BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2007-2008 Regular Session
SB 234 S
Senator Corbett B
As Introduced
Hearing Date: March 27, 2007 2
Civil Code 3
CS/ADM 4
SUBJECT
Motor Vehicle Consumer Warranties: Members of the Armed
Forces
DESCRIPTION
This bill would provide that California's "Lemon Law" would
cover a motor vehicle purchased by a member of the Armed
Forces in the United States with a manufacturer's express
warranty regardless of the state of purchase or
registration, if both of the following apply: 1) the member
purchased the motor vehicle, as defined, from a
manufacturer who sells vehicles in California; and 2) the
member was stationed in or a resident of California at the
time he or she purchased the vehicle or at the time he or
she filed an action pursuant to California's Lemon Law.
This bill would define "Member of the Armed Forces" for
purposes of California's Lemon Law as a person on full-time
active duty in the Army, Navy, Marine Corps, Air Force,
National Guard, or Coast Guard; and would provide that
full-time active duty would also include active military
service at a designated military service school.
(This analysis reflects author's amendments to be offered
in committee.)
BACKGROUND
California's Lemon Law [Song-Beverly Consumer Warranty and
Tanner Consumer Protection Acts] provides consumers certain
(more)
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rights and remedies when they find that a new or used
vehicle with a manufacturer's express warranty they have
purchased does not conform to the applicable express
warranties despite a reasonable number of repair attempts.
The California Supreme Court held that the Lemon Law only
applies to motor vehicles purchased in California.
[Cummins, Inc. v. Superior Court of Riverside County (2005)
36 Cal.4th 478.] This means that a member of the Armed
Forces stationed in or a resident of California who
purchased a "lemon" in another state cannot avail him or
herself of California's Lemon Law.
A number of reports have discussed the personal, emotional,
and financial problems associated with "lemon" motor
vehicles members of the Armed Forces face when they are
already in the stressful situation of being in the Armed
Forces, and potentially deployed at any time. Among the
reports, a 2000 financial readiness curriculum states "the
most frequent categories of [service members'] complaints
are new and used car sales?." As an example, Navy
Lieutenant Kindig, a resident of Arkansas, purchased a new
2004 Dodge Dakota from DaimlerChrysler in Washington State,
which overheated frequently. He attempted numerous repairs
both in and out of California to no avail, and the vehicle
became inoperable. While he was deployed in Iraq as a
medic, his wife was unable to use the vehicle for the
family business, which resulted in loss of needed income
and family stress. An attorney working pro bono eventually
obtained a settlement for Lieutenant Kindig, which did not
comport with California's Lemon Law. DaimlerChrysler
thereafter asked Washington State to retitle the vehicle as
a "VOLUNTARY BUYBACK, meaning a customer satisfaction
return. This is a regular transfer and should NOT be
branded in any way as a lemon law buyback."
This bill is intended to rectify situations such as those
of Lieutenant Kindig's by providing members of the Armed
Forces stationed in or residents of California the same
relief under the Lemon Law provided to those who purchased
their vehicle in California.
CHANGES TO EXISTING LAW
1.Existing law , the Song-Beverly Consumer Warranty Act,
establishes a number of protections for new and used
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motor vehicles covered by a manufacturer's express
warranty. [Civil Code (CC) Section 1790 et seq.]
Existing case law holds that Song-Beverly only applies to
a motor vehicle sold in California, even if the buyer is
a resident of California, the manufacturer sells such
vehicles in California, and its authorized repair
facilities in California failed to repair the vehicle
after a reasonable number of attempts. [Cummins, Inc. v.
Superior Court of Riverside County (2005) 36 Cal.4th
478.]
Existing case law holds that a used motor vehicle sold or
leased with a balance of the manufacturer's original
warranty is a "new motor vehicle" for purposes of
California's Lemon Law. [Jensen v. BMW of North America,
Inc. (1995) 35 Cal.App.4th 112.]
Existing law requires, as specified, that every
manufacturer of consumer goods sold in this state with a
manufacturer's express warranty must maintain sufficient
service and repair facilities, as specified. [CC Section
1793.2(a)-(e).]
