ATTORNEYS FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
TIMOTHY V. HOFFMAN    STEVE CARTER    
CAMILLE CRIBARO-MELLO    ATTORNEY GENERAL OF INDIANA
SANCHEZ & DANIELS    Indianapolis, IN
Chicago, IL
     ROBERT B. WENTE
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
_____________________________________________________________________

    IN THE INDIANA TAX COURT _____________________________________________________________________

DAIMLERCHRYSLER CORPORATION,                                              )
                                                                               )
    Petitioner,                                                                )
                                                                               )
    v.                                                                         )   Cause No. 49T10-0307-TA-38
                                                                               )                
INDIANA DEPARTMENT OF                                                          )                
STATE REVENUE,                                                                 )
             
                                                                              
                                                                              
                                                                              
                                                                 

Id. at (c).
All responsibilities and liabilities under the Lemon Law rest solely with the manufacturer of the vehicles. Ind. Code Ann. § 24-5-13-24 (West 2004). Indeed, “[n]othing in [the Motor Vehicle Protection Act] imposes any liability on a dealer or creates a cause of action by a consumer against a dealer, and a manufacturer may not, directly or indirectly, expose any franchised dealer to liability” for a vehicle’s “nonconformity.” Id.

(Oral Argument Tr. at 3-4 (emphasis added).) As a result, DaimlerChrysler continues, under the Lemon Law, manufacturers “step into the shoes” of the dealers who, as retail merchants, actually collected and remitted the sales tax to the Department in the first instance. (See Pet’r Cross-Mot. for Summ. J. at 5 (citing Chrysler Fin. Co., LLC v. Indiana Dep’t of State Revenue, 761 N.E.2d 909 (Ind. Tax Ct. 2002), review denied.) Because DaimlerChrysler stands in the same shoes as its dealers, it “is a retail merchant engaged in selling at retail and, therefore, [] entitled to a refund of sales tax it paid to consumers.” (Pet’r Cross-Mot. for Summ. J. at 4.) See footnote
    In contrast, the Department argues that the intent behind Indiana’s Lemon Law is not to return all involved to a pre-purchase status. Instead, the Department argues that it is clear, by the terms of Indiana’s Lemon Law, that the legislature intended for the manufacturer’s “reimbursements” of sales tax, registration fees and excise taxes, finance charges, and the costs of all options added by the authorized dealer, to be penal in nature. As a result, the refund provisions of Indiana Code § 6-2.5-6-13 and § 6-2.5-6-14 do not contain “any language that would allow a manufacturer to recoup expenses that the legislature intended . . . as a penalty for introducing defective goods into the stream of commerce.” (Resp’t Br. In Supp. of [its] Mot. for Summ. J. at 10-11.)

Gen. Motors Corp. v. Zirkel, 602 N.E.2d 1069, 1071 (Ind. Ct. App. 1992) (internal quotation and citation omitted), rev’d on other grounds by 613 N.E.2d 30 (Ind. 1993). Thus, lemon laws are “policy-driven statute[s] aimed at the long-standing problems resulting from the unequal playing field between consumers and manufacturers.” Church v. Chrysler Corp., 585 N.W.2d 685, 689 (Wis. Ct. App. 1998). Consumer protection statutes like Indiana’s Lemon Law are to be liberally construed in favor of the consumer. See, e.g., Johnson v. Scandia Assocs., Inc., 641 N.E.2d 51, 56 (Ind. Ct. App. 1994) (stating that “[i]mplied warranties are imposed by operation of law for the protection of the consumer, and they must be liberally construed in favor of the consumer”), rev’d on other grounds by 717 N.E.2d 24 (Ind. 1999); Ind. Code Ann. § 24-5-0.5-1 (West Supp. 2004) (providing that because the statutes contained within Indiana’s Deceptive Consumer Sales Act serve to protect consumers, they shall be liberally construed).
    It is clear from its language that the primary purpose of Indiana’s Lemon Law is to make consumers whole by returning them to pre-purchase status. A.I.C. § 24-5-13-11. Tangential to this purpose, however, is the goal of getting vehicle manufacturers’ to improve quality control. DaimlerChrysler’s position that manufacturers, like consumers, should be allowed to return to pre-purchase status defeats this goal.
    Lemon laws “must have teeth in order to be effective.” See Royster v. Toyota Motor Sales, USA, Inc., 750 N.E.2d 531, 535 (Ohio 2001) (stating that to work well, lemon laws “need[] a harsh remedy at a time certain”). Consequently, “the fact that a manufacturer may experience some financial discomfort as a result of its Lemon is inconsequential.” Collins v. Mullinax East, Inc., 795 N.E.2d 68, 72 (Ohio Ct. App. 2003). Under Indiana’s Lemon Law, the consumer gets back exactly what it paid as a result of the transaction. The manufacturer, however, must pay out more than it ever received originally. This financial discomfort is intended for a reason: it provides the incentive - or the “teeth” - for manufacturers to improve the quality of their product.
    In light of this, DaimlerChrysler’s argument that it has “stepped into the shoes” of its dealers is incorrect for two reasons. First, DaimlerChrysler’s reliance on this Court’s holding in Chrysler Financial is misplaced. In that case, this Court held that when several automobile dealers assigned to Chrysler all their rights and interests in installment contracts with their consumers, they also assigned their statutory rights to sales tax deductions under Indiana’s Bad Debt statute. Chrysler Fin. Co., LLC v. Indiana Dep’t of State Revenue, 761 N.E.2d 909, 911-13 (Ind. Tax Ct. 2002), review denied. Specifically, this Court explained that
It is a “well-settled principle of contract law that a valid assignment gives the assignee neither greater nor lesser rights than those held by the assignor.” In other words, “assignee stands in the shoes of the assignor.” Therefore, it does not matter whether Chrysler actually is a retail merchant, or whether it was the person who paid or owed the sales tax; as the assignee, Chrysler stands in the shoes of the Dealers, and the parties do not dispute that the Dealers are retail merchants, or that the sales tax was paid. The Dealers assigned their rights to Chrysler when they executed the contracts. Because Chrysler stands in the Dealers’ shoes, Chrysler has a right to the sales tax deduction under the Bad Debt Statute.

Id. at 914 (internal citations, quotations, and footnote omitted).
    DaimlerChrysler has taken the holding of Chrysler Financial out of context. In that case, there was an actual assignment of rights between the parties from which another right subsequently flowed. In this case, there is no assignment of any rights or interests from the dealers to DaimlerChrysler. There being no assignment in the first instance, there cannot be a subsequent right which flows therefrom. In other words, DaimlerChrysler does not step into the shoes of the dealer just because it wants to.
    Even assuming the dealers assigned a right to DaimlerChrysler in this case, under Indiana Code § 6-2.5-6-13 and § 6-2.5-6-14 they could only assign the right to a refund if the sales tax was either erroneously or illegally collected in the first instance. Such is not the case here: at the point and date of sale, the sales tax was properly and legally collected. Allowing DaimlerChrysler a refund of sales tax reimbursed under the terms of the Lemon Law expands the language of the refund statutes to include situations that surpass retail transactions between a retail merchant and a buyer.

DISTRIBUTION:

Timothy V. Hoffman
Camille Cribaro-Mello
SANCHEZ & DANIELS
333 West Wacker Drive, Suite 500
Chicago, IL 60606

Steve Carter
Attorney General of Indiana
By: Robert B. Wente
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, IN 46204-2770