Chrysler Files Appeal on California Lemon Law Penalty

12/02/96

Reuters reported that Chrysler announced last Tuesday that it had filed an appeal to the California Department of Motor Vehicle's decision to ban the corporation from shipping any new vehicles to dealers in the state for 45 days.

The California Department of Motor Vehicles (DMV) issued the ban October 16 as a penalty against Chrysler for violating the state's "lemon law." California's DMV determined that Chrysler sold 116 vehicles in 1991 and 1992 without telling the new owners that the cars were lemons.

The original owners of the cars in question returned the vehicles to Chrysler because they were defective. California's lemon law requires automakers to buy back any car that spends 30 days or more in a repair shop during its first year on the streets. The law also requires the carmaker to notify customers that buy the repaired lemons of the fact that the vehicles had been returned to the carmaker because of chronic problems.

Chrysler's appeal had been expected. It will effectively delay the DMV imposed ban for years as the carmaker pursues the issue through the legal system. The carmaker's appeal to the California DMV Board calls the ban a "draconian penalty," and argues that the corporation complied with the lemon law as it was written at the time of the vehicle sales.

Chrysler says the statute in effect at the time of the violations was vague about which repurchased vehicles had to be branded as lemons. It argues that the law did not address disclosure for repurchases that resulted from informal dispute resolutions or those made as part of legal settlements.

Chrysler claims to have made good-faith efforts to keep used-car buyers informed about the cars they bought. The company also said the economic impact of the penalty on its 240 California dealers would be unreasonably harsh. Chrysler wrote, "the economic harm to the dealers and their employees caused by this action has been well documented but ignored by the DMV."

R.L. Polk & Co. says that Chrysler sold almost 8% of its annual volume in California in 1995--nearly 170,000 new vehicles.

Consumer advocates who support the DMV ban--which should have taken effect Monday--called it the first tough stance aimed at ending the process of "lemon laundering."

Paul Dever -- The Auto Channel