The New York Lemon Law – A Primer

INTRODUCTION

The New York Lemon Law is a consumer protection statute that provides recourse to automobile consumers in the event that their vehicles are subject to an unreasonable number of warranty repairs or days out of service for warranty repairs. Although most people have vaguely heard of lemon laws, very few are aware of how they work. The purpose of this article is to provide an introduction to the New York Lemon Law statute and explain how it works in practice. New York has a separate statute for used cars which is not addressed in this article. Additionally, this article is presented for informational purposes only, and should not be construed as legal advice.

HISTORY OF THE NEW YORK LEMON LAW

Prior to enactment of the New York Lemon Law, the primary avenue for aggrieved New York automobile consumers was a Federal statute called the “Magnusson-Moss Warranty Act.” Due to a widespread perception that Magnusson-Moss did not provide sufficient remedies for automobile consumers, the states, one at a time, started to promulgate their own automobile specific warranty enforcement acts. These statutes, called ‘lemon laws’, now exist in all 50 states. New York promulgated its own lemon law in 1983 and has amended it several times since.

REASONABLE OPPORTUNITY TO REPAIR

The basic premise of the New York Lemon Law is that if the manufacturer of a motor vehicle cannot repair the vehicle pursuant to warranty, despite a reasonable opportunity to do so, then the manufacturer should be obligated to buy the vehicle back from the consumer or replace it with a new one.

PRESUMPTION PERIOD

The statute designates a 2 year / 18,000 presumption period (whichever comes first)during which repairs are scrutinized. Repairs that occur after the presumption period are not relevant with respect to the Lemon Law, even if they are conducted under warranty and even if previous repairs occurred during the presumption period. If, during the presumption period, either 4 warranty repairs occur upon the vehicle for a single defector the vehicle is out of service due to warranty repair for 30 or more days, then the statute presumes the manufacturer has been unable to repair the vehicle despite a reasonable opportunity to do so, and lemon law liability attaches.

It is important to note that consumers can have recourse under different statutes, even if they don’t have enough repairs under the New York Lemon Law. Most notably, under the aforementioned Magnusson-Moss Warranty Act.

REFUSAL TO REPAIR

A Little known section of the New York Lemon Law statute deals with situations where a dealership refuses to repair a vehicle under warranty. There are a lot of reasons why such refusals can occur. The most typical situation is where the dealership claims it is unable to find anything wrong with the vehicle. However, a refusal to repair can also occur if the dealership believes that the problem with the vehicle is not covered under the manufacturer’s warranty or occurred because of abuse or neglect by the consumer.

If a consumer disagrees with the dealership’s refusal to repair the vehicle, he can formally put the manufacturer on notice of its dealership’s refusal to repair the vehicle. This is done via certified letter, return receipt requested. If within 20 days of receipt the manufacturer still does not effectuate a repair, then a consumer can bring a New York Lemon Law claim – essentially for breach of the warranty. Unlike a traditional lemon law case which is based upon an unreasonable number of repairs or days of repair, a consumer can theoretically have a meritorious lemon law case based upon refusal to repair with not even a single repair or day out of service for repair.

MANUFACTURER DEFENSES

The New York Lemon Law statute contains two express defenses that can be utilized by a manufacturer. First, a manufacturer is not liable under the statute if the problems with the vehicle resulted from abuse or neglect by the consumer. Failure to maintain the vehicle by changing it oil per the manufacturer’s instructions is a classic situation where this defense would be utilized. I have also seen the defense raised where a vehicle was driven excessively fast prior to mechanical failure. The defense is often extended into situations where aftermarket devices are installed into the vehicle, such as a remote starter or DVD player. For instance, if an aftermarket remote start system was incorrectly installed (often by the selling dealership), it can cause a parasitic draw upon the vehicle’s battery, creating an intermittent failure to start condition. In such a case, the manufacturer would likely claim that the problem with the vehicle was not it’s fault, but rather occurred due to a negligent installation, and thus it should not be held liable under the Lemon Law.

