1

The text of the arbitration agreement, in pertinent part, provides as follows:

This agreement for binding arbitration is this date entered between Gary R. Cunningham

and Delores Cunningham hereinafter called "Buyer" and Ronnie Smith's Home Center

Mobile Home Center, a corporation, hereinafter called "Seller." ... Buyer and Seller

agree, covenant and consent that any controversies or claims arising out of or in any way

relating to the sale of the said mobile home and the negotiations leading up to the sale,

whether in the nature of covenant, warranty, misrepresentation, rescission, any breach of

contract, or other tort shall be settled solely by arbitration in accordance with the

applicable Rules of the American Arbitration Association then in effect, and that

judgment upon award rendered by the arbitrators may be entered in and enforceable by

any court of competent jurisdiction. Buyer and Seller further agree that they shall submit

any and all disputes, controversies and cases arising out of the negotiations for the sale

and service of the mobile home, whether in the nature of contract, warranty or tort, to the

decision of a three-person arbitration panel. Buyer and Seller agree that they shall be

bound by the determination of the said arbitration panel.... It is further agreed by the

parties that all rights, privileges and responsibilities under this agreement shall expressly

inure to the benefit of the manufacturer of the said mobile home insofar as any claims

may exist or thereafter arise against the manufacturer, including but not limited to,

enforcement of the warranties, whether express or implied.

(R.1-28 at 2-3). In addition, the retail installment contract and security agreement conspicuously

Gary R. CUNNINGHAM, Delores Cunningham, Plaintiffs-Appellees,

v.

FLEETWOOD HOMES OF GEORGIA, INC., Defendant-Appellant.

Nos. 00-12225, 00-12510.

United States Court of Appeals,

Eleventh Circuit.

June 6, 2001.

Appeals from the United States District Court for the Northern District of Alabama. (No. 99-02605-CV-PTE), Robert B. Propst, Judge.

Before ANDERSON, Chief Judge, and HULL and COX, Circuit Judges.

COX, Circuit Judge:

Fleetwood Homes of Georgia, Inc. (Fleetwood) appeals the district court's denial of Fleetwood's

motion to compel arbitration pursuant to 9 U.S.C. § 16(a).

I. FACTS

In April of 1998, Gary and Delores Cunningham (the Cunninghams) purchased a new mobile home

manufactured by Fleetwood from Ronnie Smith's Home Center, Inc. (Ronnie Smith's). The mobile home

came with a manufacturer's warranty, and, as a part of the sales transaction, the Cunninghams executed an

arbitration agreement with Ronnie Smith's.1

 Shortly after the purchase and installation of the home, the
and explicitly detailed the parties' arbitration obligations. (R.1-28 at 4). 

Cunninghams contacted Ronnie Smith's and Fleetwood with a variety of complaints about defects in the

home. Unsatisfied with the response, the Cunninghams filed suit.

II. PROCEDURAL HISTORY

The Cunninghams filed a complaint in Alabama circuit court alleging fraud, mental anguish and

emotional distress, fraud in the inducement, negligence and wantonness, breach of contract, breach of express

and implied warranties, breach of implied warranty of merchantability, violation of the Alabama Extended

Manufacturer's Liability Doctrine, ALA.CODE 1975, § 6-5-500, et seq., and violations of the Magnuson-Moss

Warranty Act, 15 U.S.C. § 2301-2312. Fleetwood and Ronnie Smith's removed to federal district court on

the basis of the Magnuson-Moss Warranty Act claims. See 28 U.S.C. §§ 1331, 1367 (1993).

Ronnie Smith's filed a motion to compel arbitration or in the alternative for dismissal, and Fleetwood

subsequently joined in the motion. The district court, concluding that Fleetwood was a third-party beneficiary

of the arbitration agreement but that the Magnuson-Moss Warranty Act precludes arbitration of the

Cunninghams' written or express warranty claims, issued an order compelling arbitration of all claims except

for the Magnuson-Moss claims for breach of written or express warranties. Fleetwood appeals.

III. ISSUE ON APPEAL

Fleetwood challenges the district court's conclusion that the Magnuson-Moss Warranty Act-Federal

Trade Commission Improvement Act, 15 U.S.C. §§ 2301-2312 (Magnuson-Moss), precludes Fleetwood from

utilizing its third-party beneficiary status under the Ronnie Smith's-Cunningham arbitration agreement to

compel binding arbitration of the Cunninnghams' breach of written or express warranty claims. We assume

for the purpose of deciding this case that Fleetwood is entitled to the benefit of the arbitration agreement.

IV. STANDARD OF REVIEW

 We review an order denying a motion to compel arbitration de novo. Paladino v. Avnet Computer

Techs., Inc., 134 F.3d 1054, 1060 (11th Cir.1998).

