Vol. 76, No. 11, November 2003

Lemon Law Practice Pointers

by Stephen J. Nicks

After 20 years and numerous appellate decisions, it is amazing that there are still fresh "how, when, and what" Lemon Law cases of widespread, practical importance. The cases discussed here provide concrete answers to issues that can occur with the next client who has motor vehicle problems.

In earlier cases, both the Wisconsin Supreme Court and Court of Appeals consistently emphasized the remedial nature of the Lemon Law and liberally construed it to the consumer's benefit.¹ In four of the five cases discussed here, however, the remedial nature of the Lemon Law did not provide this saving grace for the plaintiffs, even though each had a vehicle that qualified as a lemon. The court of appeals, in each case, acknowledged the law's remedial nature, but found that a consumer's failure to follow what the court read as the "plain language" on how and when to claim relief, doomed relief. The fifth case, on what the law covers, reverted to the remedial norm to arrive at significant consumer relief.

How to Claim Relief

A consistent theme of Lemon Law cases in Wisconsin has been bright-line certainty, especially in disputes involving the 30-day requirement of Wis. Stat. section 218.0171(2)(c) for a manufacturer to provide a replacement or refund, or face double damages plus reasonable attorney fees. The strict application of this 30-day requirement culminated in Chariton v. Saturn Corp.,² with the Terminator-like tag line: "There are no excuses."

Similar strictness has now come to the level of specificity required in the consumer's demand for Lemon Law relief, which triggers the 30-day response period. Berends v. Mack Truck Inc.³ is a prime example of the forehead-slapping, "wow, that could have happened to me," type of misplaced reliance. In Berends, there was no dispute that the consumer's vehicle qualified as a lemon - it had both been returned for the same defect more than four times and been out-of-service for more than 30 days (only one criterion need be met) within the first year from delivery.⁴ Once the lemon threshold is met, a consumer must make his or her demand for relief to the manufacturer. The statute does not prescribe an exact form of this demand.

Berends sent a timely demand letter to Mack Truck that conformed to a form letter the Wisconsin Department of Transportation (DOT) had distributed at one time to help consumers seek Lemon Law relief. (The DOT has since changed the form.⁵) The Berends letter stated in part:

"At this time, Mr. Berends is still having the same warranty problems with his vehicle. These defects have substantially impaired the use, safety and market value of his vehicle. Mr. Berends, therefore, demands that you either repair these defects within seven business days, accept the return of his vehicle and within 30 days of the return, provide him with a vehicle acceptable to him, or provide him with a refund calculated within accordance of the Lemon Law."

Mack Truck did not respond, and then, when sued for Lemon Law relief, moved for summary judgment on the ground that the notice was defective. The circuit court granted summary judgment to Mack Truck, and the court of appeals affirmed, finding that the choice of remedies section of the Lemon Law⁶ requires the consumer to elect the specific remedy - either a replacement or a refund - and that leaving that choice to the manufacturer was a fatal defect. The court further found that the consumer's suggestion that he would be satisfied if the vehicle were repaired within seven days also rendered the notice fatally defective, since it was inconsistent with bright-line triggering of Lemon Law relief.

Berends argued that he ought not be penalized for using a DOT-suggested form "when that form does not directly conflict with the provisions of the Lemon Law statute." The court of appeals sympathized "with any consumer who unknowingly used a DOT form with language contrary to the statutory requirements," but found that such was not a basis to conclude that proper notice had been provided. No Lemon Law relief was granted because the court found it "only fair" to require strict compliance, given the rigidity of the 30-day time frame in which a manufacturer must respond to a demand or suffer the significant penalties of double damages and attorney fees.

The obvious practice pointer is to make sure you are not using this outdated notice form, even though you may have used it without manufacturer objection in the past. Interestingly, this same issue was raised in Schonscheck v. Paccar Inc.⁷ In Schonscheck, the same demand letter was used, but the manufacturer did not raise the defective notice issue until motions after verdict, after Berends had been decided. The court of appeals ruled that raising it at that late point constituted waiver, and so proceeded to the merits.

