Ohio Lemon Law

Remedies

As discussed above, there are two remedies that Ohio's Lemon Law provides to consumers. The first is a replacement vehicle acceptable to the consumer, and the other choice is a full refund after returning the vehicle. Let's look at both of these in turn, because even though this sounds pretty simple to understand, there are some issues that turn up.

A. Replacement

If the consumer wants his or her vehicle to be replaced after a nonconformity in violation of Ohio's Lemon Law takes place, then the vehicle that the manufacturer offers as a replacement must be acceptable to him or her. Ohio cases have recognized that it is sometimes impossible for the manufacturer to replace the vehicle with a new one of the exact type as the one that turned out to be a lemon. So if the vehicle with the nonconformity was a Chevrolet Camaro, and the manufacturer no longer made this model, then the manufacturer could offer you a Chevrolet Corvette, and if you didn't mind, then this would satisfy the statutory remedy. But if you hated Corvettes and you can't find any car the manufacturer makes that would satisfy you, then you could just turn to your second remedy, the refund.

B. Refund

As stated above, it's not just the purchase price of the car that has to be refunded. It's everything. It's anything you paid for the car, including finance charges, insurance, tax and title, delivery and destination charges, charges for extended warranties, charges for rust proofing and undercoating, charges for the making or canceling of the loan or lease, etc., even towing, alternate vehicle rental charges, and meals and lodging (if your car stopped out of town let's say).

Normally, a car is financed either through the dealership, or through a lender that the dealership works with very closely. But. let's say that you did not want to do dealer financing and instead you took out a home equity loan to pay for your car in cash. There are lots of reasons to do this. One would be that you generally get a lower rate of interest. Two, you can lower the payment by paying it off over 30 years rather than four, five or six. Three, interest on home loans can be written off of your taxes. But after you get this second mortgage on you house so you can pay cash for the car, the car turns out to be a lemon in violation of Ohio's Lemon Law. Now here's the tricky bit. You are entitled to a refund of everything you spent to pay for the car. But does this include the closing costs on your second mortgage?

Ohio Revised Code Section 1345.72(D) discusses the nature of the refund process when a secured party (that would normally be the company doing dealer financing. They are called the secured party because they have a lien on the vehicle that shows up on its title until the loan is paid off) is involved. This section says that the rights and obligations between a consumer and the secured party shall not be affected if the consumer opts for a refund.

Ohio's Lemon Law gives us no clear process listed for the refund of finance charges when a party finances his or her purchase from a source other than a secured party. The Eleventh District Court of Appeals rejected the argument that because R.C. 1345.72 does not specifically detail a refund process for the recovery of finance charges from a consumer's home equity line of credit, it is not obligated to repay these charges.

In coming to this conclusion, the Eleventh District Court of Appeals reasoned that:

the primary duty of the court is to give effect to the intention of the Legislature enacting it. Such intention is found in the language employed and the apparent purpose to be subserved, and such a construction adopted which permits the statute and its various parts to be construed as a whole and give effect to the paramount object to be attained. Northeast Ohio Regional Sewer Dist. v. Shank (1991), 58 Ohio St.3d 16, 23, 567 N.E.2d 993, citing Cochrel v. Robinson (1925), 113 Ohio St. 526, 3 Ohio Law Abs. 738, 3 Ohio Law Abs. 740, 149 N.E. 871, 23 Ohio L. Rep. 607.

The Lemon Law creates a remedy that is intended "to make the consumer whole, and to restore the purchaser to a position he or she occupied before acquiring the lemon." This is a policy designed to protect consumers when their vehicle does not conform to the express warranty of the manufacturer, is defective, or its condition substantially impairs its use, value, or safety to the consumer. Its purpose, therefore, is to protect any consumer who buys a new car that is ultimately deemed a Lemon. As such, the argument that the statute only contemplates repayment of finance charges for secured transactions is contrary to the Lemon Law's remedial nature.

Furthermore, although the statute speaks directly to the rights and obligations between a consumer and a secured party in the event of a refund, the Eleventh District Court of Appeals failed to see how this provision acts to exclude consumers who finance their purchase without the assistance of a secured party. As just indicated, the Lemon Law has the broad, inclusive purpose of making any purchaser of a Lemon whole. By directly discussing the relationship between a consumer and a secured party, the statute does not exclude those purchasers who do not buy with the assistance of a secured party. In our view, the statute is simply acknowledging that when and if a consumer acquires her purchase money from a secured party, the secured party has some rights to the amount being reimbursed.

The Eleventh Appellate District Court held that this interpretation is consistent with both the letter and spirit of the law. With respect to the former, the statute requires the manufacturer to "forward the total sum required under division (B) of this section." Division (B) mandates a refund of the "full purchase price," which includes "all financing charges." If the legislature intended to deny the reimbursement of financing charges to a specific category of consumers, it would have avoided the use of any comprehensive language.

Moreover, as indicated above, the statute creates a remedy that is intended to make the consumer whole. As a consumer protection law, the Lemon Law must be simple and must have teeth in order to be effective. The law is designed for self-help without protracted litigation. Hence, to work well, the statute needs a harsh remedy at a certain time. A reading that would exclude an entire category of consumers from total reimbursement would not only contravene the statute's policy but also punish a consumer for her incidental choice to make her purchase on unsecured credit. Consequently, the argument that finance charges incurred with a third parry are not part of what a consumer can recover under Ohio's Lemon Law is fundamentally inconsistent with the statute's remedial nature and hostile to its prophylactic purpose. Id.

The Eleventh District Court of Appeals also rejected the argument that public policy was against interpreting the statute that way. Initially, it was argued that public policy does not support a consumer's recovery of finance charges pertaining to the vehicle in question from a home equity line of credit because it requires courts to make inexact assumptions regarding the actual finance charges. Thus, a court may award a consumer financing charges he or she never actually incurred thereby punishing a manufacturer and creating a windfall for the consumer.

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