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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1987 

                         CHAPTER 52-S.F.No. 793 
           An act relating to commerce; consumer protection; 
          requiring the repair, refund, or replacement of new 
          motor vehicles under certain circumstances; 
          prescribing certain arbitration mechanisms for all 
          automobile manufacturers doing business and offering 
          express warranties on their vehicles sold in Minnesota;
          amending Minnesota Statutes 1986, section 325F.665.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1986, section 325F.665, is 
amended to read:  
    325F.665 [NEW MOTOR VEHICLE WARRANTIES; MANUFACTURER'S DUTY 
TO REPAIR, REFUND, OR REPLACE.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, the following terms have the meanings given them:  
    (a) "consumer" means the purchaser or lessee, other than 
for purposes of resale or sublease, of a new motor vehicle used 
for personal, family, or household purposes at least 40 percent 
of the time, a person to whom the new motor vehicle is 
transferred for the same purposes during the duration of an 
express warranty applicable to the motor vehicle, and any other 
person entitled by the terms of the warranty to enforce the 
obligations of the warranty;  
    (b) "manufacturer" means a person engaged in the business 
of manufacturing, assembling or distributing motor vehicles, who 
will, under normal business conditions during the year, 
manufacture, assemble or distribute to dealers at least ten new 
motor vehicles;  
    (c) "manufacturer's express warranty" and "warranty" mean 
the written warranty of the manufacturer of a new motor vehicle 
of its condition and fitness for use, including any terms or 
conditions precedent to the enforcement of obligations under 
that warranty; 
    (d) "lease" means a contract in the form of a lease or 
bailment for the use of personal property by a natural person 
for a period of time exceeding four months, used for personal, 
family, or household purposes at least 40 percent of the time, 
whether or not the lessee has the option to purchase or 
otherwise become the owner of the property at the expiration of 
the lease;  
    (e) "motor vehicle" means (1) a passenger automobile as 
defined in section 168.011, subdivision 7, including pickup 
trucks and vans, and (2) the self-propelled motor vehicle 
chassis or van portion of recreational equipment as defined in 
section 168.011, subdivision 25, which is sold or leased to a 
consumer in this state;  
    (f) "informal dispute settlement procedure or mechanism" 
means an arbitration process or procedure by which the 
manufacturer attempts to resolve disputes with consumers 
regarding motor vehicle nonconformities and repairs that arise 
during the vehicle's warranty period;  
    (g) "motor vehicle lessor" means a person who holds title 
to a motor vehicle leased to a lessee under a written lease 
agreement or who holds the lessor's rights under such agreement; 
and 
    (h) "early termination costs" means expenses and 
obligations incurred by a motor vehicle lessor as a result of an 
early termination of a written lease agreement and surrender of 
a motor vehicle to a manufacturer under subdivision 4, including 
penalties for prepayment of finance arrangements and investment 
tax credits not allowed for the year in which such termination 
occurs and for prior years; and 
    (i) "early termination savings" means expenses and 
obligations avoided by a motor vehicle lessor as a result of an 
early termination of a written lease agreement and surrender of 
a motor vehicle to a manufacturer under subdivision 4, including 
the interest charges the motor vehicle lessor would have 
otherwise paid to finance the motor vehicle. 
    Subd. 2.  [MANUFACTURER'S DUTY TO REPAIR.] If a new motor 
vehicle does not conform to all applicable express warranties, 
and the consumer reports the nonconformity to the manufacturer, 
its agent, or its authorized dealer during the term of 
the applicable express warranties or during the period of one 
year two years following the date of original delivery of the 
new motor vehicle to a consumer, whichever is the earlier date, 
the manufacturer, its agent, or its authorized dealer shall make 
the repairs necessary to conform the vehicle to the applicable 
express warranties, notwithstanding the fact that the repairs 
are made after the expiration of the warranty term or 
the one-year two-year period.  
