Originally from Dispute Resolution Journal

In recent years, there has been a growing divide over whether the federal Magnuson-Moss Warranty Act (MMWA)1 permits warranty claims to be arbitrated under the Federal Arbitration Act (FAA).2 The issue is important to businesses that have arbitration agreements with customers because arbitration can be quicker, less adversarial, and more efficient than litigation. The U.S. Supreme Court has held that the FAA embodies a strong congressional policy favoring arbitration. It has also recognized that arbitration is an appropriate means of resolving consumer disputes, observing that without enforceable arbitration agreements, the typical consumer, who has only a small damage claim, would be left with just a court remedy, “the costs and delays of which could eat up the value of an eventual small recovery.”3

The majority of courts that have addressed the arbitrability of MMWA claims (including the 5th and 11th Circuits, as well as the Illinois, Texas, Michigan, and Alabama Supreme Courts) have held that these claims can be arbitrated,4 but some courts, including the Mississippi Supreme Court and a number of federal district courts, have reached the opposite conclusion.5 Recently, Maryland’s highest court became the latest court to weigh in on the controversy, adopting the minority position. In this article, we discuss the rationale of that decision and why, in our view, its reasoning is flawed.