Legal Victory for Auto Dealers Reaffirms the Value of Illinois Warranty Reimbursement Law

Sarah J. Reusche • May 23, 2024
A close up of an orange car in a dark room.

The current Warranty Law in Illinois became effective on January 1, 2022, by Public Act 102-232, and is now codified as 815 ILCS 710/6. The purpose of the Warranty Law is to ensure that dealers are compensated equitably, aligning warranty reimbursement, recall, and stop-sale repairs directly with the rates charged to retail customers. The Warranty Law also prohibits manufacturers from imposing cost recovery surcharges on dealers who choose to be reimbursed at their retail rate. 


Volkswagen Grp. of Am., Inc. v. Giannoulias 


On May 6, 2024, the Northern District of Illinois dismissed a lawsuit filed by Volkswagen: Volkswagen Grp. of Am., Inc. v. Giannoulias, No. 22-cv-7045. (N.D. Ill. May 6, 2024). The suit challenged the constitutionality of the 2022 changes to the Warranty Law, asserting violations of the U.S. Constitution, including Due Process, Equal Protection, First Amendment, and the Commerce Clause.


The court rejected Volkswagen’s Due Process claim based in part on a finding that the Illinois legislature has a legitimate state interest related to ensuring that dealers are fairly compensated for warranty repairs.


The court disagreed with Volkswagen’s argument that the Warranty Law discriminates against traditional manufacturers by not imposing similar requirements on manufacturers that do not use independent dealers. The court held that if direct sale manufacturers chose to adopt dealer networks, the Warranty Law would apply to them in the same way it applies to traditional manufacturers such as Volkswagen.


Additionally, the court disagreed with Volkswagen’s argument that the Warranty Law infringes on its free speech rights and concluded that the Warranty Law did not prevent Volkswagen from raising prices or communicating the reasons for such increases.


Lastly, the court disposed of Volkswagen’s Commerce Clause arguments by clarifying that the Warranty Law does not prohibit Volkswagen from recovering increased warranty costs through price adjustments. 


Dealer Rights Under The Warranty Law


The decisive ruling of Volkswagen Grp. of Am., Inc. v. Giannoulias not only affirms the strength of the Warranty Law but also underscores its value to Illinois dealers. 


The Warranty Law empowers dealers to claim reimbursements that accurately reflect the value of their services. Under the Warranty Law, a manufacturer’s time allowance must be at least equal to the time allowance for retail customers for the same repair work. If no extended warranty time guide is agreed upon, the time allowance must equal the manufacturer’s time guide multiplied by 1.5. The Warranty Law also requires manufacturers to compensate dealers for diagnostic time, including time spent on calls and on-hold with technical assistance centers.


Additionally, the Warranty Law allows dealers to charge retail rates for parts used in warranty, recall, and stop-sale repairs. Reimbursement for parts is calculated by multiplying the dealer’s purchase price by the sum of 1 plus the dealer’s average percentage markup for customer pay repairs. Dealers are further entitled to receive a 30% markup on parts for entire engine and transmission assemblies.

 

Dealers may submit a request to a manufacturer for an increase in warranty reimbursement once each year. A manufacturer must approve or disapprove warranty reimbursement claims within 30 days. Unchallenged claims within this period are automatically considered approved.


Lavelle Law can assist dealers in submitting warranty reimbursement claims and enforcing their right to greater compensation for labor and parts used in warranty repairs. For further inquiries or questions, please contact attorney Sarah Reusche at sreusche@lavellelaw.com or (847) 705-7555. 


More News & Resources

Lavelle Law News and Events

The most common commercial lease types and how they impact both parties.
By Theodore M. McGinn June 13, 2025
Other than payroll costs, there is generally no other larger ongoing cost that a business pays than its commercial lease obligation. Moreover, often the term for a typical commercial lease will extend far into the life of any business. Finally, there are a multitude of ways in which a poorly drafted lease can cause a business to incur significant unforeseen costs. Accordingly, it is critical that every business devotes the necessary resources, including the use of an experienced lawyer, to negotiate a fair lease.
IRS Issues Statistics on its 2024 Operations
By Timothy M. Hughes June 10, 2025
A recent press release by the IRS addressed the Fiscal Year (“FY”) 2024 (Oct. 1, 2023 – Sept. 30, 2024) Data Book, describing the Agency’s activities. For the first time, revenue collected exceeded 5 trillion dollars, accounting for 96% of total government revenue. The IRS’s expenditures to collect over $5 trillion were $18.2 billion for overall operations in FY 2024, with 90,516 full-time equivalent employees.
When should you prepare, review, or update estate plan documents?
By Jackie R. Luthringshausen June 2, 2025
As life changes, it is important to recognize major life events when it is pertinent to prepare, review, or update estate plan documents. Whether you recently got married, just had a baby, bought a house, went through a divorce, have an adult child, or are acquiring assets that may need tax planning provisions, be proactive and make sure the proper estate plan documents are in place.
Learn key strategies and legal tools to protect your business and avoid litigation.
By Lavelle Law May 27, 2025
Key strategies and tools to protect business assets were the topics of Lavelle Law’s Breakfast Briefs presentation on May 21, 2025. Attorneys Matt Sheahin and Jennifer Tee presented important legal strategies for business owners as well as business and office managers, business brokers, and insurance professionals. Topics included Non-Compete Agreements, Shielding Trade Secrets, Nuances of Temporary Restraining Orders (TROs), Injunctive Relief, Contracts, and Managing Risks.
Employment Law Success Story
By Employment Law May 23, 2025
Our client contacted us for advice regarding the termination of a long-time employee who was failing to meet performance standards. Our client already provided several accommodations for this employee, but they still were not meeting the mark.
Every adult should have an estate plan in Illinois.
By Heather A. McCollum May 22, 2025
When people hear “estate planning,” they often picture wealthy individuals with sprawling mansions and complex assets. But the truth is, everyone — regardless of income, age, or family size — can benefit from having an estate plan.
IRS Whistleblower Office Releases Operating Plan Outlining Integrated Approach to Advance Program
By Timothy M. Hughes May 10, 2025
The Internal Revenue Service recently issued a press release addressing the IRS Whistleblower Office’s publishing its first-ever multi-year operating plan that outlines its guiding principles, strategic priorities, recent achievements, and current initiatives to advance the IRS Whistleblower Program.
The Junk Fee Ban Act and pricing transparency legislation.
By Sarah J. Reusché and Jacob Rotolo April 23, 2025
If enacted, the Junk Fee Ban Act would protect consumers from hidden fees and promote fair business practices in Illinois. While there has yet to be legislation in the proposed Junk Fee Ban Act that excludes dealerships, it will be important to look for future updates on this bill, as Illinois is quickly becoming a hub for vehicle innovation and automotive plant expansion.
Ancillary probate is required when a person dies owning real estate outside of their home state.
By Heather A. McCollum April 21, 2025
When someone passes away owning property in another state, their estate may need to go through ancillary probate—a secondary court process in that state.
$9.9 Million Dollar Purchase of Packaged Multi-Unit Properties
By Commercial Real Estate April 18, 2025
Lavelle Law represented a joint venture in its $9.9 million acquisition of four multi-unit buildings.
More Posts