A typical New York Lemon Law case involves a vehicle that has been serviced repeatedly for the same problem, or has been out of service for repair for an unreasonable amount of time. These are “inability to repair cases”. I previously wrote a blog that concentrates on these types of cases.
There is also another kind of New York Lemon Law case which perhaps doesn’t get as much attention, but is just as important. Refusal to repair cases. These are cases where the vehicle is brought to the dealership for warranty repairs and the dealership is either unable to verify the consumer’s complaint (”cannot duplicate customer’s concern”), or it verifies that something is wrong with the car, but determine that the problem is not covered by the vehicle’s warranty.
Refusal to repair cases are more difficult to pursue because there is a fundamental disagreement between the consumer and the manufacturer. The manufacturer believes that there is either nothing wrong with the car, or alternatively, that whatever is wrong with the car is not its responsbility. On the other hand, in an inability to repair case, the manufacturer has attempted a repair, which implies that it recognizes something was wrong with the vehicle and that it was its responsibility to fix it. In those cases, where there are sufficient repairs, a manufacturer will usually concede that it must repurchase or replace the vehicle, and it does so voluntarily. This absolutely never happens in a refusal to repair situation.
Thus, refusal to repair cases must always be litigated or arbitrated. An expert must be retained to inspect the vehicle, verify a defective condition, and testify about it. The manufacturer will, of course, produce its own technical specialists who will testify that there is nothing wrong with the vehicle. Ultimately, it can often come down to credibility, or if its an arbitration, the arbitrator’s test drive.
In addition to the evidentiary hurdles that consumers must get through in order to win their refusal to repair case, there is also a procedural step that often proves difficult. Pursuant to the New York Lemon Law statute, the following steps must occur before a consumer can bring a refusal to repair case:
The consumer must bring the defect to the attention of the dealership
After the dealership refuses to commence repairs within 7 days of being notified of the defective condition, the consumer must write a letter to the manufacturer of the vehicle, notifying it of its dealership’s refusal to commence repairs, and demanding that it commence repairs within 20 days of its receipt of the notice. I have provided a sample letter here which you can use as a template when drafting your own.
The letter must be mailed via Certified Mail, with Return Receipt Requested (the two green slips at the post office), to the manufacturer, NOT the dealership.
The statute is very specific about how these steps must be carried out. Of course its also important to keep a photocopy of your letter, keep the certified mail slip when its given back to you at the post office, and the return receipt slip when it is mailed back to you after the manufacturer receives your letter.
There is one side benefit to these procedural hurdles. When a manufacturer receives this type of letter, it will often contact you to make arrangements for one of its own technical specialists (instead of a dealership employee) to inspect the vehicle and conduct repairs if the defective condition is verified. I have had plenty of situations where this type of 20 day notice letter has resulted in the customer’s vehicle finally being fixed. And of course, any such repair can potentially be used in an inability to repair case.
One thing to note is that the 2 year / 18,000 mile Lemon Law presumption period applies to refusal to repair cases. If you purchased or leased your vehicle more than 2 years ago, or have put on more than 18,000 miles, the refusal to repair provision of the New York Lemon Law is not applicable to your case.
I often advise individuals to prepare their own 20 day notice letter using the sample letter I provided as a template. If you follow all of the steps in this article, and 20 days after receipt of your letter the manufacturer has still not commenced any repairs, you may have a Lemon Law case. At that point you should call me or another New York Lemon Law attorney, who can then assist you in pursuing your case further.
Imagine you knew someone who has a new car that unfortunately does not always slow down when he hits the brakes. Once in a while the brakes just don’t work. Now imagine you were his lawyer and you were forced to advise him to have his car fixed three more times before taking any action. That just doesn’t seem right, does it?
I have to tell my clients this on a regular basis. The New York Lemon Law does not distinguish between run of the mill defects, and defects that can kill the driver. In both situations you typically need to meet a presumption of 4 repairs for the same defect (with the defect continuing to persist after the 4th repair attempt), or 30 days out of service for repair, within the first 2 years or 18,000 miles, whichever comes first, in order to have a viable case.
Other states have dealt with this issue by updating their Lemon Law statutes to include a “safety lemon” provision. Such a provision would force an automobile manufacturer to repurchase or replace a vehicle if it is repaired one time for a potentially deadly problem, and that problem continued to persist after that repair.
While other states have taken steps over the years to modernize their versions of the law, our politicians in New York have neglected this important statute. Thus, I have mailed a letter to Governor Spitzer, along with other NYS political leaders, urging them to add a ’safety lemon’ provision to the statute, along with several other improvements.
You can view a PDF scan of the letter here. In order to try and bring some additional attention to this matter, I have also issued a Press Release, which you can view here.
In recent news, both GM and Chrysler have recently suspended operations at several manufacturing plants as a result of problems with their part suppliers.
