April 16, 2014 – If you or someone you know recently purchased or leased a vehicle, consider this: Wisconsin’s new “lemon law” considerably alters procedures and remedies in consumer cases alleging vehicle defects against the manufacturers.

Under 2013 Wisconsin Act 101, which changes the state’s lemon law, persons who purchased defective cars on or after March 1, 2014, are subject to reduced damage provisions and a shorter period in which to file lemon law claims, among other changes.

Vince Megna, a lawyer at Aiken & Scoptur S.C. in Milwaukee, who has worked on lemon law cases for more than 25 years, says the old lemon law was considered “one of the best in the country,” and Wisconsin’s consumers now have much less protection.

But attorneys for large car manufacturers, such as General Motors and Ford, say the old lemon was “onerous” and “one of the worst lemon laws in the country.”¹

In testimony, counsel for General Motors said the old lemon law “has provided the local and national plaintiff’s lemon law bar a method to manipulate the requirements of and abuse the process for utilizing the Wisconsin Lemon Law.”

The wisdom of Wisconsin’s new lemon law may trigger different reactions, depending on one’s perspective. But this article outlines provisions of the new law, with Megna’s perspective on the law’s practical impact on consumers (and their lawyers).

Wisconsin Lemon Law

Under Wisconsin’s lemon law, a manufacturer must replace a purchased “lemon” with a “comparable new motor vehicle” or provide a full refund to the consumer. For leased vehicles, consumers can get full refunds for amounts paid under the written lease.

Vehicles must have a “nonconformity,” a condition or defect “which substantially impairs the use, value or safety of a motor vehicle, and is covered by an express warranty applicable to the motor vehicle or to a component of the motor vehicle.”²

A lemon must be leased or new, and the lemon law applies so long as the vehicle was under warranty and the owner of the vehicle can enforce the warranty.³ Demonstration cars and used cars driven primarily by executives of a licensed manufacturer, distributor or dealer, or also subject to the lemon law. 

To be considered a lemon, the vehicle must have the same nonconformity after four repair visits to an authorized vehicle dealer, or if the motor vehicle has been out-of-service “for an aggregate of at least 30 days because of warranty nonconformities.”⁴ Out-of-service means the consumer could not drive the vehicle.

Once one of these occurrences happen, the consumer can offer to transfer title of the lemon to the manufacturer. The consumer can elect to receive a refund or a comparable new motor vehicle. At this point, the old and new lemon laws part ways.

Replacement or Refund

The new law does not change the time period for receiving refunds. If the consumer elects to receive a refund, the manufacturer must provide one within 30 days of receiving the consumer’s offer to transfer title based on the nonconformity.

But the new law is different for consumers who elect to receive replacement vehicles. Under the old lemon law, the manufacturer had to provide a comparable new motor vehicle within 30 days of receiving the offer to transfer title from the consumer.⁵

Under the new lemon law, the consumer must elect to receive replacement vehicle (as well as refunds) on a form developed by the Wisconsin Department of Transportation.⁶ The consumer must properly provide specific information, including:

• the consumer's contact information;
• identification of the motor vehicle dealer from which the motor vehicle was purchased, the date of delivery of the motor vehicle from the dealer, and the purchase price of the motor vehicle;
• identification of any holder of a perfected security interest in the consumer's motor vehicle;
• the mileage of the motor vehicle at the time the first nonconformity is asserted to have occurred;
• an election for a refund or a new comparable vehicle; and
• an itemization of any other damages claimed by the consumer.⁷

Within 30 days of receiving this notice, the manufacturer must agree in writing to provide a comparable new motor vehicle, but retains the right to provide a refund if a new car, upon due diligence in locating one, cannot be provided.⁸ The manufacturer has 45 days from the date the manufacturer received notice from the consumer to provide a new car or a refund.⁹

This provision differs from the old lemon law, which did not allow the manufacturer to provide a refund in lieu of a replacement vehicle if the consumer elected a replacement.

For “heavy duty vehicles” – vehicles that weigh more than 10,000 pounds – the manufacturer has 120 days after receiving the consumer's notice to provide a comparable new vehicle while retaining the right to provide a refund instead.¹⁰

Giving the manufacturer a right to provide a refund in lieu of a replacement car (or heavy duty vehicle) amounts to giving the manufacturer the choice to provide a refund, says Megna. Under the old law, he says, it was the consumer’s choice.

“The new law essentially lets the manufacturer provide a refund even if the consumer wants a replacement,” says Megna, an outspoken critic of the new law. “Replacements allowed the consumer to keep the same financing arrangement they had negotiated.”

With a refund, he says, a consumer loses the previous financing deal. If circumstances have changed since the consumer bought the lemon, the consumer may pay more in interest for a comparable vehicle or lose the ability to purchase a new car at all.

“This has come up many times over my 25 years,” Megna says. “The consumer can make the payments but their financial situation has changed. Maybe somebody lost a job. Now they don’t qualify for a loan anymore. This provision really hurts consumers.”

Statute of Limitations and Claim Waivers

The new law creates a three-year statute of limitations to file lemon law claims. Actions must be commenced “within 36 months after first delivery of the motor vehicle to a consumer.”¹¹ Megna says consumers previously had six years to file lemon law claims.

With 30-day notice requirements and additional time to replace a vehicle or provide a refund, the three-year statute of limitations becomes a time trap for consumers, says Megna.

