufficient fix – in this case, look for updated TSBs from the manufacturer; or 3) The dealership is performing the TSB correctly, but has mis-diagnosed the real problem with your vehicle. This list is not comprehensive, but it should provide you with a starting point.

Sometimes, the dealership will disclose the TSB to the consumer, but oftentimes dealerships never reveal to their customers that the vexing problem for which they keep coming back is a “known problem” that affects many more cars than just theirs. Fortunately, everyone can gain access to most manufacturer’s TSBs. To do this, you go to National Highway Traffic Safety Administration website, and choose the year, make and model of your vehicle using a series of drop down menus. The site will provide lists of all TSBs as well as all recalls and all consumer complaints.

On January 1, 2008, SB 234 (Corbett) will go into effect. This bill, which California Governor Arnold Schwartzenegger signed on July 27, 2007, will extend California Lemon Law Protection to all military personnel stationed in California, regardless of where they purchased their lemon.

McCoy, Turnage & Robertson law partner Ellen Turnage represented Lt. Nathan Kindig in the Lemon Law case that brought this issue to the attention of the California legislature. Lt. Kindig’s case was especially sympathetic as evidenced by Ms. Turnage’s testimony to the California State Senate Judiciary Committee. I have endeavored to summarize her testimony here:

Any one who purchases and takes delivery of a vehicle within the state of California is protected by California’s lemon law, a very consumer friendly statute. However, buyers, including California residents, who purchase vehicles in other states – even though they register the vehicles in California and pay California sales tax – are not protected by the California Lemon Law. These California citizens do not realize they are not protected by California Lemon Law until they discover they are the proud owners of a lemon.

But even worse is the fact that our military personnel who are not California residents and who purchased vehicles in other states are excluded from California lemon law protection. The tragedy is that these individuals are not here voluntarily. They are ordered to this state for the purpose of protecting this state and our nation. And yet, our California Lemon Laws fail to protect them. They are in essence individuals without a state.

Let me see if I can demonstrate how our laws fail to protect our military by describing Lt. Kindig’s pending lawsuit against DaimlerChrysler.

Continue reading "California Lemon Law Extended to Military Personnel Transferred to California" »

A few days ago, I wrote about Certified Pre-Owned Vehicles and the California Lemon Law. Problems with Certified Pre-Owned Vehicles can give rise to fraud claims as well as lemon law claims. Fraud claims are generally brought against the selling dealership, but not against the manufacturer. (By contrast, lemon law cases are generally brought against the manufacturer.)

The usual scenario that gives rise to a fraud claim against a selling dealership goes something like this. Joe Consumer reads in the local circular about certified pre-owned vehicles for sale. He is interested in some of the offerings and decides to stop by the dealership that placed the ad. He meets with a salesperson, who tells him that the CPO program is one of the best there is. Each CPO vehicle has been subjected to a 112-point inspection and is almost “like new.” In fact, it’s better than new, because the vehicle has to meet exacting standards and comes with an extended “bumper-to-bumper” warranty.

Joe Consumer agrees to pay a premium for the "better-than-new" certified pre-owned vehicle and drives off the lot feeling that he’s gotten a great deal.

Within a short amount of time, however, Joe Consumer begins to notice a lot of problems with his CPO vehicle. There are some mechanical problems that the dealership cannot seem to fix and a perplexing inability to stay aligned.

Because Joe Consumer does not have time to drive all the way back to the selling dealership during the work week, he drives to the dealership close to his work. To his shock, he is informed by this dealership that the vehicle has over-spray, evidence of bondo on the quarter panel, and other signs of collision damage.

Adding to his woes, this new dealership says that they “won’t touch it” and warns that the factory warranty is probably void because of the prior collision damage.

Continue reading "Joining Fraud Claims to Lemon Law Claims in the Certified Pre-Owned Context" »

The National Highway Traffic Safety Administration has published its Monthly Defect Report for the month of November 2007.

There are a few notable investigations pending. For example, on October 19, 2007, NHTSA opened an investigation on the 2007 Chrysler Pacifica for an engine compartment fire concern. The investigation is in the Preliminary Evaluation (PE) phase, which is the initial phase of a NHTSA investigation. As defined by NHTSA, a "PE is prompted after a review of consumer complaints and/or manufacturer service bulletins suggest a safety defect may exist. The results of a PE determine whether the investigation will be upgraded to an Engineering Analysis or closed. Most PEs are resolved within four months." NHTSA describes the reason for the investigation on the 2007 Pacificas as follows: “complainants allege that a fire erupted under the hood of the vehicle while they were driving the vehicle and without warning. The fire began on the driver's side, near the front of the vehicle. The agency has received two vehicle owner complaints alleging a fire, and some early warning reporting (EWR) data. This preliminary evaluation has been opened to further assess the potential safety consequences associated with the alleged defect.”

