After the U.S. Supreme Court resuscitated class action waivers earlier this year in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), companies have once again sought to enforce those waivers or have considered adding them to their consumer agreements as a means of managing class action risk. The Ninth Circuit recently issued a decision in Kolev v. Euromotors West/The Auto Gallery, __ F.3d __, 2011 U.S. App. LEXIS 19254 (9th Cir. Sept. 20, 2011), that could have broad implications for companies that seek to enforce class action waivers in the Ninth Circuit.
The plaintiff in Kolev filed suit against a dealership after the car she purchased developed mechanical problems during the warranty period and the dealer refused to honor her warranty claims. She asserted claims for breach of express and implied warranty under the Magnuson Moss Warranty Act (“Magnuson-Moss”), breach of contract, and unconscionability under California law. The dealership then successfully moved to compel arbitration based on a mandatory arbitration provision in the sales contract.
On appeal, the plaintiff argued that Magnuson-Moss barred the provision mandating arbitration of her warranty claims. Although Magnuson-Moss does not specifically address the validity of pre-dispute mandatory arbitration provisions, the plaintiff argued that the Federal Trade Commission (FTC), pursuant to its rulemaking authority under Magnuson-Moss, had issued a rule prohibiting judicial enforcement of such provisions with respect to consumer claims brought under the Act. See 16 C.F.R. § 703.5; 40 Fed. Reg. 60167, 60210 (Dec. 31, 1975).
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