Tuesday, August 27, 2013

ADR Bars Fees in Auto Defect Suits

Congress in 1975 set forth a policy to encourage warrantors to establish procedures whereby consumer disputes could be fairly and expeditiously settled through informal dispute settlement mechanisms under the Magnuson-Moss Act. Apparently, this was not successful enough in resolving consumer disputes regarding chronically defective automobiles. Consequently, many states enacted Lemon Law legislation to address perceived problems. Use of Better Business Bureau's (BBB) Auto Line is required prior to filing suit under the Magnuson-Moss Act, but is not a prerequisite to an action under the Lemon Law. A three-judge panel of the Superior Court of New Jersey’s Appellate Division recently ruled in Nissan’s favor, stating consumer claimants were not eligible for attorneys’ fees as a matter of law because they were bound to an alternative dispute resolution process as a term of their warranties. Claimants signed away their rights to pursue civil actions by accepting arbitration decisions. BBB Auto Line requires aggrieved consumers to mediate the claim first, then proceed to arbitration if the mediation process proves unsuccessful, with the consumer given a choice between an impartial arbitrator or a three-person panel. Plaintiffs were sent to Auto Line after first trying to circumvent that forum with civil suits. While successful in getting Nissan to repurchase the defective vehicles, the arbitrator did not award attorneys’ fees-- prompting new suits and an appeal when trial judges dismissed those suits. The appellate panel found that Plaintiffs were not entitled to attorneys’ fees because of their participation in the ADR process and signatures on settlements that waived legal action related to the same claim. Plaintiffs were not bound to accept the informal dispute settlement decision, but neither rejected the award of repurchase in favor of initiating legal action with the hope of collecting attorneys' fees. It was found the absence of an attorneys' fees award neither violates statutes nor offends public policy. See story here http://bit.ly/1aLYWH7 and opinion http://www.judiciary.state.nj.us/opinions/a6034-11a0116-12.pdf