Lyeth v. Chrysler Corp.

• Citation: 929 F.2d 891
• Decision Date: 29 March 1991
• Docket Number: D,Nos. 189,505,s. 189
• Parties: Robert J. LYETH, Plaintiff-Appellee, v. CHRYSLER CORPORATION, Defendant-Appellant, Robert Abrams, Attorney General of the State of New York, Intervening Defendant. ockets 90-7433, 90-7591.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 891

929 F.2d 891

Robert J. LYETH, Plaintiff-Appellee, v. CHRYSLER CORPORATION, Defendant-Appellant Robert Abrams, Attorney General of the State of New York Intervening Defendant.

Nos. 189, 505, Dockets 90-7433, 90-7591.

United States Court of Appeals Second Circuit.

Argued Sept. 28, 1990.

Decided March 29, 1991.

Mark A. Costello (Boylan, Brown, Code, Fowler, Randall & Wilson, Rochester, N.Y., of counsel), for plaintiff-appellee.

Thomas S. Wiswall (Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, N.Y., of counsel), for defendant-appellant.

Thomas G. Conway, Asst. Atty. Gen., Albany, N.Y. (Peter H. Schiff, Deputy Sol. Gen., Rachel Kretser, Marla Tepper, Asst. Attys. Gen., of counsel), for intervening defendant.

Before NEWMAN, PIERCE, and ALTIMARI, Circuit Judges.

PIERCE, Senior Circuit Judge:

This appeal of a diversity case primarily involves a due process challenge to the compulsory alternate arbitration mechanism of New York's New Car Lemon Law ("Lemon Law"). Chrysler Corporation appeals from a judgment entered April 4, 1990, in the United States District Court for the Western District of New York (David G. Larimer, Judge) granting plaintiff's summary judgment motion, thereby confirming an arbitration award under the Lemon Law, and a judgment entered May 24, 1990, awarding attorney's fees and costs to plaintiff and confirming an award of costs under the Lemon Law. In addition to its due process challenge, Chrysler makes the following arguments: it was denied meaningful review of the arbitral award; the award was not founded on a rational basis; the district court erred by granting summary judgment and by denying its discovery requests; Lyeth was not entitled to "rearbitrate" his claim; the arbitrator exceeded his authority by awarding Lyeth a new car; and Lyeth was not entitled to attorney's fees. We hold: the compulsory alternate arbitration mechanism affords the basic procedural safeguards required by due process; since Chrysler failed to request a record of the arbitration hearing, it may not rely upon the lack of one to press its claims that was denied meaningful review and that the award lacks a rational basis; summary judgment was properly granted; the denial of Chrysler's discovery requests was not an abuse of discretion; Lyeth was eligible to seek relief under the compulsory alternate arbitration mechanism; and the award of attorney's fees and costs was proper. We conclude, however, that the arbitrator exceeded his authority by awarding Lyeth a new car. We therefore affirm the judgments as modified and remand with instructions to request that the Lemon Law arbitrator render a modified award.

BACKGROUND

In October 1984, Lyeth purchased a new 1985 model Jeep Cherokee that was manufactured by Jeep Corporation, a subsidiary of American Motors Corporation ("AMC"). After Lyeth had driven the jeep between 1,000 and 1,500 miles, he discovered that periodically the front-end of the jeep vibrated severely when he drove over 45 miles per hour during warm weather. Lyeth returned the jeep to the dealer to correct the problem at least four times during his first two years of ownership, but the dealer was unable to repair the defect.

A year later, based on the continuing defective condition, Lyeth sought arbitration pursuant to AMC's non-binding arbitration program conducted by the Better Since the vibration problem was sporadic and had surfaced only during warm weather, Lyeth initially accepted the decision subject to the condition that he be allowed until August 1986 to determine whether the defect had been corrected. Neither the BBB arbitrators nor AMC consented to Lyeth's proposal. Thereafter, in a letter to the BBB, dated April 29, 1986, Lyeth explicitly rejected the decision of the arbitrators, and thus, it did not become legally binding on the parties.

Business Bureau ("BBB"). At the time, Lyeth had driven the jeep about 12,600 miles. On March 14, 1986, after a road test and a visual inspection of the jeep, two BBB arbitrators determined that "the vehicle in this case may have the problems described by Mr. Lyeth" but that these problems were not "apparent," and they requested that Lyeth arrange to have an independent inspection made. The BBB arbitrators directed that upon receipt of the inspection results, AMC had thirty days to perform the repairs, and afterwards, Lyeth had thirty days to decide whether the defect had been repaired to his satisfaction.

