Lemon Law Lawyer Blog

In the case of Schreidel v. American Honda Motor Co., 34 Cal. App. 4th 1242 (1995), the California Court of Appeal found that Mrs. Schreidel had successfully proved the following about her Honda during trial: (1) that the clutch was sticking; and (2) that there was difficultly shifting into first gear. Both problems were intermittent, meaning that they happened at unpredictable times.

The case came before the Court of Appeal, because Honda was unhappy with the result at the trial court level. The jury found that the Mrs. Schreidel had proved that the defects with the clutch and the transmission were substantial nonconformities under the California Lemon Law. In other words, those defects substantially impaired the use, value, or safety of the vehicle to the buyer.

Honda disagreed and filed an appeal.

Honda claimed that under the California Lemon Law, a sticking clutch was not a substantial defect because it was not “major.” Honda took this position, even though the word “major” appears nowhere in the California Lemon Law.

The California Court of Appeal agreed with Mrs. Schreidel and disagreed with Honda. The Court of Appeal found that the evidence showed that: (1) Mrs. Schreidel avoided using the car for long trips; (2) the delay of shifting into first gear was like stalling, which is dangerous; (3) Mrs. Schreidel experienced panic; (4) Mrs. Schreidel felt she never had a new car; and (5) Mrs. Schreidel lost confidence in the car and attempted to replace it.

The Court also found that Mrs. Schreidel proved the existence of a defect through her testimony and through the testimony of her expert witness, who observed and videotaped the sticking clutch.

These five pieces of evidence proved that Mrs. Schreidel’s Honda had a non-conformity that substantially impaired the use, value, and safety of the vehicle. (Note that the California Lemon Law only requires that the consumer prove that one of the three was impaired. So, if Mrs. Schreidel had only proved impairment to use, but not to safety or value, the car would still qualify for repurchase under the Lemon Law.)

The Schreidel case shows that subjective evidence such as feeling panicked and losing confidence in your vehicle, can be as powerful as objective evidence (e.g., videotape of the sticking) in pursuing a lemon law case in California.

One of the requirements of the California Lemon Law is that lemon cars must have a defect that substantially impairs use, value, or safety to the buyer. But what does “substantially” mean? That question has been the subject of several cases decided under the California Lemon Law. One of those cases was Lundy v. Ford Motor Company, 87 Cal. App. 4th 472 (2001). Mr. Lundy purchased a 1997 Ford F150. Within the first year of ownership, the truck went back to the dealership for cracking noises, sticking windows, an odor coming from the air conditioning system, and transmission problems.

The dust-up over the word “substantially” started when the jury asked for clarification of the term. Ford proposed a dictionary definition. The court used part of that definition and added another. The final definition presented to the jury was: “substantially . . . is an adverb modifying the verb impaired and the use of that term here means that the non-conformity was not imaginary and actually impaired the use, value or safety of the vehicle.” The plaintiff won and Ford Motor Company appealed.

The Court of Appeal passed on whether the unaltered dictionary definition should have been given. The court did hold, however, that a qualifying defect cannot be any impairment. Whether there is a defect must be subjected to an objective test, based on what a reasonable person would understand to be a defect, applied within the specific circumstances of the buyer. Does that mean that the car has to be un-drivable to be a lemon? No. A substantial impairment to value under the lemon law can occur in a car that can be driven. A substantial impairment to safety can also exist where the car can be driven. Same with use, if the quality or reliability of the usage is substantially impaired to the person who bought the car. It depends upon what a reasonable person would think and it must be applied to the specific buyer, namely, you, the consumer. Ultimately, California’s Lemon Law must be applied broadly and its purpose of protecting consumers must be given full weight.

Have you ever wondered whether those blue-sky promises by salesmen have legal significance? Under the California Lemon Law, they just might. It all comes down to whether the promises turned into an express warranty. That can happen when there is: (1) an affirmation of fact or promise which relates to the car and becomes a part of the bargain; or (2) a description of the goods which is made part of the “basis of the bargain.” (“Basis of the Bargain” is another way of saying “what you bargained for.”)

An early lemon law case discussed this very subject. In Keith v. Buchanan, 173 Cal. App. 3d 13 (1985), the buyer relied on a sales brochure that described the “Island Trader 41” as “a picture of sure-footed seaworthiness.” Based in part on that promise, the buyer, Mr. Keith, paid $75,000 for the vessel. There were no traditional warranty documents that came with the vessel, however, and when it failed to sail as promised, Mr. Keith brought suit. (Yes, the lemon law applies to boats.)

The trial court found that there was no warranty, but the California Court of Appeal reversed and said that the promises in the sales brochure rose to the level of an express warranty. The promise of “seaworthiness” was an affirmation of fact and not just an opinion or commendation (another way of saying “puffery” or “sales talk”). The Court of Appeal then agreed with Mr. Keith that the promise of “seaworthiness” had become part of the basis of the bargain. And that was all Mr. Keith needed to revive his lemon law claim.

