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

Decision Date18 January 1990
Citation75 N.Y.2d 175,550 N.E.2d 919,551 N.Y.S.2d 470
Parties, 550 N.E.2d 919, 58 USLW 2460 MOTOR VEHICLE MANUFACTURERS ASSOCIATION OF the UNITED STATES, INC., et al., Appellants, v. STATE of New York et al., Respondents.
CourtNew York Court of Appeals Court of Appeals

William R. Stein, Philip A. Lacovara, Washington, D.C., Ross Lipman, New York City, David Madoff, William H. Crabtree, Knoxville, Tenn., Charles H. Lockwood, II, and John T. Whatley, for appellants.

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

OPINION OF THE COURT

SIMONS, Judge.

Plaintiffs, trade associations representing automobile manufacturers, importers and distributors, commenced this action seeking a declaration that the New Car Lemon Law alternative arbitration mechanism, contained in General Business Law § 198-a(k), violates the State Constitution. Specifically, they allege that the statute deprives motor vehicle manufacturers of their right to trial by jury (N.Y. Const., art. I, § 2), abridges the Supreme Court's jurisdiction (N.Y. Const., art. VI, § 7) and constitutes an unconstitutional delegation of judicial authority (N.Y. Const., art. VI, §§ 1, 7). In addition, plaintiffs maintain that the alternative arbitration mechanism violates the New York State Administrative Procedure Act.

I

The original Lemon Law (General Business Law § 198-a) was enacted in 1983 to provide New York consumers greater protection than that afforded by automobile manufacturers' express limited warranties or the Federal Magnuson-Moss Warranty Act (15 U.S.C. § 2301 et seq.). Under the statute, when a manufacturer is unable to correct a defect or condition that "substantially impairs" the value of the motor vehicle after a reasonable number of attempts, the manufacturer, at the option of the consumer, is required either to (1) replace the motor vehicle with a comparable motor vehicle or (2) accept return of the vehicle and refund the full purchase price to the consumer (General Business Law § 198-a[c][1]; 13 NYCRR 300.17[b]. As originally enacted, the statute did not establish an informal dispute resolution mechanism and consumers were forced to seek these remedies in court or by means of nonbinding informal arbitration programs established by the manufacturers, procedures which often proved costly for the average consumer and resulted in long delays and unfair awards (see generally, Givens, Practice Commentaries, McKinney's Cons.Laws of N.Y., Book 19, General Business Law § 198-a, at 311-313). The Legislature responded by enacting General Business Law § 198-a(k), which gives the consumer the option of arbitration, rather than legal proceedings, and compels participation by the manufacturer. 1

Plaintiffs subsequently commenced this action and, after issue was joined, both parties moved for summary judgment. Supreme Court granted defendants' motion and declared section 198-a(k) constitutional. The Appellate Division, 146 A.D.2d 212, 540 N.Y.S.2d 888, modified by declaring a portion of the regulations implementing the statute invalid and otherwise affirmed. Plaintiffs appealed to this court on constitutional grounds (CPLR 5601[b] and we now affirm.

II

Plaintiffs contend first that section 198-a(k), which allows the consumer to unilaterally invoke the compulsory arbitration program, violates article I, § 2 of the New York State Constitution by depriving automobile manufacturers of their right to a trial by jury. Section 2 mandates that "[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). Thus, an examination of the constitutional sources which previously "guaranteed" a trial by jury is necessary to determine the scope of the present right.

New York's first Constitution, enacted in 1777, guaranteed trial by jury in all cases "in which it hath heretofore been used" (N.Y. Const. of 1777 art. XLI). The import of that provision was to include in the constitutional guarantee all cases in which a jury trial had been provided under common law (see, Matter of Luria, 63 Misc.2d 675, 676-677, 313 N.Y.S.2d 12; Siegel, N.Y.Prac. § 377). Prior to 1777 a jury trial was required if the nature and substance of the relief requested was legal; if the relief demanded was equitable, there was no right to a jury trial ( 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; Matter of Luria, 63 Misc.2d 675, 682, 313 N.Y.S.2d 12, supra; 4 Weinstein-Korn-Miller, N.Y.Civ.Prac. p 4101.02). Subsequent Constitutions, up to and including the Constitution of 1894, adopted the "heretofore been used" clause without change. The effect was to include in the constitutional guarantee those cases to which the right to jury trial had been extended not only at common law before 1777 but also by statute between the 1777 and 1894 Constitutions (Matter of Luria, supra; Siegel, N.Y.Prac. § 377). The Constitution of 1938, whose relevant sections remain unchanged today, abandoned the "heretofore been used" language and provided that "[t]rial by jury in all cases in which it has heretofore been guaranteed by constitutional provision shall remain inviolate forever" (N.Y. Const. of 1938, art. I, § 2 [emphasis added]. Consequently, all cases afforded a jury trial under the common law prior to 1777 and all cases to which the Legislature extended a right to a jury trial prior to 1894 come within the present constitutional guarantee in article I, § 2.