V. CONTENTIONS OF THE PARTIES

Fleetwood notes that the Federal Arbitration Act (FAA) creates a presumption of validity for

arbitration clauses, see 9 U.S.C. § 2, and argues that because Magnuson-Moss does nothing to disturb the

FAA's mandate, the arbitration agreement must be enforced according to its terms. See Volt Info. Scis., Inc.

v. Bd. of Trs. of Leland Stanford, Jr. Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 1255-56, 103 L.Ed.2d 488
 2

The text of the informal dispute settlement mechanism provision reads as follows: "[o]ne or more

warrantors may establish an informal dispute settlement procedure which meets the requirements of the

Commission's rules under paragraph (2). If—

(A) a warrantor establishes such a procedure,

(B) such procedure, and its implementation, meets the requirements of such rules, and

(C) he incorporates in a written warranty a requirement that the consumer resort to such

procedure before pursuing any legal remedy under this section respecting such warranty,

then (i) the consumer may not commence a civil action (other than a class action) under

subsection (d) of this section unless he initially resorts to such procedure...." 15 U.S.C. §

2310(a)(3). 

(1989). Fleetwood acknowledges that the FAA may be overridden by a contrary congressional command,

but contends that an examination of the text, legislative history, and purpose of Magnuson-Moss reveals no

evidence of a congressional intent to prevent the enforcement of arbitration agreements. See

Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 227, 107 S.Ct. 2332, 2337-38, 96 L.Ed.2d 185

(1987) (noting that Congress's intent to limit or prohibit waiver of a judicial forum for a particular claim will

be deducible from a statute's text, legislative history, or from an inherent conflict between arbitration and the

statute's underlying purposes). The Cunninghams, on the other hand, argue that Magnuson-Moss and the

rules promulgated by the Federal Trade Commission pursuant to Magnuson-Moss prohibit binding arbitration

of warranty claims. Naturally, the Cunninghams contend that their view, not Fleetwood's, is supported by

the legislative history and the stated purpose of Magnuson-Moss.

A. The Text of the Magnuson-Moss Warranty Act

For their analysis of the text of Magnuson-Moss, the Cunninghams rely on the reasoning of opinions

from district courts within this circuit. See, e.g., Boyd v. Homes of Legend, 981 F.Supp. 1423, 1434-41

(M.D.Ala.1997); Wilson v. Waverlee Homes, Inc., 954 F.Supp. 1530, 1537-39 (M.D.Ala.1997). The

Cunninghams note that 15 U.S.C. § 2310(d) creates a statutory right of action for consumers "who [are]

damaged by the failure of a supplier, warrantor, or service contractor to comply with any obligation under

this chapter or under a written warranty, implied warranty, or service contract...." 15 U.S.C. § 2310(d). Also,

in § 2310(a) Magnuson-Moss provides for the inclusion of informal dispute settlement mechanisms within

written warranties,2

 and delegates to the Federal Trade Commission the authority to establish minimum

requirements for these mechanisms. The Cunninghams argue that Magnuson-Moss prohibits binding

arbitration by making § 2310(a)'s informal dispute settlement mechanism the only exception to the right of
 3

The Federal Trade Commission, drafting regulations pursuant to the Act, has provided that

"[d]ecisions of the Mechanism shall not be legally binding on any person." 16 C.F.R. § 703.5(j). 

action created by § 2310(d); no other mechanisms are permitted. In other words, in the Cunninghams' view

Magnuson-Moss permits alternative dispute resolution, including arbitration, but only of the non-binding sort

that fits the § 2310(a)(3) description and that complies with the rules promulgated by the Federal Trade

Commission.3

 See id. § 2310(a)(2); 16 C.F.R. § 703.5(j) (1999).

Fleetwood argues that § 2310(a)(1) only encourages inclusion of informal dispute resolution

mechanisms in written warranties, and does not preclude enforcement of agreements to resolve claims by

binding arbitration. Under Fleetwood's reading of Magnuson-Moss, the mechanism described by § 2310(a)

is not the only method of alternative dispute resolution available to warrantors and consumers, and the

statutory cause of action created by § 2310(d) merely confers a right that can be waived by express

agreement. In support of this line of argument, Fleetwood notes that Magnuson-Moss expressly states that

nothing in the Act shall invalidate or restrict any right or remedy of a consumer under any other federal law.

15 U.S.C. § 2311(b). In Fleetwood's view, this provision necessarily includes the substantive portions of the

FAA that protect the ability of contracting parties to enter into binding arbitration agreements.

B. The Legislative History of the Act

Fleetwood argues that the legislative history of Magnuson-Moss does not express a clear intent to

prohibit binding arbitration, but that at most, it evidences an intention to prohibit warrantors from including

binding informal dispute resolution mechanisms in written warranties. Because the arbitration agreement at

issue here was not in the manufacturer's warranty, but was instead a part of the sales transaction between the

buyer and the seller, Fleetwood contends that legislative history indicating concerns with the content of

written warranties is inapplicable.