Existing law provides that, except as provided, after a
reasonable number of repair attempts, the manufacturer or
its representative must either promptly replace the
vehicle or promptly make restitution to the buyer, as
specified. The buyer has the option to elect restitution
in lieu of replacement. [CC Section 1793.2(d).]
Existing law , the Tanner Consumer Protection Act ("Lemon
Law"), generally requires a manufacturer to replace or
refund the purchase price of a new vehicle which
experiences multiple instances of mechanical difficulties
within 18 months or 18,000 miles of purchase, whichever
comes first. [CC Section 1793.22.]
Existing law provides that it shall be presumed that a
reasonable number of repair attempts have been made if,
within 18 months from delivery to the buyer or 18,000
miles, whichever occurs first, one or more of the
following occurs: 1) the same nonconformity, as defined,
results in a condition likely to cause death or serious
bodily injury if the vehicle is driven and the
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nonconformity has been subject to two or more repair
attempts by the manufacturer or its agents and the buyer
or lessee has directly notified the manufacturer of the
nonconformity; 2) the same nonconformity has been subject
to four or more repair attempts and the buyer has
directly notified the manufacturer of the nonconformity;
or 3) the vehicle has been out of service for more than
30 calendar days. [CC Section 1793.22(b).]
Existing law defines "nonconformity" to mean a
nonconformity which substantially impairs the use, value,
or safety of the vehicle to the buyer or lessee. [CC
Section 1793.22(e).]
Existing law , as specified, allows for the recovery of
damages as well as other legal and equitable relief in
addition to the replace-or-reimburse remedy. [CC Section
1794 et seq.] When the buyer establishes that the breach
was willful, the judgment may include, in addition to
damages, a civil penalty not exceeding two times the
amount of actual damages as well as costs, expenses and
attorney's fees. [Section 1794 (c)-(d).] Existing law
also provides manufacturers with the option of
establishing a third party dispute resolution process to
address disputes over the enforcement of express
warranties, which, if followed, could change the nature
of the damages recoverable. [Section 1793.22(c).]
Existing federal law , the Magnuson Moss Act, applies to
sales of warranted consumer goods intended for use as
personal, family and household purposes. [15 U.S.C.
Section 2301 et seq.] The legislative history indicates
that the purpose of the Act is to make warranties on
consumer products more readily understood and enforceable
and to provide the Federal Trade Commission with means to
better protect consumers. [Davis v. Southern Energy
Homes, Inc. (2002) 305 F.3d 1268.] However, it is a
remedial statute, designed to protect the purchasers of
consumer goods from deceptive warranty practices.
[Miller v. Willow Creek Homes, Inc. (2001) 249 F.3d 629.]
This bill would provide that California's "Lemon Law"
would cover a motor vehicle purchased by a member of the
Armed Forces in the United States with a manufacturer's
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express warranty regardless of the state of purchase or
registration, if both of the following apply: 1) the
member purchased the motor vehicle, as defined, from a
manufacturer who sells vehicles in California, and 2) the
member was stationed in or a resident of California at
the time he or she purchased the vehicle or at the time
he or she filed an action pursuant to California's Lemon
Law.
2.Existing law defines "express warranty" as a written
statement arising out of a sale to the consumer of a
consumer good pursuant to which the manufacturer,
distributor, or retailer undertakes to preserve or
maintain the utility or performance of the consumer good
or provide compensation if there is a failure in utility
or performance. [CC Section 1791.2.]
Existing law defines, among other things, "consumer
goods," "buyer," "distributor," "independent repair or
service facility" and "manufacturer." [CC Section 1791.]
This bill would, for purposes of the Lemon Law, define
"Member of the Armed Services" to mean a person on
full-time active duty in the Army, Navy, Marine Corps,
Air Force, National Guard, or Coast Guard; and would
provide that full-time active duty would also include
active military service at a designated military service
school.