“With regard to the heavy duty trucks, the three-year period could be shortened by five months,” Megna said. “And with regard to the regular vehicles, the limitations period could be 75 days shorter, or even twice that if there’s something wrong with the notice.”

In addition, consumers who purchase heavy duty vehicles waive their right to file lemon law claims if they sign “negotiated written settlements” with vehicle manufacturers.¹²

Under the old lemon law, all consumers could accept a manufacturer’s attempt to address the nonconformity by accepting extended warranties or other remedies offered by the manufacturer, but any future lemon law claim was not waived by that decision.

Under the new law, consumers who buy regular vehicles can still file lemon law claims despite signing such written settlement agreements. But Megna says purchasers of any vehicle over 10,000 pounds, including motor homes, should beware.

“If a truck driver or other consumer of a heavy duty vehicle agrees in writing to let the manufacturer do something to address the nonconformity, such as extend the warranty or make a few payments, the lemon law can never be applied to that vehicle,” he said.

No More Double Damages

Under the old lemon law, consumers who prevailed in a lemon law action were entitled to twice the amount of pecuniary loss, together with costs, disbursements and reasonable attorney fees, and equitable relief the court determines appropriate.

Under the new lemon law, double damages are eliminated. A consumer is no longer entitled to receive twice the amount of pecuniary damages. Megna says double damages allowed consumers to fight back against well-heeled manufacturers.

“The purpose of double damages was to punish the auto industry, which treated people so badly,” Megna said. “That was the purpose. It was to give the little guy leverage and level the playing field with these giant companies. That’s all gone now.”

"The double damages went to the consumer; it didn't go to attorneys," Megna said. "Lawmakers claimed this was necessary to stop so-called predatory lawyers, but all the law does is create major obstacles for consumers who have been wronged."

In an opinion, Wisconsin Supreme Court Justice William Bablitch had recognized the purpose of double damages more than a decade after the original lemon law passed in 1983.

“[A] potential recovery must be large enough to give vehicle owners the incentive to bring suits against these corporations,” Justice Bablitch wrote. “The threat of double damages increases the bargaining power of individual consumers.”

Attorney Fee Cap Applies, Too

The new law, Megna says, provides much less incentive to comply with the lemon law and gives consumers much less bargaining power to assert their rights.

Together with another law that creates a presumptive cap on attorney’s fees in consumer cases at three times the amount of damages, Megna says Wisconsin's consumer laws are devastating to lower income car buyers. That is, many cases involve misrepresentations, under Wis. Stat. section 100.18, involving used cars sold for under $10,000.

Megna says he will continue to take the low damage misrepresentation cases because he is committed to consumers and his firm has the resources.

But many consumer attorneys, he says, cannot afford to take low damages cases when the attorney fees are capped.

“Those are the types of cases we’ve handled for 25 years, and there’s a ton of them out there,” Megna said. “But those are really hard to take now. Who can afford to take a case on a $3,000 car with fees capped at $9,000? What if the case went to trial?”

Megna also noted that under the lemon law, consumers can get damages if manufacturers or dealers refuse or don't attempt to make repairs of a nonconformity that has been reported to them by the consumer. 

In one case, the jury gave his client $3,100, which was doubled to $7,200. The court awarded attorney fees of $220,000, based on the multi-year work that Menga expended to fight the case. Under today’s law, the consumer would get $3,100, and presumptive attorney fees would be capped at $9,300.

“Some judges might say, ‘we see you did all this work over the course of several years, and the presumptive fee cap is not reasonable.’ Others judges might not,” he said. "The previous law allowed consumers to fight back."

Megna says he’ll rely more heavily on the federal Magnuson-Moss Warranty Act, which many consumer lawyers used before state’s began passing lemon laws. It allows consumers to collect some damages, but no refund or replacement is available.

That federal law has fewer teeth to protect consumers, he says, but there is a six-year statute of limitations and no attorney fee cap applies. “We have court decisions saying the lemon law was enacted so that we don’t have to rely on archaic laws like Magnuson-Moss. Now we are back to that,” Megna said.

Still, Megna encourages other attorneys to take these vehicle-related cases. "We have to find new ways to work with what we've got now," he said. "Consumers really need attorneys to continue to fight for them."

Endnotes

¹ Testimony  on 2013 Assembly Bill 200 (2013).

² Wis. Stat. § 218.0171(1)(f).

³ § 218.0171(b).

⁴ § 218.0171()(h).

⁵ § 218.0171(2)(c) (2009-10).

⁶ § 218.0171(8). The Department of Transportation (DOT) has not posted a form to reflect the new law’s requirements on the DOT website, last visited on April 15, 2014. An old form may be used for “offers to transfer title” for car purchases made before March 1, 2014. But Megna says this form is not adequate for purchases made on or after March 1, 2014.

⁷ § 218.0171(8)(b)

⁸ § 218.0171(2)(cg)1. Also, if the consumer has not provided all information to the manufacturer “to the satisfaction of the manufacturer,” the manufacturer “may,” within 30 days of receiving the form, request that the consumer provide additional information. If the manufacturer makes a request for additional information, the time period for providing a refund or a replacement vehicle does not start running until the additional information is received. § 218.0171(8)(c).

⁹ Id.

¹⁰ § 218.0171(2)(cg)2.

¹¹ § 218.0171(7)(a).

¹² § 218.0171(6m).