In response the Cunninghams note that at the time of Magnuson-Moss's passage members of

Congress indicated that use of the informal dispute resolution mechanism was intended as only a prerequisite,

and would not be a bar to a later civil action on the warranty. See H.R.REP. NO. 93-1107, (1974) reprinted

in 1974 U.S.C.C.A.N. 7702, 7703. In keeping with their construction of the text, the Cunninghams interpret

this statement as an indication that Congress expected that all informal dispute resolution mechanisms would

be non-binding, as they would otherwise violate the provisions of the Act. In support the Cunninghams cite

the regulations promulgated by the Federal Trade Commission pursuant to the Act, which detail the
particulars of the informal dispute resolution mechanism of § 2310(a), as well as the history of the

regulations, which includes statements by the Federal Trade Commission rejecting industry calls for the

incorporation of legally binding mechanisms. See 40 Fed.Reg. 60,168, 60,211 (1975) (stating "reference

within the written warranty to any binding, non-judicial remedy is prohibited by the Rule and the Act.").

Fleetwood's retort courteous is to repeat that none of the above applies to arbitration agreements not in the

written warranty.

C. The Purpose of the Act

Fleetwood locates the purposes of Magnuson-Moss in the section detailing the Act's disclosure

requirements, which reads: "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).

Fleetwood submits that enforcing seller-consumer arbitration agreements that make warrantors third-party

beneficiaries does not conflict with these purposes. Fleetwood analogizes to the federal securities statutes,

which share Magnuson-Moss's concern with the disclosure of information to consumers. Although, like

Magnuson-Moss, the Securities Act of 1933 and the Securities Exchange Act of 1934 require disclosure to

potential investors to prevent disinformation and fraud in a transactional context, the Supreme Court has held

that claims brought under both acts can be subject to binding arbitration. Rodriguez de Quijas v.

Shearson/American Express, Inc., 490 U.S. 477, 485-86, 109 S.Ct. 1917, 1922, 104 L.Ed.2d 526 (1989)

(Securities Act of 1933); McMahon, 482 U.S. at 238, 107 S.Ct. at 2343 (Securities Exchange Act of 1934).

Fleetwood concludes that the same reasoning applies to Magnuson-Moss claims.

The Cunninghams note that the legislative history provides that Magnuson-Moss was passed at least

in part to "provide[ ] the consumer with an economically feasible private right of action," Wilson, 954 F.Supp.

at 1538 (quoting 119 CONG.REC. 972 (1973) (remarks of Congressman Moss)), and they argue that allowing

Fleetwood to compel arbitration would force them to absorb costs that do not comport with the statutory

policy of Magnuson-Moss. See Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1062 (11th

Cir.1998) (finding conflict between statutory policy of Title VII and restrictive arbitration clause).

Additionally, the Cunninghams argue that because Magnuson-Moss's purpose is to require manufacturers to

include all information relevant to the warranty in the warranty itself, allowing Fleetwood to compel

arbitration as a third-party beneficiary of the Ronnie Smith's-Cunningham agreement defeats the express

purpose of the Act. The Cunninghams also submit that the absence of language in the warranty referencing
 4

Fleetwood notes in its reply brief that the written warranty is not a part of the record in this appeal. 

However, it is undisputed that the warranty does not contain any reference to the arbitration agreement or

to an informal dispute settlement mechanism. 

the arbitration agreement is itself a violation of the Act, as Magnuson-Moss and the Federal Trade

Commission regulations require full and conspicuous disclosure of the terms and conditions of the warranty.

See 15 U.S.C. § 2302; 16 C.F.R. §§ 701.3, 703.2. Thus, the Cunninghams argue compelling arbitration on

the basis of an arbitration agreement that is not referenced in the warranty4

 presents an inherent conflict with

the Act's purpose of providing clear and concise warranties to consumers.

VI. DISCUSSION

A. The Federal Arbitration Act

 The Federal Arbitration Act, 9 U.S.C. § 1, et seq., "plac[es] arbitration agreements upon the same

footing as other contracts." McMahon, 482 U.S. at 226-27, 107 S.Ct. at 2337 (citations omitted). The FAA

provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Statutorily-created causes of

action are no exception to the rule that arbitration agreements should be enforced according to their terms.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626-27, 105 S.Ct. 3346, 3354, 87

L.Ed.2d 444 (1985).

 Agreements to arbitrate are essentially forum-selection clauses, Scherk v. Alberto-Culver Co., 417

U.S. 506, 519, 94 S.Ct. 2449, 2457, 41 L.Ed.2d 270 (1974), and by "agreeing to arbitrate a statutory claim,

a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an

arbitral, rather than a judicial, forum." Mitsubishi, 473 U.S. at 628, 105 S.Ct. at 3354. However, Congress

may limit or prohibit waiver of a judicial forum for specific statutory claims. McMahon, 482 U.S. at 227,

107 S.Ct. at 2337. To deduce such an intent, reviewing courts must scrutinize a statute's text and legislative

history, and ascertain whether an inherent conflict exists between enforcement of the arbitration agreement

and the statute's underlying purposes. Id., 482 U.S. at 227, 107 S.Ct. at 2337-38.