COMMENT
1.Stated need for the bill
The author and sponsor write:
Existing law requires car buyers to purchase their
vehicles in California in order to benefit from the
protections under California's auto lemon law. In
some cases, that results in service members and their
families suffering major hardships when they are
saddled with unsafe and/or inoperable vehicles,
purchased in another state. This can cause our troops
additional stress, loss of income, lack of
transportation, and other financial and
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service-related hardships and can distract them from
their important mission of protecting our nation.
Due to varying provisions of state lemon laws, in some
cases, troops may lack protection under the lemon laws
of ANY state.
In one case, a Lieutenant testified live from Iraq,
while on deployment from a base in Southern
California, the auto manufacturers acknowledged his
new truck was a lemon, and told him that if he were
protected by California's lemon law the manufacturer
would promptly repurchase the lemon, but since he
lacked that protection, they refused to buy it back.
Eventually, that case was resolved, but the lieutenant
had to accept a large deduction and took a hefty loss,
instead of obtaining a complete refund. (Testimony
was delivered live via telephone, before the Joint
Committee on Boards, Commissions, and Consumer
Protection, held May 23, 2006.) In addition, the
manufacturer has attempted to have the vehicle
retitled as a VOLUNTARY BUYBACK, as opposed to a lemon
law buyback. This could mean that some unsuspecting
consumer may get saddled with a lemon.
2.Extending Lemon Law to vehicles purchased in the United
States, rather than solely in California, by Armed Forces
members
The basic requirement of California's Lemon Law is that
the motor vehicle be purchased or sold in California with
a manufacturer's express warranty. The California
Supreme Court held that the Lemon Law does not apply to
vehicles sold outside of California, even if the buyer is
a resident of California, the manufacturer sells such
vehicles in California, and its authorized repair
facilities in California failed to repair the vehicle
after a reasonable number of attempts. [Cummins, Inc. v.
Superior Court (2005) 36 Cal.4th 478.] In arriving at
this decision, the Court relied solely on a strict
interpretation of the statute, as written, and found that
had the Legislature intended for the Lemon Law to apply
to purchases made outside of the state, it would have
drafted it as such. [Id. at 494.] Other courts have
arrived at a similar conclusion. [See, e.g. California
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State Electronics Ass'n v. Zeos (1996) 41 Cal.App. 4th
1270 (court found that goods sold by mail order from an
out-of-state manufacturer were not "sold" in California
under Song-Beverly); Davis v. Newmar Corp. (2006) 136
Cal.App.4th 275; Barabino v. Dan Gamel, Inc. (2006)
(citation omitted).]
Each court addressing the issue of whether the product
must be purchased in California for a consumer to seek
the protections of Song-Beverly has rested its decision
on strict statutory interpretation, leaving it to the
California Legislature to decide whether the law should
be changed to allow out-of-state purchases to come within
the statute.
The provisions of California's Lemon Law requiring that
the product be purchased in California thus limits the
reach and territorial scope of the law. Several states
that have modeled their lemon laws after California's
require that the vehicle be registered in the state, yet
do not require that the vehicle be purchased in the
state. Some states merely require that the person
seeking lemon law protection be a resident of the state
and some do not specify any registration or purchase
requirement. However, a majority of the states generally
have an either/or option.
This bill would allow a member of the Armed Forces on
full-time active duty to invoke the protections of
Song-Beverly regardless of the state where the vehicle
was purchased. The bill would address the situation
where a member of the Armed Forces purchased a lemon
motor vehicle outside of California and is now a state
resident or is stationed in California (not by choice).
Instead of subjecting him or her and their family to the
frustration of dealing with the manufacturer (or dealer)
from another state, and the possibility of having to
undergo major expenses and stress accompanying those
circumstances, SB 234 would enable those military
personnel to seek the protections of California law.
Proponents note that to avail themselves of the
protections, the Armed Forces member would still have to
satisfy California's Lemon Law requirements. (See
Comment 6.)