The Berends court declined to address whether section 218.0171(2)(c) also requires the consumer's notice to explicitly state an intention to transfer title, or whether such an offer can be inferred from the consumer's offer to return the vehicle. In a footnote, the court noted "for the reader's benefit ... the most prudent approach would be to explicitly offer to transfer title."⁸

The other shoe dropped in Garcia v. Mazda Motor of America,⁹ decided on Sept. 25, 2003. Garcia's vehicle qualified as a lemon, and she requested a replacement from Mazda. Her request, therefore, met the Berends requirement of specific remedy choice. However, she did not explicitly state that in exchange for the replacement vehicle she would transfer title. The court of appeals, in a 2-1 decision with a well-reasoned dissent, again relied on a "plain language" reading of section 218.0171(2)(c), this time to find that the consumer must "offer to the manufacturer ... to transfer title of that [nonconforming] motor vehicle," to qualify for relief. The majority recognized the harshness of this plain reading in denying relief to Garcia as "unfortunate," but put the solution to the legislature "[i]f the requirement of offering to transfer title is a technicality that causes more harm to unwary consumers than it does facilitate the actual transfer of title to the manufacturer."

As noted earlier, the DOT has crafted a new Lemon Law demand form. This demand form meets both the Berends and Garcia requirements. The form can be found on the DOT Web site under the hotlink of Motor Vehicle Lemon Law Notice.¹⁰ Its use would be prudent given how strictly the notice requirement has been interpreted, and how harsh the result is for failure to comply with the requirements.

When to Claim Relief

Now knowing that a specific choice of remedy and an offer of title must be articulated in the demand for Lemon Law relief, when must the demand be made? The next two cases demonstrate just when such a demand is "too late."

In Smyser v. Western Star Trucks Corp.,¹¹ the consumer had vibration problems with his $87,000 truck almost immediately after delivery. Many repair attempts were made, and there was no dispute that the truck qualified as a lemon. The consumer, however, did not make a demand for Lemon Law relief at that point, but instead worked out a deal with the dealership to take back the truck and pay off the loan. The truck was parked at the dealership, the keys were given to a salesman, and the consumer signed a power of attorney authorizing the dealer to obtain clear title by paying off the lender. Some 10 months later, after the truck had been sold to a third party, the consumer wrote to the manufacturer demanding Lemon Law relief.

The court in Smyser found that the consumer was not entitled to Lemon Law relief because, since he no longer owned the vehicle, he could not perform the "clear and unambiguous" duties the Lemon Law requires, among them, the obligation to deliver the vehicle and title to the manufacturer when a refund is sought. At its essence, the court equated continued ownership of the vehicle to still being a "consumer" under Wis. Stat. section 218.0171(1)(b). The court recognized the law's remedial purpose in favor of consumers, but stated that it would not "rewrite" clear and unambiguous terms of the Lemon Law.

This rule of ownership when making the Lemon Law relief demand is consistent with how the court in Varda v. General Motors Corp.¹² dealt with leased vehicles. In Varda, the consumer did not make his demand until after his lease expired and after he had purchased the vehicle. There was no dispute that the vehicle qualified as a lemon; the only dispute was the timeliness of the demand for Lemon Law relief. The Varda court, like the court in Smyser, found that the statute's general remedial nature could not overcome its plain language reading. The court's reading required that in order to be a "consumer" under the statute, the Lemon Law demand be made before the lease expires, since remedies for leased vehicles differ from remedies for purchased ones. Eventual ownership of the vehicle did not overcome this required procedure. While the damages issue was not reached in Varda, insight into the correct measure of damages in a properly filed Lemon Law claim regarding a leased vehicle can be found in Estate of Riley v. Ford Motor Co.¹³

What the Lemon Law Covers

Schonscheck v. Paccar Inc., d/b/a Kenworth Truck Co.,¹⁴ plugs the last major gap of what is covered by the Lemon Law. Kenworth maintained that it did not have Lemon Law liability for a major component (the engine) that it installed because that component was excluded from its express warranty. In this case, the engine installed by Kenworth was a Cummins diesel and was protected by a separate warranty issued by Cummins.