B. The Magnuson-Moss Warranty-Federal Trade Commission Improvement Act

Congress enacted the Magnuson-Moss Warranty Act "to improve the adequacy of information

available to consumers, prevent deception, and [to] improve competition in the marketing of consumer

products." 15 U.S.C. § 2302. Magnuson-Moss does not require manufacturers to provide warranties, but

instead creates specific duties and liabilities for manufacturers that choose to do so. 16 C.F.R. § 700.03. The
 5

Magnuson-Moss defines "written warranty" as "any written affirmation of fact or written promise

made in connection with the sale of a consumer product by a supplier to a buyer which relates to the

nature of the material or workmanship and affirms or promises that such material or workmanship is

defect free or will meet a specified level of performance over a specified period of time, or ... any

undertaking in writing in connection with the sale by a supplier of a consumer product to refund, repair,

replace or take other remedial action with respect to such product in the event that such product fails to

meet the specifications set forth in the undertaking, which written affirmation, promise, or undertaking

becomes part of the basis of the bargain between a supplier and a buyer for purposes other than resale of

such product." 15 U.S.C. § 2301(6). 

 6Magnuson-Moss does not restrict the ability of consumers to pursue relief under Uniform

Commercial Code or other state law theories, but merely establishes minimum federal standards within its

limited ambit. 15 U.S.C. § 2311(b), (c); see also HOWARD J. ALPERIN AND ROLAND F. CHASE, 2

CONSUMER LAW: SALES PRACTICES AND REGULATION § 214 (1986) (describing design of MagnusonMoss Warranty Act as complementing rather than superseding state warranty law). 

Act focuses primarily on written warranties for consumer products.5

The most significant provisions in Magnuson-Moss pertain to the disclosure of written consumer

product warranty terms and conditions, the pre-sale availability of written warranty terms, the authorization

of consumer suits for damages and other legal and equitable relief, and the procedures for creating informal

dispute settlement mechanisms. See 15 U.S.C. §§ 2302-04, 2310. The Cunninghams argue that the text of

these provisions evidences Congress's intention to prohibit or limit the waiver of judicial remedies for

Magnuson-Moss claims. We turn first to § 2310, the civil action and informal dispute settlement mechanism

section.

1. Section 2310: the Civil Action and Informal Dispute Settlement Mechanism

Section 2310 of Magnuson-Moss provides a statutory cause of action to consumers "damaged by the

failure of a supplier, warrantor, or service contractor to comply with [any obligation imposed by the Act] or

under a written warranty, implied warranty or service contract." Id. § 2310(d)(1). Suit may be brought in

either state or federal court.6

 Id. The Act also permits class actions, and in an effort to encourage consumers

to pursue claims, Magnuson-Moss allows prevailing consumer litigants to receive attorneys' fees and costs.

Id. § 2310(d)(2), (e).

The Act also places certain impediments in the way of litigation-minded consumers. First, prior to

bringing suit for breach of warranty, a consumer must give persons obligated under the warranty a reasonable

opportunity to "cure" the failure to comply with the obligations at issue. Id. § 2310(e). Second, in order to

bring suit in federal court, the amount in controversy must be at least $50,000, exclusive of interests and
 7

Additionally, there is a $25 per claim requirement and there must be 100 named plaintiffs for

Magnuson-Moss class actions. 15 U.S.C. § 2310(d)(3)(A), (d)(3)(C). 

 8As in other areas, Magnuson-Moss delegates to the Federal Trade Commission the prescription of

minimum requirements for any informal dispute settlement procedure incorporated into the terms of a

written warranty. 15 U.S.C. § 2310(a)(2). The detailed requirements may be found at 16 C.F.R. § 703.1-

8, and include among other things, the duties of the warrantor, who can qualify as a member of a dispute

resolution panel, how the process must be conducted, and the method for keeping records. See 16 C.F.R.

§ 703.1-8. 

 9We do not consider here the possibility that a consumer may forgo utilization of the mechanism

where the consumer pursues rights or remedies that are not created by but are actionable under

Magnuson-Moss. See Rules, Regulations, Statements and Interpretations Under Magnuson-Moss

Warranty Act, 40 Fed.Reg. 60,168, 60,194-95 (Dec. 31, 1975) (to be codified at 16 C.F.R. 701, et seq.)

(discussing design of § 703.2(b) as intending "to ensure that the consumer is not deceived into believing

that prior resort to the Mechanism is required in all instances."). 

costs.7

 Id. § 2310(d)(1)(B), (d)(3)(B). Significantly, Magnuson-Moss also gives warrantors the ability to

establish procedural prerequisites to a consumer's civil action.

