Oregon Lemon Law

Oregon Lemon Law

The Oregon Lemon Law ORS 646A.400 – 646A.418 covers new passenger motor vehicles primarily used for personal, family or household purposes. This includes self-propelled motor homes. Vehicles that are purchased primarily for business purposes and used vehicles are not covered under the Lemon Law.

A new passenger motor vehicle is presumed to be a lemon if it has been out of service for thirty cumulative business days (sixty cumulative days if a motor home) or has had three or more repair attempts on the same substantial defect. Either of these circumstances must have occurred within two years after delivery or before 24,000 miles, whichever comes first. A substantial defect is a manufacturing defect that either causes a serious safety risk or causes the vehicle to not function. Additionally, a series of smaller defects, which when combined cause serious safety risks or cause the vehicle to not function, may also constitute a substantial defect. Consumer abuse or neglect of the vehicle voids the protection of the Lemon Law.

To make a claim under Oregon’s Lemon Law a consumer must provide written notice of each defect to the vehicle’s manufacturer as well as to the manufacturer’s agent or its authorized dealer. This written notice must specifically state the defects. Failing to provide this written notice is one of the major stumbling blocks for consumers attempting to use the Lemon Law.

Once the manufacturer has been notified and the consumer has shown that the vehicle is a lemon, the manufacturer may either replace the vehicle with a new vehicle of equal value or accept the return of the lemon and refund the purchase price, less a reasonable usage fee. Or, the manufacturer may instead request an “informal dispute settlement” or arbitration.  See ORS 646A.408.

That statute states:  “If a manufacturer, for the purpose of settling [Lemon Law] disputes … establishes or participates in an informal dispute settlement procedure that substantially complies with the provisions of 16 C.F.R. part 703, as in effect on June 23, 2009, and causes a consumer to be notified of the procedure.  [Consumer remedies] do not apply to a consumer who has not first resorted to the procedure.”

I am told, however, that many auto manufactures do not comply with 16 CFR part 703 in establishing an informal dispute resolution procedure; if this proves to be the case, the consumer can bypass “informal dispute resolution” and immediately file suit.

If one first arbitrates (“informal dispute resolution”), that arbitration decision is binding on the manufacturer only.  The consumer, by contrast, may appeal and try the case in the courts. If the consumer prevails, the court may also award the consumer triple damages (not to exceed $50,000 if the manufacturer found to have acted in bad faith) and may order the manufacturer to pay the consumer’s attorney fees if the consumer prevails.  If the manufacturer prevails and the court finds the consumer brought the action in bad faith or solely to harass,  the court may order the consumer to pay the manufacturer’s attorney fees.  See ORS 646A.412.

The right to attorney fees only accrues to a consumer following a victory in court.  This means should the case settle before then, after an arbitration decision, e.g., there is no right to prevailing party consumer fees.  This seems to encourage consumers to handle the arbitration on their own—or the consumer has to pay his/her attorney out of pocket.  (Or it may encourage consumers to see if the manufacturer has failed to comply with 16 CFR part 703 (by establishing an informal dispute resolution procedure), and if that is the case, bypass informal dispute resolution and file a lawsuit with the court.

An alternative to the Oregon Lemon Law is a federal law known as the Magnuson-Moss Warranty Act (MMWA), 15 U.S.C. 2301 – 2312. The MMWA covers personal property that is used for personal, family, or household purposes. The MMWA is a tool for enforcing warranties, both written and implied. It gives teeth to the warranties by providing for prevailing plaintiff attorney fees. (And, there is no risk of paying the manufacturer or dealer’s attorney fees if you lose.) The MMWA allows for the consumer to file in either state or federal court. In order to file in federal court, however, the value of the consumer product needs to be $50,000 or more.