On February 14, 2007, NHTSA opened an Engineering Analysis on 2006-2007 Dodge Durangos for side curtain air bag failure. NHTSA investigators discovered the problem during testing and describe it as follows: “The metal gas distribution tube in the side curtain air bag assembly may fracture during deployment resulting in failure of the air bag to deploy properly.” The Engineering Analysis stage is defined by NHTSA as the “second and final phase of a NHTSA investigation, an EA is undertaken if data from a PE indicate further examination of a potential safety defect is warranted. The results of an EA determine whether a safety recall should be initiated or the investigation should be closed. Most EAs are resolved within one year.”

Also at the EA stage is a complaint of wheel failure in the 2005-2007 Nissan 350Zs. Initially, the Office of Defects Investigation (ODI) opened pe06-050 based on two consumer complaints alleging incidents of wheel separation while driving due to spoke fracture. One of the incidents resulted in a crash and serious injury when the separated wheel struck a California Highway Patrol Officer on the opposite side of the freeway. Nissan claims that the problem was caused by an after-market “re-chroming” process, but ODI also found incidences of cracking in original Nissan alloy wheels. ODI is continuing the investigation, because it wants to determine what is causing the problems in the original equipment.

The work of ODI is critical to the safety of motorists. It can also be helpful to consumers who have lemon law claims. Through its collection of consumer complaints, manufacturers' technical service bulletins, and accident data, ODI has amassed a storehouse of information on almost all makes and models of vehicles. While this information may not be admissible in court, it can be very instructive to both the consumer and the consumer’s attorney and should be consulted when considering a lemon law claim.

Signs and banners publicize certified pre-owned (CPO) vehicles at big and small dealerships throughout California. What is a CPO vehicle? At its most basic, a CPO vehicle is one that has been inspected carefully by an authorized dealership and given an extended factory warranty. Most of the major manufacturers – such as Toyota, BMW, Mercedes-Benz, Honda, etc. – have certified pre-owned (CPO) programs. The CPO programs can be a good deal for consumers looking to avoid the heavy depreciation that hits new cars when they are driven off the lot for the first time.

Sounds great, right? A lot of times, it is; it's a great deal from which all parties walk away happy. Sometimes, however, the deal goes sour. Fortunately, the California Lemon Law covers vehicles that prove to be “certified lemons.”

A common misconception is that the lemon law only covers new vehicles and only if the defect appears in the first year or two. California lemon law is broader than that, however. The formal name of California’s lemon law, “The Song-Beverly Consumer Warranty Act,” hints at the key to its application. Specifically, if a vehicle is sold with a warranty, then it is covered by the lemon law, regardless of whether the vehicle was purchased new or used. The scope of the warranty may dictate how much help the lemon law will be to the consumer, but it will still be of some help. California’s lemon law states that "[i]f the manufacturer or its representative in this state is unable to service or repair a ... motor vehicle . . . to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle . . . or promptly make restitution to the buyer. . . However, the buyer shall be free to elect restitution in lieu of replacement." (Cal. Civ. Code, § 1793.2(d)(2).)

Continue reading "The California Lemon Law and Certified Pre-Owned Vehicles" »

The excitement of purchasing a new vehicle is often tempered by the amount of money in fees and taxes involved. Some dealerships, especially motor home retailers, are quick to offer a “solution” to paying state taxes. Specifically, these dealerships will suggest that consumers agree to take delivery of their vehicle across state line and avoid paying state taxes altogether. Now, if the consumer is experienced in these types of transactions, it may prove to be a fair, arms-length purchase. But, if the consumer is being led into this tax-saving scheme for the first time, it may prove to be a risk that is not worth taking.

The most important risk is the fact that the consumer will probably be giving up the right to bring a lemon law claim under California’s Lemon Law, the Song-Beverly Consumer Warranty Act. Why is this important? It is important, because California’s Lemon Law is strong and pro-consumer and the consumer who gives up her California Lemon Law rights is giving up significant rights. In fact, many car makers will argue that by taking delivery across state line, say in Arizona or Oregon, the consumer is forever waiving their right to have a defective vehicle repurchased. If the manufacturer wins that argument, then the consumer may be limited to Commercial Code remedies, which may only be the cost of repair.

Second, is that failure to comply with the strict requirements for out of state delivery could subject consumers to California Franchise Tax Board penalties.

If you are looking at purchasing a “big ticket” item, such as a motor home or boat, be sure to weigh the benefits of out of state delivery tax savings carefully against the considerable rights you are jeopardizing.

Perhaps you are in this situation right now: you’ve brought your new car back to the dealership three or four times for the same aggravating problem and you are beginning to think that it is a lemon. More frustrating than that, however, is the fact that every time you take that lemon into the shop, the service advisor tells you that your car is “operating to the manufacturer’s specifications.” “What in the world does that mean?” you ask. Does that mean that all of that cars that are of the same year, make and model as your car are defective? Does it mean that the manufacturer’s specifications amount to low standards? Does it mean that your car is, in reality, fine? Regardless of what it means, it does not automatically stop a valid lemon law claim.