To encourage the settlement of consumer disputes by means other than civil suits, § 2310 allows

warrantors to include informal dispute settlement mechanisms in the warranty. Id. § 2310(a)(3). So long as

the mechanism complies with the Act's requirements and the rules established by the Federal Trade

Commission,8 id. § 2310(a)(3)(B), and the written warranty contains the requirement that the consumer utilize

the mechanism before pursuing a legal remedy, id. § 2310(a)(3)(C), warrantors can make the informal dispute

settlement process a mandatory prerequisite to instituting a consumer suit in state or federal court. Id.

 The district court concluded that the informal dispute settlement procedure of § 2310(a)(3) is a

non-binding mechanism, in that it serves at most as a prerequisite, and not a bar, to relief in court. We agree.

The language of the section makes this clear when it states that, if a warrantor establishes a mechanism, "then

... the consumer may not commence a civil action ... unless he initially resorts to such procedure." Id. §

2310(a)(3). Congress's inclusion of the word "initially" in the proviso clause indicates that once a consumer

has utilized the warrantor's conforming mechanism, a subsequent civil action is permissible9

—a possibility

that binding arbitration does not anticipate. The legislative history buttresses this conclusion. One of the

original sponsors of the bill explained that the informal dispute settlement mechanism was drafted as a

possible "prerequisite to suit." 119 CONG. REC. 972 (1973). Additionally, the Federal Trade Commission,

drafting regulations pursuant to the Act, has provided that "[d]ecisions of the Mechanism shall not be legally

binding on any person." 16 C.F.R. § 703.5(j).

The Cunninghams contend, and the district court agreed, that the only permissible conclusion to be
 10See, e.g., Circuit City Stores, Inc. v. Adams, --- U.S. ----, 121 S.Ct. 1302, --- L.Ed.2d ---- (2001)

(compelling arbitration of state court employment discrimination action); Gilmer v. Interstate/Johnson

Lane Corp., 500 U.S. 20, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991) (compelling arbitration of Age

Discrimination in Employment Act of 1967 claim); Rodriguez de Quijas v. Shearson/American Express,

Inc., 490 U.S. 477, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989) (compelling arbitration of Securities Act of

1933 claims, overruling Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953)); McMahon,

482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) (compelling arbitration of Securities Exchange Act

of 1934 and Racketerer Influenced and Corrupt Organizations Act claims). 

drawn from the text of § 2310 and the attendant legislative history is that Magnuson-Moss makes the

non-binding § 2310 mechanism the sole exception to its guarantee of a consumer cause of action; these two

alternatives eclipse the field of possibilities. Thus, binding arbitration agreements executed between buyer

and seller that designate manufacturers as third-party beneficiaries violate the Act because they are binding,

whether they are in the warranty or not, and they are therefore unenforceable. However, as Fleetwood notes,

there is no explicit reference to binding arbitration in the statute, and a contrary conclusion is in fact

permissible.

Since its decision in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 105

S.Ct. 3346, 87 L.Ed.2d 444 (1985), which made clear the applicability of the FAA's mandate to

statutorily-created causes of action, the Supreme Court has revisited similar arbitration issues in a variety of

contexts.10 A review of these cases convinces us that the district court was incorrect in concluding that,

standing alone, the presence of the non-binding § 2310 mechanism in the statutory text requires the

conclusion that Magnuson-Moss claims may not be the subject of binding arbitration agreements.

Aspects of § 2310 of Magnuson-Moss resemble provisions in statutory schemes previously

considered in the Supreme Court's FAA jurisprudence. For instance, in Gilmer the Court noted that the

ADEA establishes prerequisites to a claimant's civil action. Gilmer v. Interstate/Johnson Lane Corp., 500

U.S. 20, 27, 111 S.Ct. 1647, 1653, 114 L.Ed.2d 26 (1991). First, ADEA claimants must file a charge with

the Equal Employment Opportunity Commission (EEOC). Id. The ADEA also requires the EEOC to "attempt

to eliminate the discriminatory practice or practices alleged, and to effect voluntary compliance ... through

informal methods of conciliation, conference, and persuasion" before bringing an action. Gilmer, 500 U.S.

at 27, 111 S.Ct. at 1653 (quoting 29 U.S.C. § 626(b)). This aspect of the ADEA is not unlike that portion of

§ 2310 which announces a "policy to encourage warrantors to establish [informal dispute settlement]

procedures whereby consumer disputes are fairly and expeditiously settled," 15 U.S.C. § 2310(a)(1), and

which obligates Magnuson-Moss claimants to first give warrantors an opportunity to cure. Id. § 2310(e).
 11Of course, there are discernible differences, both in the language and structure of the MagnusonMoss Warranty Act and the ADEA. See 15 U.S.C. § 2301, et seq.; 29 U.S.C. § 621, et seq. 

