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April 4, 1990


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 arbitrators.

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 plaintiff's complaint.

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
  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, supra.

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 [1938]). "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 [1945]). 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 construing § 198-a(k) as constitutional in each of the respects contested by defendant.

       2. General Business Law § 198-a(k) Does Not Deprive
          Defendant of Due Process or Equal Protection.

Defendant argues that General Business Law ยง 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 ...

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