The second defense expressly contained within the statute is that the defects forming the basis of the Lemon Law claim must “substantially impair the value of the vehicle to the consumer.” The purpose of this defense is to protect manufacturers from incurring significant expenses due to relatively minor issues. According to the New York legislature it would be unfair, for instance, to impose a drastic penalty upon an automobile manufacturer because a radio doesn’t work properly. Or interior trim pieces fall off. Manufacturers tend to utilize this defense quite a bit in cases where the problem is limited to noises, and the safety of the vehicle or its usability as a transportation device are not impacted.

REMEDIES

If a manufacturer is liable under the New York Lemon Law then it must agree to repurchase the vehicle from the consumer for the original purchase price, along with dealership fees, or alternatively, replace the vehicle with a new one. With respect to repurchase, the most common issues involve which items are reimbursable and which aren’t. Extended warranties or maintenance plans are generally not reimbursable. Interest on automobile financing and other carrying costs such as automobile insurance are generally not reimbursable as well. Sales tax is not reimbursable from the manufacturer. However, in New York, a consumer can apply for reimbursement of sales tax directly from the New York State Department of Taxation & Finance once the repurchase transaction is completed.

Replacement transactions are typically on an MSRP to MSRP basis. You are given credit for the MSRP value of your vehicle towards the MSRP price of another vehicle sold by the manufacturer. Thus, MSRP is used as an objective valuation. Even if you paid less than MSRP for your vehicle, you get credit for the MSRP price, thus allowing you to keep the original bargain from when you first purchased your vehicle. The most common problem in a replacement transaction is actually locating a suitable replacement vehicle.

The New York Lemon Law statute also creates a usage offset to compensate a manufacturer for the consumer’s use of the vehicle if such usage exceeds 12,000 miles. Essentially, the value of a repurchase is reduced by 1% of the price of the vehicle for every 1,000 miles over 12,000. With a replacement, the consumer would have to write a check to the manufacturer for that amount. In practice, many manufacturers will waive usage on replacement transactions as they prefer them over repurchases.

It should be noted, as a practical matter, that if a consumer wishes to keep her car, lemon law cases can often be settled for monetary compensation without the need for a repurchase or replacement to occur.

ATTORNEY FEES

Just because a manufacturer is supposed to provide you relief under the New York Lemon Law doesn’t mean it actually will. Thus, unfortunately, at times it is necessary to litigate a lemon law case. To that end, the New York statute, like many other state lemon laws, contains an attorney fee shifting provision. The importance of this cannot be overstated. In the absences of an attorney fee shifting provision it would be cost prohibitive to enforce your rights against a manufacturer. As a matter of course, the manufacturer could refuse to meet its obligations under the statute, and if you wanted to enforce the statute against the manufacturer it could cost more in attorney fees then the case would be worth. The fee shifting provision allows a consumer’s attorney to collect fees and expenses from the manufacturer if the consumer wins a lawsuit.

Although the fee shifting provision is structured to provide for attorney fees where a consumer wins at trial, in practice it gets extended to matters that are settled prior to commencement of litigation. This is because of the implied threat of a lawsuit, even at the pre-litigation stage. The manufacturers are aware that if they don’t pay the consumer’s attorney fees prior to litigation, the consumer might reject its offer and bring a lawsuit, at which point attorney fees would be recoverable. It’s obviously cheaper for a manufacturer to pay a small amount of attorney fees prior to litigation than a higher amount at the end of litigation – so in practice the manufacturers are willing to pay the consumer’s fees prior to commencement of litigation.

ARBITRATION PROCEDURE

The New York Lemon Law statute created an arbitration mechanism, administrated by the Attorney General’s office, which adjudicates hundreds of lemon law cases statewide every year. The arbitration program does not impose formal rules of evidence or procedure upon participants, and therefore it is accessible to laymen who are not represented by attorneys. Unlike a lawsuit, attorney fees are not recoverable. By far, the greatest benefit of participating in the arbitration program is time. A lawsuit can take years to resolve, whereas an arbitration through the Attorney General’s office often takes only a couple of months.

The arbitration program is binding upon both the manufacturer and consumer. If a consumer loses the arbitration she has no further recourse other than a very limited right to appeal. Thus, it is usually prudent for the consumer to attempt to resolve a lemon law matter amicably with the manufacturer, often with the assistance of an attorney, before taking further steps such as a lawsuit or arbitration.

 

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