Now, if your car is operating within normal and generally acceptable tolerances, you should not bring a lemon law case. But if you suspect that “operating to manufacturer’s specifications” is code for “we don’t know what is going on with your vehicle and we don’t want to admit it,” then don’t lose hope. Even if the dealership does not actually “turn a wrench” on your car and even if the dealer says that the vehicle is “operating to manufacturing specifications,” California’s lemon law may still help you. All you have to do is present your vehicle to the dealership for repair. The rest is up to the dealership and if the technician fails to properly diagnose the defect, that is their problem and not yours. Each presentation for repair, regardless of what happens in the technician’s bay afterwards, counts as a repair attempt under the lemon law. The policy for this is a good one. It stops dealers and manufacturers from leading the consumer around with false or negligent reports of “no problem found” or “operates to manufacturer’s specifications.”

The moral: don’t be discouraged just because the dealership seems not to hear or believe you. Just keep bringing your lemon back until the dealership either admits your car has a problem and fixes that problem or until you have exhausted a reasonable number of repair visits.

More and more consumers are facing the situation where they have a good claim under the California Lemon Law, which they cannot effectively pursue, because they have too much negative equity rolled into the financing.

Lenders are reporting a sharp increase in consumers trading in vehicles where they are “upside down” on the loan. In other words, they owe more than the car is worth. The difference is called “negative equity.” Undisclosed negative equity, i.e., negative equity from a trade-in vehicle that is rolled into the price of the new vehicle, violates state and federal truth in lending laws. Disclosed negative equity becomes a sticking point in lemon law cases. The dispute: manufacturers say “we’re willing to repurchase the vehicle, but we will deduct the negative equity from the final award.” The consumer’s attorney will respond: “the negative equity constitutes part of the price ‘paid or payable’ for the vehicle and should be reimbursed.” Indeed, the State of California Department of Consumer Affairs supports the lemon law lawyer’s view of the matter. The Department wrote an opinion letter to Ford Motor Company’s General Counsel in April 1997 stating specifically that “‘negative equity’ is part of the actual price payable by the buyer.”

The main problem with the negative equity question is that consumers could actually end up owing the manufacturer money at the end of a lemon law buy-back transaction. Here’s how. Let’s say you trade in a late-model vehicle where you have $10,000.00 in negative equity. That $10,000.00 is properly disclosed and re-financed in the purchase of the new vehicle. Let’s also say that you made a down-payment of $2,000.00 and that your monthly payments are $500.00 and that your loan balance is $30,000. Let’s also assume that within the first three months, you brought the vehicle into the shop four times for defects to the engine. The auto-maker agrees to buy your car back. Great you say! But wait. Here’s how the manufacturer does the math: you get back the $2,000.00 plus three monthly payments of $500.00 totaling $1,500.00. That comes to $3,500.00. The auto maker cuts a check to the bank for the $30,000.00 loan balance, but then subtracts $10,000.00 from $3,500.00, leaving a negative balance of $6,500.00. That’s the amount of the check you will be writing to the auto giant who made the lemon vehicle.

Is this fair? The auto makers say “Yes! While we might be responsible for making a lemon car; we’re not responsible for how consumers decide to handle their debt.” As a matter of public policy, however, this effectively lets the auto makers skate on their obligations under the lemon law, because very few consumers can come up with $6,500.00 cash at a moment’s notice. The law is unclear, so the moral of this story is: consider keeping that late-model vehicle a little longer if your only option in trading it in will be to re-finance the negative equity.

The California Lemon Law requires that consumers present their vehicle for repairs a “reasonable” number of times, before invoking the Lemon Law. The attorneys at our firm have talked to thousands of consumers throughout our years of practice. A recurring theme is the question: “what constitutes reasonable” or, in other words: “when is enough enough?”

The benchmark in the California Lemon Law is four times for the same defect under warranty or 30 cumulative days for any number of different or similar defects. If the defect constitutes a safety hazard that could cause bodily injury or death, then the benchmark is two times. But the benchmark is just that – a guideline. It is not a requirement. I have seen manufacturers repurchase vehicles after three repair attempts where the three repair attempts came in the first 5,000 miles. I have also seen manufacturers resist repurchasing vehicles where there have been nine or ten repair attempts, where the repair attempts stretched over 60,000 or 70,000 miles. (We eventually got our client a new replacement truck.)

One argument that we use at our firm is that the case of Krotin v. Porsche held that the California Lemon Law imposes an affirmative duty upon manufacturers to repurchase lemon vehicles after a reasonable number of repair attempts have yielded no fix. The rationale behind the Krotin case is that manufactuers have more knowledge, resources and power than any one individual consumer will every have. They are also charged with knowledge of the Lemon Law. Therefore, if your car starts to look like a lemon, the manufacturer should step up and offer to buy it back or replace it.

To summarize, it’s tempting to use that phrase that lawyers love to use “it depends,” but it really does depend – on the type of defect, on the mileage at the time you make the claim, and on whether the manufacturer knows your lawyer. If you think that you have given the manufacturer a reasonable amount of time to repair your vehicle, but the vehicle is still unrepaired, call an experienced lemon law attorney. Most will provide you with a free consultation, so there is no risk in getting that little bit of information that might help you ditch that lemon.