A Look at State Legislation
by Richard Stuhlbarg and Adele Karoum
A growing number of states are passing legislation creating a “lemon law” for farm equipment. Under these statutes, an owner of farm equipment, and sometimes a lessee of farm equipment, has a legal remedy when the farm equipment has a nonconformity which has not been repaired within a reasonable number of attempts. Most of these lemon laws provide for recovery of attorneys’ fees too.
Historically, farm equipment for commercial and agricultural use was not covered under federal consumer warranty law. The federal Magnuson-Moss Warranty Act, 15 U.S.C. §2301, only covers warranties for products normally used for personal, family, or household purposes. Most farm machinery and implements are used in the business or occupation of farming, rather than for personal use or household gardening, so they are not covered by the federal Magnuson-Moss Warranty Act.
Due to consumer complaints, lawmakers in several states have passed legislation to create state lemon laws covering farm equipment. The basic structure of a farm equipment lemon law is similar to a motor vehicle lemon law. All lemon laws mandate re-purchase or replacement of the product if it has a nonconformity that has not been repaired within a reasonable number of attempts. Some states provide a presumption of the reasonable number of attempts to repair, or they limit the repair attempts to a specific number of days out of service. Some lemon laws require a consumer to give the manufacturer notice to make a final repair attempt before the consumer can seek legal relief.
While some states like Virginia and Minnesota passed farm equipment lemon laws in the 1980s, a growing number of additional states have passed farm equipment lemon laws. States with farm equipment lemon laws include:
Georgia (1991) (Ga. Code § 10-1-811 et seq.)
Illinois (815 ILCS 340 “Farm Implement Buyer Protection Act”)
North Dakota (2001) (N.D. Cent. Code § 51-26 et seq. “Farm Equipment Nonconformity Remedies”)
Missouri (1987) (Mo. Rev. Stat. § 407.592 to 407.592)
Minnesota (1986) (Minn. Stat. § 325F.6651 through 325F.6659)
New York (2009) (N.Y. Gen. Bus. Law § 697-A “Express Consumer Warranty on Farm Equipment”; § 697-d “New farm equipment bill of rights”)
New Jersey (2016) (N.J. Stat. § 56:12-29 et seq); and recently,
South Dakota (2019)
Arkansas is the latest state to pass a similar law. In late March, the state legislature passed its farm equipment lemon law, which has since been enacted. (See Arkansas Act 588, 2019 Senate Bill 450.)
In states with a lemon law, a farm equipment manufacturer may have a duty to repair that extends beyond the express warranty period, as long as a consumer has provided notice of the non-conforming condition prior to the expiration of the warranty period, also known as the “lemon law rights period.” The limits on exactly how long a lemon law will extend a manufacturer’s requirements to repair farm equipment vary by state.
At first glance, manufacturers might envision a flood of litigation resulting from these laws. However, many lemon laws require an independent dispute resolution mechanism, such as mediation, be used to encourage resolution of equipment issues before filing a lawsuit. For example, the new law in Arkansas requires a consumer, in good faith, to attempt to resolve all issues and claims through a third-party mediator prior to filing a legal action in court. (See Arkansas Act 588, 2019 Senate Bill 450 (to Amend Arkansas Code Title 4, Chapter 96, § 4-96-308(b)(1).)
Many farm equipment lemon laws impose certain requirements on sellers, such as a disclosure of lemon law rights at the time of sale. For example, New York requires a “New Farm Equipment Bill of Rights” be provided in conspicuous 10-point bold type to consumers. The law in Arkansas similarly requires the seller of farm equipment, at the time of purchase or lease, to provide a written statement that adequately discloses and explains the consumer’s rights and obligations under the law.
Importantly, many farm equipment lemon laws allow for the consumer to recover attorneys’ fees and costs if a lawsuit is necessary. This puts teeth into consumer laws, because it encourages consumers with cases they believe will be successful to pursue legal relief without regard for their financial ability to hire an attorney or to pay other expenses such as court filing fees.
It also increases the cost to manufacturers if a lawsuit is pursued and the manufacturer does not prevail. A manufacturer may end up responsible for a judgment of not only the cost of the farm equipment but also thousands of dollars of fees and costs incurred during litigation.
The law in Arkansas includes both purchased and leased equipment, as long as the leased equipment is “leased for the first time from a manufacturer, distributor, or an authorized dealer.”
The new law in South Dakota, on the other hand, does not include leased equipment, but only covers purchasers of new farm machinery. The new law in Arkansas includes farm machinery that is propelled by power other than physical power, but specifically excludes off-road vehicles, all-terrain vehicles (defined by statute), equipment under twenty-five horsepower, lawn tractors, or lawn mowers. (SeeArkansas Act 558, 2019 Senate Bill 450, Arkansas, 4-96-302(5)(A) and (B).)
Like many states with a lemon law, the new law in Arkansas provides for a refund or replacement of the non-complying equipment after a designated number of repair attempts, and provides the buyer has an “unconditional right” to choose a refund rather than a replacement. However, if a consumer chooses a refund, the refund is typically not for the full purchase price but includes a reasonable offset allowance for the consumer’s use and for any physical damage to the farm machinery while under the ownership of the consumer.
The offset calculation, where available, varies from state to state. For example, New York calculates the deduction for use by multiplying the days in use by the purchase price and dividing by a useful life of 1,825 days (five years).
It is important to understand which lemon law applies in the state where the equipment was purchased or leased, because these laws vary.
Defenses under farm equipment lemon law also vary by state. Some states consider the following as manufacturer defenses:
1) the alleged nonconformity does not substantially impair the use, market value, or safety of farm machinery;
2) the nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations by a consumer; or
3) the claim was not filed in good faith. (See, e.g., South Dakota HB 1103, Section 7; N.J. Stat. 56:12-40; MO Rev Stat § 407.589.)
The differences in these state laws can be substantive. As a result, it is important to understand the applicable jurisdiction and its law and to have legal counsel experienced in defending lemon law and warranty litigation, as there is little farm equipment or tractor case law currently available to provide guidance.
Rick Stuhlbarg and Adele Karoum are attorneys in the Los Angeles office of Bowman and Brooke LLP, practicing in the areas of warranty and product liability law. Stuhlbarg concentrates his practice on defending some of the world’s largest automotive and consumer product manufacturers in product liability claims and commercial disputes. Karoum concentrates her practice handling advanced motions and appeals.