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3.Extending California's Lemon Law protections to Armed
Forces members stationed or residing in California would
be in the best interests of the both the state and the
Armed Forces members
Proponents assert that this bill is narrowly tailored to
protect a particularly vulnerable population, Armed
Forces members stationed in or residents of California
who are subject to deployment on short notice, and who do
not have any choice of where they are stationed or
deployed. Several reports and a 2005 hearing of the
Assembly Banking and Finance Committee have noted that
car sales related issues are the number one problem
military legal assistance officials deal with for Armed
Forces members. This means that a member saddled with a
lemon faces numerous obstacles at a time when they and
their families are at their most vulnerable, such as when
they have been deployed or are about to be deployed and
their family is relying on the vehicle for
transportation, work, or other family needs.
In addition, proponents note that, if an Armed Forces
member has a lemon vehicle being used in California, it
exposes all on California's roadways to potential
dangers.
4. California currently extends other protections to
Armed Forces members
The Military and Veterans Code provides a number of
protections to military personnel, including, among other
things: relief from motor vehicle lease contracts (with
installment payments over a period of time at least as
long as active duty service), waiver of a number of fees
and charges, and exemption from certain taxes, jury duty
and other obligations.
5. Protections of California Lemon Law extended to Armed
Forces members, but available only if member complies
with the Lemon Law requirements
California's Lemon Law provides certain rights and
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remedies to purchasers of new and used motor vehicles
purchased in California. This bill would extend those
same rights and remedies to an Armed Forces member
stationed in or a resident of California who purchased
their vehicle in another state as long as the vehicle
manufacturer sells the vehicle line in California and the
Armed Forces member is stationed in or a resident of
California at the time of purchase or at the time of
filing an action under California's Lemon Law.
Among the protections of California's Lemon Law are the
"Lemon Law" presumptions. California law presumes that a
vehicle is a lemon if the following criteria are met
within 18 months of delivery to the buyer or lessee or
18,000 miles on the vehicle's odometer, whichever comes
first:
1) The manufacturer or its agents have made four or
more attempts to repair the same warranty problem, or
the vehicle has been out of service for more than 30
days (not necessarily all at the same time) while
being repaired for any number of warranty problems; or
2) The manufacturer or its agents have made two or
more attempts to repair a warranty problem that
results in a condition that is likely to cause death
or serious bodily injury if the vehicle is driven; and
3) The problems covered by the warranty, substantially
reduce the vehicle's use, value, or safety to the
consumer and are not caused by abuse of the vehicle;
and
4) If required by the warranty materials or by the
owner's manual, the consumer has directly notified the
manufacturer about the problem(s), preferably in
writing. The notice must be sent to the address shown
in the warranty or owner's manual. If these criteria
are met, the Lemon Law presumes the buyer or lessee is
entitled to a replacement vehicle or a refund of the
purchase price. However, the manufacturer may show
that the criteria have not been met (for example,
because the problems are minor) and therefore, the
buyer or lessee is not entitled to a replacement
vehicle or refund. [CC Section 1793.22 (b).]
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SB 234 would not alter the requirements for the
presumptions that a member of the Armed Forces must show
in order to seek the protections of California's Lemon
Law.
Proponents assert that they do not intend to extend any
protections beyond those currently provided in
California's Lemon Law to members of the Armed Forces
stationed in or residents of California. Author's
amendments to be offered in committee (see Comment 9)
would assure that Armed Forces members stationed in or
residents of California who purchased a vehicle in
another state would be required to comply with
California's Lemon Law provisions. This would include,
among other things, making the required reasonable number
of repair attempts - two or more if the vehicle is
unsafe, otherwise four or more; direct notice to the
manufacturer; and submitting a dispute to arbitration
under some circumstances.
6. This bill would not be undue burden on vehicle
manufacturers or their agents who sell vehicles in this
state as they offer the same express warranty regardless
of where the vehicle is purchased or leased in the United
States
Generally, vehicle manufacturers offer "national" express
warranties that apply regardless of where a consumer
purchases the vehicle. Thus, a car purchased
out-of-state may have its warranty work performed in
California, and vice-versa. Given that this bill would
only apply to vehicles of a vehicle line a manufacturer
sells in California, for which the manufacturer must
already comply with California's Lemon Law (if the
vehicle was purchased in California), the author and
sponsor assert that it would not cause an undue burden to
manufacturers, or their agents, to comply with
California's Lemon Law if the vehicle was purchased in
another state by an Armed Services member currently
stationed in or a resident of California.
