United States District Court, Western District of New York
April 4, 1990
ROBERT J. LYETH, PLAINTIFF,
CHRYSLER CORPORATION, DEFENDANT, AND ROBERT ABRAMS, ATTORNEY GENERAL OF THE STATE OF NEW YORK, INTERVENOR.
The opinion of the court was delivered by: Larimer, District Judge.
DECISION AND ORDER
In 1984, Robert J. Lyeth ("plaintiff") purchased a new Jeep
Cherokee motor vehicle. Very soon after the purchase, he had
severe problems with the vehicle and he has attempted ever
since to have the vehicle fixed or replaced. Today, almost six
years after the purchase he continues to spar with Chrysler
Corporation over the vehicle. Perhaps this decision will bring
this saga closer to a conclusion.
Lyeth has moved for summary judgment in this action to
confirm a 1987 award to him of a new vehicle under New York
General Business Law § 198-a(k), the compulsory arbitration
provision of the state's so-called "New Car Lemon Law."
Plaintiff has also moved for costs and attorneys fees pursuant
to General Business Law §§ 198-a(c), (h) and (l). For the
following reasons, plaintiff's motions for summary judgment and
for costs and attorneys fees are granted.
A. Complaints About The Jeep.
On October 10, 1984, plaintiff, a resident of Lima, New
York, bought a new 1985 Jeep Cherokee from a dealer in Geneva,
New York. The vehicle was manufactured by Jeep Corporation,
which was a subsidiary of American Motors Corporation ("AMC")
at the time. Chrysler Corporation ("defendant"), a Delaware
corporation with its principal place of business in Michigan,
acquired AMC in August 1987.
According to plaintiff, after having driven the jeep between
1,000 and 1,500 miles, the vehicle began periodically to
experience severe front-end vibrations. These vibrations
tended to occur in warm weather at speeds over 45 m.p.h., and
were worst in the summer months. According to plaintiff, the
shaking would sometimes reach the point where driving became
impossible and full stopping was required to correct it.
In August 1985, after complaining to AMC and to the dealer,
plaintiff took the car back to the dealer. There, according to
Chrysler Arbitration Coordinator Gregory Schoonover, it
remained for two weeks before service personnel concluded that
they could not duplicate the problem. The Jeep remained at the
dealer for another three weeks before plaintiff, apparently at
the dealer's behest, retrieved the vehicle. All in all, during
his first two years of ownership, plaintiff returned the
vehicle to the dealer for repairs at least four times.
B. Nonbinding Arbitration.
In October 1985 plaintiff sought relief from AMC under its
own informal dispute-settlement plan that conforms to the
requirements of General Business Law § 198-a(g) and (m). At
this point, the Jeep had 12,600 miles on it.
Arbitration was conducted by two arbitrators from the Better
Business Bureau who rendered their decision on March 14, 1986.
Although they too could not duplicate the shaking, they
concluded that plaintiff's Jeep "may have the problems
described," and referred the Jeep to an independent service
center in Rochester for a more detailed inspection and repair
at AMC's expense.
Plaintiff, although initially willing to accept the
arbitrators' decision, agreed to be bound by it only if the
independent evaluation and repair could be postponed several
months until summer. This was because he felt that only under
warm conditions would the shaking be likely to occur. Neither
AMC nor the arbitrators would consent to such a postponement.
Plaintiff consequently refused to accept the decision of the
C. Lemon Law Arbitration.
In late 1987 plaintiff timely filed a claim with the New
York State Attorney General's Office seeking mandatory
arbitration with defendant under General Business Law §
198-a(k). The statute had been amended to add the provision
concerning compulsory arbitration, § 198-a(k), effective
January 1, 1987.
On October 29, 1987, an arbitrator from the American
Arbitration Association ("AAA") conducted a hearing on
The arbitrator rendered his decision on November 2, 1987. In
pertinent part the decision reads as follows:
I find that the consumer qualifies for relief
under [General Business Law § 198-a] and award
relief to the consumer. The consumer has elected to
receive a comparable replacement vehicle as
follows: NEW MODEL JEEP CHEROKEE INCLUDING ALL
OPTIONS WITHIN HIS 1985 JEEP CHEROKEE. The consumer
is entitled to reimbursement from the manufacturer
of the $200 filing fee. The manufacturer is hereby
directed to comply with this decision within 30
days. . . . [F]ailure of the manufacturer to comply
. . . shall entitle the consumer to recover a fee
of $25 for each business day of noncompliance, up
to $500. This decision is binding on both parties.
A dissatisfied party may seek judicial relief
pursuant to CPLR [New York Civil Practice Law and
Rules Article] 75.
By letter dated November 9, 1987, Schoonover, on behalf of
Chrysler, objected to the arbitrator's decision. Schoonover
disputed the facts developed at the arbitration hearing, and
he also maintained that the arbitrator had made a legal error
in his calculation of the award because he had failed to
deduct an amount representing use of the vehicle, which he
claimed was 47,743 miles at the time of arbitration.
Schoonover maintained that this entitled defendant to reduce
plaintiff's award by $4,761.68 or, in effect, to receive this
amount before giving plaintiff a new Jeep.
The arbitrator rejected Chrysler's objections and confirmed
his award to plaintiff of a new, comparably equipped Jeep.
