Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State

• Citation: 146 A.D.2d 212,540 N.Y.S.2d 888
• Parties: , 57 USLW 2660 MOTOR VEHICLE MANUFACTURERS ASSOCIATION OF THE UNITED STATES, INC., et al., Appellants, v. STATE of New York et al., Respondents.
• Decision Date: 20 April 1989
• Court: New York Supreme Court Appellate Division

Page 888

540 N.Y.S.2d 888

146 A.D.2d 212, 57 USLW 2660

MOTOR VEHICLE MANUFACTURERS ASSOCIATION OF THE UNITED

STATES, INC., et al., Appellants, v. STATE of New York et al., Respondents.

Supreme Court, Appellate Division,

Third Department.

April 20, 1989.

Hughes, Hubbard & Reed (Philip A. Lacovara, William R. Stein and Ross Lipman, New York City, of counsel), for appellants.

Robert Abrams, Atty. Gen. (Thomas G. Conway, Peter H. Schiff and Rachel Kretser, of counsel), Albany, for respondents.

Before CASEY, J.P., and WEISS, MIKOLL, LEVINE and HARVEY, JJ.

WEISS, Justice.

This appeal focuses on the constitutional validity of the New Car Lemon Law alternative arbitration mechanism implemented by General Business Law § 198-a(k) (see, L.1986, ch. 799, § 4, eff. Jan. 1, 1987). Plaintiffs, who are trade associations representing automobile manufacturers and importers, commenced this action seeking to declare General Business Law § 198-a(k) constitutionally invalid on several bases, as well as to invalidate certain of the implementing regulations (see, 13 NYCRR part 300). Upon the parties' respective motions for summary judgment, Supreme Court declared both the arbitration mechanism and implementing regulations constitutionally valid as challenged. The court adhered to this position after granting plaintiffs' motion to renew and reargue. This appeal by plaintiffs ensued.

As originally enacted in 1983, the Lemon Law did not establish an informal dispute resolution mechanism. Consumers were essentially left to pursue their remedies in court or via nonbinding informal programs adopted by the various manufacturers. Responding with an inexpensive and expeditious alternative, the Legislature enacted General Business Law § 198-a(k), which reads as follows:

Each consumer shall have the option of submitting any dispute arising under this section upon the payment of a prescribed filing fee to an alternate arbitration mechanism established pursuant to regulations promulgated hereunder by the New York state attorney general. Upon application of the consumer and payment of the filing fee, all manufacturers shall submit to such alternate arbitration.

Such alternate arbitration shall be conducted by a professional arbitrator or arbitration firm appointed by and under regulations established by the New York state attorney general. Such mechanism shall insure the personal objectivity of its arbitrators and the right of each party to present its case, to be in attendance during any presentation made by the other party and to rebut or refute such presentation. In all other respects, such alternate arbitration mechanism shall be governed by article seventy-five of the civil practice law and rules.

This legislation creates an alternative arbitration mechanism to be pursued at the consumer's option. ¹ Participation by the manufacturer is compulsory.

Plaintiffs first maintain that the compulsory arbitration requirements of General Business Law § 198-a(k) effectively deprive automobile manufacturers of their constitutional right to trial by jury (see, NY Const., art. I, § 2). As indicated, once a consumer exercises his option to invoke General Business Law § 198-a(k), the resulting arbitration process is compulsory with respect to the manufacturers. Moreover, judicial review is limited to the standard delineated in CPLR article 75, without provision for de novo judicial proceedings. Because compulsory arbitration is unauthorized where a right to trial by jury exists (see, Penney v. Elmira Professional Communications, 131 A.D.2d 938, 939, 516 N.Y.S.2d 533; Glass v. Thompson, 51 A.D.2d 69, 73-76, 379 N.Y.S.2d 427), the pivotal question presented is whether plaintiffs enjoy a right to jury trial in the present context. The State constitution provides that a "[t]rial by jury in all cases in which it has heretofore been guaranteed by constitutional provision shall remain inviolate forever" (N.Y. Const., art. I, § 2). It is generally understood that only actions at law, not equitable remedies, fall within the scope of this provision (see, Phoenix Mut. Life Ins. Co. v. Conway, 11 N.Y.2d 367, 370, 229 N.Y.S.2d 740, 183 N.E.2d 754; JIHL Assoc. v. Frank, 107 A.D.2d 662, 663, 484 N.Y.S.2d 29; 4 Weinstein-Korn-Miller, N.Y.Civ.Prac. pp 4101.02, 4101.08). While this distinction is easier stated than applied, our task is to properly characterize the nature of a Lemon Law action and the remedy sought (see, Tull v. United States, 481 U.S. 412, 107 S.Ct. 1831, 95 L.Ed.2d 365).