    Subd. 3.  [MANUFACTURER'S DUTY TO REFUND OR REPLACE.] (a) 
If the manufacturer, its agents, or its authorized dealers are 
unable to conform the new motor vehicle to any applicable 
express warranty by repairing or correcting any defect or 
condition which substantially impairs the use or market value of 
the motor vehicle to the consumer after a reasonable number of 
attempts, the manufacturer shall, at the consumer's option, 
either replace the new motor vehicle with a comparable motor 
vehicle or accept return of the vehicle from the consumer and 
refund to the consumer the full purchase price, or the total 
amount actually paid by the consumer under any vehicle lease, 
including the cost of any options or other modifications 
arranged, installed, or made by the manufacturer, its agent, or 
its authorized dealer within 30 days after the date of original 
delivery, and all other charges including, but not limited to, 
sales tax, license fees and registration fees, reimbursement for 
towing and rental vehicle expenses incurred by the consumer as a 
result of the vehicle being out of service for warranty repair, 
less a reasonable allowance for the consumer's use of the 
vehicle not exceeding ten cents per mile driven or ten percent 
of the purchase price or full lease cost of the vehicle, 
whichever is less.  If the manufacturer offers a replacement 
vehicle under this section, the consumer has the option of 
rejecting the replacement vehicle and requiring the manufacturer 
to provide a refund.  Refunds must be made to the consumer, and 
lienholder, if any, as their interests appear on the records of 
the registrar of motor vehicles.  Refunds shall include the 
amount stated by the dealer as the trade-in value of a 
consumer's used motor vehicle, plus any additional amount paid 
by the consumer for the new motor vehicle.  For a lease vehicle, 
refunds shall include the total amount actually paid by the 
consumer under any vehicle lease, less any finance charges paid 
by the consumer.  A reasonable allowance for use is that amount 
directly attributable to use by the consumer and any previous 
consumer prior to the first report of the nonconformity to the 
manufacturer, agent, or dealer during any period in which the 
use and market value of the motor vehicle are not substantially 
impaired.  It is an affirmative defense to any claim under this 
section (1) that an alleged nonconformity does not substantially 
impair the use or market value, or (2) that a nonconformity is 
the result of abuse, neglect, or unauthorized modifications or 
alterations of a motor vehicle by anyone other than the 
manufacturer, its agent or its authorized dealer.  
    (b) It is presumed that a reasonable number of attempts 
have been undertaken to conform a new motor vehicle to the 
applicable express warranties, if (1) the same nonconformity has 
been subject to repair four or more times by the manufacturer, 
its agents, or its authorized dealers within the applicable 
express warranty term or during the period of one year two years 
following the date of original delivery of the new motor vehicle 
to a consumer, whichever is the earlier date, but the 
nonconformity continues to exist, or (2) the vehicle is out of 
service by reason of repair for a cumulative total of 30 or more 
business days during the term or during the period, whichever is 
the earlier date.  
    (c) If the nonconformity results in a complete failure of 
the braking or steering system of the new motor vehicle and is 
likely to cause death or serious bodily injury if the vehicle is 
driven, it is presumed that a reasonable number of attempts have 
been undertaken to conform the vehicle to the applicable express 
warranties if the nonconformity has been subject to repair at 
least once by the manufacturer, its agents, or its authorized 
dealers within the applicable express warranty term or during 
the period of one year two years following the date of original 
delivery of the new motor vehicle to a consumer, whichever is 
the earlier date, and the nonconformity continues to exist.  
    (d) The term of an applicable express warranty, the 
one-year two-year period and the 30-day period shall be extended 
by any period of time during which repair services are not 
available to the consumer because of a war, invasion, strike, or 
fire, flood, or other natural disaster.  
    (e) The presumption contained in paragraph (b) applies 
against a manufacturer only if the manufacturer, its agent, or 
its authorized dealer has received prior written notification 
from or on behalf of the consumer at least once and an 
opportunity to cure the defect alleged.  If the notification is 
received by the manufacturer's agent or authorized dealer, the 
agent or dealer must forward it to the manufacturer by certified 
mail, return receipt requested.  
    (f) A consumer is eligible to receive a refund or 
replacement vehicle under this section if the nonconformity is 
reported to the manufacturer, its authorized agent or dealer, at 
any time during the motor vehicle's express warranty period, 
even if the motor vehicle's express warranty expires before the 
requirements of paragraphs (a), (b), and (c) have been met The 
expiration of the time periods set forth in paragraph (b) does 
not bar a consumer from receiving a refund or replacement 
vehicle under paragraph (a) if the reasonable number of attempts 
to correct the nonconformity causing the substantial impairment 
occur within three years following the date of original delivery 
of the new motor vehicle to a consumer, provided the consumer 
first reported the nonconformity to the manufacturer, its agent, 
or its authorized dealer during the term of the applicable 
express warranty.  
