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A “lemon law” battle between New York Attorney General Eliot Spitzer and automobile manufacturers is heading for the court showdown that both sides seem to want. The dispute is rooted in a new statutory interpretation that gives consumers slightly more clout than they would have otherwise, and a newly aggressive posture by car manufacturers in challenging lemon law arbitrations. Two years ago the attorney general said that under the lemon law a consumer is entitled to either a refund or a new car if the dealer cannot repair a defect after four tries — whether or not the car is fixed by the time the motorist gets a lemon law arbitration hearing. The new policy bucked 16 years of practice and administrative precedent in New York. But it matched the policies of several states with laws modeled after New York’s. Auto companies objected vigorously and the car companies challenged the arbitration award by bringing an action under Article 75 of the CPLR to vacate the arbitration award. Those actions name the consumer as respondent. In each of the five cases to date, a judge ruled for the car company. The judges said the legal standard employed by arbitrators on instructions from Spitzer was incorrect. But Spitzer never really had an opportunity to defend himself since neither he nor the state was a defendant. He did appear as amicus curiae in a couple of the cases but never got a chance to play the lead role. That changed July 23 when DaimlerChrysler Corp., General Motors Corp. and Saturn Corp. sued Spitzer and the New York State Dispute Resolution Association under Article 78 of the Civil Practice Law and Rules. The suit accuses Spitzer of violating the statute and seeks to permanently enjoin the attorney general from disseminating consumer informational materials and arbitrator training manuals advancing his interpretation of the lemon law. Albany Supreme Court Justice Louis C. Benza issued a temporary restraining order Tuesday that effectively bars Spitzer’s office from proceeding with lemon law arbitrations until the dispute is resolved. Justice Benza had previously ruled for the auto makers in cases against consumers. Court records explain that under the lemon law, codified as General Business Law �198-a, consumers are entitled to a refund or replacement if a new vehicle “has been subject to repair four or more times” for the same defect in the first two years or 18,000 miles, whichever comes first. Since an arbitration program was implemented in 1987, attorneys general have consistently maintained that relief is available only if there is an existing defect at the time of a proceeding or trial. In 1992, Spitzer’s office changed that policy. The attorney general in November 2002 circulated a memo to all arbitrators involved in the lemon law arbitration program, advising them that an existing defect was no longer a necessary prerequisite for recovery if the vehicle was not fixed after four attempts, even if the consumer authorized more than four repair attempts. With that directive, arbitrators began ruling for consumers in cases that previously would have been rejected. Auto makers started taking consumers to court to overturn the arbitration orders. Despite the auto companies’ unbroken string of victories, the attorney general continues to adhere to his interpretation and continues to advise arbitrators to rule for consumers when their vehicle has not been repaired after four efforts. The Article 78 action, filed by Albany attorney Keith B. Rose of the Rose Law Firm, counsel for the auto companies, seeks to put an end to Spitzer’s policy. It would compel him to retrain arbitrators and rewrite informational materials. Rose said the policy is absurd since it requires manufacturers to buy back vehicles that have “absolutely nothing wrong with them.” Justice Benza’s temporary restraining order tells the attorney general to stop circulating the disputed interpretation and to advise arbitrators that they can rule for the consumer only if the vehicle is still defective at the time of the hearing. As a practical matter, according to the attorney general’s office, that stops arbitration hearings in their tracks, pending an appearance before Benza on Friday. The office notes that the lemon law does not say that the defect must exist at the time of the proceeding. “The whole purpose of the lemon law is to set a reasonable number of attempts to repair a defect,” said Christine Pritchard, Spitzer’s spokeswoman. “That is the purpose of the lemon law, and that is what we are defending. “What we find a little more alarming is we have seen a pattern of activity by manufacturers to discourage the use of the lemon law, and this lawsuit is an example.”

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