As a backdrop to this case, in Harger v. Caterpillar Inc.¹⁵ the court of appeals had ruled that a component engine manufacturer is not subject to the Lemon Law. Harger reasoned that the legislature could not have intended component manufacturers to have Lemon Law exposure because of both the practical and financial implications: they don't have completed vehicles on hand for replacements, and the financial exposure would be unfair given their relatively modest contribution to the whole vehicle's value. So, if Kenworth's argument prevailed, the consumer would be without any Lemon Law coverage for the most important and expensive components of a vehicle, if those components were warranted by others and excluded from the vehicle manufacturer's warranty.

The Schonscheck court found vehicle manufacturers liable for Lemon Law coverage for components¹⁶ under three alternative theories. First, the plain language of the statute rendered the manufacturer liable even for components it did not warrant. Wis. Stat. section 218.0171(2)(a) was read to hold the vehicle manufacturer responsible for Lemon Law relief for all express warranties, not just its own. As the court put it, "had the legislature intended to limit the scope of the statute to manufacturer's express warranties, it could have done so. It did not." The court went further, saying that even if the statutory language were ambiguous, the legislative history required such liability. And finally, since the Lemon Law also prohibits waiver of consumer rights, the warranty structure attempted here could not stand, since it operated to totally exclude Lemon Law coverage for major components.

The result in Schonscheck is extremely important to purchasers of big rigs and motor homes. Motor home manufacturers oftentimes can be described more accurately as assemblers of component parts. Schonscheck now clearly establishes that the vehicle manufacturer is responsible for Lemon Law relief even for those components that it has specifically excluded from its warranty and that are warranted by others.

Endnotes

¹Hughes v. Chrysler Motors Corp., 197 Wis. 2d 973, 542 N.W.2d 148 (1996); Church v. Chrysler Corp., 221 Wis. 2d 460, 585 N.W.2d 685 (Ct. App. 1998); Dieter v. Chrysler Corp., 2000 WI 45, 234 Wis. 2d 670, 610 N.W.2d 832.

²2000 WI App 148, 238 Wis. 2d 27, 32, 615 N.W.2d 209.

³2002 WI App 69, 252 Wis. 2d 371, 643 N.W.2d 158.

⁴Wis. Stat. § 218.0171(1)(h).

⁵See the DOT Web site, www.dot.wisconsin.gov/safety/consumer/rights/lemonlaw.htm.

⁶Wis. Stat. § 218.0171(2)(b)2.

⁷2003 WI App 79, 261 Wis. 2d 769, 661 N.W.2d 476 (review denied).

⁸Berends, 2002 WI App 69, ¶1 n.2, 252 Wis. 2d 371.

⁹Garcia v. Mazda Motor of America, No. 02-2260, 2003 WL 22207874 (Wis. Ct. App., Sept. 25, 2003).

¹⁰See supra note 5.

¹¹2001 WI App 180, 247 Wis. 2d 281, 634 N.W.2d 134.

¹²2001 WI App 89, 242 Wis. 2d 756, 626 N.W.2d 346.

¹³2001 WI App 234, 248 Wis. 2d 193, 635 N.W.2d 635.

¹⁴2003 WI App 79, 261 Wis. 2d 769, 661 N.W.2d 476.

¹⁵2000 WI App 241, 239 Wis. 2d 551, 620 N.W.2d 477.

¹⁶While not specifically defined by the Schonscheck court or the Lemon Law, a component can only mean an integral part of a motor vehicle installed by the manufacturer. For a discussion of how "accessories," which are dealer-installed items, are treated for Lemon Law purposes, see Stephen J. Nicks, Accessories Under the Lemon Law, 75 Wis. Law. 18 (March 2002).

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