Wisconsin Supreme Court Issues Bad Lemon Law Decision

In a troubling 5-1 decision, the Wisconsin Supreme Court awarded Attorney Vince Megna – the self-proclaimed “Lemon Law King” – a victory that allowed him and his client to walk away with over $700,000 in damages. This despite the fact that Megna and the owner acted in bad faith, therefore making it impossible for the manufacturer to provide a refund payment within the statutory 30-day deadline. The Court’s decision will make it easier for plaintiff attorneys to game the system and obtain large damage awards against auto manufacturers. The case is Marquez v. Mercedes-Benz USA, LLC, 2012 WI 57.

Facts of the Case and Background on Wisconsin Lemon Law

The facts involving the Supreme Court’s decision are important to understand how unfair and damaging the Court’s decision actually is to manufacturers. It is also important to provide a dicussion of how Wisconsin’s Lemon Law operates.

The plaintiff, Marco Marquez, purchased a Mercedes-Benz E-series automobile that had mechanical problems triggering Wisconsin’s Lemon Law. Wisconsin law provides that “if a new motor vehicle does not conform to an applicable express warranty,” and the nonconformity is not cured after a “reasonable attempt to repair,” then the consumer may return the vehicle and elect to receive either: 1) a new comparable vehicle, or 2) a refund.[1]

If the auto manufacturer fails to provide a refund or replace the vehicle within 30 days, the law provides harsh penalties. For example, the owner is awarded “twice the amount of any pecuniary loss, together with costs, disbursements and reasonable attorney fees, and any equitable relief the court determines appropriate.”[2] “Pecuniary loss” includes the cost of the vehicle, which means that the plaintiff is awarded twice the cost of the vehicle. The plaintiff is also entitled to pre- and post-judgment interest, which can be large in cases like this that take years to wind through the court system.

After Mercedes-Benz was alerted that the car was a lemon, it began working with the owner and his attorney to provide the owner the proper remedy. Originally the owner sought a new vehicle, but instead of seeking a similar E-series he requested an S-series. Mercedes-Benz notified the owner that the 2007 S-series he requested had not yet been released to dealers, but told him that the company would work with him to get such a vehicle as soon as possible.

With just five days left remaining under the 30-day statutory deadline, the owner notified Mercedes-Benz that he changed his mind and instead of a new vehicle he wanted a refund. This was on the Wednesday (November 23, 2005) before Thanksgiving. The Mercedes-Benz representative, Wade Messing, was not in the office either Thursday or Friday because of the Holiday, and instead traveled to Wisconsin on Monday, November 28 to issue the refund check to both the owner and his bank, which had issued a loan for the vehicle.

On November 28, Messing contacted the owner’s bank to obtain the auto loan payment information so he could issue the check, but the bank refused to provide the information citing privacy issues. The bank told Messing that if the owner called the bank and authorized the release of the information, it would provide the information to Messing. Messing then contacted the owner and asked that he call the bank to provide the release. The owner told him he would do so and that he would call Messing back after he contacted the bank. However, the owner neither called the bank nor returned the call to Messing. The owner further withheld from Messing that he had given John Gray, the owner’s loan officer at the bank, permission to release the payout figure to Messing.

After not hearing from the owner, Messing called Attorney Megna, who conveniently was not in the office and could not be reached. Moreover, Megna’s office did not inform Messing that it had the payout number from the bank. Because Messing did not have the requisite information to issue a refund check to both the owner and the bank, Mercedes-Benz did not issue a refund check to the owner within Wisconsin’s statutory 30-day statutory deadline. As a result, the owner’s attorney filed a lawsuit the next day alleging Mercedes-Benz violated Wisconsin’s Lemon Law. The complaint was actually dated May 28, 2005, meaning that Attorney Megna was getting ready to seek the damages the very same day that he and his client were withholding information and failing to respond to Messing’s phone calls.

Lower Court Decisions

The case started in Waukesha County Circuit Court, where a judge ruled in favor of the owner. The case was appealed to the court of appeals, which reversed the lower court. The court of appeals held that a consumer who intentionally thwarts a manufacturer’s efforts to provide a refund within the 30-day statutory period cannot recover the Lemon Law’s stiff remedies. The court remanded the case back to the circuit court for the jury to determine whether the owner intentionally thwarted Mercedes-Benz’s attempt to provide a statutory refund within the 30-day period by failing to provide the requisite bank information.

On remand, the jury found in favor of Mercedes-Benz. The jury determined that the owner and his attorney, Megna, acted in bad faith by failing to call the bank so that Mercedes-Benz could access the bank account information. The circuit court judge, however, overturned the jury’s verdict by issuing a directed verdict in favor of the owner. The judge determined there was no credible evidence that the owner (or his attorney) intentionally thwarted Mercedes-Benz’s efforts to provide a refund.

