Sour result: No pre-litigation attorneys’ fees under lemon law

A car manufacturer didn’t violate Virginia’s “Lemon Law” statute when it offered a refund to a dissatisfied purchaser but refused to pay for all of their pre-litigation attorneys’ fees, the Supreme Court of Virginia has held.

Consumers who prevail in a civil action under the Lemon Law statute can recover attorneys’ fees, but “[i]f there is no violation, there can be no viable civil action,” Justice Stephen R. McCullough pointed out, affirming the trial court’s dismissal of the case with prejudice.

“Pre-litigation attorney’s fees are not a component of collateral or incidental damages under the Lemon Law,” McCullough explained. “Therefore, when a manufacturer provides a refund, it is not required to pay pre-litigation attorney’s fees to satisfy its obligations under the Lemon Law.”

The opinion is Ranger v. Hyundai Motor America (VLW 023-6-008).

Demand for fees

After his new vehicle required repeated repairs, Nicholas Ranger retained a lawyer. His attorney demanded that Hyundai Motor America reimburse Ranger for the purchase price, interest on the note, attorneys’ fees and incidental and consequential damages under the Lemon Law.

Hyundai offered to repurchase the vehicle and pay some of Ranger’s attorneys’ fees. Ranger rejected the offer and filed suit.

The Circuit Court of Accomack County found that Hyundai complied with the Lemon Law and dismissed Ranger’s case with prejudice.

Ranger appealed.

Lemon Law

McCullough explained that the Lemon Law “offers some advantages to both consumers and manufacturers” by “prodding manufacturers to repair a vehicle, replace a vehicle, or offer a refund … because compliance avoids costly litigation.”

Under the Lemon Law, “if the manufacturer does not, or is unable to, bring a defective vehicle into conformity with the warranty within the specified time, the manufacturer must ‘[a]ccept return of the motor vehicle and refund to the consumer … the full contract price, including all collateral charges, incidental damages, less a reasonable allowance for the consumer’s use of the vehicle up to the date of the first notice of nonconformity that is given to the manufacturer, its agents or authorized dealer.’”

The court noted that “collateral charges” was defined as “any sales-related … charges.” Attorneys’ fees are not mentioned or contemplated in the definition.

Relying on the Uniform Commercial Code, the court reached the same conclusion about “incidental damages.”

“The official commentary to this provision explains that this subsection ‘is intended to provide reimbursement for the buyer who incurs reasonable expenses in connection with the handling of rightfully rejected goods,’” the justice noted. “The official commentary also makes no mention of attorney’s fees.”

McCullough sought guidance from other courts.

“Although we could not find a Virginia case on point, the ‘overwhelming weight of authority’ from other courts concludes that attorney’s fees are not available under this provision of the Uniform Commercial Code. We agree,” he wrote.

No violation

To satisfy its obligations under the Lemon Law, there is no requirement for a manufacturer to pay pre-litigation attorneys’ fees when it provides a refund, McCullough said.

And while a consumer can bring a civil action against a manufacturer that fails to abide by its obligations under the Lemon Law statute, there can be no viable civil action if there’s no violation.

“Although we could not find a Virginia case on point, the ‘overwhelming weight of authority’ from other courts concludes that attorney’s fees are not available under this provision of the Uniform Commercial Code.”

— Justice Stephen R. McCullough

“A manufacturer who has offered a refund that satisfies the Lemon Law requirements is not in violation of the statute,” the justice explained. “The only time a consumer can recover attorney’s fees is when a consumer has filed an action and prevailed. In that instance, the consumer is entitled to “recover reasonable attorney’s fees, expert witness fees and court costs incurred by bringing such action[].”

The court held that Hyundai’s refund conformed with the requirements of the Lemon Law. Any disputed facts regarding payment of pre-litigation attorneys’ fees were immaterial under the law because Ranger was not entitled to recover those fees.

Finding no genuine dispute of material fact, the court affirmed summary judgment for Hyundai.

Not cut-and-dried

Hyundai was defended by Rob Wise, a partner with Nelson Mullins.

“This looked like a pretty cut-and-dried lemon case until the guy decided he wanted to be made whole for every bit of inconvenience he had,” Wise told Virginia Lawyers Weekly.

“It’s not unusual for a manufacturer to pay some amount just to buy the peace, especially if the fees are nominal,” he added. “The demands were exorbitant right out of the gate and then the meter was running from there on forward.”

Wise confirmed that the plaintiff’s rejection of Hyundai’s offer and subsequent loss in court mean that he has lost all of his remedies under the Lemon Law.