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The refund-or-replace remedy in California’s Lemon Law does not apply to used cars with a remaining balance on the manufacturer’s warranty, a California appellate panel ruled.

The unanimous opinion affirmed a judgment from Riverside Superior Judge L. Jackson Lucky.

Case background

The plaintiffs in the case, Everardo Rodriguez and Judith Arellano, bought a 2-year-old Dodge truck with 55,000 miles from Fontana’s Pacific Auto Center in 2013. The truck’s basic warranty had expired, but the limited powertrain warranty had not. In 2014, the car’s check engine light came on. The plaintiffs took the car to an authorized Chrysler dealer in Hemet six times over the course of the year.

Finally, they sued Chrysler for not providing them with a new car or with full reimbursement of the cost of the car, under California’s refund-or-replace provision.

The Lemon Law requires manufacturers to replace new motor vehicles or refund the purchase of the vehicle if the manufacturer is unable to repair the vehicle to conform to its warranty.

Among other definitions, the law defines new motor vehicles as “a dealer-owned vehicle and a ‘demonstrator’ or other motor vehicle sold with a manufacturer’s new car warranty.” A demonstrator is a vehicle used by a dealer to demonstrate what similar vehicles are like.

The plaintiffs argued the “other” clause included their Dodge, which still had a limited powertrain warranty.

Lucky rejected the plaintiff’s claims in a motion for summary judgment, ruling that their truck was not new.

Appellate analysis

The appellate court agreed.

While they agreed that in isolation, the plaintiff’s interpretation of the phrase could be correct, the context of the law requires a more narrow interpretation.

The prior phrase, “dealer-owned vehicle and a ‘demonstrator’” establishes a narrow category of basically new vehicles that have never been previously sold to a consumer and come with full warranties, the appellate panel said.

The phrases’ structure and lack of commas also indicates that the list referenced by the plaintiffs does not establish a new type of vehicle that their Dodge would be included in, the panel ruled.

“Indeed, nothing about the wording or structure of the provision indicates the Legislature intended to expand the definition of ‘new motor vehicle’ to include used vehicles sold with some part of the manufacturer’s warranty still in force,” the panel wrote.

The panel said that the plaintiff’s interpretation of the law raises more questions than it answers by leaving the coverage of multiple cars sold and resold by different parties in the air.

The legislative intent on inserting that phrase was intended to ensure that vehicles sold after being demonstrators would be covered under the bill, the panel found.

A federal case, Johnson v. Nissan N. Am., Inc, reached the same conclusion as the appellate panel did, the ruling said.

“Having examined the statutory provision, its place within the Act as a whole, and its legislative history, we conclude the phrase ‘other motor vehicles sold with a manufacturer’s new car warranty’ refers to cars sold with a full warranty, not to previously sold cars accompanied by some balance of the original warranty,” the panel concluded.

Individuals in the same position as the plaintiffs can still sue manufacturers for breach of an express warranty to repair defects under the California Uniform Commercial Code, the ruling said.

Parties

Fourth District Court of Appeal, Division Two, Associate Justice Marsha Slough wrote the published opinion, which Associate Justices Douglas Miller and Michael Raphael joined.

Riverside Superior Judge L. Jackson Lucky presided over the case at trial court.

Hallen Rosner and Arlyn Escalante of San Diego’s Rosner, Barry & Babbitt, LLP, also known as the Auto Fraud Legal Center, and Steve Mikhov and Roger Kirnos of Los Angeles’ Knight Law Group, represented the plaintiffs.

David Brandon and Georges Haddad of San Francisco’s Clark Hill, and Lisa Perrochet and Shane McKenzie of Burbank’s Horvitz & Levy LLP, represented Chrysler.

Superior court case number RIC1807727.

Appellate case number E073766.

Read the ruling here.

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