California Lemon Law

In certain cases, an auto manufacturer may request a vehicle owner who has filed a claim for compensation under California Lemon Law to settle their dispute through arbitration. Most manufacturers run arbitration programs certified by the California Department of Consumer Affairs as a mechanism to settle claims out-of-court. Vehicle owners have the option to go into arbitration to try and obtain compensation for defective vehicles at any time during the warranty period and (as of March 2023) up to 6 months after the warranty expires.

When the owner of a defective “lemon” vehicle decides to go into arbitration with the manufacturer to obtain compensation, a neutral third party (the arbitrator) steps in to assess the merits of the claim and resolve the issue. 

Within a 40-day period, the arbitrator is tasked to ascertain that the vehicle’s defect is material enough as to severely impair the vehicle’s safety, ease of use, and value. They will also review and see if the manufacturer was allowed a reasonable number of repair attempts to fix the problem. Lastly, the arbitrator will decide on the most appropriate compensation for the vehicle owner.

No. Arbitration is neither necessary nor required under California Lemon Law. This means that entering into arbitration with a manufacturer is entirely voluntary and optional on the part of the vehicle owner. You can, in fact, proceed immediately to filing a Lemon Law court case without having to go through any arbitration process.

The way arbitration programs are presented, many vehicle owners view the process as a quick and easy way to obtain compensation for their defective vehicles. Here are some features that make arbitration so appealing to many consumers:

• Fast resolution. Arbitrators are given 40 days maximum to present their decision.
• Hiring an attorney is optional. Vehicle owners believe they can go through the process of arbitration on their own without retaining proper legal representation much like the way any layman could argue a case before a small claims court. 
• Not binding to the vehicle owner. Only the manufacturer is legally bound to abide by the decision of the arbitrator. If you disagree with the decision, you can disregard it altogether and proceed to file a claim in court.

In many cases, vehicle owners who participated in free arbitration programs offered by the manufacturers found themselves at a disadvantage after the arbitration proceedings. The following are some of the reasons why we’re not huge fans of arbitration and do not recommend this process to our clients:

• Bankrolled by the manufacturer. While safeguards are in place to protect the consumer and ensure impartiality, the manufacturer, who hires the arbitrators and pays for the entire arbitration program, may have too much influence over the proceedings.  
• Optional legal representation. Many vehicle owners are attracted to this process because of the promise of quick resolution and the ill-advised notion that they can muddle through the proceedings without legal counsel. This is a huge mistake as the deliberations are entirely governed by the California Lemon Law and they will be facing top caliber attorneys representing the auto makers. 
• Decisions can be used against you. While it’s true that the aggrieved consumer can choose to disregard the arbitrator’s decision, the evidence presented during the process and the adverse decision itself can be used as counter evidence by the manufacturer when you subsequently file your case in court.

In California, an arbitration program offered by an auto manufacturer is required to proceed under strict guidelines to maintain impartiality and must be duly certified by the appropriate state agency. We don’t recommend going into arbitration to settle your claim but if you’re considering the option, make sure that the arbitration is certified by the California Department of Consumer Affairs. You can call them at 800-952-5210.