Plaintiffs concur in this interpretation of the constitutional provision but contend that they are entitled to a jury trial because the remedies created by the Legislature in the Lemon Law, acceptance of a replacement vehicle or a refund of the full purchase price (General Business Law § 198-a[c][1], are analogous to actions triable by jury at common law.

Analysis starts by recognizing that judicial remedies for breach of contract may be characterized as either "legal" or "equitable", depending on whether they were available in the common-law courts or in courts of equity (Farnsworth, Contracts § 12.2). The principal "legal" remedy to enforce a contract is a judgment awarding a sum of money. This is a type of "substitutional" relief "intended to give the promisee something in substitution for the promised performance, as when the court awards a buyer of goods money damages instead of the goods" (id.). The principal "equitable" remedy to enforce a contract is an order requiring specific performance of the contract (id.). This is a type of "specific" relief "intended to produce as nearly as is practicable the same effect that the performance due under a contract would have produced" (Restatement [Second] of Contracts § 357, comment a). The remedy of specific performance allows a court to compel a party to a contract to perform, "if not exactly, at least substantially, what he has undertaken to do" (11 Williston, Contracts § 1418, at 644 [3d ed. 1968].

Turning to the Lemon Law remedies, the replacement remedy provided by the Lemon Law is analogous to specific performance; it is designed to produce, as nearly as practicable under the circumstances, the same performance promised under the contract. The remedy is equitable in nature and would not be subject to a jury trial under common law (see, supra; Independent Church of Realization of Word of God v. Board of Assessors, 72 A.D.2d 554, 555, 420 N.Y.S.2d 765). Accordingly, plaintiffs are not entitled to a jury trial under article I, § 2 of the New York Constitution when the consumer seeks the replacement remedy under General Business Law § 198-a(c)(1).

As for the refund remedy, plaintiffs maintain it is indistinguishable from the legal actions of breach of warranty (see, Emerald Painting v. PPG Indus., 99 A.D.2d 891, 892, 472 N.Y.S.2d 485; Walter Sign Corp. v. Municipal St. Sign Co., 25 A.D.2d 667, 668, 268 N.Y.S.2d 219) and revocation of acceptance and refund of the purchase price ( see, Merola v. Atlas Lincoln Mercury, 70 A.D.2d 950, 417 N.Y.S.2d 775; Stream v. Sportscar Salon, 91 Misc.2d 99, 109, 397 N.Y.S.2d 677; UCC 2-608). Unlike a "legal" breach of warranty action, however, in which a consumer retains the defective vehicle and seeks damages as compensation for the breach (see, UCC 2-714[2], the refund remedy of the Lemon Law permits the consumer to seek rescission to undo the wrong and return to the status quo ante (see, Matter of Teller, 277 App.Div. 937, 938, 98 N.Y.S.2d 875, amended 277 App.Div. 1016, 99 N.Y.S.2d 944).

Furthermore, compared to an action for revocation of acceptance under UCC 2-608, in which the buyer first revokes acceptance of the product and then pursues an action to recover the consideration paid, the revocation and cancellation of the contract do not occur prior to litigation under the Lemon Law. The distinction is critical. Actions similar to the action under UCC 2-608 for the return of the purchase price after a party has fully rescinded a contract, actions upon a rescission, are considered actions at law (see, Vail v. Reynolds, 118 N.Y. 297, 302, 23 N.E. 301). By contrast, actions for rescission to restore the status quo ante are considered actions in equity (id.). They are "not founded upon a rescission, but [are] maintained for a rescission" and the plaintiff offers in his complaint to return what he has received and make tender of it upon trial (Vail v. Reynolds, 118 N.Y. 297, 302, 23 N.E. 301, supra [emphasis in original].

The Lemon Law refund remedy is an action seeking a rescission and restoration of the status quo ante, similar to an action for restitution, and is equitable in nature (see, Tull v. United States, 481 U.S. 412, 422, 107 S.Ct. 1831, 1838, 95 L.Ed.2d 365). It would not have been triable by jury under the common law (Phoenix Mut. Life Ins. Co. v. Conway, 11 N.Y.2d 367, 370, 229 N.Y.S.2d 740, 183 N.E.2d 754, supra; JIHL Assocs....

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