Title: Krol v. FCA US, LLC

State: florida

Issuer: Florida Supreme Court

Document:

Supreme Court of Florida 
 
 
____________ 
 
No. SC19-952 
____________ 
 
LES KROL, 
Petitioner, 
 
vs. 
 
FCA US, LLC, et al., 
Respondents. 
 
February 18, 2021 
 
MUÑIZ, J. 
We took this case to resolve a certified conflict over whether the Federal 
Trade Commission’s “single document rule,” promulgated under the Magnuson-
Moss Warranty Act, requires the disclosure of a binding arbitration agreement.  
We hold that it does not. 
BACKGROUND 
The federal Magnuson-Moss Warranty Act is a consumer protection law that 
governs written warranties on consumer products.  15 U.S.C. §§ 2301-2312.  
Among other things, the Act mandates disclosure of “the terms and conditions” of 
a warranty “to the extent required by rules of the [Federal Trade] Commission.”  
 
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15 U.S.C. § 2302(a).  Although the Act includes a nonexhaustive list of suggested 
disclosures that the FTC’s rules “may require,” the Act leaves it to the FTC to 
specify by rule what the mandatory disclosures shall be.  Id. 
 
The FTC exercised its delegated authority by adopting what has come to be 
known as “the single document rule.”  16 C.F.R. § 701.3.  That rule lists nine 
specific warranty-related “items of information” that a warrantor must disclose.  16 
C.F.R. § 701.3(a).  And the rule requires the warrantor to make these disclosures 
“clearly and conspicuously” and “in a single document.”  Id. 
 
Against that legal backdrop, we turn to the facts of this case.  Petitioner Les 
Krol bought a used truck from Respondent Gibson Auto.  Krol v. FCA US, LLC, 
273 So. 3d 198, 200 (Fla. 5th DCA 2019).  The parties’ retail purchase order 
included a “binding arbitration agreement for any dispute related to the truck’s 
purchase.”  Id.  Gibson Auto separately extended an express written warranty on 
the truck.  Id. 
A few months after the purchase, a dispute arose between Krol and Gibson 
Auto over alleged defects in the truck, and Krol eventually filed suit under the Act.  
Id.  Gibson Auto successfully moved for a stay of the litigation and to compel 
arbitration.  Id.  Krol appealed to the Fifth District Court of Appeal, arguing that 
the arbitration agreement was unenforceable because it was not disclosed in a 
 
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single document with other warranty terms, allegedly in violation of the FTC’s 
single document rule.  Id. at 201. 
The Fifth District rejected Krol’s argument.1  It held that the existence of a 
binding arbitration agreement is not among the items covered by the single 
document rule’s disclosure requirements.  Id. at 206-08.  In doing so, the Fifth 
District certified conflict with the contrary decision of the Third District Court of 
Appeal in Larrain v. Bengal Motor Co., Ltd., 976 So. 2d 12 (Fla. 3d DCA 2008).2  
We exercised our discretionary jurisdiction to resolve the conflict.  Art. V, § 
3(b)(4), Fla. Const. 
ANALYSIS 
We look to the text of the FTC’s single document rule itself to determine 
whether it mandates the disclosure of a binding arbitration agreement.  As we 
mentioned, the rule lists nine specific disclosure items, most of which are 
 
 
1.  The Fifth District also rejected Krol’s separate argument that claims 
under the Act cannot not be made subject to presuit binding arbitration agreements.  
Krol, 273 So. 3d at 206.  Krol does not challenge that holding here. 
 
 
2.  The Third District’s decision was 2-1, with Judge Shepherd dissenting.  
Larrain, 976 So. 2d at 15. 
 
 
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indisputably irrelevant to this case.3  None of the nine items listed in the rule 
mentions arbitration. 
In support of the argument that the single document rule requires disclosure 
of a binding arbitration agreement, Krol relies on the following three disclosure 
items from the rule: 
 
(3) A statement of what the warrantor will do in the event of a 
defect, malfunction or failure to conform with the written warranty, 
including the items or services the warrantor will pay for or provide, 
and, where necessary for clarification, those which the warrantor will 
not pay for or provide; . . .  
 
(5) A step-by-step explanation of the procedure which the 
consumer should follow in order to obtain performance of any 
warranty obligation, including the person or class of persons 
authorized to perform warranty obligations.  This includes the name(s) 
of the warrantor(s), together with: The mailing address(es) of the 
warrantor(s), and/or the name or title and the address of any employee 
or department of the warrantor responsible for the performance of 
warranty obligations, and/or a telephone number which consumers 
may use without charge to obtain information on warranty 
performance; [and] 
 
(6) Information respecting the availability of any informal 
dispute settlement mechanism elected by the warrantor in compliance 
with part 703 of this subchapter. 
16 C.F.R. § 701.3(a)(3), (5)-(6).4 
 
 
3.  The single document rule is found at 16 C.F.R. § 701.3(a).  Items 1, 2, 4, 
7, 8, and 9 are the ones that are irrelevant to this case.  See 16 C.F.R. § 701.3(a)(1)-
(2), (4), (7)-(9). 
 
