Lemon Law Update

By Stephen J. Nicks

In Dieter v. Chrysler Corp.,¹ the Wisconsin Supreme Court, with Justice Sykes writing a consumer friendly opinion, reversed the court of appeals and stressed the remedial nature of the lemon law "with a view towards the social problem which the Legislature was addressing when enacting the law."² The court of appeals decision in Dieter³ held that only hidden defects discovered after the delivery of a new vehicle were covered by the lemon law.⁴ Defects that a consumer knew about - in this case paint scratches from dealer-installed, manufacturer-approved accessories - were not covered.

Since the lemon law comes into play only where there is manufacturer warranty coverage,⁵ the supreme court first had to determine if the paint scratches, which occurred before delivery during the dealer installation of manufacturer-approved accessories,⁶ were covered by the Chrysler warranty. The court found Chrysler's warranty unambiguously covered "genuine MOPAR (Chrysler Corporation) accessories approved by Chrysler for dealer installation."⁷ Chrysler argued that since the damage occurred before the warranty start date - the delivery date - there was no coverage. The court, however, found no limitation pertaining to the date the defect or damage was created, finding instead that the warranty "simply covers repair costs that are incurred during the warranty period for qualifying defects and damage."⁸

What about the fact that the consumers were aware of the paint scratches before delivery? This was significant to the court of appeals, which grafted a "hidden defect" or "lack of knowledge" element onto the lemon law. Relying heavily on the remedial nature of the lemon law, the supreme court favored the opposite result, which put the consumers in the position they were in when they signed the sales contract - they thought they were getting a scratch-free truck. Strictly reading the "plain language" of the lemon law, the court found "nothing" requires that the consumer be unaware of the nonconformity before accepting delivery in order for coverage.⁹ Further, since lemon law protection cannot be waived, the court of appeals conclusion that the law does not apply to known defects acted as a waiver by notice rule, contravening Wis. Stat. section 218.015(6).¹⁰

Dieter represents a powerful reaffirmation of the supreme court's liberal construction of the lemon law first articulated in Hughes v. Chrysler Motors Corp. in 1996.¹¹

There Are No Excuses

Chariton v. Saturn Corporation¹² is as interesting for what it did not do, as for what it did. Chariton is another of the "breakdown of negotiations" genre of lemon law cases. Previously, the supreme court in Hughes,¹³ and the court of appeals in Church v. Chrysler Corp.,¹⁴ held that when it comes to the 30-day refund period in Wis. Stat. section 218.015(2)(c), 30 days means 30 days - the period is not extended, tolled, or reset if sticking points in the negotiations arise. Church recognized that the rigidity of the 30-day requirement sometimes placed the manufacturer in a "difficult position with attendant risk,"¹⁵ but reasoned that the lemon law intent of creating a more equal bargaining situation between consumers and manufacturers mandated this sometimes harsh policy.

In Chariton, Saturn conceded liability very early, but two problems occurred in arriving at the correct refund amount: the consumers' attorney was alleged to be dilatory in providing Saturn the information it needed to exactly calculate the refund, and then Saturn insisted on a general release before payment. Regarding the general release, the court held that this request contravened Wis. Stat. section 218.015(5), which expressly states that the lemon law does not limit rights or remedies available under any other law. Saturn's proposed release "would have barred any suit against anyone about anything"¹⁶ having to do with the car. This type of release puts a consumer into the position that, to obtain lemon law relief, he or she would have to forfeit any other cause of action. Gosse v. Navistar International Transp. Corp.¹⁷ illustrates the practical effect this can have. Gosse held that nonlemon law claims related to a faulty vehicle - such as a personal injury claim - must be asserted in a separate nonlemon law claim. The consumer's reluctance to sign the proposed release in Chariton was therefore justified, and did not "suspend time in this case."¹⁸

The Chariton court reiterated its holding in Church stating: "regardless of the status of negotiations, the Lemon Law requires that the manufacturer provide a refund within thirty days or the Lemon Law has been violated."¹⁹ In a tag line worthy of Arnold Schwartzenneger in a Terminator flick, the court concluded: "There are no excuses."²⁰ However, the Chariton court also held that a manufacturer may insist that all persons named as owners on the title sign off on the title.

In its order for oral argument, the Chariton court requested additional briefing and argument on whether there is an "implied duty of good faith and fair dealing within the lemon law" and on whether a "claim of unfair dealing against the vehicle owner and/or the owner's attorney obviates the necessity of complying with the thirty day rule." The court also requested, and received, an amicus brief from the Wisconsin Department of Justice.

Underlying this additional briefing was Saturn's contention that the consumers' attorney, when time was of the essence, failed to promptly return Saturn's phone calls during the negotiation process and then used regular mail instead of fax to respond to requests for information Saturn needed to calculate a correct refund. These actions allegedly impeded Saturn getting the refund completed within the 30-day window.

After briefing and oral argument, the Chariton court declined to address whether the consumer has a duty to communicate promptly with the manufacturer, since Saturn had all the information it needed by the 22nd day. Therefore, "[t]his was not a case where the manufacturer was lost at sea due to the consumer's alleged evasiveness."²¹

Where this good faith issue will go in the future is anyone's guess. The manufacturers' concern about the process being abused by dilatory tactics will have to be weighed against the lemon law's original intent to equalize the parties' bargaining positions and the case law that has articulated a bright-line refund test to encourage swift resolution.

Endnotes

1 Dieter v. Chrysler Corp., 2000 WI 45, 234 Wis. 2d 670, 610 N.W.2d 832 (2000).

2 Id., 234 Wis. 2d 670, 19, citing Hughes v. Chrysler Motors Corp., 197 Wis. 2d 973, 982, 542 N.W.2d 148 (1996).

3 Dieter v. Chrysler Corp., 229 Wis. 2d 481, 600 N.W.2d 201 (Ct. App. 1999).

4 Wis. Stat. § 218.015.

5 Wis. Stat. § 218.015(2)(a).

6 There is a distinction between dealer-installed aftermarket accessories approved by the manufacturers as here, which are covered by lemon law, and dealer-installed nonmanufacturer-approved accessories that are not covered. See Malone v. Nissan Motor Corp. in U.S.A., 190 Wis. 2d 436, 442, 526 N.W.2d 841 (Ct. App. 1994).

7 Dieter, 234 Wis. 2d 670, 16.

8 Id., 17.

9 Id., 21.

10 Id., 22.

11 Hughes, 197 Wis. 2d 973.

12 Chariton v. Saturn Corp., 2000 WI App 148, ___ Wis. 2d ___, 615 N.W.2d 209 (Ct. App. 2000).

13 Hughes, 197 Wis. 2d 973.

14 Church v. Chrysler Corp., 221 Wis. 2d 460, 585 N.W.2d 685 (Ct. App. 1998).

15 Id. at 469.

16 Chariton, 2000 WI App 148, 5.

17 Gosse v. Navistar International Transp. Corp., 2000 WI App 8, 14, 232 Wis. 2d 163, 605 N.W.2d 896 (Ct. App. 1999), rev. denied Feb. 22, 2000.

18 Chariton, 2000 WI App 148, 5.

19 Id.

20 Id.

21 Id., 3, n.3.

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