Although the statute required Chrysler to comply with the
award within thirty days, § 198-a(h), it neglected or refused
to do so. After about five months plaintiff retained counsel
and commenced a proceeding in New York State Supreme Court to
confirm the award. Plaintiff sought a new Jeep, reimbursement
of the $200 filing fee under § 198-a(c)(1), the $500.00 penalty
for defendant's failure to comply with the arbitration award
under § 198-a(h); and attorneys' fees under § 198-a(l).
Defendant subsequently removed the action on diversity grounds
to this Court in early 1989.
By order dated May 4, 1989, I granted the motion of Robert
Abrams, New York State Attorney General, to intervene relative
to Chrysler's constitutional challenges to § 198-a(k).
A. Arbitration Under The Lemon Law.
In 1983, New York enacted General Business Law § 198-a, which
quickly became known as the "New Car Lemon Law." As noted by a
recent decision of the New York Court of Appeals, the law was
enacted in order "to provide New York consumers greater
protection than that afforded by automobile manufacturers'
express limited warranties or the federal Magnuson-Moss
Warranty Act [15 U.S.C. § 2301 et seq.]." Motor Vehicle
Manufacturers Association of the United States v. State, 75
N Y2d 175, 551 N.Y.S.2d 470, 472, 550 N.E.2d 919, 921 (1990)
[hereinafter Motor Vehicle Manufacturers].
The statute provides that, when a manufacturer cannot
correct a defect or condition that "substantially impairs" the
value of a new motor vehicle after a "reasonable number of
attempts," the manufacturer, at the option of the consumer, is
required either to replace the vehicle with a comparable
product or refund the purchase price. N.Y.Gen.Bus.Law §
198-a(c)(1) (McKinney 1989). The statute presumes that a
"reasonable number of attempts" have been made to repair a
vehicle if, within two years or 18,000 miles of purchase, the
vehicle requires four trips to the repair shop or is out of
service for thirty or more days. N.Y.Gen.Bus.Law § 198-a(d)
(McKinney 1989). As originally enacted, the statute provided no
dispute resolution mechanism for consumers. See generally,
Givens, Practice Commentary, N.Y.Gen Bus.Law § 198-a (McKinney
1988). Consumers had no recourse but to seek enforcement of the
Lemon Law in court or by means of non-binding informal
arbitration programs established by manufacturers themselves
along guidelines provided by § 198-a(g). These procedures often
proved costly for the average consumer and resulted in long
delays, lengthy litigation and unfair awards. Motor Vehicle
Manufacturers, supra, 551 N.Y.S.2d at 472, 550 N.E.2d at 921.
See, e.g., State v. Ford Motor Co., 74 N.Y.2d 495, 549 N.Y.S.2d
368, 548 N.E.2d 906 (1989). These informal in-house arbitration
programs have themselves been the subject of much litigation —
specifically, over the question of whether or not they are
preempted by federal legislation. See, e.g., General Motors
Corp. v. Abrams, 897 F.2d 34 (2d Cir. 1990) [hereinafter
General Motors]. See also, The Great Legal Auto War Forges a
United Front, Nat'l L.J., Mar. 5, 1990, at 8, col. 1.
After several attempts to modify the Lemon Law so as to
achieve its goal of swift and equitable resolution of consumer
complaints, the New York Legislature enacted General Business
Law § 198-a(k) in 1986, effective January 1, 1987. See Givens,
Section 198-a(k) gives aggrieved consumers the option of
submitting the dispute to arbitration.
§ 198-a(k) provides that:
Each consumer shall have the option of
submitting any dispute arising under this section
upon the payment of a prescribed filing fee to an
alternate arbitration mechanism established
pursuant to regulations promulgated hereunder by
the New York State Attorney General. Upon
application of the consumer and payment of the
filing fee, all manufacturers
shall submit to such alternate arbitration. . . .
[which] shall be conducted by a professional
arbitrator or arbitration firm appointed by and
under regulations established by the New York
State Attorney General. Such a mechanism shall
ensure the personal objectivity of its
arbitrators and the right of each party to
present its case, to be in attendance during any
presentation made by the other party and to rebut
or refuse such presentation. In all other
respects, such alternate arbitration mechanism
shall be governed by [Civil Practice Law & Rules
(CPLR) Article 75].
These provisions, noted Governor Mario Cuomo upon signing
them into law, "provided important new protections to
consumers [necessary] to insure that the intent of the
original Lemon Law is fulfilled." Governor's Approval
Memorandum, 1986 N.Y.S.Leg.Ann. 334.
B. Chrysler's Challenge To The Lemon Law In General And Its
Challenge To The Particular Award To Lyeth Are Without
Defendant defends its failure to comply with this particular
arbitration award essentially on five grounds: (1) that the
Lemon Law violates the New York State Constitution and State
Administrative Procedure Act ("SAPA"); (2) that the compulsory
arbitration provision of the Lemon Law is unconstitutional in
that it deprives automakers of due process and equal
protection under the Fourth and Fourteenth Amendments; (3)
that regulations promulgated by the Attorney General to
implement the Lemon Law are inconsistent with the statute's
legislative goals; (4) that, having sought informal resolution
of his claim in 1985, plaintiff was barred from utilizing
compulsory arbitration under § 198-a(k); and (5) that the
arbitrator exceeded his authority in making the award.
As the following analysis will illustrate, I am not
persuaded by any of Chrysler's arguments and therefore
plaintiff is entitled to summary judgment against Chrysler.
