Wisconsin State Legislature Alliance of Automobile Manufacturers (including GM, DaimlerChrysler, Ford, Toyota, BMW, Volkswagen, Mitsubishi Motors, Porsche and Mazda) Truck Manufacturers Association (including Mack Truck, PACCAR, International Truck, Freightliner, Volvo) Recreational Vehicle Industry Association Wisconsin Automobile & Truck Dealers Association Wisconsin Manufacturers & Commerce Date: February 17, 2004 Subject: Lemon Law Legislation (LRB 3152/1)
To: From:
Rep. Gundrum and Sen. Zien are circulating legislation relating to revisions to Wisconsin’s Lemon Law. The above groups respectfully request you consider signing on the bill as a co-sponsor. The changes are the result of extensive discussions with interested parties, and for the most part, reflect compromises that Rep. Gundrum and Sen. Zien sought to assure consumers’ interests are enhanced and in no way are compromised. We have a similar interest that the law works as intended. However, for several reasons, the existing law sometimes fails to work for either the consumer or the manufacturer. Under Wisconsin’s Lemon Law, if the manufacturer fails to provide a comparable vehicle or refund for a “lemon” within 30 days of the vehicle owner’s request, the law requires the courts to award him or her double any pecuniary loss, together with costs, disbursements and reasonable attorney fees. The courts have interpreted “pecuniary” loss to include the vehicle’s purchase price. Wisconsin is the only state in the nation to provide for mandatory double damages under a lemon law. This reading of the law creates unintended consequences; namely, a substantial incentive to litigate lemon law claims. In turn, this incentive, along with procedural defects in the law, often frustrates attempts to implement the dispute resolution programs envisioned by the law. (See the attached article from James L. Brown, J.D, Director of the Center for Consumer Affairs, University of Wisconsin – Milwaukee.) Clearly, the legislative preference for dispute resolution is frustrated when certain lemon law lawyers see double damages and attorney fees as a more lucrative remedy. It is not uncommon for these lawyers to reject awards granted by arbitrators in an effort to obtain more profitable rewards through litigation. For example, the Council of Better Business Bureaus, the umbrella organization for Better Business Bureaus throughout the United States, found that for Wisconsin cases where the consumer was not represented by an attorney, 88% of the consumers accepted the arbitrator’s award of a refund or a replacement vehicle. For cases in which the consumer was represented by an attorney, only 9% accepted the arbitrator’s award.
They also found that the common thread in these and other cases is that consumers were getting a refund or replacement vehicle that makes the consumer whole, which is what the lemon law intended. Yet these awards are being rejected and lawsuits are being filed, which is not what the lemon law intended. The path to the double damages lottery in lieu of early settlement is made all too easy due to the inflexible 30-day period to provide a comparable vehicle, which is sometimes an impossible task, particularly for heavy-duty commercial trucks and RVs that are custom built. For example, a truck owner asked for a comparable commercial truck to replace one that was several years old. No new trucks met the older truck’s specifications (e.g., the engine in the older vehicle and various installed items were no longer available from the factory). In this all too common instance it was a manufacturing impossibility to custom build a truck that met the customer’s specifications in 30 days. Yet, there are no exceptions in the law to accommodate such instances. In addition, certain lemon law lawyers can easily frustrate manufacturers’ reasonable attempts to provide a comparable vehicle. For example, although an auto manufacturer provided a car within the 30-day period, the lemon lawyer argued it was not a “comparable” new vehicle because the original car had pin striping and clear coat (both aftermarket items). The attorney filed suit seeking double damages and attorney fees, since the 30-day deadline could no longer be met. Interestingly, the owner later told the manufacturer that he would have accepted the new vehicle regardless of the aftermarket items but his attorney advised him otherwise. He regretted hiring the lemon lawyer, who he also had to pay $2,500. In another example, a customer requested a replacement vehicle, and a new vehicle was shipped to the dealer and inspected by the customer. But the lemon lawyer refused it as not “comparable” stating the vehicle had 17 inch alloy wheels when the original had 16 inch wheels. Alleging a violation of the lemon law and seeking double damages and attorney fees, the lemon lawyer sued. Clearly, selling cars and trucks in Wisconsin entails higher costs than in other states. For example, the experience of one major auto manufacturer reflects that for Wisconsin the overall repurchase rate is 45% above the national average, lemon law suits are filed at a rate 46% above the national average, and settlement costs are 38% above the national average. Wisconsin is the only state in the nation that holds a top ten position in each of these categories. We believe upon your review you will find the bill is reasonable and does not compromise the underlying precepts of the law. Most important, key provisions help give dispute resolution a chance to work, which is consistent with the legislative intent, and ultimately will provide quicker solutions than the current litigation regime. These provisions are described in more detail in the attached summary. Please consider supporting this legislation. For further information contact: Bob Fassbender or Amy Boyer (608) 258-9506 Joe Strohl (608) 251-0900 2