California was the first state to require a permanently affixed label on the driver’s door frame. A permanent decal identifies a lemon law buyback to prospective purchasers throughout the entire chain of ownership. If nothing else, this ensures that California consumers know when they are purchasing such a vehicle, even if the title has been washed in another state.
While some other states require window stickers that are more conspicuous, the lemon label that California requires is intended to be permanent. The law prohibits its removal. The costs are minimal, and are one-time only.
A permanent label also serves a useful purpose for auction companies and dealers. Vehicles are naturally transportable, and lemon vehicles may undergo several wholesale transactions before being resold to a retail consumer. A permanent decal indicates that additional paperwork and disclosures are required in connection with that vehicle, making it easier to comply with state lemon disclosure laws.
As an excellent example of a manufacturer’s misuse of the terms goodwill and customer satisfaction, consider the 1996 administrative action in California against Chrysler Corporation regarding the disposition of 119 repurchased vehicles. Chrysler contended that all 119 vehicles had been customer satisfaction buybacks, and thus not subject to the title branding, disclosure, and warranty requirements of California’s lemon law.
But Chrysler’s own statements and records acknowledged that the vehicles were actually lemon law buybacks. To begin with, Chrysler had repurchased 48 of the 119 vehicles following decisions in favor of the consumers in Chrysler’s own dispute resolution process. Continue reading Chapter 13: Lemon Laundering (Page-06)
It doesn’t matter whether the manufacturer bought back the vehicle due to an arbitration award, a court order, or so-called customer satisfaction. It doesn’t matter what the manufacturer calls it. If it’s a lemon, any potential secondary owner who might end up with the vehicle should be warned. Lives may well hang in the balance.
Some states, including California, already require title branding and resale disclosure even for goodwill buybacks, in which the manufacturer has never formally acknowledged an obligation to take back the vehicle.
Trade Assists
A trade assists means that the owner trades in a defective vehicle to the selling dealer for a new vehicle. Lemon owners may be desperate to get rid of their vehicles. As a result, they are sometimes induced to pay for a more expensive model, instead of choosing a replacement or refund as the lemon laws provide. Continue reading Chapter 13: Lemon Laundering (Page-05)
Latent defects are defects that are not apparent when the car is first purchased but appear some time later.
Under many state laws, a consumer buying a used lemon law buyback is entitled to notice of the history of problems that the first buyer experienced. These disclosures usually do not advise them of any existing defects, but only of the vehicle’s history of problems. The disclosure provisions are designed to alert prospective purchasers that the first owner experienced serious problems with the vehicle.
A vehicle’s history as a lemon law buyback is significant for several reasons. Cars with repeated problems, or that are out of service for extended periods, may have underlying structural or design flaws. They may be repaired with parts or components that have the same design flaws that caused the original problems. And they usually have a much lower resale value. Continue reading Chapter 13: Lemon Laundering (Page-04)
Just as laundered money appears to be untainted, so does the laundered lemon vehicle. The new owner-who thinks he or she is getting a low mileage, relatively new car for an excellent price-may in fact be signing a death warrant. At the very least, some unsuspecting purchaser is about to enter the gauntlet again.
Isolated Cases or Big Business?
The number of damaged cars being resold is staggering. According to the National Association of Independent Insurers, approximately two and a half million vehicles in any given year are so badly damaged in accidents that they are declared total losses. Nevertheless, roughly 40 percent are rebuilt and put back on the road. Of this number, as many as one hundred thousand may be repurchased lemons, according to Consumers for Auto Reliability and Safety (CARS), a consumer watchdog group in California. Continue reading Chapter 13: Lemon Laundering (Page-03)
Many times, the manufacturer or dealer simply sells lemon vehicles at auction, “as is.” The auction company is usually located in another state, where the lemon law is different. Ideally-for the manufacturer-it will be in a state that does not require any sort of branding, and offers no protection to future purchasers. These states usually do not recognize title notations from other states.
The vehicle is retitled in the name of the auction company, and then retitled again in the name of the dealership-often from yet another state-that purchases it at auction. In the process, any notation that was once on the title disappears. The title to the car has been washed or laundered. Continue reading Chapter 13: Lemon Laundering (Page-02)
“Every crime depends on somebody not waking up too soon.” -G. K. Chesterton
What Is Laundering?
Laundering is the act of taking something dirty and making it clean. Money received from the sale of illicit drugs is frequently laundered to make it appear as though it were legitimately earned. It is an illegal activity and carries heavy penalties.
Lemon Vehicle Laundering
By now you know what a lemon is. You may even be driving one. In chapter 10, you learned that a manufacturer must either repurchase your lemon or replace it with a comparable vehicle. Either way, the manufacturer is stuck with a car that has been through numerous failed repair attempts. The vehicle may be entirely unsafe to drive. Continue reading Chapter 13: Lemon Laundering (Page-01)
In states with civil penalties, the manufacturer faces a much more unpleasant prospect if it loses at trial. The threat of having to pay two or three times as much is a strong incentive for manufacturers to settle lemon law claims voluntarily. The consumers get what they deserve, no less, and the . . . → Read More: Chapter 12: Litigation (Page-16)
A settlement conference is not arbitration. It is not binding on either side. A mediator cannot force the manufacturer to repurchase your car, but a mediator also cannot force you to take less than you deserve. Mediation can resolve a case only if everyone agrees.
Civil Penalty
California’s lemon law has a special provision for something called a civil penalty. The lemon laws of a few other states have similar provisions. The civil penalty is an additional penalty, beyond actual damages, that can be imposed on manufacturers for failure to comply with the lemon law. In California, it can be up to two times the consumer’s actual damages. Continue reading Chapter 12: Litigation (Page-15)
In the course of your lawsuit, you will probably have to participate in some form of discovery. Discovery is the legal term for each party’s right to learn things from the other side. This includes the right to ask questions, request documents, or inspect property.
In a typical lemon law case, the manufacturer will want to take your deposition. In a deposition, the manufacturer’s attorney asks you questions, which you must answer under oath. Your attorney will be present to protect you against improper questioning. Continue reading Chapter 12: Litigation (Page-14)
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