1. General Business Law § 198-a(k) Does Not Violate
the New York State Constitution or SAPA.
A basic purpose of a district court, in the exercise of its
diversity jurisdiction, is "the enforcement of state-created
rights and state policies going to the heart of those rights."
Bernhardt v. Polygraphic Company of America, Inc.,
350 U.S. 198
, 208, 76 S.Ct. 273, 279, 100 L.Ed. 199 (1956) (Frankfurter,
J., concurring) (citing Erie R. Co. v. Tompkins, 304 U.S. 64
58 S.Ct. 817, 82 L.Ed. 1188 ). "In adjudicating a
state-created right in the exercise of its diversity
jurisdiction [a district court is] `for that purpose, in
effect, only another court of the State.'" Factors Etc., Inc.
v. Pro Arts, Inc., 652 F.2d 278
, 282 (2d Cir. 1981), cert.
denied 456 U.S. 927
, 102 S.Ct. 1973
, 72 L.Ed.2d 442 (1982)
(quoting Guaranty Trust Co. v. York, 326 U.S. 99
, 108, 65
S.Ct. 1464, 1469, 89 L.Ed. 2079 ). See also DeWeerth v.
Baldinger, 836 F.2d 103
, 108 (2d Cir. 1987), cert. denied,
486 U.S. 1056
, 108 S.Ct. 2823
, 100 L.Ed.2d 924 (1988); Stafford v.
International Harvester, 668 F.2d 142
, 148 (2d Cir. 1981).
Defendant here argues that § 198-a(k) contravenes the New
York State constitution by (1) denying it trial by jury, (2)
depriving it of access to the courts, and (3) unduly delegating
judicial power to arbitrators. Defendant also claims that
regulations devised to implement § 198-a(k) violate SAPA.
Each of these arguments was raised by automakers and
rejected by the New York State Court of Appeals in its recent
decision in Motor Vehicle Manufacturers, 551 N.Y.S.2d at
474-75, 475-476, 478, 550 N.E.2d at 923-924, 924-925, 927. In
its papers filed in this case, before the Court of Appeals
rendered its decision, Chrysler made precisely the same
arguments that had been made before the Court of Appeals in
Motor Vehicle Manufacturers. The New York Court of Appeals has
now spoken on the state issues. Therefore, acting as "only
another [state] court" for the purposes of this action, I
accept the conclusions of New York's highest court in
§ 198-a(k) as constitutional in each of the respects contested
2. General Business Law § 198-a(k) Does Not Deprive
Defendant of Due Process or Equal Protection.
Defendant argues that General Business Law § 198-a(k) denies
automakers due process under the Fourth Amendment, as well as
equal protection of the law as prescribed by the Fifth and
Fourteenth Amendment. I find these contentions to be
(a) § 198-a(k) Does Not Deny Equal Protection.
Chrysler claims a denial of equal protection although the
basis for the claimed denial is not altogether clear. To be
sure, the law creates a specific avenue of relief solely for
the benefit of consumers. The consumer initiates the action by
paying a filing fee. The consumer, not the manufacturer, has
the option of choosing an oral hearing or one based solely on
But without minimizing these differences, it is clear that
§ 198-a(k) otherwise treats both parties to Lemon Law
arbitration in a substantially equal manner. Each party gets to
present its case, each has the right to be in attendance during
the other side's presentation and each has the right to rebut
or refute the evidence submitted by the other. Each may be
represented by counsel. 13 N.Y.C.R.R. § 300.11. Both parties
have the right to seek judicial review under CPLR Article 75.
And — most importantly — the arbitrator's ruling equally
binds both parties.
In my view, the primary material aspects of the Lemon Law's
arbitration program treat both sides in a similar fashion.
There is no equal protection violation.
Even if there are some differences in treatment, that fact
by itself does not create a violation of equal protection.
Assuming some differences, the threshold issue concerns the
appropriate standard of review to be applied by a court when
an equal protection challenge is mounted. United States
Railroad Retirement Board v. Fritz, 449 U.S. 166, 174, 101
S.Ct. 453, 459, 66 L.Ed.2d 368 (1980).
Chrysler does not claim that the law burdens "fundamental
rights" or creates "suspect classifications." It seems clear
that the Lemon Law constitutes a type of economic regulation.
Therefore, the appropriate level of review must be the Supreme
Court's "rational relationship" standard — that is, whether §
198-a(k) is rationally related to a legitimate objective of the
State of New York. San Antonio Independent School District v.
Rodriguez, 411 U.S. 1, 20-21, 93 S.Ct. 1278, 1289-1290, 36
L.Ed.2d 16 (1973); Williamson v. Lee Optical Co., 348 U.S. 483,
487-88, 75 S.Ct. 461, 464, 99 L.Ed. 563 (1955). See also
Chrysler v. Texas Motor Vehicle Commission, 755 F.2d 1192, 1201
(5th Cir. 1985) (upholding the constitutionality of the Texas
lemon law on rational relationship grounds).
