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  • Supreme court sides with consumer in lemon law case, urges legislature to close gap

    Even if a consumer receives a refund for an automobile considered a “lemon,” the consumer can still sue for equitable relief and recover the attorneys’ fees and costs associated with the claim.

    Joe Forward

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    Supreme court sides with consumer in lemon 
law case, urges legislature to close gap 
in law July 13, 2011 – Even though Steven Kilian returned his Mercedes Benz, and received a refund of about $21,000, the lender continued to hound him for his monthly lease payments. That is, until he was forced to file a lawsuit asking them to stop under Wisconsin’s Lemon Law.

    The circuit and appeals courts ruled that Kilian was not entitled to attorneys’ fees and costs because he did not suffer a “pecuniary loss.” His refund had been paid in full, those courts concluded. But the Wisconsin Supreme Court disagreed in Kilian v. Mercedes Benz USA, 2011 WI 65 (July 12, 2011).

    The supreme court unanimously (6-0) ruled that Kilian was entitled to costs, disbursements, and reasonable attorneys’ fees because the lease financing lender, Mercedes Benz Financial, continued to enforce the lease after Kilian returned the car and received a refund.

    The facts

    In 2006, Kilian signed a 39-month lease agreement with an authorized auto dealer for Mercedes Benz USA, the vehicle manufacturer, and Mercedes Benz Financial, the lease financing company.

    But the vehicle had problems in the first year, requiring repairs that put the car out of service for approximately 40 days. Kilian returned the car and demanded a refund. Mercedes Benz accepted the car and refunded his lease payments and collateral costs totaling nearly $21,000.

    Kilian stopped making payments on the lease, thinking his obligation was discharged. But Mercedes Benz Financial began contacting Kilian for collection of unpaid installments. Despite receiving a letter from Kilian’s attorney indicating the car was returned and a refund paid, the collections department at Mercedes Benz Financial continued to seek lease payments and threatened to inform credit bureaus.

    Finally, Kilian filed a complaint in the Waukesha County Circuit Court, alleging Mercedes Benz Financial violated Wisconsin’s Lemon Law by continuing to enforce the lease. He sought twice the amount of all pecuniary losses, rescission of the lease, attorneys’ fees, costs and disbursements.

    This prompted Mercedes Benz USA to pay the balance on Kilian’s account with Mercedes Benz Financial, and Mercedes Benz Financial ceased enforcement after the lawsuit commenced.

    The lemon law

    Wis. Stat. section 218.0171(2)(cm)3 prohibits an auto manufacturer or lease financing company from enforcing a lease after the consumer receives a refund. Under section 218.0171(7), a consumer can file a lawsuit “to recover for any damages” caused by a violation “[i]n addition to pursuing any other remedy.”

    A consumer who shows a violation occurred is a “prevailing party” entitled to “twice the amount of any pecuniary loss, together with costs, disbursements and reasonable attorney fees, and any equitable relief the court determines appropriate." Section 218.0171(7).

    Mercedes Benz Financial argued that a consumer cannot bring an action under section 218.0171(7) unless “damages” include a “pecuniary loss.” In other words, Mercedes Benz Financial argued for dismissal of the claim because Kilian received a refund. The circuit court and the court of appeals agreed, meaning Kilian was on the hook for the attorneys’ fees and costs associated with the claim.

    However, the supreme court – in an opinion written by Justice Michael Gableman – held that a “pecuniary loss is not required for a consumer to maintain an action” under subsection (7).

    That is, a consumer may file an action under subsection (7) to demand equitable relief, such as an injunction to stop enforcement of the lease, even where there is no pecuniary loss. In that situation, the consumer is entitled to reasonable attorneys’ fees, costs and disbursements if they prevail.

    The remedies

    Although Kilian was a “prevailing party,” the supreme court ruled that he was not entitled to “twice the amount of any pecuniary loss” because he already received a refund.

    “The legislature did not intend that consumers who have already received a proper refund should also recover twice the amount they paid under the lease as pecuniary loss,” Justice Gableman wrote.

    However, the court awarded reasonable attorneys’ fees, costs, and disbursements as a result of the lemon law violation, and remanded the case to the circuit court to determine those amounts.

    Concurrence

    Justice Patience Roggensack filed a concurring opinion, joining the majority opinion but writing separately to urge the Wisconsin Legislature to close a lemon law gap highlighted in this case.

    She noted that “the Lemon Law does not require the manufacturer to notify a financing institution that finances a lease or a purchase when the owner has returned the car to the manufacturer under the law,” and urged the legislature to “close this gap.”

    Attorneys

    Vincent P. Megna and Timothy J. Aiken of Aiken & Scoptur S.C., Milwaukee, represented Steven Kilian. Patrick L. Wells and Owen Armstrong of von Briesen & Roper S.C., Milwaukee, represented Mercedes Benz USA and Mercedes Benz Financial.

    By Joe Forward, Legal Writer, State Bar of Wisconsin




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