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Consumer Warranty Law: 19.10.3.2.5 Administrative enforcement

Administrative enforcement authority for automobile repair laws is not uniform; authority may be vested in the state attorney general, the secretary of state, the motor vehicle commissioner, the commerce department, or an administrative board or commission. A regulatory body may be authorized only to initiate investigations. Administrative remedies include civil penalties,295 license suspension and revocation,296 and cease and desist orders.

Consumer Warranty Law: 19.10.3.3 Repair Shop Licensing

Several states license automobile repair shops or mechanics. These statutes often prohibit unregistered or unlicensed practice. Generally, but not always, the licensing statute is applicable only to those who repair mechanical parts, not to body and fender mechanics, and not to service stations or other employees.297 Garages, repair shops, and towing services may also be regulated by municipal ordinances.

Consumer Warranty Law: 14.2.11.9.3 Attorney time compensable under the lemon law

Fees should be awarded for all work on lemon law issues, even if those issues are common to other claims on which fees are not available.618 When the consumer prevails on a lemon law claim but is unsuccessful on a related warranty claim, no reduction is appropriate because “the jury’s verdict provided the plaintiff with substantial relief.”619

Consumer Warranty Law: 14.2.11.9.5 When lemon law does not provide for fees

When a lemon law does not explicitly provide for fees, the failure of a manufacturer to comply with the consumer’s refund or replace remedy is likely to be a state UDAP violation.629 Most UDAP statutes provide attorney fees to prevailing consumers. A Magnuson-Moss Warranty Act or UDAP claim for actual damages can also provide a vehicle for attorney fees.630 Some states have non-UCC laws that allow fee-shifting in warranty cases.631

Consumer Warranty Law: 14.2.11.9.7 Costs and expert witness fees

Many lemon laws allow the consumer to recover “costs and expenses” for the litigation. The Arkansas Supreme Court construed this language as intending to make the consumer whole, and allowed reimbursement for copying and mileage costs that went beyond the general court rule on taxable costs.644 The court held that a broad construction of the statute was consistent with the legislature’s intent to address the hardship a defective vehicle causes a consumer.

Consumer Warranty Law: 14.2.11.9.8 Tax consequences to consumer of fee recoveries

It is important to be aware of potential tax issues that may arise in new car defect cases when the award includes the consumer’s attorney fees. Until recently, when a lemon law case is resolved, the manufacturer would send a lump sum check to the consumer’s attorney that included both the consumer’s damages and an award for the consumer’s attorney fees incurred in prosecuting the lemon law action. The manufacturer would issue a Form 1099-MISC to the consumer’s attorney for the entire amount, while not issuing any tax document to the consumer.

Consumer Warranty Law: 14.2.8.2 Must Defect Still Exist at Time of Hearing?

A consumer has no right to a refund or replacement if the manufacturer cures the defect within the allowed number of repair attempts.348 If a consumer requests a replacement or refund in the proper manner, the manufacturer’s eventual cure of the defect is not sufficient when the cure occurs after the maximum number of attempts349 or the maximum time period set forth in the statute has elapsed.350 The right to a lemon law remedy is determined by the

Consumer Warranty Law: 14.2.8.4 Effect of Consumer’s Inability to Return Car

The exact terms of the state law and the circumstances of the consumer’s loss of the vehicle’s possession will determine whether a consumer can bring a lemon law claim when no longer in possession of the vehicle. Some lemon laws offer a damage remedy which may be available when loss of possession prevents a refund or replace remedy.358 Losing possession before defendants can inspect the vehicle can create spoliation of evidence problems.359

Consumer Warranty Law: 14.2.8.5 Is a Replacement Vehicle Comparable?

Lemon laws may specify that a replacement vehicle must be both new and comparable, just comparable, just new, or comparable and “acceptable to the consumer.” These different statutory provisions may be essentially the same because statutes that require a vehicle to be “comparable” probably intend this concept to also mean “new.”371

Consumer Warranty Law: 14.2.8.7.1 Components of the refund

Lemon law refund provisions should be construed to make the consumer whole.383 Many lemon laws require the manufacturer to refund the “purchase price” or “full purchase price.” A number of lemon laws define these terms to include not only the cash payments and trade-in allowance, but also optional purchases,384 sales tax,385 and registration fees.386 A lessee may not be entit

Consumer Warranty Law: 14.2.8.7.3 Incidental and consequential damages

Some lemon laws require that the manufacturer reimburse the consumer for incidental or consequential damages, and a few even specify which incidental or consequential damages are reimbursable.411 Even when such damages are not recoverable, the consumer may be able to bring an action to recover such damages under the UCC or some other theory. The consumer need not elect one remedy over another unless the lemon law so requires.412

Consumer Warranty Law: 14.2.8.8 Deduction from Refund for Reasonable Use Allowance

Almost all lemon laws provide that any purchase price returned to the consumer can be offset by a “reasonable allowance for use,” thereby reducing the consumer’s refund to the extent that the consumer has used and benefited from the car.419 These provisions recognize that the buyer may continue to use the car while pursuing lemon law remedies without the risks present under UCC § 2-606 that use after revocation will be found to bar cancellation.420

Consumer Warranty Law: 14.3.1 General

State lemon laws provide a refund or replace remedy closely akin to the UCC revocation of acceptance, with certain advantages over the UCC remedy.654 There are situations in which the consumer is better served by seeking UCC revocation of acceptance instead of lemon law remedies.

Consumer Warranty Law: 14.3.3.1 Major Defects

To revoke acceptance under the UCC, the defect must substantially impair the vehicle. General standards for substantial impairment are set out in § 8.3.2, supra. This section examines case law determining whether new car defects are substantial impairments.

In applying the substantial impairment test to vehicles, courts have held that the following sorts of vehicles had substantially impaired value:

Consumer Warranty Law: 14.3.3.2 Cumulative Effect of Minor Defects

The cumulative effect of minor defects, none of which alone would substantially impair value, can be sufficient to justify revocation if in violation of a warranty. In Rester v. Morrow,732 the car had a gasoline fume odor, a malfunctioning air conditioner, a broken oil indicator gauge, missing chrome, soiled carpets, and other less significant problems, and the battery required repeated replacement.