California’s Song-Beverly Act provides extensive protection for consumers who unknowingly purchased defective vehicles. Colorado’s lemon law, on the other hand, is strongly weighted in favor of vehicle manufacturers. Every state lemon law has slightly different characteristics, so if you have a vehicle you think might be a lemon, you should contact a qualified lemon law attorney in your state. This article is designed to illustrate the differences between one of the most consumer friendly lemon laws, and one of the least.
An important component of any law is it the breadth of coverage. California’s Lemon Law covers any product that is purchased or used primarily for personal, family, or household purposes, including cars, trucks, motor homes, and motorcycles. It also covers used vehicles, assuming the vehicle was purchased under the original manufacturer’s warranty. It does not include vehicles purchased solely with extended warranties.
Colorado, on the other hand, does not cover used vehicles, motor homes, or motorcycles. This is especially disconcerting for motor home owners, as not only are motor homes very expensive, they are also difficult to maintain due to their complexity. Many of them leak, or have slide-out issues. But, if the manufacturer is unable to repair it, or any other vehicle in these categories, the consumer cannot bring a lawsuit to enforce his/her rights. However, a consumer may still be protected by the federal lemon law act, which will be discussed below.
California’s Lemon Law requires that any company that is unable to repair a consumer product under warranty within a reasonable number of repair attempts must either replace it or refund the purchase price. This obligation remains for the duration of the warranty period. So, a vehicle sold with a 5 year/60,000 miles powertrain warranty that has been driven for 3 years and 50,000 miles is still protected under the lemon law if the manufacturer was unable to repair it during that time period. As long as the vehicle remains under warranty, the manufacturer is obligated to ensure that the vehicle conforms to the warranty and works as it should. After all, that is essentially what a warranty is–the promise to repair a product for a limited period of time.
In contrast, Colorado’s lemon law only protects consumers for defects that occur during the first year of ownership, regardless of the warranty terms. Using the example above, a vehicle sold with a 5 year/60,000 miles powertrain warranty that has been driven for 3 years and 50,000 miles that exhibits transmission problems after the first year of purchase is not covered under the lemon law. If a manufacturer is unable to repair a vehicle after that first year, the consumer is unable to file a lawsuit to seek enforcement of the lemon law. The requirement that this occur within the first year is especially problematic given the notice requirements we will discuss below.
Manufacturers are in a unique position in that even though they supply the warranty, they are technically not the party that performs vehicle repairs. Rather, it is the manufacturers’ dealer that performs warranty repairs. Although the dealer will generally seek authorization/reimbursement from the manufacturer when performing warranty repairs, the manufacturer will often claim that it had no notice that a consumer’s vehicle suffered from frequent problems. Without notice, the manufacturer will often argue it is not in a position to know when a vehicle is a lemon and should be repurchased or replaced. So, many states have enacted notice requirements to ensure the manufacturer is alerted to a consumer’s vehicle problems before that consumer can file suit to enforce their rights. In some states the requirement on the consumer are quite onerous.
In Colorado, a consumer with a lemon vehicle must notify the manufacturer before filing suit, via certified mail, of the vehicle’s defects, and request a refund or replacement. If the manufacturer maintains a “dispute settlement procedure” (nearly all do), then the consumer must participate in it. In the procedure, the consumer and manufacturer will present their side of the story to an “impartial” third party, or arbitrator, who will then make a determination in favor of the consumer or the manufacturer. If the arbitrator rules in favor of the manufacturer, then the consumer gets nothing, and must continue to make payments on his or her vehicle. The arbitrator might also rule that the manufacturer must refund some of the consumer’s monthly payments, or the manufacturer must repurchase the vehicle. The arbitrator’s ruling is binding on the manufacturer, but not the consumer. So, the consumer can either choose to accept the award or reject it and file suit to enforce their lemon law rights. Obviously, if the arbitrator awards a refund, then the consumer would accept it. Unfortunately, this rarely happens. In fact, in 2013, the percentage of eligible applicants receiving any relief (either a refund or monthly payment reimbursement) from the BBB auto line (the largest lemon law arbitration program) was only 10.5%. In other words, the manufacturer “won” 89.5% of the time. This is far below the result we should expect from an open and neutral dispute resolution process.
After the consumer has participated in the dispute resolution program and declined the remedy (if any), only then can the consumer file a lawsuit against the manufacturer. But, as previously discussed, any lawsuit brought against the manufacturer must be filed within the first year of purchase. In order to comply with the law’s requirements, the consumer with a potential lemon must act extremely quickly. So, the consumer’s vehicle must have required repairs 4 times, the consumer must have notified the manufacturer via snail mail, the manufacturer must have responded and coordinated an arbitration, and the arbitrator must issue his/her ruling–all within the first year of ownership.
In California, the consumer is encouraged to participate in a dispute resolution program, but not required to. Given the odds are highly stacked in the manufacturer’s favor, most attorneys recommend that the consumer not avail themselves of the program as it is often of little value.
The cost of retaining an attorney is an important consideration in all legal matters. Fortunately, in many states the lemon law addresses that concern. In California, for example, a prevailing plaintiff can recover reasonable attorneys’ fees and costs from the manufacturer. So, if a consumer files a lawsuit and wins, or even settles for any amount of money, the manufacturer must pay the consumer’s attorneys’ fees. Due to this provision, consumers do not need to pay their attorneys for services rendered. It allows attorneys to take cases that they might not otherwise be able to take, and it allows consumers who may not otherwise be able to afford legal representation the ability to enforce their legal rights.
Attorneys’ fees under Colorado law are not as advantageous. The statute grants attorneys’ fees to the prevailing party, not the prevailing plaintiff. If a consumer brings a lawsuit and loses at trial, then the consumer must pay the manufacturer’s attorneys’ fees, which can be tens of thousands of dollars. Deciding whether or not to file a lawsuit is always a tough decision, and this increased danger adds an extra wrinkle to the decision. As much as a consumer might want rectification for their vehicle’s problems, is it worth taking the risk of being on the hook for what could be tens of thousands of dollars in attorneys’ fees? It is a consideration the consumer must weigh carefully with their attorney’s advice.
In addition to state lemon laws, there is a federal lemon law known as the Magnuson-Moss Warranty Act (“MMWA”) which protects consumers regardless of in which state the vehicle was purchased. It applies to used vehicles, motor homes and motorcycles. So, if there is no state protection for those vehicles, a consumer is still afforded protection under the MMWA. However, the MMWA contains an important limiting factor: the consumer’s damages must be greater than $50,000. Damages in a lemon law case are usually calculated based on the price of the vehicle, so if a vehicle was purchased for less than $50,000, then it is probably not protected by the MMWA unless a considerable amount of money was spent on repairs or rental costs.
Whether participation in a dispute resolution program is necessary is still unclear. To compel consumers to participate, manufacturers must have a written arbitration clause contained within the written warranty. However, merely placing the arbitration clause in the written warranty may not be enough to make the clause enforceable, particularly where the consumer never sees the written warranty until after the purchase.
Finally, the MMWA allows prevailing consumers to seek reasonable attorneys’ fees from the manufacturer.
Remember, this article is only a general summary of the lemon law. If you think you have purchased a lemon, contact a lemon law attorney who can advise you of your rights under both the federal lemon law and the lemon law in the state where your vehicle was purchased.