The first issue relates to the legitimacy of the Lemon Law's
goals. These goals are, in sum, to provide an easier means for
individual consumers to pursue their grievances against
automobile manufacturers concerning disputes where traditional
litigation proved expensive and protracted to the detriment of
Defendant does not dispute that, in general, regulation of
automobiles is a proper state function. The state regulates
many aspects of automobile ownership and use. No one now
challenges the state's right to do so. A regulatory scheme
concerning procedures for pursuing grievances by consumers
against automakers is entirely consistent with the state's
broad interest concerning the ownership and operation of motor
The Fifth Circuit responded to a similar challenge by
Chrysler in Texas as follows: "[a] legislature entitled to
deference in its regulatory scheme sufficient to license sales
of a product or set standards for its quality, [such as motor
vehicles,] a fortiori can express its economic choices and
attempt to achieve them with procedural tools" such as Lemon
Law arbitration. Texas Motor Vehicle Commission, supra, 755
F.2d at 1201.
In short, it is a legitimate state purpose to create a
procedural device to process consumer complaints relating to
quality of automobiles sold and used in the state.
Another issue is whether Lemon Law arbitration, and the
distinctions it draws between consumers on the one hand and
automakers on the other, rationally relates to the Lemon Law's
stated purpose. I find that it does. It is not seriously
disputed that traditional means of redress available to
disgruntled consumers, such as a lawsuit sounding in contract
or warranty, was inadequate. In any event, the New York State
legislature made a decision that the available remedies were
not satisfactory and Chrysler cannot seriously contend that
such a decision was unreasonable. Furthermore, there is no
evidence to demonstrate that the Lemon Law program produces
"patently arbitrary or irrational" results. Fritz, 449 U.S. at
177-78, 101 S.Ct. at 460-61.
A legislative program such as the Lemon Law is not invalid
simply because it makes it easier for one group of people to
gain redress at another's expense.
There are many factors that can be considered by a state
legislature in determining how to correct a perceived problem.
As the Fifth Circuit noted in Texas Motor Vehicle Commission,
the legislature was here responding to more than
the length of the respective parties' purses. It
was also, as it was entitled to do, recognizing
the distinct economic stakes of the parties. The
legislature could permissibly assume that a car
purchaser has little economic incentive to risk
more than the value of his purchase to protect
it. A manufacturer, on the other hand, has
distinct economic concerns, including product
image and reputation for toughness in its
litigation posture, and accordingly its interests
in warranty suits are plainly greater than its
immediate exposure, or at least the legislature
was entitled to conclude. Indeed, much of tort
law rests on such economic adjustments and
legislative assumptions about economic incentives
and allocative efficiencies.
755 F.2d at 1203.
The Supreme Court has recognized that there are many
legitimate factors that legislators may consider in
determining state policy.
The process of making the determination of
rationality is, by its nature, highly empirical,
and in matters not within specialized judicial
competence or completely commonplace, significant
weight should be accorded the capacity of [the
legislature] to amass the stuff of actual
experience and cull conclusions from it.
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1
, 28, 96 S.Ct.
2882, 2898, 49 L.Ed.2d 752 (1976) (quoting United States v.
Gainey, 380 U.S. 63
, 67, 85 S.Ct. 754, 757, 13 L.Ed.2d 658
In short, when analyzing the constitutional viability of a
statute a court sitting in judgment runs the risk of
substituting one set of assumptions for another — to wit, the
Legislature's assumptions with its own. It is for this reason,
wrote Chief Justice Rehnquist in Fritz, that for several
decades the Supreme Court "has consistently refused to
invalidate on equal protection grounds [economic] legislation
which it simply deemed unwise or unartfully drawn." 449 U.S. at
175, 101 S.Ct. at 459.
For these reasons, I accordingly refuse to invalidate
General Business Law § 198-a(k) on equal protection grounds. As
the Fifth Circuit suggested to the same party, Chrysler, in
Texas Motor Vehicle Commission, it should take its fight
elsewhere — specifically to the legislature — to try to
obtain the relief it seeks. Id. at 1207.
(b) § 198-a(k) Does Not Deprive Automakers of Due Process.
There is nothing per se unconstitutional about binding
compulsory arbitration. Indeed, the Supreme Court and this
circuit have generally held compulsory arbitration to be
constitutional, and have done so in diverse contexts. See,
e.g., Andrews v. Louisville & Nashville Railroad, 406 U.S. 320,
322, 92 S.Ct. 1562, 1564, 32 L.Ed.2d 95 (1972) (railway labor
disputes); Textile Workers Pension Fund v. Standard Dye &
Finishing Co., 725 F.2d 843,
857-58 (2d Cir. 1984) (pension fund litigation).
In declaring constitutional a federal statute mandating
arbitration to resolve pension fund disputes, the Second
Circuit has said that
[i]t is familiar law that legislative acts
adjusting the burdens and benefits of economic
life carry with them a presumption of
constitutionality and that the person complaining
of a due process violation must establish that
the legislature has acted in an arbitrary and
capricious manner. [Citations omitted.] The same
rule prevails even though the effect of the
legislation is to impose a new duty or liability
based upon past acts.
725 F.2d at 843 (citing Turner Elkhorn, 428 U.S. at 15-16, 96
S.Ct. at 2892-2893; Lee Optical, 348 U.S. at 487-88, 75 S.Ct.
Indeed, cases holding unconstitutional the delegation of
adjudicating authority to private parties have all done so on
the ground that the parties to whom the delegation is made
lack the impartiality and objectivity which due process
requires. Republic Industries, Inc. v. Teamsters Joint Council,
718 F.2d 628, 640 (4th Cir. 1983).
Defendant has not asserted and there is no evidence to prove
that § 198-a(k) produces arbitrary and capricious results. Nor
am I persuaded that § 198-a(k) deprives automakers of an
adequate hearing. See Mathews v. Eldridge, 424 U.S. 319,
333-34, 96 S.Ct. 893, 901-902, 47 L.Ed.2d 18 (1976).
