Opinion ID: 1101218
Heading Depth: 1
Heading Rank: 2

Heading: Wilson v. Waverly Homes, Inc.

Text: In Wilson, 954 F.Supp. at 1537-40, the United States District Court for the Middle District of Alabama addressed the question whether the Magnuson-Moss Act, which provides a private right of action to consumers for breaches of express and implied warranties, precludes operation of the Federal Arbitration Act (the FAA). The district court analyzed the text of the Magnuson-Moss Act and analyzed the regulations promulgated pursuant to that Act. The district court concluded that although the Magnuson-Moss Act does not address arbitration or the FAA, that Act nonetheless precludes binding arbitration under the FAA: (1) because it provides a statutory right to bring suit for damages and other legal and equitable relief ... in a court of competent jurisdiction, 15 U.S.C. § 2310(d)(1)(A); and (2) because it allows for nonbinding informal dispute settlement mechanisms, 15 U.S.C. § 2310(a)(1). See Wilson, 954 F.Supp. at 1537-38. The district court noted that the legislative history of the Magnuson-Moss Act indicates that `[a]n adverse decision in any informal dispute settlement proceeding would not be a bar to a civil action on the warranty involved in the proceeding.' Id. at 1538 (quoting H.R. Rep. 93-1107, 93d Cong., 2d Sess. 41, reprinted in 1974 U.S.C.C.A.N. 7702, 7723). The district court further noted that the Federal Trade Commission (the FTC) had rejected a proposal to allow warrantors to require binding arbitration. Id. at 1539. After noting that no other federal court had done so, the district court, using broad language, concluded that the Magnuson-Moss Act prevented arbitration of the express-and implied-warranty claims in Wilson. Id. at 1537, 1539.
In Boyd, 981 F.Supp. 1423, the district court abandoned the broad language of Wilson the language to the effect that the Magnuson-Moss Act precludes arbitration of all warranty claims arising under the Actand limited the application of Wilson to bar only arbitration of written-warranty claims. Id. at 1436 ([T]he conclusion in [ Wilson ] that Congress intended in the Magnuson-Moss Act to preclude binding arbitration of warranty claims must be understood to be limited to written warranties ....) (emphasis omitted). [19] Recognizing the abundance of Supreme Court precedent requiring arbitration of claims arising under federal statutes similar to the Magnuson-Moss Act, the district court conceded that neither the Act's provision for the filing of an action in the federal court, nor the indication in the relevant legislative history that alternative dispute resolution should be a prerequisite to the filing of an action, precluded application of the FAA. Id. at 1437-38. The district court also recognized that the FTC had stated that a purchaser and a warrantor could agree to arbitrate claims, but that a warrantor may not place an arbitration clause in a written warranty. [20] The district court held that for two reasons the Magnuson-Moss Act precludes operation of the FAA with respect to claims concerning written warranties that include arbitration clauses: (1) the provision in § 2310(a)(3)(C) for the incorporation of nonbinding settlement mechanisms in written warranties implies that binding arbitration is not proper for such warranties; and (2) a statement issued by the FTC stated that warrantors are prohibited from including a binding arbitration clause in a written warranty. Boyd, 981 F.Supp. at 1437-38. Thus, the district court's own substantially narrowed view of Wilson on which the main opinion relies does not bar the application of the arbitration agreement to the plaintiffs' misrepresentation claims or to their implied-warranty claims. Although the district court has recently reaffirmed its view expressed in Boyd that the Magnuson-Moss Act precludes enforcement of arbitration agreements contained in written warranties, Rhode v. E & T Investments, Inc., 6 F.Supp.2d 1322, 1331 (M.D.Ala. 1998), the controlling Supreme Court precedents lead me to disagree with the Boyd rationale.