Consumer Lemon Law

Reducing Overlitigation: A Balanced Approach to California's Lemon Law

Reducing overlitigation when referring to California’s Lemon Law, encompassing the Song-Beverly Consumer Warranty Act and the Tanner Consumer Protection Act, is what associations like the CJAC are trying to do.

Designed to facilitate a swift resolution, the Lemon Law ensures that consumers can receive a replacement or refund if their vehicle fails to be repaired after a reasonable number of attempts.

The concern in California is that attorney fees are increasing because firms are extending these Lemon cases, racking up legal fees that manufacturers are on the hook for. 

With manufacturers improving their builds and fewer recalls being released, Lemon Law cases should be decreasing but instead are on the rise.

Does California have an overlitigation issue? 

Avoiding Overlitigation for California's Lemon Law

The Evolution of Auto Reliability

The automotive industry has witnessed significant advancements in vehicle reliability over the past decade. Digital Trends highlights the difficulty in finding a subpar car in today’s market, attributing this to improvements in every facet of vehicle creation.

Consumer Reports corroborates this trend, noting a general decline in average problem rates across all models since 2012. With major engine problems dwindling from 2% in 2012 to less than 1% in 2018, the expectation for fewer lemons in the market is well-founded.

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Disparity in Lemon Law Litigation

Despite these improvements, the rate of litigation under California’s Lemon Law has not mirrored the decline in vehicle defects. Over a dozen auto manufacturers faced more than 500 lawsuits since 2015, with lemon lawsuits in Los Angeles County alone doubling from 2015 to 2019.

This surge contrasts sharply with the enhanced reliability of vehicles, suggesting other factors at play in the increasing litigation.

Fee-Shifting Provisions and Legal Overreach

A significant driver behind this litigation surge is the law’s fee-shifting provisions, which allow attorneys for prevailing plaintiffs to claim fees based on reasonable rates and hours.

This mechanism, while intended to empower consumers, has inadvertently fostered a cottage industry of litigation.

Cases such as McCullough v. FCA U.S. LLC and King v. Hyundai Motor America expose the exploitation of these provisions, where legal fees requested by plaintiffs’ attorneys far exceed the settlement or judgment amounts, prompting courts to criticize and reduce the exorbitant fee requests.

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The Courts’ Response and the Need for Reform

The judicial system has taken steps to curb these excesses, often reducing attorney fees to more reasonable amounts. However, these reductions are frequently challenged on appeal, highlighting the persistent abuse of the fee-shifting mechanism.

The federal district court’s observation in Karapetian v. Kia Motors America Inc. encapsulates the dilemma, pointing out the disproportionate legal fees in comparison to the actual damages.

Towards a Fair and Efficient Resolution

The core purpose of California’s Lemon Law—to ensure quick and fair resolution for consumers facing serious vehicle defects—remains paramount.

However, the exploitation of the law’s provisions by some plaintiffs’ attorneys not only undermines this goal but also burdens the legal system and detracts from the interests of consumers and the public at large.

Recommendations for Improvement

To address these challenges, a multifaceted approach is essential. Reforming the fee-shifting provisions to prevent overreach, encouraging early and fair settlements, and enhancing the oversight of legal fees can restore the balance between protecting consumer rights and preventing unnecessary litigation.

Additionally, fostering transparency in attorney-client agreements and incentivizing the resolution of cases through mediation or arbitration could further reduce the strain on the courts and ensure that the Lemon Law fulfills its intended purpose.

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Moving Forward

California’s Lemon Law serves as a critical protection for consumers, yet its potential is compromised by litigation practices that prioritize legal fees over consumer welfare and justice. By recalibrating the law’s provisions and encouraging a culture of fair settlement, California can better serve the interests of consumers, promote automotive quality, and ensure the legal system operates efficiently and justly.

Reducing Overlitigation FAQs

California’s Lemon Law, including the Song-Beverly Consumer Warranty Act and the Tanner Consumer Protection Act, is designed to offer consumers a quick resolution for serious vehicle defects. If a vehicle is not repaired after a reasonable number of attempts, the consumer is entitled to a replacement or refund.

Despite significant advancements in vehicle reliability, reducing the occurrence of defects, lemon law lawsuits have not seen a corresponding decline. Surprisingly, litigation has increased, highlighting a disconnect between vehicle quality and legal actions.

The increase in litigation is partly attributed to the exploitation of the law’s fee-shifting provisions by a cottage industry of plaintiffs’ attorneys, leading to a rise in lawsuits that may not directly correlate with the actual frequency of vehicle defects.

Reforming the fee-shifting provisions to prevent overreach and encouraging early and fair settlements can help reduce unnecessary litigation. Additionally, enhancing oversight of legal fees and promoting mediation or arbitration could further streamline the resolution process.

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