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Michigan Attorney General Granholm Files Action Against General Motors

28 February 2000

Michigan Attorney General Granholm Files Action Against General Motors

    LANSING, Mich., Feb. 28 -- Attorney General Jennifer M.
Granholm today announced that she has taken legal action against General
Motors Corporation for violating federal and state law by imposing mandatory,
binding arbitration on GM employees, spouses and relatives who make warranty
claims on vehicles purchased or leased from GM.
    In a Notice of Intended Action filed today, Granholm alleges that GM's
"Vehicle Purchase Program" is unlawful because it deprives employees and their
families of their rights under the Michigan Lemon Law and the federal
Magnuson-Moss Warranty Act.  The purchase program forces customers to submit
their warranty claims to a binding, out-of-court arbitration proceeding and
limits the remedies which an arbitrator can award.  The Notice further alleges
that GM's program wrongfully imposes sanctions, including termination, against
those who do avail themselves of their rights under state and federal laws.
    The federal Magnuson-Moss Warranty Act gives consumers the right to file a
lawsuit in state or federal court for breach of warranty.  Michigan's Lemon
Law allows consumers to file an action in court for replacement or a refund if
a defective vehicle requires four repair attempts for the same problem or 30
days in a repair facility for different problems.  GM's Vehicle Purchase
Program, however, bars participants from suing under the Magnuson-Moss Act or
Michigan's Lemon Law.  GM's program imposes sanctions, including legal action
and termination of employment, against any employee who files a warranty claim
in court.  According to a published description of GM's purchase program,
participation is "mandated ... in consideration of the discount offered
through the vehicle purchase programs."
    Last year, however, a special panel of the Michigan Court of Appeals
handed down a decision which makes mandatory binding arbitration programs like
the one offered by General Motors illegal because they deny consumers their
lawful right to seek legal relief.
    Granholm explained:  "In many cases, binding arbitration presents a
win-win situation for parties who find themselves standing on the brink of a
legal proceeding.  Businesses and employers often use binding arbitration to
keep litigation costs down and avoid big jury verdicts.  Courts favor it,
because it eases the burden on crowded dockets.  In car warranty cases,
however, binding arbitration is simply banned by federal law.  Employees
should not be subject to termination if they or their family members exercise
their rights under the law."
    General Motors has ten days to respond to the State's notice.  If it does
not respond, it faces a potential lawsuit filed on behalf of affected
consumers.  If a lawsuit is filed, the State will seek a declaratory judgment
on the validity of GM's arbitration program and an injunction barring GM from
imposing sanctions against participants.  Willful and knowing violation of the
Michigan Consumer Protection Act is punishable by fines of up to $25,000 for
each violation.
    All Attorney General news releases may be found at http://www.ag.state.mi.us .