Chrysler acquired AMC in August 1987 and, as a result of corporate restructuring, assumed whatever legal obligations existed in this case. A month later, Lyeth submitted a request for compulsory arbitration under the Lemon Law to the New York State Attorney General's Office. An arbitrator from the American Arbitration Association ("AAA") conducted a hearing and determined that Lyeth was entitled to relief under the Lemon Law. At the time of the AAA hearing, Lyeth had driven the vehicle approximately 47,700 miles. On November 2, 1987, the AAA arbitrator awarded Lyeth a "new model Jeep Cherokee including all options included within his 1985 Jeep Cherokee." Chrysler objected to the AAA arbitrator's decision, arguing that the award should have been reduced for Lyeth's use of the jeep in excess of 12,000 miles. The AAA arbitrator declined to modify the award. Chrysler did not, as required by a Lemon Law regulation, honor the arbitrator's decision within thirty days.

In March 1988, Lyeth instituted a special proceeding in the New York State Supreme Court, Monroe County, and requested that the award be confirmed pursuant to section 7510 of New York's Civil Practice Law and Rules ("CPLR"). Chrysler removed the proceeding on diversity grounds to the district court for the Western District of New York. In its answer, Chrysler raised thirteen defenses, including defenses attacking the Lemon Law on state and federal constitutional grounds. Chrysler served notices of depositions and requests for documents on Lyeth, on the arbitrator who had issued the Lemon Law award, on the AAA, and on the State of New York. Lyeth moved to remand the matter to state court or, alternatively, for summary judgment, and for a protective order and attorney's fees. The Attorney General of the State of New York moved to intervene and also moved for a protective order. In orders filed May 4, 1989, the district court denied Lyeth's motion to remand, granted the State's motion to intervene, and stayed Chrysler's discovery requests until further order. In a decision and order dated October 16, 1989, the district court ruled that Chrysler's broad discovery requests were wholly inappropriate and unnecessary in the context of reviewing an arbitral award, and granted Lyeth's and the State's motions for a protective order.

On April 4, 1990, the district court granted Lyeth's summary judgment motion, thereby confirming the arbitration award, and ordered Chrysler to pay reasonable attorney's fees and costs. The opinion is reported at 734 F.Supp. 86 (W.D.N.Y.1990). The court held that (1) the Lemon Law did not violate the New York State Constitution or the State Administrative Procedures Act; (2) the Lemon Law's compulsory arbitration provision did not violate the due process or equal protection clauses of the fourteenth amendment of the United States Constitution; (3) the regulations promulgated by the state's Attorney General to implement the Lemon Law were consistent with the statute's legislative goals; (4) plaintiff's previous participation in informal dispute resolution did not bar him from seeking relief through compulsory arbitration- The district court also directed Lyeth's counsel to submit an affidavit concerning his fees and gave Chrysler an opportunity to respond to the fee application. By order dated May 23, 1990, the court awarded $19,692 in attorney's fees, $200 in filing charges, $500 for Chrysler's noncompliance and $160.76 in costs, totaling $20,552.76. This appeal followed.

; and (5) the AAA arbitrator did not exceed his authority when he awarded plaintiff a new car.

DISCUSSION

New York's New Car Lemon Law, ch. 444, 1983 N.Y. Laws 840, (codified at N.Y.Gen.Bus.Law Sec. 198-a), creates a statutory warranty for any new motor vehicle for the first two years of ownership or 18,000 miles of operation, whichever occurs sooner. Sec. 198-a(b). It provides that if, after a "reasonable number of attempts," a manufacturer cannot repair a defect or condition that substantially impairs the value of the motor vehicle, then "the manufacturer, at the option of the consumer, shall replace the motor vehicle with a comparable motor vehicle, or accept return of the vehicle from the consumer and refund to the consumer the full purchase price" of the motor vehicle. Sec. 198-a(c)(1). A "reasonable number of attempts" is presumed under the statute if the same defect has been subject to repair at least four times or if the vehicle is out of service due to repairs for a total of thirty or more days. Sec. 198-a(d).

The Lemon Law was amended in 1986 to address, inter alia, the "growing consumer dissatisfaction with informal dispute settlement mechanisms" administered by motor vehicle manufacturers. Approval Memorandum of Governor, ch. 799, 1986 N.Y.Laws 3202, August 2, 1986. One important amendment to the Lemon Law was providing consumers with the option of submitting their disputes to a compulsory "alternate arbitration mechanism." Professional arbitrators, appointed by the Attorney General, are to conduct these arbitrations. Sec. 198-a(k). This arbitration forum has been available to consumers since January 1, 1987. Ch. 799, 1986 N.Y.Laws 1882, 1888. ¹

A. Due Process Challenge

"[D]ue process is flexible and calls for such procedural protections as the particular situation demands." Morrissey v. Brewer, 408 U.S. 471, 481, 92 S.Ct. 2593, 2600, 33 L.Ed.2d 484 (1972). In the context of a statutory scheme that involves compulsory arbitration, due process does not guarantee any...