Sellers of `laundered lemons' forced to come clean.

A California jury's $10 million punitive damages award against Ford Motor Co. for failing to disclose mechanical problems on a car it had taken back from its previous owner is good news for unwitting "lemon" buyers nationwide, consumer advocates say. (Johnson v. Ford Motor Co., No. 647076-9 (Cal., Fresno County Super. Ct. Dec. 18, 2001).)

Ford's motion for a new trial was denied, and it plans to appeal the verdict, said Fresno attorney William Krieg, who represents plaintiffs Greg and Joann Johnson. But he said that the verdict is significant even if it is eventually overturned because it has called attention to the many ways in which auto manufacturers skirt so-called lemon laws.

Rosemary Shahan, president of Consumers for Auto Reliability and Safety (CARS), a California-based watchdog organization, said lemon laundering is "rampant" among automakers, but Ford is "a little more sophisticated" than others.

When the Johnsons purchased their 1997 Ford Taurus in February 1998, they were told it had no repair history. But after replacing the transmission twice in 15 months, they obtained service records and discovered that the car's previous owner had asked Ford to buy back the car because of transmission problems. Instead, Ford took the car back in trade, issued its previous owner a $1,500 "owner appreciation certificate" toward a new car, and put the used one back on the lot.

California law requires a vehicle repurchased as a lemon to be "branded," Krieg said. The title and a decal that is required to be placed on the vehicle door must state that the vehicle is a lemon-law buyback. An auto is presumed to be a lemon if an owner made four or more attempts to repair it within the first 12 months or 12,000 miles after purchase, or two such attempts in the case of life-threatening defects like faulty brakes or steering. A vehicle may also be classified as a lemon if it has not been repaired after a "reasonable number" of attempts within the first 18 months or 18,000 miles after purchase.

Even if a car is not a lemon, when a dealer buys it back after complaints, the transaction is classified as a warranty or "goodwill" buyback. The vehicle's repair history must then be disclosed, although the car need not be labeled.

Krieg said that Ford has been issuing more than 10,000 owner appreciation certificates per year, including about 1,300 in 2000 and 2001 in California alone. Ford's policy manual states that these certificates are to be issued only when a customer complains about a vehicle and is unwilling to keep it. If a customer appears willing to keep a car, dealers are instructed to first offer an extended warranty.

Ford tells its dealers that no disclosure is required when certificates are issued, because the cars taken back in trade are not classified as lemons, Krieg said. Dealers may not understand the nuances of the lemon law, he said, but "they certainly understand fraud. If a car has a history of problems, the customer should be told."

In Johnson, the local dealer settled before trial, and the plaintiffs pursued a claim against Ford. "It is manufacturers who are liable under lemon laws," Shahan said. "Dealers are only the manufacturers' agents for repairs." Because many consumers don't understand this, lemon buyers often complain only to dealers, who take no action. Manufacturers, she said, are "perfectly happy to let this go on."

All 50 states have some form of lemon law, Shahan said, but "their efficacy varies tremendously," so some automakers sidestep the law by shipping their lemons to states with lax regulations, such as Florida and Texas.

Although Ford plans to appeal the Johnson verdict, Krieg hopes to expand the case into a California class action.