Lemon Law /

Lease-Holder Entitled To Warranty Protection On Appeal

By Tom Hester, Star-Ledger Staff (Thursday, March 31, 2005)

A driver whose leased car or truck won't run right is assured of repair warranty protection under a federal law even when New Jersey's Lemon Law does not apply, a state appeals court ruled yesterday.

The unanimous decision by a three-judge panel allows a Camden County man to sue American Honda Motor Corp., claiming it did not honor the warranty on his leased Passport SUV.

"This is a very important decision" for those who choose to lease rather than buy a vehicle, said attorney Robert M. Silverman of Ambler, Pa. His client, Christopher Ryan of Berlin, leased the Passport from Burns Honda of Marlton in 1999. Fifteen months later, after 22,000 miles of driving, the engine failed.

The auto dealer, according to court papers, said the engine had suffered damage not covered by warranty and directed Ryan to file an insurance claim. The insurer paid $6,771 for repairs and auto rentals while Ryan paid a $2,000 deductible. But after the repairs, the vehicle continued to run poorly.

A lessee is covered by New Jersey's Lemon Law but only if the vehicle has been driven less than 18,000 miles or leased for less than two years.

In July 2001, Ryan sued American Honda Motor Corp. claiming, in part, that the vehicle was covered by warranty under federal law. American Honda argued it owned the vehicle and since Ryan was only leasing it, he was not entitled to warranty protection.

A Superior Court judge in Camden held in 2002 that Ryan did not have a case and directed him to pay $8,605 in legal costs to American Honda. Ryan then appealed.

Appeals court Judges Edwin H. Stern, Donald S. Coburn and Barbara Byrd Wecker had to decide if the federal Magnuson-Moss Act allows lease-holders, as well as car owners, to sue for breach of warranty. They declared Ryan is a "consumer" under the law and entitled to warranty protection.

Writing for the court, Wecker said the language of the law and "a common sense approach" lead to the same conclusion.

"It is unlikely that the auto leasing market would have developed as it has, if prospective lessees were denied the right to enforce the manufacturers' new car warranties," the judge wrote. "It is hard to imagine that Burns Honda did not intend Ryan to rely on the promises contained in American Honda's warranty when it... obtained his signature on the lease agreement."

The judges remanded Ryan's lawsuit to Camden Superior Court for reconsideration and reversed the order that he cover Honda's legal fees. Charles W. Craven, American Honda's Philadelphia-based counsel, was not available for comment. Silverman said Ryan will attempt to sue American Honda for consumer fraud as well as his repair and rental costs.

For more information about consumers' rights under the New Jersey Lemon Law, visit Kimmel & Silverman's website at www.lemonlaw.com.

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