In Gilmer, however, the Supreme Court held that ADEA claims are arbitrable, in spite of the presence of an

alternative settlement mechanism within the statute. This indicates that the presence of one type of

non-judicial mechanism in the text does not necessarily preclude the possibility of all alternative

mechanisms.11 See Southern Energy Homes, Inc. v. Lee, 732 So.2d 994, 1007 (Ala.1999) (See, J. dissenting).

However, while we are inclined to think that the presence of the non-binding § 2310 mechanism in

the statutory text does not in and of itself mandate the conclusion that Magnuson-Moss renders binding

arbitration agreements unenforceable, other key provisions of Magnuson-Moss, together with § 2310, cast

considerable doubt on the propriety of the particular arrangement at issue here. These provisions include the

requirements that significant conditions, limitations, and terms of the warranty be included in simple language

in the warranty itself, and that the warranty must consist of a single, understandable document made available

prior to sale to the consumer.

2. Section 2302: the Disclosure Requirements

Magnuson-Moss provides rules governing the content of warranties "[i]n order 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 any warrantor that chooses

to provide a written warranty with a consumer product "shall ... fully and conspicuously disclose in simple

and readily understood language the terms and conditions of such warranty." Id. The Act suggests the

inclusion of thirteen items, among them: "[a] statement of what the warrantor will do in the event of a defect,

malfunction, or failure to conform with [the] written warranty-at whose expense-and for what period of time,"

id. § 2302(a)(4); "[a] statement of what the consumer must do and expenses he must bear," id. § 2302(a)(5);

"[e]xceptions and exclusions from the terms of the warranty," id. § 2302(a)(6); "[t]he step-by-step procedure

which the consumer should take in order to obtain performance of any obligation under the warranty," id. §

2302(a)(7); "[i]nformation respecting the availability of any informal dispute settlement procedure offered

by the warrantor and a recital, where the warranty so provides, that the purchaser may be required to resort

to such procedures before pursuing any legal remedies in the courts," id. § 2302(a)(8); and "[t]he elements

of the warranty in words or phrases which would not mislead a reasonable, average consumer as to the nature

or scope of the warranty." Id. § 2302(a)(13). Magnuson-Moss delegates promulgation of specific disclosure
 12For purposes of an FTC-instituted action, a warranty is deceptive if it "contains an affirmation,

promise, description, or representation which is either false or fraudulent, or which, in light of all of the

circumstances, would mislead a reasonable individual exercising due care; or [if the warranty] fails to

contain information which is necessary in light of all of the circumstances, to make the warranty not

misleading to a reasonable individual exercising due care...." 15 U.S.C. § 2310(c)(2). 

requirements to the FTC, but requires that the terms of any written warranty be made available to the

consumer or prospective consumer prior to sale. Id. § 2302(a), (b)(1)(A).

The disclosure requirements established by the FTC pursuant to Magnuson-Moss are codified at 16

C.F.R. § 701.3, and obligate warrantors to "clearly and conspicuously disclose [warranty terms] in a single

document in simple and readily understood language." 16 C.F.R. § 701.3(a). Among these mandatory items,

nondisclosure of which is a violation of both Magnuson-Moss and the Federal Trade Commission Act as an

unfair or deceptive act or practice,12 15 U.S.C. §§ 45(a)(1), 2310(b), the FTC includes: "[a] statement of what

the warrantor will do in the event of a defect, malfunction or failure to conform with the written warranty ..."

16 C.F.R. § 701.3(a)(3); "[a] step-by step explanation of the procedure which the consumer should follow

in order to obtain performance of any warranty obligation ..." id. § 701.3(a)(5); and "[i]nformation respecting

the availability of any informal dispute settlement mechanism...." Id. § 701.3(a)(6). This last requirement

is echoed in § 703.2, which requires the warrantor to disclose "clearly and conspicuously at least the

following information on the face of the written warranty: ... [a] statement of the availability of the informal

dispute settlement mechanism." Id. § 703.2(b)(1).

The comprehensive disclosure requirements of Magnuson-Moss are an integral, if not the central,

feature of the Act, perhaps eclipsing even the civil action and informal dispute resolution mechanisms in their

importance to consumers. CURTIS R. REITZ, CONSUMER PROTECTION UNDER THE MAGNUSON-MOSS

WARRANTY ACT 31 (1978). Prior to the passage of Magnuson-Moss, consumers had been inundated with

problems concerning the complexity of warranties, complexity generated by the presence of misleading terms

and incomplete disclosure on the part of warrantors. See 40 Fed.Reg. 60,168, 60,168 (Dec. 31, 1975).

