Lemon Puppy Breeder Banned

Posted by Sergei Lemberg, Esq. on November 28th, 2008

Pennsylvania Attorney General Tom Corbett successfully shut down a puppy breeder in Berks County who, according to the AG’s press release, “sold consumers puppies that were sick, had infectious diseases, congenital or genetic defects or were falsely represented as healthy dogs.”

The breeder, Traci Murai, also required people purchasing dogs to forfeit their rights under Pennsylvania’s Puppy Lemon Law.

The court order prohibits Murai from breeding and selling dogs in the state, and requires restitution and penalties of $25,000.

New Home Repair Fraud Protections for Pennsylvanians

Posted by Sergei Lemberg, Esq. on November 27th, 2008

On October 17, Pennsylvania Governor Ed Rendell signed a bill creating the Home Improvement Consumer Protection Act, a measure that’s long overdue and that should act as a model for other states around the country. Sponsored by Senator Robert Tomlinson, the new law requires home improvement contractors to register with the Attorney General’s Bureau of Consumer Protection. Consumers can call a toll-free number to check on the status of a contractor.

For work that costs more than $500, the law also mandates contracts that include an outline of the work, the completion timeline, and the total costs. The new law also has teeth: home improvement scams could be prosecuted as felonies, and sanctions are enhanced if the victim is 60 years old or older.

Tomlinson noted:

“In too many cases, an unethical operator will take a deposit and leave town, or do sub-par repairs and refuse to fix the job. Oftentimes, homeowners are left with empty wallets and no recourse. Scam artists often target senior citizens living on a fixed income, telling them they need work that is not necessary, or taking payment and never doing the work. My legislation will more strictly police home improvement contractors and give consumers more information before they hire a home repair operator.”

A Lemon or a Fraud?

Posted by Sergei Lemberg, Esq. on November 26th, 2008

A new client came to us with what sounded like a rock solid lemon law buyback claim: a brand new 2008 Subaru was out of service for over 30 days, and required replacement of the engine, exhaust, and oil pan. We sent a demand letter to the manufacturer and, a few days later, we received a callback questioning why we had even submitted the demand. Their position? The car had no material defects.

The client sent in his documents, including his sales agreement and service records. The discrepancy was immediately solved. The purchase agreement was from an independent auto dealership and the vehicle had been bought on eBay. The customer had not had the opportunity to test drive the vehicle prior to winning the eBay auction. Thus, his first drive in it was the drive home. He immediately noticed a vibration, which grew increasingly worse as the days passed. He brought the Subaru to three different auto mechanics, including a manufacturer authorized dealership, and all three came back with the same opinion; the vehicle had been in a serious accident and had sustained heavy damage to the front end, as well as to the exhaust.

The exhaust and oil pan were replaced first. The customer informed the seller of the issues with the vehicle and the necessity for the repair, to which the seller voluntarily agreed to pay half of the bill. Soon thereafter, the vehicle was returned for service, which was when the client was told he needed a new engine.

The takeaway? Beware of “new” used cars, and deals that seem too good to be true. If you’re going to buy a used car, do a CARFAX check on the vehicle’s history, take it for a test drive, and have it inspected by a mechanic. If you buy a previously wrecked vehicle and the dealer doesn’t tell you, you may have a cause of action against the dealer, but you don’t have a lemon law claim.

Automaker Bankruptcy – Tough Break for Consumers

Posted by Sergei Lemberg, Esq. on November 25th, 2008

As a former bankruptcy lawyer who now represents consumers in warranty and lemon law cases, I have a pretty unique view on what a possible bankruptcy of General Motors, Ford or Chrysler would mean for the owners of those companies’ vehicles. So I thought I would share it with my readers.

IS YOUR WARRANTY GOING TO BE INTACT IN BANKRUPTCY?

The answer depends on whether a particular automaker will reorganize or liquidate in bankruptcy. Warranty agreements are called ‘executory contracts’ in bankruptcy – simply put, they are contracts where one or the other party has not finished fulfilling its obligations. In the context of a warranty, the manufacturer has yet to perform on the unexpired portion of the contract, so the contract qualifies as ‘executory.’ The Bankruptcy Code allows the debtor to keep these contracts (if they are favorable) or ‘reject’ them (if the debtor feels that the contract isn’t favorable to it).

So, technically, a bankrupt automaker could either keep its warranty obligations or cancel them, and it has the power to choose. From the practical standpoint, it is hard to see how an automaker that intends to reorganize or be purchased, and to remain in business, would choose to cancel its obligation to service the vehicles of its own customers. No one would have any trust in buying its cars going forward. Long story short, if GM, Ford, or Chrysler files with the intent to reorganize or be acquired, your warranty will most likely be intact.

However, if an automaker decides to liquidate and go out of business under Chapter 7 of the Bankruptcy Code, its warranty obligations may go to the grave with it. It’s possible that a trust could be established to pay warranty claims over time.

WHAT IF MY VEHICLE IS A LEMON? CAN I STILL SUE THE CARMAKER?

First and foremost, a bankruptcy filing has the effect of stopping all suits or other efforts to collect against the debtor. This nifty device is known as the ‘automatic stay.’ That means, literally, all suits, including lemon law actions, creditors’ efforts to collect, or any other means to grab what the bankrupt has, must stop. The automatic stay applies with equal force to arbitrations run by Attorneys General in many states to adjudicate lemon law suits. The stay isn’t permanent – it lasts only as long as the bankruptcy does – but from a creditor’s or a consumer’s perspective it makes no difference. That is because all claims against the debtor would be administered through the bankruptcy process.

One possible source of hope for lemon owners lies in Section 362(b)(4) of the Bankruptcy Code, which provides an exception for so-called ‘police powers’ actions against the debtor. This normally means that the Bankruptcy Court has no power to stop state or local governments from enforcing regulatory, administrative or even criminal violations by the debtor – these cases go forward regardless of the debtor’s bankruptcy.

Could lemon law cases fall under this exception? Possibly. There is a good argument to be made that the lemon law legislation is intended to police wrongful or unfair conduct by the automakers. However, the police powers exception normally applies to government, not private actions by individuals.

WHAT CAN I DO IF MY WARRANTY IS VOIDED OR LEMON LAW CLAIM STOPPED?

Get in line. The bankruptcy process provides for orderly liquidation of claims. All creditors who lose money as a result of a debtor’s bankruptcy filing may file a claim with the court. If the court allows the claim, each creditor will get its proportional share of recovery of the debtor’s remaining assets, depending on where the creditor stacks up on the food chain of claims.

IS THERE SOMEONE ELSE I COULD SUE?

Yes, the bank that financed the car. The bank may be liable, but likely only up to the amount of money you have already paid on the loan, not the entire finance agreement.

PLEASE UNDERSTAND THAT NOTHING IN THIS BLOG IS MEANT IN ANY WAY TO CONVEY LEGAL ADVISE TO ANY READER OF THIS BLOG IN ANY STATE.

Pennsylvania City Stuck with Lemon Dump Truck?

Posted by Sergei Lemberg, Esq. on November 25th, 2008

The Pittsburgh Tribune-Review recently reported that the South Hills Area Council of Governments may have a lemon dump truck. Although the truck is almost five years old, it only has 6,000 miles on it and has had turbo engine problems two times each year. The paper reported that the government’s attorney was looking into the state’s lemon law for possible recourse. Since Pennsylvania lemon law only covers personal vehicles, that’s highly doubtful.

They probably do have a cause of action, though, under other state and federal laws.