 
4.  The Act lists “[a] brief, general description of the legal remedies 
available to the consumer” as a potential required disclosure item for the FTC’s 
implementing rule.  15 U.S.C. § 2302(a)(9).  But the FTC did not include that item 
in the single document rule. 
 
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Two of these items are clearly of no help to Krol.  Item (3) speaks to the 
substantive content of the warranty and what it covers.  Item (5) speaks to the 
direct interaction between the consumer and the warrantor over the logistics of 
obtaining performance of the warranty.  Neither item has anything to do with the 
legal remedies available to the consumer when a warrantor fails to honor its 
obligations. 
 
This case thus comes down to whether, for purposes of the FTC’s single 
document rule, a binding arbitration agreement qualifies as an “informal dispute 
settlement mechanism elected by the warrantor in compliance with part 703 of this 
subchapter.”  As the Fifth District correctly concluded, the answer to that question 
is no. 
 
The term “informal dispute settlement mechanism” traces back to the text of 
the Act itself.  There Congress expressly declared its “policy to encourage 
warrantors to establish procedures whereby consumer disputes are fairly and 
expeditiously settled through informal dispute settlement mechanisms.”  15 
U.S.C. § 2310(a)(1).  To that end, Congress directed the FTC to “prescribe rules 
setting forth minimum requirements for any informal dispute settlement procedure 
which is incorporated into the terms of a written warranty” governed by the Act.  
15 U.S.C. § 2310(a)(2).  The Act gives warrantors the choice whether to adopt 
such a procedure.  If a warrantor does elect to do so, then the warrantor may also 
 
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require the consumer to avail himself of the procedure before resorting to civil 
litigation over a violation of the Act.  15 U.S.C. § 2310(a)(3); see also 15 U.S.C. § 
2302(a)(8) (referring to use of the informal procedure “before pursuing any legal 
remedies in the courts”). 
 
The rule that the FTC adopted to govern informal dispute settlement 
mechanisms (i.e., the rule cross-referenced in the single document rule) is 
consistent with Congress’s direction.  Most important for our purposes, that rule 
says that the decisions of an informal dispute settlement mechanism “shall not be 
legally binding on any person.”  16 C.F.R. § 703.5(j).  And the FTC’s rule further 
requires that consumers be informed that they may pursue “legal remedies” if they 
are dissatisfied with the results of the informal dispute resolution process.  16 
C.F.R. § 703.5(g)(1). 
 
It would thus be unreasonable to conclude that the single document rule’s 
reference to an “informal dispute settlement mechanism elected by the warrantor in 
compliance with part 703 of this subchapter” encompasses a binding arbitration 
agreement.  As the Fifth District correctly observed, “binding arbitration is not 
comparable to the informal dispute settlement procedures described in [the Act] 
 
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because it is not a prerequisite to litigation—it is a substitute for litigation.”  Krol, 
273 So. 3d at 203.5 
 
The question remains: why did the Third District reach a contrary decision 
in the conflict case, Larrain?  The answer is that the Third District mistakenly 
relied on the Eleventh Circuit’s decision in Cunningham v. Fleetwood Homes of 
Georgia, 253 F. 3d 611 (11th Cir. 2001).  In our respectful view, the Eleventh 
Circuit in Cunningham made two interpretive errors, both of which the Third 
District copied in Larrain. 
 
One error was to treat binding arbitration as a type of “informal dispute 
settlement mechanism,” as that term is used in the Act and in the FTC’s single 
document rule.  For the reasons we have explained, that interpretation of either text 
is untenable. 
 
The other error (indeed, the more fundamental error) was to allow the 
expressed purpose of the Act to eclipse the specific requirements of the single 
document rule’s text.  The Eleventh Circuit rightly observed that the Act furthered 
 
 
5.  As the Fifth District explained, the FTC (in interpretive regulations) has 
taken the position that the Act prohibits binding predispute agreements to arbitrate 
claims under the Act.  Krol, 273 So. 3d at 206.  The Fifth District joined the U.S. 
Court of Appeals for the Eleventh Circuit in rejecting the FTC’s interpretation.  
See Davis v. S. Energy Homes, Inc., 305 F. 3d 1268 (11th Cir. 2002).  This issue is 
not before us here.  But the FTC’s position on the issue gives even more reason to 
conclude that the single document rule does not cover binding arbitration 
agreements.  There would be no reason for the FTC to require the disclosure of a 
type of agreement that the FTC itself deems forbidden under the Act. 
 
