Originally from Dispute Resolution Journal

CONSUMER

Magnuson-Moss Warranty Claims

The 5th Circuit held that the Magnuson-Moss Warranty Act does not preclude arbitration of a consumer warranty claim when there is a valid arbitration clause in the consumer contract.

The Waltons purchased a manufactured mobile home from a retailer. The manufacturer’s one-year warranty contained an arbitration clause. When their complaints about defects in the home were not resolved to their satisfaction, the Waltons rescinded their acceptance and sued the manufacturer and retailer. The defendants moved to compel arbitration. The Waltons countered that the MMWA precludes enforcement of a binding arbitration clause in an express written warranty. A magistrate judge denied the motion to compel arbitration and the district court concurred, except that it compelled arbitration of the Waltons’ claims that were unrelated to the MMWA.

The 5th Circuit held that the claims under the MMWA also were arbitrable. The statute does not specifically address binding arbitration, which generally is considered a substitute for litigation. Nor does it define “informal dispute settlement procedures,” which a claimant is required to initiate under the MMWA prior to filing a lawsuit. Accordingly, the court ruled that binding arbitration “seems to fall outside” the MMWA and the Federal Trade Commission’s power to regulate. In addition, it found that the legislative history, which indicated that informal settlement procedures must be nonbinding, and the judicial remedy the MMWA provided to consumers, did not mean that Congress intended to preclude arbitration. One judge dissented.

Walton v. Rose Mobile Homes LLC, 2002 WL 1542008 (5th Cir., 2002).