New Chrysler Group LLC Will Honor "Lemon Law" Obligations

Bankruptcy Court approves agreement with State Attorneys General

June 5, 2009 -- Fiat and the new "Chrysler Group LLC" have agreed to honor the "Lemon Law" rights of Chrysler buyers when the new company takes control of the U.S. auto maker, Attorney General Steve Six said Friday.

"State Lemon Laws provide consumers with rights and procedures to obtain a refund or a replacement vehicle if a new vehicle develops a significant problem that can't be repaired after a certain number of repair attempt," Six said.

Six said it was a very significant question whether the new Chrysler Group LLC would be required to honor Lemon Law rights for vehicles sold or leased by the company prior to the upcoming closure of the "Old Chrysler" through the bankruptcy court. Chrysler Group LLC will be owned by Fiat, the UAW, the U.S., and Canada following the bankruptcy.

Lemon Law rights vary from state to state, but they generally apply for several years or up to certain mileage limits for new vehicles purchased or leased by consumers.

Fiat negotiated with a group of state attorneys general and agreed to honor all the rights consumers had under the "Old Chrysler" to seek and obtain a refund or replacement vehicle if their vehicle has a significant or recurring problem.  The agreement is contained in the Bankruptcy Court judge's order issued Monday, June 1.

"I commend Fiat and the other Chrysler Group LLC partners for reaching the formal agreement with Lemon Law protections for consumers," Six said.  "The agreement is a significant ‘win' for consumers nationwide."

More background and detail:    

Under the court order, the "New Chrysler" company "will recognize, honor and pay liabilities under Lemon Laws for additional repairs, refunds, partial refunds (monetary damages) or replacement of a defective vehicle (including reasonable attorneys' fees, if any, required to be paid under such Lemon Laws and necessarily incurred in obtaining those remedies) . . . . on vehicles manufactured by the Debtors [Chrysler] in the five years prior to the Closing . . ." 

The court order also provides that the "New" Chrysler "has agreed to continue addressing Lemon Law claims (to the extent that they are Assumed Liabilities) using the same or substantially similar procedural mechanisms previously utilized by the Debtors."   The states said the "procedural mechanisms" referred to in the court's order means state-run or third-party Lemon Law dispute arbitration programs set up under individual state Lemon Laws to help consumers and manufacturers settle Lemon Law disputes.

The states recognized Karen Cordry, Bankruptcy Counsel for the National Association of Attorneys General, for her assistance in reaching the agreement between the states and Fiat.

Attorney General Six also said the states will be watching the GM bankruptcy carefully for similar issues.

Kansas's Lemon Law:

Six said Kansas's Lemon Law, K.S.A. 50-645, gives consumers the right to seek a refund or replacement vehicle if their new vehicle has a defect, malfunction or condition that renders the vehicle unfit, unreliable or unsafe for warranted or ordinary use or which significantly diminishes the value of the vehicle.  It applies only to the first buyer of the vehicle, and only on new cars and trucks under 12,000 pounds.

A consumer's vehicle can qualify for refund or replacement if one or more of the following conditions have been met during the Lemon Law Rights Period, which is one year from the date of warranty or the date of original delivery to the consumer:

For more information, go to the Kansas Attorney General's website: http://www.ksag.org/.