We’ll start with GM. American Axle Corp. was spun off from GM in 1994. Its former parent is still its biggest client, representing 80% of its business. It supplies truck and SUV parts to GM. Or at least it did until recently. In order to compete with its rivals, it released plans to cut hourly labor costs from its current $70 per employee down to between $20 and $30. Not surprisingly, the United Auto Workers Union went on strike.
On to Chrysler. Most recently, it shut down a minivan plant in Windsor, Ontario. The Canadian Auto Workers Union at TRW Automotive walked off the job on February 28 after failing to reach a contract with their employer. This problem for Chrysler is in addition to other recent difficulties. Last month, a company called Plastech filed for Bankruptcy protection. This caused Chrysler to temporarily shutter five plants, with a potential shut down of all 14 Chrysler facilities as a result of not having access to the over 500 parts sold to it by Plastech. A temporary agreement kept the parts coming, but its set to expire on March 3. In the mean time, Chrysler lost a motion before the Bankruptcy Court to compel Plastech to turn over tooling used to make those 500 parts. So Chrysler had better hope that further deals can be reached to keep those parts coming.
From a New York Lemon Law perspective, this could get interesting. Imagine you were the CEO of American Axle Corp. GM represents 80% of your business. If GM said they were going to pay you 75% of what they used to pay you for the same parts, what can you do? If you want to stay in business, your going to give GM what it wants. After that, you will try to cut expenses enough to stay in business. The predictable results: strikes and bankruptcies for suppliers, plant shutdowns for automobile manufacturers. And possible lemon law cases as vehicles are unable to be repaired due to a shortage of replacement parts.
Truth be told, GM and Chrysler can use a little down time. They have enormous inventories built up to weather this storm. I am sure that this factored in to their decision to squeeze their suppliers. However, these types of things have a way of getting out of hand.
In the mean time, if your car is being repaired, and your service advisor has requested that you take the vehicle home until parts arrive, SAY NO. You WANT your car to sit at the dealership. You are absolutely helping the manufacturer when you take the vehicle back before its fixed, as you lose days out of service for repair. You are well within your rights to ask the dealership to hold the vehicle until it can be fixed. There is no reason for you to be driving a defective vehicle.
So you think you may have a lemon. That’s why your here, right? Fair enough. Here are some tips that can possibly mean the difference between getting rid of your car, or being stuck with it.
#1 - Document EVERYTHING
If you speak with someone at the dealership, take down her name. If your defect only occurs intermittently, keep a camcorder ready in the car. And most importantly…
Be smart about your repair invoices. These are the documents that your case will live and die on. First off, don’t lose them. Second, demand that they give you one each and every time your car is repaired. Call me up immediately if the dealership refuses to give you one. Most importantly, third, when you get one, make sure it is accurate. It should accurately reflect the date that you brought the vehicle into the dealership for repair, the date they informed you the repairs were completed, and a detailed description of the repairs that occurred.
Over the years that I have been handling Lemon Law cases, I have seen hundreds of examples of poorly drafted invoices which should have been rejected by the consumer at the dealership. I have seen situations where an invoice was left open so as many as three separate and distinct repair incidents were reflected on a single invoice. Or where the invoice states the consumer’s complaint, but does not bother to show what type of repair was completed. None of these situations are necessarily fatal to your case, but it makes things more complicated.
#2 - If your car is broken, have it fixed.
You paid good money for your car. But you didn’t just buy a car. You also purchased an obligation on the part of the manufacturer to repair certain covered defects over the course of a period of time. Yes, you have a warranty. So use it!
This is important. It can never hurt you to get your car fixed in New York. That isn’t true in other states. My partner in Texas, Darin Siefkes, has to deal with requirements under the Texas Lemon Law that the manufacturer be given a final attempt to repair the defect. Thus, if a Texas client got his car fixed without first serving notice on the manufacturer, it could end up costing him his case. In New York there is no such problem. As I stated in a previous blog, Chrysler tried to convince the highest court in New York that Lemon Law relief should not be granted where the vehicle is finally made to operate properly. The Court disagreed with that contention. So long as you have the requisite repairs, you will not be precluded from taking advantage of the Lemon Law because your car is finally working properly. So keep getting it repaired (and keep the invoice!).
#3 - Leave your car at the dealership as long as possible
For your Lemon Law case to succeed, we need either multiple repair attempts, or 30 days out of service for repair. Very often, my clients are told by the dealership that their complaint has been verified, and parts are on order. They are then told it is perfectly safe to continue driving the vehicle while you wait for the parts. Don’t do it. First off, the car might not be safe. I had a client recently tell me that the dealership had her take the car back while she waited for a replacement airbag module. Doesn’t sound safe to me! Second, why give up those days out of service for repair? I know it may be a hassle to be without your vehicle for those extra days, especially if you aren’t given a loaner vehicle. However, you should be aware that days out of service helps your Lemon Law case, so losing those days out of service does hurt it.
#4 - Speak to an attorney ASAP
I’m throwing this extra tip in for free. Why? Because, generally speaking, your legal services for a Lemon Law case will be free! Whether you retain me or another attorney, you should expect to pay nothing if you end up having your car repurchased or replaced pursuant to the NY Lemon Law. Its a consumer protection law, and the fee-shifting provision of the statute requires the manufacturer to pay your attorney fees if you end up prevailing.