I am also not persuaded by Chrysler's claims that § 198-a(k)
produces inherently biased results. As it was for the Fifth
Circuit in Texas Motor Vehicle Commission, the touchstone for
such an analysis is Tumey v. Ohio, 273 U.S. 510, 523, 47 S.Ct.
437, 441, 71 L.Ed. 749 (1927). In Tumey and its progeny the
Supreme Court held that it is constitutionally impermissible to
subject a litigant to adjudication before a tribunal that has
an economic interest in the case's outcome. Tumey, 273 U.S. at
523, 532, 47 S.Ct. at 441, 444. See also Gibson v. Berryhill,
411 U.S. 564, 578-79, 93 S.Ct. 1689, 1697-98, 36 L.Ed.2d 488
(1972) (holding that a state optometrics board made up entirely
of private practitioners could not adjudicate complaints aimed
at non-member optometrists employed by corporations).
It cannot seriously be argued that Lemon Law arbitrators
have an economic stake in the outcome of cases before them;
there is no evidence to support that. Indeed, the law itself
requires that arbitration be conducted by independent
professionals under regulations "insur[ing] the personal
objectivity of its arbitrators." N.Y.Gen.Bus.Law § 198-a(k)
Defendant has not alleged that arbitration resulting in an
award against an automaker in any way redounds to the benefit
of the arbitrator. Defendant's assertion that the AAA serves
"at the whim of the Attorney General," Chrysler's Memorandum
in Opposition to Summary Judgment, at 26, is particularly
unpersuasive and does not support a claim of arbitrator bias.
Republic Industries, 718 F.2d at 640 n. 13.
All concede that due process requirements are not the stuff
of hard and fast rules. As the Supreme Court has noted,
"Due process," unlike some legal rules, is not a
technical conception with a fixed content
unrelated to time, place and circumstances . . .
[Rather, d]ue process is flexible and calls for
such procedural protections as the particular
Mathews v. Eldridge, 424 U.S. at 334, 96 qS.Ct. at 902
In the case at bar, the following circumstances compel the
conclusion that § 198-a(k) affords due process: Lemon Law
arbitrators are independent and impartially chosen, consumer
relief depends upon a showing of statutorily-defined vehicle
unserviceability and arbitration hearings are governed by a
myriad of procedural safeguards. Most importantly, arbitrators
are not free to fashion their own awards, regardless of a
case's equities, but are restricted to denying or granting a
consumer a predictable and limited form of relief, a choice
between a new car or a refund.
Though arbitrators decide the fact of an automaker's liability,
the extent of that liability is determined by outside factors.
In this sense, Lemon Law arbitrators do not enjoy even the
discretion of multi-employer pension fund trustees, whose
"mixed" administrative-adjudicative role was deemed
constitutional in Keith Fulton & Sons v. New England Teamsters
and Trucking Industry Pension Fund, 762 F.2d 1137, 1142 (1st
Cir. 1985) (statutory schema in which "[b]oth the fact and the
degree of [defendants'] liability" were determined by fund
trustees comported with due process). See also Republic
Industries, 718 F.2d 640 n. 13; Dorn's Transportation, Inc. v.
I.A.M. National Pension Fund, 578 F. Supp. 1222, 1237-38 (D.D.C.
Finally, although the aggregate cost to automakers of §
198-a(k) awards may be high,*fn1 the interest at stake here
does not rise to the level of, say, criminal liability or child
custody. After all, an award under the Lemon Law can run to no
more than the price of an automobile, and the Government is not
the beneficiary. While these observations do not vitiate the
due process requirement completely, it does suggest that these
matters are proper "circumstances" which can be considered in
determining whether due process has been afforded under Mathews
and other Supreme Court decisions. See, e.g., Weinberger v.
Salfi, 422 U.S. 749, 785, 95 S.Ct. 2457, 2476, 45 L.Ed.2d 522
(1975) ("[t]he Constitution does not preclude such policy
choices as a price for conducting [legislative] programs . . .
[u]nlike criminal prosecutions, or [child] custody proceedings
. . . such programs do not involve affirmative Government
action which seriously curtails important liberties cognizable
under the Constitution").
Defendant has made no showing that the Lemon Law fails to
afford automakers due process — either in general or under the
circumstances particular to this case. The arbitration award in
question was not arbitrary or capricious, nor is the
impartiality of the particular arbitrator in doubt. I decline
to invalidate § 198-a(k) on constitutional grounds.
3. The Attorney General's Regulations Conform to the
As noted supra, the Lemon Law statute contains specific
directives concerning the establishment of the § 198-a(k)
arbitration mechanism. Among other things, the statute directs
that the mechanism shall "insure the personal objectivity of
its arbitrators." N.Y.Gen.Bus.Law § 198-a(k). To this end, the
Attorney General's regulations disqualify from service as an
arbitrator anyone having "any current connection to the sale or
manufacture of motor vehicles." 13 N.Y.C.R.R. § 300.7(5).