7. For tax and other reasons, Armed Forces members stationed
in or residents of California should not be required to
register their vehicles in California
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The question has been raised as to whether Armed Forces
members stationed in or residents of California should be
required to register their vehicle in California to be
able to take advantage of the Lemon Law. Armed Forces
members often are residents of other states, and choose
to remain so for a number of reasons, whether personal,
financial, or otherwise. The author and sponsor contend
that the bill should not include a registration
requirement because military sources say that a vehicle
registration requirement could have significant adverse
tax consequences for an Armed Forces member. Military
sources state that the state California Franchise Tax
Board, in evaluating whether to levy state income taxes,
considers a number of factors, including where a person's
vehicle is registered.
Military sources also say that an additional issue and
expense for an Armed Forces member who gets stationed in
California is the substantial use tax that is levied on
out-of-state vehicles that are re-registered in
California.
For these reasons, the author and sponsor assert that
vehicle registration in California should not be a
requirement of the bill.
8. Requirement for Armed Forces member to make at least one
repair attempt in California would not be good public
policy
Representatives from vehicle manufacturers have suggested
that SB 234 should require an Armed Forces member to make
a least one repair attempt of a lemon vehicle in
California. Proponents question the need for that
suggestion. First, under the bill, a motor vehicle
purchased by an Armed Forces member in another state
would be subject to California's Lemon Law requirements,
including a reasonable number of repair attempts -- two
or more if the vehicle is unsafe, otherwise four or more.
(Under the Lemon Law, an unsafe vehicle is one that is
likely to cause death or serious bodily injury if
driven.) Thus, unless the requisite number of attempts
has already been made outside the state, then the Armed
Forces member, to comply with California law, will be
attempting at least one repair in California. However,
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if the Armed Forces member has already done the requisite
number of repairs outside of California, then a
requirement of at least one attempt in California would
force a further hardship on the family. Second, if the
member were required to make an additional repair attempt
in California where the defect is a safety defect, this
would pose additional risk to the family and a public
safety risk to all those on California's roads.
9. Author's amendments
A. On page 4, line 20 after the word "1795.8." insert:
Notwithstanding any other provision of law,
B. On page 4, line 21 strike out "new or used"
C. On page 4, line 21-22 strike out "with a
manufacturer's express warranty"
D. On page 4, line 22 before the word "by" insert:
as defined in Section 1793.22 (e)(2)
E. One page 4, line 25 strike out "new or used"
F. One page 4, line 26 after the word "vehicle"
insert:
as defined in Section 1793.22 (e)(2)
G. On page 4, line 27 after the word "state" insert:
or from an agent or representative of that
manufacturer
Support: Consumer Action; Consumer Attorneys of
California; Consumer
Federation of California; Navy Federal Credit
Union; Major General Lehnert-Commanding General of
Marine Corps Installation West, Camp Pendleton, CA;
California State Commanders Veterans Council;
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Charles S. Cooper-Major General, USAF, Retired;
Steve Lynch-Lt. Col., USAF, Retired
Opposition: None Known
HISTORY
Source: Consumers for Auto Reliability and Safety (CARS)
Related Pending Legislation: None Known
Prior Legislation: SB 1848 (Figueroa of 2006), very
similar to this bill, would have permitted a
member of the armed forces, as defined, who
was stationed in or a resident of CA at the
time he or she purchased a motor vehicle from
a manufacturer who sold consumer goods in CA
or when he or she filed an action under CA's
lemon law, to exercise his or rights under
CA's lemon law of in which state the vehicle
was purchased or registered. The bill would
have also required that a reasonable number
of repair attempts would have included repair
attempts in another state. (This bill was
held in Assembly Rules Committee.)
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