The opinion of the court was delivered by: Larimer, District Judge.
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:
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