Magnuson-Moss's enactors anticipated that "[o]ne of the most important effects of this bill [would] be its

ability to relieve consumer frustration by promoting understanding." Id. (citing 119 CONG.REC. 972 (1973)

(remarks of Congressman Moss)); see also H.R. REP. NO. 93-1107, at 1 (1974) reprinted in 1974

U.S.S.C.A.N. 7702, 7702 (stating "[t]he purpose of this legislation is (1) to make warranties on consumer

products more readily understood and enforceable").

Congress sought to remedy the situation by requiring that material terms be presented in clear
 13Magnuson-Moss's treatment of informal dispute resolution mechanism clauses in warranties is

consistent with general contract law, in that arbitration clauses, like other kinds of forum selection

clauses, are generally considered material terms under state law variants of the Uniform Commercial

Code. See Coastal Indus., Inc. v. Automatic Steam Prods. Corp., 654 F.2d 375 (5th Cir.1981) (finding

unilateral insertion of arbitration clause per se alteration of the contract under state law); General

Instrument Corp. v. Tie Mfg., Inc., 517 F.Supp. 1231, 1234 (S.D.N.Y.1981) (finding forum selection

clause materially alters contract for Connecticut corporation); Lorbrook Corp. v. G&T Industries, Inc.,

162 A.D.2d 69, 562 N.Y.S.2d 978, 980 (1990) (discussing addition of forum selection term as material

alteration to prior agreement); see also Michael A. Stiegal & Debra J. Williams, The Battle of the Forms: 

UCC Section 2-207, in PLI COMMERCIAL LAW & PRACTICE COURSE HANDBOOK SERIES ORDER NO. A4-

4297 at 6 (1990) (stating that "[i]t is generally recognized that a 'forum selection' clause 'materially alters'

a contract within the meaning of U.C.C. § 2-207"). 

 14The FTC explains further that "absolute silence on a material fact may be deceptive where the

public assumes from this silence that a state of facts exists when, in fact, affirmative disclosure would

reveal that these assumptions are unfounded. In such instances, the consumer's normal and reasonably

foreseeable expectations are exploited, and a false or misleading impression is created." 40 Fed.Reg.

60,168, 60,170 (Dec. 31, 1975). 

language in a single document. The FTC, instructed to implement Congress's solutions to the perceived

problems, crafted the disclosure requirements so that they might "inform the consumer of the full extent of

his or her obligations under the warranty, and to eliminate confusion as to the necessary steps which he or

she must take in order to get warranty performance." 40 Fed.Reg. 60,168, 60,175 (Dec. 31, 1975). The

single document rule reinforces these concerns by requiring warrantors to present all information relevant to

the warranty in one place, where it might be easily located and assimilated by the consumer. Id. at 60,172.

Significantly, the FTC, bringing its regulatory experience to the task, recognized that the omission of relevant

terms13 was as likely to foster erroneous assumptions as inclusion of misleading terms, because "the failure

to disclose all conditions, limitations, and exclusions as to product warranties renders any affirmative claims

about warranties deceptive."14 Id. at 60,170.

 Our preceding analysis commands the conclusion that Fleetwood's use of its third-party beneficiary

status under the Ronnie Smith's-Cunningham agreement to compel arbitration where Fleetwood has failed

to disclose in the warranty a term or clause requiring the Cunninghams to utilize an informal dispute

resolution mechanism contravenes the text, legislative history, and purpose of the Magnuson-Moss Warranty

Act. Fleetwood contends that neither Magnuson-Moss nor the rules promulgated by the FTC pursuant to

Magnuson-Moss apply to agreements that are not incorporated into the terms of the written warranty, like the

arbitration agreement here. Whether Fleetwood is correct in this contention or not, Magnuson-Moss and the

rules do apply to the content of written warranties, including omissions, and Fleetwood can not "do by [the]

surrogate or vicarious means" of the Ronnie Smith's-Cunningham arbitration agreement what Magnuson-
Moss requires that it do directly: disclose in a single document all relevant terms of the warranty. See Wilson

v. Waverlee Homes, Inc., 954 F.Supp. 1530, 1539 (M.D.Ala.1997). Compelling arbitration on the basis of

an arbitration agreement that is not referenced in the warranty presents an inherent conflict with the Act's

purpose of providing clear and concise warranties to consumers.