Defendant argues that this provision creates bias in that it
"serves to ensure that the pool of arbitrators will be skewed
in favor of the consumer, since arbitrators will almost
certainly be consumers themselves" but perforce will not be
automakers. Chrysler's Memorandum in Opposition to Summary
Judgment, at 15. Defendant seems to suggest that a more
equitable regulatory scheme could be achieved if the provision
disqualified anyone who had ever bought a new car from service
as an arbitrator. Such a requirement is absurd. If all
consumers who had purchased new vehicles were eliminated,
there would be very few persons eligible to serve as
arbitrators. No specific "skew" has been demonstrated in this
case, and therefore, I reject defendant's argument that the
law and its implementing regulation must be invalidated.
4. Previous Informal Dispute Resolution in 1985 Does
Not Preclude Relief in the Instant Action.
Defendant contends that, when the Legislature enacted the
compulsory arbitration provision of § 198-a(k) in 1986, it
intended for it to be an exclusive alternative to informal
dispute resolution under § 198-a(g) and (m). Defendant has
asked me to accept the implication that an individual seeking
resolution of a claim under the earlier provisions is barred
from relief under the later. The statute itself, the
history and recent case authority clearly demonstrates that
defendant's argument is without merit.
First of all, nothing in the Lemon Law or its regulations
specifically indicates that a consumer who has sought informal
dispute resolution under § 198-a(g) cannot later seek judicial
enforcement of an arbitration award made under the Attorney
General's § 198-a(k) program.
Second, the legislative history of the statute also
indicates otherwise. One of the state's primary goals in
enacting the Lemon Law, as noted supra, was to provide
consumers with new avenues of nonjudicial dispute resolution,
not to restrict them. As the Second Circuit has stated,
[t]he Lemon Law not only permits three separate
avenues of relief to remain available to the
consumer — [informal manufacturer-based dispute
resolution under § 198-a(g)] New York's Attorney
General arbitration mechanism [under § 198-a(k)],
and judicial relief — but these routes of redress
become meaningful under its terms. In various
subtle but significant ways these forums differ as
vehicles for affording relief — for example . . .
[a manufacturer's informal dispute resolution]
program is binding only on the manufacturer while
the State's is binding on both.
General Motors, 897 F.2d at 41.
The conclusion defendant would have me reach is further
contraindicated by the Second Circuit's holding in General
Motors that § 198-a(g)
require[s] a consumer to submit to a
manufacturer's existing arbitration program
before bringing suit under the Lemon Law, but not
prior to pursuing relief under the newly created
State's Attorney General [§ 198-a(k)] arbitration
program . . . or prior to seeking judicial relief
outside the Lemon Law. In effect, [§ 198-a(g)] . .
. makes participation in a manufacturer's existing
dispute resolution mechanism a prerequisite to
seeking judicial relief under the Lemon Law.
Id. at 40 (emphasis in original).
Furthermore, as § 198-a(h) itself states, "[i]n no event
shall a consumer who has resorted to an informal dispute
settlement mechanism be precluded from seeking the rights or
remedies available by law." Read against the legislative
backdrop of the Lemon Law and the cases interpreting it, this
statement, along with a nearly identical declaration in §
198-a(f), must be construed to preserve § 198-a(k) relief for
persons who have rejected nonbinding arbitration under §
198-a(h). In other words, the "rights or remedies available by
law" which are guaranteed to a consumer who has
unsatisfactorily resorted to informal dispute resolution
include the right to arbitration under the Attorney General's §
198-a(k) program. See Mountcastle v. Volvoville, USA,
130 Misc.2d 97, 494 N.Y.S.2d 792, 794-95 (N.Y. Sup. Ct. Nassau Co.
1985); Givens, Supplementary Practice Commentary,
N YGen.Bus.Law § 198-a (McKinney Supp. 1989).
Finally, with regard to the facts of the case before me, it
is clear that General Business Law § 198-a(k) did not become
available to consumers until 1987. In 1985 when plaintiff's
Jeep first began to exhibit the complained-of vibrations,
plaintiff had only two choices — (1) he could take advantage
of the new Lemon Law by resorting to AMC's nonbinding informal
dispute resolution program, or (2) he could sue defendant under
a breach of contract or warranty theory.
In my view, there is nothing in the statute or case law to
suggest that an individual who pursued informal dispute
resolution prior to enactment of § 198-a(k) and its compulsory
arbitration provisions is precluded from utilizing that
arbitration process in addition to the traditional litigation
remedies available. Especially in light of the specific
language of § 198-a(h) that a consumer who resorts to informal
dispute procedures is not precluded from seeking other rights
or remedies available to him by law, I believe plaintiff's
resort to the compulsory arbitration procedures was entirely
5. As a Matter of Law, the Arbitrator Did Not Exceed
First of all, this is not a plenary action, and defendant is
not entitled to a de
novo review of plaintiff's arbitration award. As the Court of
Appeals has noted, "General Business Law § 198-a(k) limits [a
trial court's] jurisdiction to [CPLR Article 75] review when a
consumer elects compulsory arbitration." Motor Vehicle
Manufacturers, 551 N.Y.S.2d at 475, 550 N.E.2d at 924.
Under CPLR Article 75, a trial court must confirm an
arbitration award upon application of a party unless the court
discerns one of four specific grounds to modify or vacate the
award. N.Y.Civ.Prac.Law § 7510, 7511 (McKinney 1988). One of
these is when "an arbitrator . . . making the award exceeded
his power." N.Y.Civ.Prac.Law § 7511(b)(1)(iii) (McKinney 1988).
