Automakers Unhappy as Court Upholds Spitzer on Lemon Law

December 20, 2006

A claim by automakers that Attorney General Eliot Spitzer’s office misinterpreted New York’s lemon law in a way that favored consumers has been rejected by the state’s highest court.

At issue was an arbitration program created by the state Legislature in 1987 to help resolve disputes between dealers and buyers over defective vehicles. The attorney general’s office said at the time that the law required customers to document at least four unsuccessful repair attempts — and show that their vehicle’s defect “continued to exist” — when they went to court or arbitration.

In 2003, Spitzer’s office reinterpreted the law, saying that as long as there were four unsuccessful repair attempts, it didn’t matter if the defect was subsequently fixed before the consumer sought legal recourse.

DaimlerChrysler, General Motors and Saturn, trying to limit their financial liability, challenged Spitzer’s reading of the law. They argued that the Legislature’s inclusion of the phrase “continues to exist” in the law proved “that for a consumer to recover, the condition must exist at the time of the arbitration hearing or trial, regardless whether more than four attempts to repair occurred.”

The Court of Appeals rejected the challenge in a 7-0 decision, saying the automakers’ reading of the law would require “a consumer to leave the new vehicle in an inoperable or malfunctioning state in order to preserve the right to seek Lemon Law relief.”

The new interpretation under Spitzer was based on an appeals court decision that the law allows, but does not require, consumers to continue seeking repairs after four unsuccessful attempts.

The lemon law requires sellers to provide consumers with a full refund within a year of the purchase, or 25 percent of the value after that.

The decision “is a victory for consumers in their efforts to exercise their rights under the state’s lemon law,” Spitzer said. “Consumers should not be forced to continue to operate a malfunctioning and possibly dangerous vehicle in order to preserve their rights.”

“New York’s attorney general interpreted the lemon law arbitration provision consistently with the plain language of the statute for the first 16 years after its adoption by the New York state Legislature,” said Michael Palese of DaimlerChrysler Corp. “The monumental change in the interpretation made by Attorney General Spitzer and affirmed today by the Court of Appeals should only be made by the legislature.”


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