    (g) At the time of purchase or lease, the manufacturer must 
provide directly to the consumer a written statement on a 
separate piece of paper, in 10-point all capital type, in 
substantially the following form:  "IMPORTANT:  IF THIS VEHICLE 
IS DEFECTIVE, YOU MAY BE ENTITLED UNDER STATE THE STATE'S LEMON 
LAW TO REPLACEMENT OF IT OR A REFUND OF ITS PURCHASE PRICE OR 
YOUR LEASE PAYMENTS.  HOWEVER, TO BE ENTITLED TO REFUND OR 
REPLACEMENT, YOU MUST FIRST NOTIFY THE MANUFACTURER, ITS AGENT, 
OR ITS AUTHORIZED DEALER OF THE PROBLEM IN WRITING AND GIVE THEM 
AN OPPORTUNITY TO REPAIR THE VEHICLE.  YOU ALSO HAVE A RIGHT TO 
SUBMIT YOUR CASE TO THE CONSUMER ARBITRATION PROGRAM WHICH THE 
MANUFACTURER MUST OFFER IN MINNESOTA."  
    Subd. 4.  [MANUFACTURER'S DUTY TO CONSUMERS WITH LEASED 
VEHICLES.] A manufacturer has the same duties under this section 
to a consumer who leases a motor vehicle as to a consumer who 
purchases a new motor vehicle.  The lessee has the same rights 
against the manufacturer under this section as does the owner of 
the motor vehicle, and the consumer may enforce the rights 
directly against the manufacturer.  If it is determined that a 
consumer who leases a motor vehicle is entitled to a refund or 
replacement vehicle pursuant to this section A consumer who 
leases a new motor vehicle has the same rights against the 
manufacturer under this section as a consumer who purchases a 
new motor vehicle, except that, if it is determined that the 
manufacturer must accept return of the consumer's leased vehicle 
pursuant to subdivision 3, then the consumer lessee is not 
entitled to a replacement vehicle, but is entitled only to a 
refund as provided in this subdivision.  In such a case, the 
consumer's leased vehicle shall be returned to the 
manufacturer and the consumer's written lease with the motor 
vehicle lessor must be terminated.  The manufacturer shall then 
provide the owner of the leased vehicle with either a full 
refund or a replacement vehicle.  The owner of the returned 
leased vehicle shall then provide the consumer with either the 
replacement vehicle or that portion of the owner's refund to 
which the consumer is entitled under this section the consumer 
with a full refund of the amount actually paid by the consumer 
on the written lease, including all additional charges set forth 
in subdivision 3, if actually paid by the consumer, less a 
reasonable allowance for use by the consumer as set forth in 
subdivision 3.  The manufacturer shall provide the motor vehicle 
lessor with a full refund of the vehicle's original purchase 
price plus any early termination costs, not to exceed 15 percent 
of the vehicle's original purchase price, less the amount 
actually paid by the consumer on the written lease.  
    Nothing contained in this section shall prohibit a motor 
vehicle lessor from recovering early termination costs incurred 
or early termination savings received pursuant to this section.  
    Subd. 5.  [RESALE OR RE-LEASE OF RETURNED MOTOR VEHICLE.] 
(a) If a motor vehicle has been returned under the provisions of 
subdivision 3 or a similar statute of another state, whether as 
the result of a legal action or as the result of an informal 
dispute settlement proceeding, it may not be resold or re-leased 
in this state unless:  
    (1) the manufacturer provides the same express warranty it 
provided to the original purchaser, except that the term of the 
warranty need only last for 12,000 miles or 12 months after the 
date of resale, whichever is earlier; and 
    (2) the manufacturer provides the consumer with a written 
statement on a separate piece of paper, in 10-point all capital 
type, in substantially the following form:  "IMPORTANT:  THIS 
VEHICLE WAS RETURNED TO THE MANUFACTURER BECAUSE IT DID NOT 
CONFORM TO THE MANUFACTURER'S EXPRESS WARRANTY AND THE 
NONCONFORMITY WAS NOT CURED WITHIN A REASONABLE TIME AS PROVIDED 
BY MINNESOTA LAW."  
    The provisions of this section apply to the resold or 
re-leased motor vehicle for full term of the warranty required 
under this subdivision.  