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Congress’s broad purposes to “provid[e] clear and concise warranties to 
consumers” and to “avoid[] consumer misinformation and deceptive practices.”  
Cunningham, 253 F. 3d at 622-23.  Informed by that understanding, the court went 
on to conclude that the single document rule requires “warrantors to present all 
information relevant to the warranty in one place” and to “disclose in a single 
document all relevant terms of the warranty.”  Id. at 621-22.  The Third District in 
Larrain followed Cunningham’s lead: “By not disclosing material terms, such as 
an arbitration agreement, within the written warranty we would be promoting 
confusion and complexity to warranties, which the MMWA was designed to 
avoid.”  Larrain, 976 So. 2d at 14. 
 
The courts in Cunningham and Larrain paid insufficient attention to the text 
of the single document rule.  Consistent with Congress’s purposes, the FTC 
perhaps could have chosen to require disclosure of all “relevant” or all “material” 
warranty terms in a single document.  But the text of the single document rule does 
not sweep that broadly.  The FTC decided to list nine required disclosure items, 
none of which encompasses a binding arbitration agreement.  And statutory 
purpose, while undoubtedly relevant to legal interpretation, cannot trump the clear 
requirements of the applicable text. 
 
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In sum, the Fifth District’s decision in Krol was right.  The existence of a 
binding arbitration agreement is not among the disclosures required by the FTC’s 
single document rule.6 
CONCLUSION 
 
We approve the Fifth District’s decision in Krol to the extent it is consistent 
with this opinion.  And we disapprove the Third District’s decision in Larrain to 
the extent it is inconsistent with this opinion. 
 
It is so ordered. 
CANADY, C.J., and POLSTON, LAWSON, and COURIEL, JJ., concur. 
LABARGA, J., dissents with an opinion. 
GROSSHANS, J., did not participate. 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, 
IF FILED, DETERMINED. 
 
LABARGA, J., dissenting. 
Because I agree that the “clear language of the [Magnuson-Moss Warranty 
Act (the Act)] expresses Congress’ intent that any arbitration agreement must be 
disclosed within the written warranty and not as a stand-alone document,” I would 
 
 
6.  In so holding, we align ourselves with the decision of the Alabama 
Supreme Court in Patriot Manufacturing, Inc. v. Jackson, 929 So. 2d 997 (Ala. 
2005). 
 
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approve the Third District Court of Appeal’s decision in Larrain,7 and quash the 
Fifth District Court of Appeal’s decision in Krol.8 
The purpose of the Act is “to improve the adequacy of information available 
to consumers, prevent deception, and improve competition in the marketing of 
consumer products.”  15 U.S.C. § 2302(a).  The Act requires that a written 
warranty “shall . . . fully and conspicuously disclose in simple and readily 
understood language the terms and conditions of such warranty.”  15 U.S.C. 
§ 2302(a).  To achieve this purpose, the Federal Trade Commission (FTC) 
promulgated the “single document rule” to establish “minimum uniformity in 
warranty disclosures . . . [to] enable consumers to make valid and informed 
comparisons of warranties for similar products.”  Disclosure of Written Consumer 
Product Warranty Terms and Conditions, 40 Fed. Reg. 60,170, 60,172 (Dec. 31, 
1975). 
These provisions notwithstanding, the majority rigidly holds that the single 
document rule does not require warrantors to include binding arbitration 
agreements in consumer warranties.  The result of the majority’s decision is that 
unwitting consumers who sign warranties may be deceived into forfeiting their 
 
 
7.  Larrain v. Bengal Motor Co., Ltd., 976 So. 2d 12, 14 (Fla. 3d DCA 
2008). 
 
8.  Krol v. FCA US, LLC, 273 So. 3d 198 (Fla. 5th DCA 2019). 
 
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rights to seek relief in court by agreeing to terms that are not contained in the 
warranty itself.  Because today’s decision stands to lessen the uniformity of 
warranty disclosures and diminishes consumers’ ability to make informed 
purchasing decisions, I dissent. 
Application for Review of the Decision of the District Court of Appeal – Certified 
Direct Conflict of Decisions 
 
 
Fifth District - Case No. 5D18-2149 
 
 
(Brevard County) 
 
Jeremy Kespohl and Angela D. Thomas of Morgan & Morgan, Jacksonville, 
Florida; and Theodore F. Greene III of Law Offices of Theodore F. Greene, LC, 
Orlando, Florida, 
 
 
for Petitioner 
 
Robert E. Sickles and Yesica S. Liposky of Dinsmore & Shohl LLP, Tampa, 
Florida, 
 
 
for Respondent Gibson Auto Sales, Inc., d/b/a Gibson Truck World