Supreme Court decisions regarding the arbitrability of claims brought under the Securities Act of

1933 and the Securities Exchange Act of 1934, which also contain mandatory disclosure requirements,

support our conclusion. Rodriguez de Quijas, 490 U.S. at 485-86, 109 S.Ct. at 1922 (Securities Act of 1933);

McMahon, 482 U.S. at 238, 107 S.Ct. at 2343 (Securities Exchange Act of 1934). In McMahon the Supreme

Court examined a provision of the Securities Exchange Act that declared void "any provision waiving

compliance with any provision of [the Act]." McMahon, 482 U.S. at 227-28, 107 S.Ct. at 2338 (quoting 15

U.S.C. § 78cc(a)). The respondents argued that this section forbade waiver of 15 U.S.C. § 78aa, which

creates exclusive jurisdiction for federal district courts, and that therefore the waiver of a judicial forum in

the arbitration agreement was unenforceable. The key to the Court's analysis lies in its conclusion that §

78cc(a) only forbade waiver of "the substantive obligations imposed by the Exchange Act," and that because

the jurisdictional provision of § 78aa "does not impose any statutory duties, its waiver does not constitute a

waiver" of a substantive obligation. Id., 482 U.S. at 228, 107 S.Ct. at 2338. For this reason, selection of an

arbitral forum would not prevent enforcement of the statutory rights created by the Securities Exchange Act.

Id. Similarly, in Rodriguez de Quijas, the Supreme Court distinguished between substantive and procedural

provisions of the Securities Act, and declined to extend the scope of a no-waiver provision to encompass the

latter class. Rodriguez de Quijas, 490 U.S. at 481-82, 109 S.Ct. at 1920-21.

Unlike the procedural provisions of McMahon and Rodriguez de Quijas, § 2302 of Magnuson-Moss

and the rules promulgated by the FCC that Fleetwood seeks to avoid do in fact impose substantive obligations

on manufacturers that choose to issue warranties, requiring clear disclosure of warranty terms in a single

document. The substantive obligation must be met at the time the consumer receives the warranty in order

to effectuate the concerns of Magnuson-Moss, and permitting warrantors to compel arbitration through a third

party contractual arrangement that allows them to evade the substantive obligations imposed by the Act

eviscerates Magnuson-Moss's core provisions.

It is clear from our earlier discussion that the Congressional purposes of avoiding consumer

misinformation and deceptive practices are effectuated where warrantors adhere to the requirements of
 15We also note, and the Cunninghams concede, that warrantors and consumers may agree to binding

arbitration after a dispute has arisen between them. The Commission stated shortly after passage of the

Act that nothing in Magnuson-Moss prevents warrantors from offering binding arbitration options to

consumers after non-binding informal dispute settlement mechanisms have been completed. 40 Fed.Reg.

60,168, 60,211 (1975). More recently the FTC has reiterated that warrantors are not precluded from

offering consumers a binding arbitration option after a warranty dispute has arisen. 60 Fed.Reg. 19,700,

19,708 (1999). 

Magnuson-Moss. Additional goals are also furthered in that adherence to uniform standards will foster

Congress's purpose of "improv[ing] competition in the marketing of consumer products." 15 U.S.C. §

2302(a). As the FTC has noted, the "requirement of minimum uniformity in warranty disclosures should

enable consumers to make valid and informed comparisons of warranties for similar products." 40 Fed.Reg.

60,168, 60,170 (Dec. 31, 1975). Allowing Fleetwood to condition the warranty by invoking an arbitration

agreement executed by the buyer and seller confounds this purpose in that consumers confronted with

warranties that do not contain arbitration clauses that are nonetheless subject to arbitration will have no basis

for judging the suitability of a warranty. This is of particular concern because the warranty is issued

unilaterally, and, as the enactors of Magnuson-Moss noted, a consumer cannot bargain with manufacturers

to adjust the terms of a warranty offered voluntarily by the manufacturer: "[t]he warranty provisions of

[Magnuson-Moss] are not only designed to make warranties understandable to consumers, but to redress the

ill effects resulting from the imbalance which presently exists in the relative bargaining power of consumers

and suppliers of consumer products." Id. at 60,168 (quoting S.REP.NO. 93-151 (1973)). The unilateral nature

of warranties by manufacturers makes full disclosure in a single document mandatory for the attainment of

Congress's goals.

VII. CONCLUSION

 Because of the unique nature of the contractual arrangement at issue here, it is important that we

describe what is and what is not decided on this appeal. First, the propriety of Ronnie Smith's and the

Cunninghams' agreement to arbitrate—the seller and buyer agreement—is not before us. We are not required

to and do not decide whether Magnuson-Moss makes arbitration agreements unenforceable as to all

Magnuson-Moss claims.15 Nor is it necessary for us to determine whether warrantors may include binding

arbitration provisions in the warranty itself. The only issue we are presented with here, and thus decide, is

whether Fleetwood can utilize its third-party beneficiary status under the Ronnie Smith's-Cunningham

arbitration agreement to compel binding arbitration of the Cunninghams' breach of written or express

warranty claims against Fleetwood when there is no reference to binding arbitration in the warranty. Because
we conclude that Fleetwood's failure to disclose in the warranty a term or clause requiring the Cunninghams

to utilize an informal dispute resolution mechanism runs afoul of the disclosure requirements of the

Magnuson-Moss Warranty Act, we affirm the district court's order declining to compel arbitration of the

written or express warranty claims.

AFFIRMED.