So, if you walk into a car dealership and are presented with a glossy brochure, and the salesman confirms what the brochure says, you should be able to hold the dealership to those promises of a smooth ride, a luxurious interior, and great fuel economy.

In our last post we warned that rumors of car manufacturer insolvency should make lemon law claimants nervous. So much has happened since that post to confirm our concerns: Chrysler declared bankruptcy during the last week of April. Chrysler settlement checks issued to consumers before the bankruptcy filing have actually BOUNCED! Consumer groups have filed an objection in the Chrysler bankruptcy case seeking clarification on what will happen to lemon law claims. A consumer-rights protest is planned for Sacramento.

General Motors appears to be next. Many are predicting a General Motors bankruptcy filing on June 1, 2009. Rumors and reports of General Motors pulling back on lemon law settlements are swirling around the lemon law attorney community in California.

There is no way to predict what is going to happen next, as this is new territory for all of us - consumers, lawyers, judges, government officials and industry leaders. Right now, everyone is hoping that either the courts or Congress will make some effort to keep the rights and claims of consumers alive through the reorganization process. That would only make sense, as the blame for these financial problems lie at the feet of corporate leaders, not consumers.

Friends and family have all asked me recently: “What is happening to California Lemon Law cases in this new economy?” The news from Detroit has been grim: Chrysler recently reported record low sales. General Motors has threatened bankruptcy. Even Toyota has reported declining sales and layoffs. The news from the RV industry is even more grim: Monaco, Fleetwood, and Country Coach have filed bankruptcy. Others have simply closed their doors.

So, where does that leave the consumer who has a Lemon Law claim? Good question. We have been telling our lemon law clients to consider every settlement overture by the manufacturers carefully in light of the economy. Settlement offers that we would have previously considered inadequate are receiving new scrutiny. The decision to settle or not settle falls more squarely under the “bird in the hand” analysis than ever before. This is not to say that we are recommending undue compromise; just that the better part of discretion and wisdom dictate a more clear-eyed, practical look at lemon law claims than ever before.

Bottom Line Advice in the Brave New Economy: If you can settle your lemon law claim with the manufacturer without having to resort to the courts, then by all means, press to wrap up the settlement as soon as you can. If you have to hire an attorney to pursue your claim successfully, then do so immediately. Do not delay contacting competent counsel and cooperate with your attorney in coming to an amicable and fair resolution.

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.

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" »

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.

The California Lemon Law allows California consumers to return vehicles that the auto maker or its authorized repair facilities cannot repair after a reasonable number of repair attempts. Many consumers are unaware of the strength of the California Lemon Law, however, and miss out on opertunities to secure the rights it provides.

Manufacturers such as Chrysler, General Motors, Ford Motor Company, Toyota and Honda often find themselves on the receiving end of complaints from consumers about lemon vehicles. Not infrequently, these manufacturers tell consumers that the defect – also called a “non-conformity to warranty” – is somehow the fault of the consumer. A good example: a friend of mine who is an attorney had a pretty clear lemon law claim against Chrysler. Within the first 18,000 miles, his Town & Country had been to the dealership seven times for uneven and excessive brake wear. The first response from Chrysler was “you live on a hill; you are causing the brake wear.” My friend is a smart guy and of course had the perfect response: “are you saying that no one who lives on a hill can buy a Chrysler vehicle?” A little coaching from me and he was able to convince Chrysler to repurchase his MiniVan under California’s Lemon Law.

Now, my friend is an experienced and savvy attorney. Trained in argument and advocacy, he had a compelling answer to the “blame the victim” tactics of Chrysler. Many consumers, however, absorb the guilt that the manufacturers lay upon them. Our advice: resist the psychology of the blame game. If your vehicle is still under warranty and manifests a defect, take it to an authorized dealership and talk with the service advisor. Explain the defect in detail: what you experience, the conditions under which you experience it and the conditions under which you do not experience it. Confirm that the service advisor described the defect accurately on the repair order. When you pick up your vehicle, ask what was done to diagnose the problem. Then, ask what the technician did to repair it, if anything. If your service advisor blames your driving for the defect, seek clarification and specifics. Measure the advisor’s explanation against your own understanding of how you drive. You should not automatically assume that the advisor is right, just because he is wearing a shirt that says “Toyota” or “Honda.” After the repair attempt, take your vehicle for a test drive. If the defect remains unrepaired, take your car back to the dealership immediately. Do not delay, as that could a) be bad for your car and b) diminish your potential lemon law claim. The hope, of course, is that the dealership can fix your car. When the dealership cannot fix your car after a reasonable number of repair attempts (usually considered to be four times or a cumulative total of 30 days), then you may have a lemon on your hands and a claim under the lemon law to the manufacturer is in order.