Where a manufacturer is unable to correct a defect or condition that "substantially impairs" the value of a vehicle after a reasonable number of attempts, the consumer may opt for one of two alternative remedies: acceptance of a replacement vehicle of comparable quality or a refund of the full purchase price, plus certain fees and charges (General Business Law § 198-a[c][1]; see, State of New York v. Ford Motor Co., 136 A.D.2d 154, 526 N.Y.S.2d 637, appeal dismissed 73 N.Y.2d 755, 536 N.Y.S.2d 58, 532 N.E.2d 1286). Plaintiffs' suggestion that replacement is simply a refund "in kind" for a breach of warranty claim and that specific performance does not attend a "non-unique" product is unconvincing. Notably, under the UCC, a buyer of goods may seek specific performance where "the goods are unique or in other proper circumstances " (UCC 2-716[1] [emphasis supplied] ). The very enactment of the Lemon Law was to afford consumers a more effective avenue of redress and may readily be considered a "proper circumstance" for equitable relief. We fully agree with Supreme Court that the concept of replacement is purely equitable in nature, akin to a direction for specific performance. The refund remedy is more problematic.

Plaintiffs maintain that a refund claim is "virtually indistinguishable" from an action at law for "revocation of acceptance" as delineated in UCC 2-608 (see, Merola v. Atlas Lincoln Mercury, 70 A.D.2d 950, 417 N.Y.S.2d 775). Pursuant to this breach of warranty provision, a buyer may revoke his acceptance of a product and recover the purchase price, plus incidental and consequential damages (UCC 2-608, 2-711, 2-712[1], [2]; 2-715). A recovery of the purchase price via UCC 2-608 constitutes a legal, not an equitable, remedy (see Motor Vehicles Mfrs. Assn. v. O'Neill, 203 Conn. 63, 523 A.2d 486, 494). Defendants candidly acknowledge that the Lemon Law resembles the UCC 2-608 remedy, and concede that the "substantially impairs" concept was directly borrowed from that provision. Nonetheless, defendants assert and we agree that the resemblance between these remedies does not substantiate plaintiffs' thesis.

A key distinction exists between the Lemon Law and UCC 2-608, for "revocation of acceptance" requires the buyer to first revoke acceptance of the product and then pursue an action to recover the consideration paid. In contrast, the Lemon Law does not anticipate an initial revocation of the product on the part of the buyer. The statute speaks to a manufacturer's acceptance of a vehicle from the consumer, but does not explicitly require an outright rejection of the contract by the consumer (see, General Business Law § 198-a[c][1] ). In effect, a UCC 2-608 action is founded upon a rescission, whereas a Lemon Law action is one for a rescission and may accurately be characterized as equitable in nature (see, Vail v. Reynolds, 118 N.Y. 297, 302, 23 N.E. 301). This conclusion is consistent with the purpose of the Lemon Law, which was clearly designed as an alternative to the traditional methods of consumer recovery (see, Givens, Practice Commentaries, McKinney's Cons Laws of NY, Book 19, General Business Law § 198-a, at 311-315). In essence, the Lemon Law provides an equitable alternative akin to the remedy of restitution, which serves to restore the status quo ante without mandating a literal rescission of the contract (see, 12 Williston, Contracts § 1455, at 20 [Jaeger 3d ed] ). The Lemon Law fits squarely within the concept of restitution, a remedy "limited to 'restoring the status quo and ordering the return of that which rightfully belongs to the purchaser' " (Tull v. United States, 481 U.S. 412, 424, 107 S.Ct. 1831, 1839, 95 L.Ed.2d 365, supra, quoting Porter v. Warner Holding Co., 328 U.S. 395, 402, 66 S.Ct. 1086, 1091, 90 L.Ed. 1332). The fact that incidental costs are recoverable does not compel a contrary conclusion, for a party may receive full relief in an equity action (see, Vail v. Reynolds, supra, 118 N.Y. at 302, 23 N.E. 301). Notably, the Lemon Law actually poses a compromise on damages, for while incidental items are recoverable, consequential loss is not (see, Givens, Practice Commentaries, McKinney's Cons. Laws of NY, Book 19, General Business Law § 198-a, at 315). Giving due regard to the language and objective of the Lemon Law (see, Ferres v. City of New Rochelle, 68 N.Y.2d 446, 451, 510 N.Y.S.2d 57, 502 N.E.2d 972), we find that the remedy is equitable in nature and no right to trial by jury has been impaired by virtue of the alternative arbitration mechanism.

We further reject plaintiffs' contention that the compulsory arbitration mechanism implemented by General Business Law § 198-a(k) violates their constitutional "right of access" to Supreme Court's jurisdiction (see, NY Const., article VI, § 7[a] ). Generally, there is no per se constitutional right of access to the civil courts (see, Matter of Colton v. Riccobono, 67 N.Y.2d 571, 576, 505 N.Y.S.2d 581, 496 N.E.2d 670). Where appropriate, the Legislature may establish alternative dispute resolution mechanisms (id.; see, e.g., Insurance Law § 5104 [no-fault]; Workers' Compensation Law § 11 [workers' compensation] ). Plaintiffs' premise is that for claims otherwise triable in court compulsory arbitration is only viable where de novo review can be obtained in Supreme Court. We have already concluded, however, that the Lemon Law constitutes an equitable remedy to which the right to trial by jury...