The case went straight to the Supreme Court, which affirmed the judge’s directed verdict in favor of the owner.

Wisconsin Supreme Court Decision

Authored by Chief Justice Shirley Abrahamson, and joined by Justices Patrick Crooks, Ann Walsh Bradley, David Prosser, Annette Zielger, and Michael Gableman, the majority upheld the circuit court judge’s decision and swept aside the jury’s verdict.

Despite the overwhelming evidence pointing to the owner and his attorney acting in bad faith, the majority found that the “jury’s verdict impermissibly rest[ed] on ‘conjecture and speculation.’” According to the majority decision, the “jury’s finding that on November 28 the consumer intentionally prevented Mercedes-Benz from complying with the Lemon Law was impermissibly speculative.”

The majority further stated that the record contained no evidence of any such intentional conduct by the owner or his lawyer to bar the manufacturer from the Lemon Law’s remedies.

Justice Roggensack’s Dissenting Opinion

Justice Patience Roggensack wrote a separate dissenting opinion arguing that the Court should have upheld the jury’s verdict in favor of Mercedes-Benz. According to Justice Roggensack, there was “credible evidence to sustain the jury’s finding that [the owner] did not act in good faith in his dealings with Mercedes-Benz.”

Justice Roggensack cited to all the evidence in the record that proved that the owner was not acting in good faith when dealing with Mercedes-Benz’s representative, who attempted to provide the owner the refund within the statutory deadline. Justice Roggensack noted that the owner told Messing that he would call his bank to release the loan payment information, however, the owner neither called the bank nor called Messing back.

Furthermore, the owner failed to tell Messing that the owner had given his loan officer, John Gray, permission to release the payout figure of his auto loan. Moreover, Attorney Megna conveniently couldn’t be reached the very last day that the refund payment was due and never called Messing back. Megna’s paralegal also failed to tell the Mercedes-Benz representative that Megna’s law office had the payout number from the bank.

Despite all of the credible evidence demonstrating that the owner (and his attorney) did not act in good faith, the majority still upheld the lower court’s directed verdict and swept aside the jury’s verdict in favor of Mercedes-Benz.

Practical Effect of Decision for Automobile Manufacturers in Wisconsin

Justice Roggensack explained that he majority’s decision has effectively eliminated manufacturers’ affirmative defense when an owner has acted in bad faith by intentionally preventing the manufacturer from refunding the owner.

Under the majority’s reasoning, no affirmative defense of thwarting a refund will be allowed unless the manufacturer can prove that the owner had knowledge of the legal effect of his conduct on the statutory obligations that the Lemon Law places on the manufacturer. For example, in its decision, the majority held that the manufacturer had to prove that the owner knew that the statutory remedies would be triggered if the manufacturer did not pay him the refund on or before November 28. That was the day that the Mercedes-Benz representative called the owner and tried to get the auto loan information.

According to the dissent, if this is indeed the new standard, it will be all but impossible for manufacturers to prove the owner acted in bad faith because most automobile purchasers are not attorneys and do not have knowledge of the Lemon Law’s requirements and statutory deadlines.

Decision Allows Plaintiff Attorneys Ability to Game the System

The majority’s decision will make it that much easier for the Lemon Law King and his plaintiff attorney cohorts to use Wisconsin’s Lemon Law as a way win huge damage awards by stringing out the 30-day statutory deadline requiring the manufacturer to provide a new car or refund. That’s because under Wisconsin’s Lemon Law, an owner can elect to either seek a similar vehicle or a refund.

As in this case, Attorney Megna will simply run out the clock by having his clients seek a vehicle that can’t be obtained within 30 days, and then tell the client at the last second to seek the full refund. Once the owner seeks the full refund, the owner (through his attorney’s advice) will make it next to impossible to get the payment issued and therefore trigger the huge damages.

In this case, the cost of vehicle was roughly $58,000. Had the owner acted in good faith and provided the manufacturer the correct bank loan information, the owner would have been given a check for the vehicle, plus other costs. However, by acting in bad faith and preventing the manufacturer from issuing the refund of the vehicle, the owner and the Lemon Law King will walk away with damages totaling over $700,000.

The Lemon Law King is pictured on his website with his fancy yellow Corvette complete with “LEMN LAW” license plates. Imagine how many more new shiny Corvettes Attorney Megna will be able to purchase with this outrageous damages award handed down by the Wisconsin Supreme Court. In his free time the Lemon Law King (Attorney Megna) makes strange YouTube videos where he uses obscene language and gestures taunting the Governor.

This post was authored by Andrew Cook.

[1] Wis. Stat. § 218.0171(2)(a)-(b). [2] Wis. Stat. § 218. 0171(7).