    (b) Notwithstanding the provisions of paragraph (a), if a 
new motor vehicle has been returned under the provisions of 
subdivision 3 or a similar statute of another state because of a 
nonconformity resulting in a complete failure of the braking or 
steering system of the motor vehicle likely to cause death or 
serious bodily injury if the vehicle was driven, the motor 
vehicle may not be resold in this state.  
    Subd. 6.  [ALTERNATIVE DISPUTE SETTLEMENT PROCEDURE 
MECHANISM.] (a) If a manufacturer has established, or 
participates in Any manufacturer doing business in this state, 
entering into franchise agreements for the sale of its motor 
vehicles in this state, or offering express warranties on its 
motor vehicles sold or distributed for sale in this state shall 
operate, or participate in, an informal dispute 
settlement procedure mechanism located in the state of Minnesota 
which complies with the provisions of the Code of Federal 
Regulations, title 16, part 703 (1982), and the requirements of 
this section, the provisions of subdivision 3 concerning refunds 
or replacement do not apply to a consumer who has not first used 
this procedure mechanism before commencing a civil action, 
unless the manufacturer allows a consumer to commence an action 
without first using this mechanism.  
    (b) The findings and decisions in An informal dispute 
settlement procedure mechanism provided for by this section 
shall address and state in writing whether the consumer would be 
entitled to a refund or replacement under the presumptions and 
criteria set out in subdivision 3, and are admissible as 
nonbinding evidence in any legal action and are not subject to 
further foundation requirements, at the time a request for 
arbitration is made, provide to the consumer and to each person 
who will arbitrate the consumer's dispute, information about 
this section as approved and directed by the attorney general, 
in consultation with interested parties.  The informal dispute 
settlement mechanism shall permit the parties to present or 
submit any arguments based on this section and shall not 
prohibit or discourage the consideration of any such arguments.  
In developing and approving information about this section as 
provided herein, the attorney general is not subject to the 
rulemaking provisions of chapter 14.  
    (c) If, in an informal dispute settlement procedure 
mechanism, it is decided that a consumer is entitled to a 
replacement vehicle or refund under subdivision 3, then the 
consumer has the option of selecting and receiving either a 
replacement vehicle or a full refund as authorized by 
subdivision 3. any refund or replacement offered by the 
manufacturer or selected by a consumer shall include all amounts 
authorized by subdivision 3.  
    (d) In any informal dispute settlement procedure provided 
for by this section:  
    (1) No documents shall be received by any informal dispute 
settlement mechanism unless those documents have been provided 
to each of the parties in the dispute at or prior to the 
mechanism's meeting, with an opportunity for the parties to 
comment on the documents either in writing, or with oral 
presentation at the request of the mechanism orally.  If a 
consumer is present during the informal dispute settlement 
mechanism's meeting, the consumer may request postponement of 
the mechanism's meeting to allow sufficient time to review any 
documents presented at the time of the meeting which had not 
been presented to the consumer prior to the meeting.  
    (2) (e) "Nonvoting" manufacturer or dealer representatives 
shall not attend or participate in the informal dispute 
settlement procedures unless the consumer is also present and 
given a chance to be heard, or unless the consumer previously 
consents to the manufacturer or dealer participation without the 
consumer's presence and participation The informal dispute 
settlement mechanism shall allow each party to appear and make 
an oral presentation in the state of Minnesota unless the 
consumer agrees to submit the dispute for decision on the basis 
of documents alone or by telephone, or unless the party fails to 
appear for an oral presentation after reasonable prior written 
notice.  If the consumer agrees to submit the dispute for 
decision on the basis of documents alone, then manufacturer or 
dealer representatives may not participate in the discussion or 
decision of the dispute.  
    (3) (f) Consumers shall be given an adequate opportunity to 
contest a manufacturer's assertion that a nonconformity falls 
within intended specifications for the vehicle by having the 
basis of the manufacturer's claim appraised by a technical 
expert selected and paid for by the consumer prior to the 
informal dispute settlement hearing.  
    (4) (g) No disputes shall be heard Where there has been a 
recent attempt by the manufacturer to repair a consumer's 
vehicle, but no response has yet been received by the informal 
dispute mechanism from the consumer as to whether the repairs 
were successfully completed, the parties must be given the 
opportunity to present any additional information regarding the 
manufacturer's recent repair attempt before any final decision 
is rendered by the informal dispute settlement mechanism.  This 
provision shall not prejudice a consumer's rights under this 
section.  
