Opinion ID: 2174415
Heading Depth: 2
Heading Rank: 4

Heading: federal trade commission's interpretation

Text: The Van Blarcums point out that the FTC has determined that decisions rendered through an informal dispute settlement mechanism shall not be binding on any person. See 16 C.F.R. § 703.5(j). They argue that the FTC's regulation demonstrates its position that the Magnuson-Moss Act precludes enforcing a binding arbitration agreement. The FTC has promulgated regulations about informal dispute settlement mechanisms. But no FTC regulation expressly prohibits binding arbitration. Rather, when the FTC first published its rules and interpretations in 1975, the agency recognized that industry representatives hoped the FTC would allow warrantors and consumers to agree to binding arbitration. The FTC refused. 40 Fed.Reg. 60162, 60210-11 (1975). It noted that it was Congress' intent that informal dispute settlement mechanisms not be legally binding, and, even if binding arbitration were contemplated under the statute, the FTC was not prepared at that time to develop guidelines for such a system. 40 Fed.Reg. 60162, 60210-11 (1975). The FTC further noted that warrantors are not precluded from offering a binding arbitration option after a warranty dispute has arisen. 40 Fed.Reg. 60162, 60210-11 (1975). In 1999, after reviewing its rules and interpretations, the FTC concluded that predispute binding arbitration agreements are still not permissible under the Magnuson-Moss Act. 64 Fed.Reg. 19700, 19708 (1999). In Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., the Supreme Court established the questions to consider in determining the weight a court should give an agency's construction of the statute it administers: First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute. 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Here, Congress has not spoken to the precise question whether the Magnuson-Moss Act precludes enforcing binding arbitration under the FAA. See Mitsubishi Motors Corp., 473 U.S. at 628, 105 S.Ct. 3346 (Having made the bargain to arbitrate, the party should be held to it unless Congress itself has evinced an intention to preclude a waiver of judicial remedies for the statutory rights at issue.) (emphasis added). And, while we may defer to an agency's interpretation of the statute it administers, see generally Chevron U.S.A., Inc., 467 U.S. at 843-44, 104 S.Ct. 2778 we owe no such deference when the agency's interpretation is unreasonable. See Amberg v. FDIC, 934 F.2d 681, 687 (5th Cir.1991) ([W]e will not bow our heads with closed eyes and walk away; rather we must still look at the [agency's interpretations] and see if they can be classified as reasonable.). In this case, we are not persuaded that the FTC's position results from a permissible or reasonable construction of the Magnuson-Moss Act. In fact, the Supreme Court, in an analogous context, has rejected arguments similar to those upon which the FTC relies to conclude the statute prohibits binding arbitration. For example, the FTC relied on a provision granting courts jurisdiction over warranty claims brought under the Magnuson-Moss Act. See 15 U.S.C. § 2310(d)(1) (investing any court of competent jurisdiction in any State ... or ... an appropriate district court of the United States with jurisdiction over Magnuson-Moss Act claims). The plaintiff made a similar argument in McMahon, 482 U.S. at 227, 107 S.Ct. 2332. The plaintiff argued that the arbitration clause was ineffective because it required the parties to waive the Exchange Act provision that the [t]he district courts of the United States ... shall have exclusive jurisdiction of violations of this title. McMahon, 482 U.S. at 227-28, 107 S.Ct. 2332 (quoting 15 U.S.C. § 78aa). The plaintiff contended that, this waiver, if allowed, would be contrary to the Exchange Act's provision declaring void [a]ny condition, stipulation, or provision binding any person to waive compliance with any provision of [the Act]. See 15 U.S.C. § 78cc(a). The Supreme Court rejected this contention, explaining that 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. McMahon, 482 U.S. at 229-30, 107 S.Ct. 2332 (quoting Mitsubishi Motors Corp., 473 U.S. at 628, 105 S.Ct. 3346). Thus, the Supreme Court concluded, the Exchange Act's providing a judicial forum to present claims does not imply an intent to preclude the parties from presenting claims in a nonjudicial forum. McMahon, 482 U.S. at 234, 107 S.Ct. 2332; see also Gilmer, 500 U.S. at 29, 35, 111 S.Ct. 1647 (ADEA claims are arbitrable notwithstanding the ADEA's providing a judicial forum for relief); Rodriguez de Quijas, 490 U.S. at 485-86, 109 S.Ct. 1917 (Securities Act of 1933 claims are arbitrable notwithstanding the statute's providing a judicial forum for relief); McMahon, 482 U.S. at 242, 107 S.Ct. 2332 (RICO claims are arbitrable notwithstanding the statute's providing a judicial forum for relief); Mitsubishi Motors Corp., 473 U.S. at 640, 105 S.Ct. 3346 (antitrust claims are arbitrable notwithstanding that the statute presumes a judicial forum for relief). Moreover, the FTC's position about binding arbitration has been less than consistent. For example, in its commentary to Rule 703.5(j), the FTC recognized that some witnesses in the 1975 hearing suggested the warrantor and consumer might agree to binding arbitration. The FTC encouraged this by emphatically stating  nothing in the rule precludes the parties from agreeing to use some avenue of redress other than the mechanism if they feel it is more appropriate. 40 Fed.Reg. 60211 (emphasis added) (citations omitted). And, even though the FTC is empowered to restrain warrantors from failing to comply with a Magnuson-Moss Act requirement, see 15 U.S.C. § 2310(c)(1), neither the parties nor the FTC as amicus have identified an FTC enforcement action to restrain these allegedly-standard predispute binding arbitration agreements. For these reasons, we need not defer to the FTC's current position about binding arbitration.