Such a conclusion must be premised on adequate evidence in the
record. Motor Vehicle Manufacturers, 551 N.Y.S.2d at 475-476,
550 N.E.2d at 924-925, citing with approval Mount St. Mary's
Hospital of Niagara Falls v. Catherwood, 26 N.Y.2d 493, 311
N YS.2d 863, 260 N.E.2d 508 (1970). See also Caso v. Coffey,
41 N.Y.2d 153, 391 N.Y.S.2d 88, 359 N.E.2d 683 (1976).
Furthermore, it is well established by New York law that
arbitration awards are subject to judicial deference and that
arbitrators are not held to the same standards as judges.
Indeed, an arbitrator's award cannot be vacated even for
apparent errors of law or fact. Albany County Sheriff's Local
775 v. County of Albany, 63 N.Y.2d 654, 479 N.Y.S.2d 513, 514,
468 N.E.2d 695, 696 (1984) ("[a]n award will not be vacated
even though the court concludes that [the arbitrator's
decision] misapplies substantive rules of law, unless it is
violative of public policy, or is totally irrational, or
exceeds . . . his power") quoting Matter of Silverman [Benmore
Coats], 61 N.Y.2d 299, 473 N.Y.S.2d 774, 779, 461 N.E.2d 1261,
Defendant here contends that the arbitrator in this case
"exceeded his power" in three general ways: (a) by failing to
set forth a rational basis for his decision and by failing to
make findings of fact; (b) by awarding plaintiff a new vehicle
and declining to deduct some amount for use of the vehicle;
and (c) by considering an affidavit from plaintiff's wife
without giving defendant the opportunity to cross-examine her
and by failing to consider evidence of the prior nonbinding
As a matter of law, none of these contentions warrants my
modifying or vacating plaintiff's award. Therefore, summary
judgment for plaintiff is appropriate.
(a) The Arbitrator's Finding That Plaintiff Qualified for
Relief Had a Rational Basis.
Defendant's claim that the arbitrator exceeded his authority
by failing to set forth a rational basis for his decision and
by failing to make findings of fact is not supported by
applicable authority. Nowhere in the Lemon Law or in CPLR
Article 75 does such a requirement exist. Indeed, CPLR Article
75 requires nothing more than that an arbitrator's decision be
in writing, signed and dated, as defendant itself
acknowledges. See Chrysler's Opposition to Summary Judgment, at
22. See N.Y.Civ.Prac.Law § 7507 (McKinney, 1989); 13 N.Y.C.R.R.
Defendant also asserts that the arbitrator was irrational in
finding that plaintiff's Jeep was "substantially impaired" by
the terms of § 198-a(c) and (d) and therefore qualified for
replacement. In this case, plaintiff claimed before the
arbitrator that his Jeep was indeed a "lemon," and swore that
it met the threshold requirements for relief — four or more
trips to the mechanic and sixty-plus days out of service —
during the statutory period. Defendant objected, but the
arbitrator found plaintiff's claim to be more credible and
ruled for plaintiff.
These are precisely the kind of conclusions a competent
arbitrator should and must draw, and I am not entitled to
second-guess them. As the Court of Appeals put it, "it need
only appear from the decision of the arbitrator that the
criteria specified in the statute were `considered' in good
faith and that the resulting award has a `plausible basis'" in
order for the award to be upheld. Caso, 391 N.Y.S.2d at 91-92
359 N.E.2d at 686-687 (citations omitted). Furthermore, "[a]n
award may be found to be rational if any basis for such a
conclusion is apparent to the court." Id. at 91, 359 N.E.2d at
686. In short, unless an impartial arbitrator's conclusions
appear irrational or are unsupported by the evidence — and
that is clearly not the case here — they control. Motor
Vehicle Manufacturers, 551 N.Y.S.2d at 475-476, 550 N.E.2d at
(b) The Arbitrator's Award of a New Jeep Was Within His Power.
Defendant alleges that the arbitrator exceeded his authority
by awarding plaintiff a new Jeep, in that a new Jeep was not
a "comparable vehicle" for the purposes of § 198-a(c)(1).
Defendant also claims that the arbitrator should have deducted
an amount to reflect plaintiff's use of the vehicle. This would
have the effect of making plaintiff pay a fee to Chrysler which
reflects in some way the mileage on the vehicle in order to get
a new Jeep.
Recently, the New York Supreme Court in Monroe County
reviewed a substantially similar challenge to a Lemon Law
arbitration award in which the arbitrator treated a two-year
old Subaru as a "new" car for the purposes of § 198-a(c)(1).
Subaru of America v. McKelvey, 141 Misc.2d 41, 532 N.Y.S.2d
617, 618 (N.Y. Sup. Ct. Monroe Co. 1988). The court in McKelvey
"The issue . . . was for the arbitrator to
determine, and it cannot be said that his
determination lacks a rational basis". . . . It
was for the arbitrator to decide if the
automobile was `new'. . . . [and i]f there was
any mistake in this matter it is one of fact and
law; it is not jurisdictional. The statute
requires the arbitrator to make decisions such as
the one made here.
532 N.Y.S.2d at 618 (quoting Chrysler Motors Corp. v.
Schachner, 138 Misc.2d 501, 525 N.Y.S.2d 127, 132 [N.Y. Sup.