    (5) (h) If the manufacturer shall provide and the informal 
dispute settlement mechanism shall consider any relevant knows 
that a technical service bulletins which may have been issued by 
the manufacturer or lessor regarding the motor vehicle bulletin 
directly applies to the specific mechanical problem being 
disputed by the consumer, then the manufacturer shall provide 
the technical service bulletin to the consumer at reasonable 
cost.  The mechanism shall review any such technical service 
bulletins submitted by either party.  
    (i) A consumer may be charged a fee to participate in an 
informal dispute settlement mechanism required by this section, 
but the fee may not exceed the conciliation court filing fee in 
the county where the arbitration is conducted.  
    (j) Any party to the dispute has the right to be 
represented by an attorney in an informal dispute settlement 
mechanism.  
    (k) The informal dispute settlement mechanism has all the 
evidence-gathering powers granted an arbitrator under section 
572.14.  
    (l) A decision issued in an informal dispute settlement 
mechanism required by this section may be in writing and signed. 
    Subd. 7.  [EXHAUSTION OF EFFECT AND ADMISSIBILITY OF 
DECISION BY INFORMAL DISPUTE SETTLEMENT REMEDY MECHANISM.] No 
consumer shall be required to first participate in an informal 
dispute settlement procedure before filing an action in district 
court if the informal dispute settlement procedure does not 
comply with the requirements of this section, notwithstanding 
the procedure's compliance with the Code of Federal Regulations, 
title 16, part 703 The decision issued in an informal dispute 
settlement mechanism required by this section is nonbinding on 
the parties involved, unless otherwise agreed by the parties.  
Any party, upon application, may remove the decision to district 
court for a trial de novo.  If an application to remove a 
decision is not filed in the district court within 30 days after 
the date the decision is received by the parties, then the 
district court shall, upon application of a party, issue an 
order confirming the decision.  A written decision issued by an 
informal dispute settlement mechanism, and any written findings 
upon which the decision is based, are admissible as nonbinding 
evidence in any subsequent legal action and are not subject to 
further foundation requirements.  
    Subd. 8.  [TREBLE DAMAGES FOR BAD FAITH APPEAL OF 
DECISION.] If the district court finds that a party has removed 
a decision of an informal dispute settlement mechanism in bad 
faith, by asserting a claim or defense that is frivolous and 
costly to the other party, or by asserting an unfounded position 
solely to delay recovery by the other party, then the court 
shall award to the prevailing party three times the actual 
damages sustained, together with costs and disbursements, 
including reasonable attorney's fees.  
    Subd. 8. 9.  [CIVIL REMEDY.] Any consumer injured by a 
violation of this section may bring a civil action to enforce 
this section and recover costs and disbursements, including 
reasonable attorney's fees incurred in the civil action.  In 
addition to the remedies provided herein, the attorney general 
may bring an action pursuant to section 8.31 against any 
manufacturer for violation of this section.  
    Subd. 9. 10.  [LIMITATION ON ACTIONS.] An A civil action 
brought under this section must be commenced within six 
months three years of the date of original delivery of the new 
motor vehicle's express warranty term expires, the date a 
consumer is eligible under this section to bring an action in 
district court, or the date a consumer receives written notice 
of the final decision by the informal dispute settlement 
mechanism, whichever is the later date vehicle to a consumer; 
except that, if the consumer applies to an informal dispute 
settlement mechanism within three years of the date of original 
delivery of a new motor vehicle to a consumer, then any civil 
action brought under this section must be commenced within six 
months after the date of the final decision by the mechanism.  
    Subd. 10. 11.  [REMEDY NONEXCLUSIVE.] Nothing in this 
section limits the rights or remedies which are otherwise 
available to a consumer under any other law. 
    Subd. 12.  [DISCLOSURE REQUIREMENT.] In addition to any 
investigative powers authorized by law, the attorney general may 
inspect the records of the informal dispute settlement mechanism 
upon reasonable notice, during regular business hours, and may 
make available to the public information about the operation of 
the mechanism, but data on an individual may not be disclosed 
without the prior consent of the individual. 
     Sec. 2.  [EFFECTIVE DATE.] 
    Section 1 is effective August 1, 1987, and applies to all 
motor vehicles that are still under an applicable express 
manufacturer's warranty and which were originally delivered to 
the consumer during the previous one-year period. 
    Approved May 4, 1987