Lemon Law Allows Atty Fees Over Vendor Contracts, Court Says – Law360 (subscription)



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By Joshua Alston

Law360, New York (July 02, 2014, 5:13 PM ET) —
A New Jersey appellate panel on Wednesday said consumers pursuing claims under the state’s Lemon Law can win attorneys’ fees over third-party contracts, rejecting Hyundai Motor America’s argument the law doesn’t cover attorneys retained to assist with contracts with third-party vendors. 

In a published decision, a three-judge panel on the Superior Court of New Jersey’s Appellate Division ruled in favor of Jorge Casal, who filed suit against Hyundai to recoup attorneys’ fees he incurred while attempting to transfer or cancel third-party contracts for protection plans on a car later deemed a lemon. The ruling reverses a trial court’s determination that the fees aren’t covered under the Lemon Law.

Although Hyundai argued it should not be held responsible for the cost of modifying third-party contracts, the appellate court said the Lemon Law is designed for efficient resolutions without the involvement of counsel, but Casal justified his need for an attorney, and the court said the cost is Hyundai’s to bear.

“We hold the Lemon Law requires the consumer to be made whole and authorizes a counsel fee award, if counsel is needed to obtain relief from any options sold through the dealer, as part of the purchase transaction,” the opinion said. “A consumer should be able to resolve his claim with the manufacturer without counsel fees, but where counsel is needed, the consumer is entitled to an award of reasonable counsel fees to obtain full relief under the statute.”

According to the opinion, Casal purchased a Hyundai Santa Fe in June 2011 from Avenel, New Jersey’s Sansone Hyundai. Casal began experiencing issues with the car within days, the opinion said, and began writing Hyundai letters, none of which received any reply until Casal retained an attorney.

By mid-July 2011, the parties agreed the car was a lemon, and Hyundai settled, offering Casal $3,000 plus the cost of car rental. Casal declined the offer and Hyundai agreed to replace the vehicle instead, the opinion said.

All that remained at issue was a trio of third-party contracts Casal entered when he purchased the vehicle, including a protection plan covering failure of the theft detection system, another offering roadside assistance and coverage for windshield repair and light body damage, and gap coverage policy purchased directly through Sansone.

Casal wanted the protection plans transferred to his replacement car at no additional cost, but Hyundai told him the matter was a dealership issue and the carmaker could make no guarantees, the opinion said. Casal’s attorney was tasked with contacting the third-party vendors to inquire about cancellation or transfer, leading to months of wrangling and red tape.

“According to counsel’s certification in support of his fee application, he received little assistance, in fact, some resistance, from the dealer,” the opinion said. “He directly contacted the third-party vendors about the policies and was told the cancellations had to come from the dealer.”

The appellate panel said the fees incurred ironing out those contracts are the responsibility of Hyundai, saying that while attorneys’ fees aren’t actually listed in the Lemon Law statute, the statute does cover other third-party fees such as state taxes, registration costs and finance charges.

The court rejected Hyundai’s argument that Casal suffered no harm from the contracts, which were cancellable with refundable costs.

Hyundai “imposed the duty of negotiating with these third parties, the dealer, and the finance company on Casal, and as a result he had to incur counsel fees,” the opinion said. “The dealer has an ongoing business relationship with the manufacturer. The third parties involved have ongoing business relationships with the dealer, and all of these contracts were offered as part of the sale of the vehicle. All were negotiated by the manufacturer’s dealer with the consumer, albeit on behalf of a third party.”

A Hyundai spokesman said the company does not comment on litigation.

Superior Court Judges Susan Reisner, Carmen Alvarez and Carol E. Higbee sat on the panel.

Casal is represented by Andrew R. Wolf, Aaron Mizrahi, Andrew W. Li and Christopher J. McGinn of the Wolf Law Firm LLC.

Hyundai is represented by Jane A. Rigby and Stephen F. Payerle of McElroy Deutsch Mulvaney & Carpenter LLP.

The case is Jorge Casal v. Hyundai Motor America, case number A-4487-12T3, in the Superior Court of New Jersey, Appellate Division. 

–Editing by Jeremy Barker. 

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