Ct. Rockland Co. 1988] [upholding as not "irrational" an
arbitrator's determination that a plaintiff qualified as a
"consumer" for Lemon Law purposes]). See also General Motors
Corp. v. Smaller, 142 Misc.2d 497, 537 N.Y.S.2d 721, 722 (N Y
Sup. Ct. Nassau Co. 1988).
Furthermore, it appears from the clear language of § 198-a
that a mileage deduction applies only to consumers who opt to
receive refunds — not to those taking replacement vehicles.
General Business Law § 198-a(c)(1) provides that a consumer
qualifying for relief can elect as compensation either a
comparable vehicle or a "refund [of the] full purchase price .
. . plus fees and charges"; the same paragraph then goes on to
state that such fees and charges
shall include but not be limited to all license
fees, registration fees and any similar
governmental charges, less an allowance for the
consumer's use of the vehicle. . . .
The mileage deduction formula for refunds is set forth in a
different paragraph, § 198-a(a)(4). But, no such deduction
formula regarding replacement vehicles is mentioned. Had the
New York legislature intended such an allowance, they could
have said so.
Indeed, the Second Circuit's recent General Motors decision,
supra, suggests that the arbitrator's decision to award a
brand-new Jeep was not merely permissible under state law but
may have been necessary.
An arbitrator should not be allowed to award the
fair value of a defective transmission on the
fifth attempt at repair . . . where state law
requires a full refund or replacement of the
"lemon" vehicle after the fourth attempt.
General Motors, 897 F.2d at 43.
As a matter of law, the arbitrator did not exceed his
authority by awarding plaintiff a new vehicle.
(c) The Arbitrator's Decision Complied With Regulations
Governing Evidence of the Prior Arbitration and Did Not
Improperly Deny Cross-Examination.
Regulations promulgated by the Attorney General to implement
the Lemon Law require that the arbitrator receive in evidence
the decision of the nonbinding arbitration
procedure and "give it such weight as [he] deems appropriate."
13 N.Y.C.R.R. § 300.13(d). In this case, although it is unclear
whether the arbitrator received a copy of the one-page decision
itself, both sides agree that the arbitrator received a
detailed description of the previous arbitration procedure and
the result from both parties. Defendant has made no assertion
that this arbitration did not meet the standards of Caso,
supra, that is, "that the criteria specified in the statute
[be] considered [by the arbitrator] in good faith." 391
N YS.2d at 91-92, 359 N.E.2d at 686-687 (citations omitted).
The award should not be vacated for this reason.
Defendant points to the requirement of § 198-a(k) that
parties have the opportunity to "rebut or refute [their
opponent's] presentation" in arguing that this award fails
because of the arbitrator's alleged refusal to permit
cross-examination of plaintiff's wife regarding her affidavit.
First of all, no specific requirement of cross-examination in
Lemon Law arbitration was provided for by the Legislature.
Second, this arbitration is not a full-blown court
proceeding and not susceptible to a courtroom's strict
procedural safeguards. 13 N.Y.C.R.R. § 300.13(c). As the Court
of Appeals noted in Motor Vehicle Manufacturers, insofar as
"[arbitrators] are required to follow a specific procedure
outlined in the statute and regulations to resolve
fact-specific issues and grant one of only two types of
specific relief . . . the Legislature has provided for
accountability." Motor Vehicle Manufacturers, 551 N.Y.S.2d at
477, 550 N.E.2d at 926.
Chrysler had every opportunity to rebut plaintiff's claim
and to present its case to the arbitrator.
The Lemon Law deals specifically with the issue of
A court may award reasonable attorney's fees to .
. . a consumer who prevails in any judicial
action or proceeding arising out of an
arbitration proceeding held pursuant to [§
N YGen.Bus.Law § 198-a(l).
This provision was "designed to protect consumers from being
worn down by protracted post-arbitration litigation even where
the decision of an arbitrator awarding relief under the . . .
Lemon Law is upheld." Givens, id. (McKinney Supp. 1990).
Numerous New York decisions have granted reasonable attorney's
fees to consumers who have prevailed in court in enforcing
awards made pursuant to § 198-a(k). See, e.g., General Motors
Corp. v. Fischer, 140 Misc.2d 243, 530 N.Y.S.2d 484, 485 (N Y
Sup. Ct. Broome Co. 1988) ("the Legislature intended the
`prevailing consumer' to be entitled to an award of attorney's
fees"); Conlan v. General Motors Corp., 137 Misc.2d 244, 520
N YS.2d 139, 140 (N.Y. Sup. Ct. Onondaga Co. 1987).
Plaintiff is entitled to such an award fee.
There is no question that plaintiff is also entitled to
recover the $200.00 filing fee, § 198-a(l), as well as a $500
award for non-compliance with the arbitrator's decision. §
Plaintiff is entitled to reasonable attorneys fees and
costs. Plaintiff shall submit to the Court within fifteen (15)
days an affidavit, and other supporting material if necessary,
setting forth the amount requested and the basis for the fee
request. Chrysler shall have ten (10) days after receipt of
plaintiff's submissions to interpose any objection to the
amount of the fee request.
For the above reasons, plaintiff's motion for summary
judgment is granted and the arbitration award entered in
plaintiff's favor is confirmed in all respects.
The Court shall determine by separate order the amount due
plaintiff as recoverable fees, costs and attorneys fees.
IT IS SO ORDERED.