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Chrysler settles lemon claims for a price

Consumer Reports News: July 01, 2009 12:23 PM

As if buying a lemon isn’t bad enough, Chrysler is now demanding that some customers who settle lemon-law claims forfeit any future legal claims against the company.

That’s the conclusion of several consumer lawyers who have clients with lemon-law claims against the new Chrysler Corp., run by Italian automaker Fiat.

Consumers who take cash settlements for lemon vehicles in lieu of selling the vehicles back to Chrysler are being asked to sign a release that indemnifies Chrysler and its dealerships “from all known and unknown claims, damages, costs, attorneys fees, expenses, loss of services, personal injuries, and property damage.”

Chrysler spokesman Michael Palese says the release is “a very standard waiver that is signed all the time.”

However, according to attorneys whose clients have been asked to sign the waiver, the clause implies that even if a current Chrysler owner who suffers a future accident caused by a defect in the car will have no recourse to Chrysler, according to Norman Taylor, Principal at Norman Taylor and Associates in Glendale, Calif.

Palese denies the form prevents consumers who sign it from taking future legal action against Chrysler. “It doesn’t prevent the signer from taking future action,” he says. “Whoever is reading that is reading the newspaper and is absolutely tripped by the debate about product liability in bankruptcy,” he says.

Taylor says it isn’t clear whether future legal action would be forbidden until a court has a chance to review such a case, but it could be.

In addition, the release asks consumers to certify that their car “is not a lemon, and does not qualify as a lemon under the Magnuson-Moss Warranty Act,” the federal law that establishes consumers’ right to lemon-law protection.

That means when consumers do resell or trade in the car, the title may not be branded as a lemon, according to Clarence Ditlow, Executive Director of the Center for Auto Safety, who is also on the board of Consumers Union, publisher of Consumer Reports. The lemons they bought go right back on the car lot to be sold to some other unsuspecting customer, he says.

“When they [the consumer] keep the car, it’s important for us to declare the car is not a lemon. If we took it [the car] back, it would not reenter the stream of commerce,” Palese says.

If the consumer kept the car, however, nothing would prevent them from trading it in at a non-Chrysler dealership with a clean title.

As part of the bankruptcy settlement, Chrysler agreed to honor lemon law claims for consumers, but this waiver seems to weaken that protection.

We will continue to monitor this fast-moving story, reporting here in the Cars blog and also updating advice and news on the Auto Crisis hub.

Eric Evarts

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