There are some very limited exceptions. In the event that a negotiated settlement with your manufacturer is not possible, I will represent you for free in a lawsuit. However, if you chose to pursue an arbitration through the NY Attorney General’s Office, then there is a flat rate fee as I cannot get paid by the manufacturer in that venue.
So in the vast majority of cases, you will have to pay nothing. You only pay out of pocket if you choose to pursue an arbitration, and you are never obligated to do that. So it stands to reason that you are always better off getting an attorney involved as early as possible. It costs you nothing. Why not benefit from that expertise?
General Motors recently disclosed that it lost a staggering 38.7 BILLION dollars in the past year. To put that in perspective, if you multiplied the amount of GM shares that exist by the current share price ($26.60), the result would be a market capitalization of only slightly more than 15 billion dollars. In other words, GM lost more than double what the market says its worth… in ONE YEAR.
So here I am, representing consumers who are either suing GM, about to sue GM, or trying to get a settlement from GM, and from the looks of it, my good friend GM has a pretty decent shot of filing for BANKRUPTCY at some point.
This is, to be perfectly blunt… literally… a Lemon Nightmare. (Cue the sour scary music).
Lets go off on a tangent for a minute. Many of you will remember a company called Daewoo that manufactured low end vehicles in the late 1990’s. When they filed for bankruptcy, the court established a trust fund to pay for warranty repairs. As far as I can tell, there were never any issues with the funding of the trust fund. However, Daewoo vehicles still lost half their value. Why? Well first off, it became very difficult to find Daewoo parts. Then, Daewoo owners found that they could not obtain collision insurance because the difficulty in obtaining such parts made it impractical for insurers to pay for repairs. And in the period before creation of the trust fund, unsold Daewoo vehicles rusted on the dealership lots, as it was illegal to sell them in some states without a warranty.
SO, in the event of a GM bankruptcy, even if provisions were made by the court for payment of warranty claims, which isn’t a given considering the cost of this liabilty, the value of the vehicles are likely to decline significantly. This would broadly effect a large segment of the US population. Essentially, a good many of us would be forced to ‘write down’ the value of our second biggest asset.
But, you ask, this is a lemon law blog, right? How would a GM bankruptcy effect my lemon law case?
Now one thing I never wanted to be was a bankruptcy lawyer. I can’t honestly say that I always dreamed of being a lemon lawyer, but one day it started to make sense, and I actually quite enjoy it. Bankruptcy, on the other hand, is the subject that I tended to snooze through in law school. HOWEVER, if there is one thing that even a daft lemon lawyer knows about bankruptcy, its the concept of the “automatic stay”. The rule is pretty black and white. If a person or corporation files for bankruptcy, any lawsuits pending against the debtor is stayed pending a resolution of the underlying bankruptcy issues. So in the (hopefully) unlikely situation that GM or another automobile manufacturer were to file for bankruptcy, any pending lemon law cases would be delayed indefinitely. Any cases that we were hoping to settle would likely be delayed as well.
Meanwhile, as these cases languish, the bankruptcy court would proceed to restructure the liabilities of the company or perhaps order its liquidation. Warranty rights of consumers could theoretically be discharged, but its more likely that the the court would create a Daewoo-like trust from the remaining assets of the corporation to cover warranty repairs going forward.
Whether or not such a trust would be sufficiently funded is a key question. Keep in mind, GM has been increasing the term of its warranty, perhaps in a desperation move to take in more revenue now at the expense of future costs. It would take a whole lot of money to cover warranty repairs on GM vehicles for upwards of the next 7 years. But lets assume that there are sufficient funds. That’s the best case scenario. My GM cases are delayed for a few months to a year or so, but ultimately I can pursue them against a solvent trust, unless, of course, the bankruptcy court discharges any past warranty liabilities.
A worst case scenario is, indeed, a situation where those past warranty liabilities are discharged by the court, OR, where the trust is not sufficiently funded. This is where it gets tricky.
If you have ever financed a vehicle, take a look at the back of your finance agreement. In bold letters, you will find a paragraph that states:
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
This language is required to be in your retail installment contract, pursuant to a little known rule promulgated by the Federal Trade Commission (16 C.F.R. 433) called the “FTC Rule on Preservation of Consumers’ Claims and Defenses”, otherwise known as the “Holder Rule“. The rule puts lenders into the shoes of a seller of consumer goods in situations where consumers cannot sue the seller. Like, for instance, in this case where a mobile home was damaged due to defective plumbing, the seller of a mobile home went out of business, and the lender had to pay damages to the consumer.
In the unlikely scenario that my GM clients could not enforce their claims against a warranty trust, it would be the lenders who would take the hit. One has to wonder whether lenders take this risk into account when writing loans on GM vehicles. With all the talk lately of a ‘credit crunch’, this is one potential fly in the ointment that is routinely overlooked.
